##### Table of Contents



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended:September 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-20707
 COLONIAL REALTY LIMITED PARTNERSHIP
 (Exact name of registrant as specified in its charter)
 Delaware
    
    63-1098468(State or other jurisdiction
    
    (IRS Employerof incorporation)
    
    Identification Number)
 2101 Sixth Avenue North, Suite 750, Birmingham, Alabama 35203  Address of principal executive offices) (Zip Code)
 (205) 250-8700
 Not applicable  (Former name or former address, if changed since last report)
  þ o
  þ o o
  o þ




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##### 



COLONIAL REALTY LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
 PagePART I: FINANCIAL INFORMATIONItem 1. Consolidated Condensed Financial Statements (Unaudited)Consolidated Condensed Balance Sheets as of
September 30, 2006 and December 31, 2005
    
    
    3Consolidated Condensed Statements of Income and Comprehensive
Income for the Three and Nine Months ended September 30, 2006 and 2005
    
    
    4Consolidated Condensed Statements of Cash Flows for the Nine Months
ended September 30, 2006 and 2005
    
    
    5Notes to Consolidated Condensed Financial Statements
    
    
    6Report of Independent Registered Public Accounting Firm *
    
    
    22Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    34PART II: OTHER INFORMATIONItem 1A. Risk Factors
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 6. Exhibits
    
    
    35SIGNATURES
    
    
    36EXHIBIT INDEX
    
    
    37EX-12.1 RATIO OF EARNINGS TO FIXED CHARGESEX-15.1 LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATIONEX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF CFO
  Review by Independent Registered Public Accounting Firm *




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##### Table of Contents



COLONIAL REALTY LIMITED PARTNERSHIP
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 (Unaudited)
 (in thousands, except unit data)
 September 30, 2006
    
    
    December 31, 2005ASSETSLand, buildings, & equipment
    
    $
    3,957,804
    
    
    $
    3,974,907Undeveloped land and construction in progress
    
    
    366,357
    
    
    
    202,052Less: Accumulated depreciation
    
    
    (462,814
    )
    
    
    (453,352
    )Real estate assets held for sale, net
    
    
    202,970
    
    
    
    367,372Net real estate assets
    
    
    4,064,317
    
    
    
    4,090,979Cash and equivalents
    
    
    29,177
    
    
    
    30,615Restricted cash
    
    
    15,202
    
    
    
    8,142Accounts receivable, net
    
    
    17,252
    
    
    
    25,767Notes receivable
    
    
    56,713
    
    
    
    36,387Prepaid expenses
    
    
    18,499
    
    
    
    19,546Deferred debt and lease costs
    
    
    43,390
    
    
    
    50,436Investment in partially owned entities
    
    
    115,490
    
    
    
    123,700Other assets
    
    
    96,064
    
    
    
    113,655$
    4,456,104
    
    
    $
    4,499,227LIABILITIES AND PARTNERS EQUITYNotes and mortgages payable
    
    $
    2,226,769
    
    
    $
    2,274,620Unsecured credit facility
    
    
    257,130
    
    
    
    210,228Mortgages payable related to real estate assets held for sale
    
    
    61,198
    
    
    
    9,502Total long-term liabilities
    
    
    2,545,097
    
    
    
    2,494,350Accounts payable
    
    
    53,686
    
    
    
    74,455Accrued interest
    
    
    32,426
    
    
    
    29,063Accrued expenses
    
    
    44,446
    
    
    
    17,603Tenant deposits
    
    
    6,724
    
    
    
    7,251Unearned rent
    
    
    3,386
    
    
    
    9,722Other liabilities
    
    
    13,358
    
    
    
    736Total liabilities
    
    
    2,699,123
    
    
    
    2,633,180Redeemable units, at redemption value - 10,579,261 units outstanding
at September 30, 2006 and 10,872,568 at December 31, 2005
    
    
    505,794
    
    
    
    456,430Limited partners minority interest in consolidated partnership
    
    
    6,749
    
    
    
    8,093General partner Common equity  46,030,615 and 45,014,823 units outstanding at
September 30, 2006 and December 31, 2005, respectively
    
    
    925,431
    
    
    
    1,003,583Preferred equity ($229,760 liquidation preference)
    
    
    225,009
    
    
    
    301,450Limited partners preferred equity ($100,000 liquidation preference)
    
    
    97,406
    
    
    
    97,406Accumulated other comprehensive income (loss)
    
    
    (3,408
    )
    
    
    (915
    )Total general partners equity
    
    
    1,244,438
    
    
    
    1,401,524$
    4,456,104
    
    
    $
    4,499,227
  3




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##### Table of Contents



COLONIAL REALTY LIMITED PARTNERSHIP
 
 CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 (Unaudited)
 (in thousands, except per unit data)
 
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue:Minimum rent
    
    $
    107,013
    
    
    $
    107,995
    
    
    $
    319,455
    
    
    $
    277,400Percentage rent
    
    
    448
    
    
    
    521
    
    
    
    1,184
    
    
    
    1,614Tenant recoveries
    
    
    7,129
    
    
    
    9,816
    
    
    
    22,289
    
    
    
    27,716Construction revenues
    
    
    6,868
    
    
    
    
    
    
    
    26,793
    
    
    
    Other property related revenue
    
    
    8,386
    
    
    
    7,886
    
    
    
    24,898
    
    
    
    18,490Other non-property related revenue
    
    
    4,724
    
    
    
    1,410
    
    
    
    13,349
    
    
    
    5,190Total revenue
    
    
    134,568
    
    
    
    127,628
    
    
    
    407,968
    
    
    
    330,410Operating Expenses:Property operating expenses:General operating expenses
    
    
    11,540
    
    
    
    10,831
    
    
    
    32,818
    
    
    
    25,897Salaries and benefits
    
    
    8,679
    
    
    
    8,149
    
    
    
    25,001
    
    
    
    19,202Repairs and maintenance
    
    
    10,994
    
    
    
    11,526
    
    
    
    31,184
    
    
    
    30,298Taxes, licenses, and insurance
    
    
    14,872
    
    
    
    13,597
    
    
    
    42,863
    
    
    
    35,406General and administrative
    
    
    12,588
    
    
    
    9,993
    
    
    
    34,869
    
    
    
    26,962Construction expenses
    
    
    6,653
    
    
    
    
    
    
    
    25,680
    
    
    
    Depreciation
    
    
    35,976
    
    
    
    33,608
    
    
    
    109,030
    
    
    
    86,447Amortization
    
    
    4,908
    
    
    
    20,217
    
    
    
    16,347
    
    
    
    46,030Total operating expenses
    
    
    106,210
    
    
    
    107,921
    
    
    
    317,792
    
    
    
    270,242Income from operations
    
    
    28,358
    
    
    
    19,707
    
    
    
    90,176
    
    
    
    60,168Other income (expense):Interest expense and debt cost amortization
    
    
    (32,625
    )
    
    
    (34,697
    )
    
    
    (97,367
    )
    
    
    (93,694
    )Loss on retirement of debt
    
    
    
    
    
    
    
    
    
    
    (791
    )
    
    
    Interest income
    
    
    1,931
    
    
    
    1,681
    
    
    
    5,879
    
    
    
    2,662Income (loss) from partially owned entities
    
    
    (2,101
    )
    
    
    43
    
    
    
    (4,105
    )
    
    
    2,874Gain on hedging activities
    
    
    37
    
    
    
    75
    
    
    
    2,588
    
    
    
    497Gains from sales of property, net of income taxes of $162 (QTR) and $1,484 (YTD)
in 2006 and $2,370 (QTR) and $2,771 (YTD) in 2005
    
    
    1,865
    
    
    
    5,736
    
    
    
    39,949
    
    
    
    7,832Minority interest of limited partners
    
    
    423
    
    
    
    (2,844
    )
    
    
    539
    
    
    
    (2,828
    )Other
    
    
    138
    
    
    
    1,593
    
    
    
    (1,008
    )
    
    
    1,157Total other income (expense)
    
    
    (30,332
    )
    
    
    (28,413
    )
    
    
    (54,316
    )
    
    
    (81,500
    )Income (loss) from continuing operations
    
    
    (1,974
    )
    
    
    (8,706
    )
    
    
    35,860
    
    
    
    (21,332
    )Income from discontinued operations
    
    
    3,258
    
    
    
    3,585
    
    
    
    9,900
    
    
    
    20,347Gain on disposal of discontinued operations, net of taxes of $2,178 (QTR)
and $6,766 (YTD) in 2006 and $0 in 2005
    
    
    23,238
    
    
    
    66,448
    
    
    
    40,983
    
    
    
    182,211Minority interest of limited partners
    
    
    7
    
    
    
    (149
    )
    
    
    (2,707
    )
    
    
    (641
    )Income from discontinued operations
    
    
    26,503
    
    
    
    69,884
    
    
    
    48,176
    
    
    
    201,917Net income
    
    
    24,529
    
    
    
    61,178
    
    
    
    84,036
    
    
    
    180,585Distributions to general partner preferred unitholders
    
    
    (4,550
    )
    
    
    (6,232
    )
    
    
    (16,354
    )
    
    
    (16,159
    )Distributions to limited partner preferred unitholders
    
    
    (1,813
    )
    
    
    (1,813
    )
    
    
    (5,438
    )
    
    
    (5,438
    )Preferred unit issuance costs write-off
    
    
    (45
    )
    
    
    
    
    
    
    (2,128
    )
    
    
    Net income available to common unitholders
    
    $
    18,121
    
    
    $
    53,133
    
    
    $
    60,116
    
    
    $
    158,988Net income available to common unitholders allocated to limited partners
    
    
    (3,389
    )
    
    
    (11,201
    )
    
    
    (11,440
    )
    
    
    (36,933
    )Net income available to common unitholders allocated to general partner
    
    $
    14,732
    
    
    $
    41,932
    
    
    $
    48,676
    
    
    $
    122,055Net income per common unit  Basic:Income (loss) from continuing operations
    
    $
    (0.15
    )
    
    $
    (0.33
    )
    
    $
    0.21
    
    
    $
    (0.92
    )Income from discontinued operations
    
    
    0.47
    
    
    
    1.37
    
    
    
    0.86
    
    
    
    4.33Net income per common unit  Basic
    
    $
    0.32
    
    
    $
    1.04
    
    
    $
    1.07
    
    
    $
    3.41Net income per common unit  Diluted:Income (loss) from continuing operations
    
    $
    (0.15
    )
    
    $
    (0.33
    )
    
    $
    0.21
    
    
    $
    (0.92
    )Income from discontinued operations
    
    
    0.47
    
    
    
    1.37
    
    
    
    0.85
    
    
    
    4.33Net income per common unit  Diluted
    
    $
    0.32
    
    
    $
    1.04
    
    
    $
    1.06
    
    
    $
    3.41Average units outstanding:Basic
    
    
    56,286
    
    
    
    51,161
    
    
    
    56,084
    
    
    
    46,532Diluted
    
    
    56,286
    
    
    
    51,161
    
    
    
    56,570
    
    
    
    46,532CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOMENet income
    
    $
    24,529
    
    
    $
    61,178
    
    
    $
    84,036
    
    
    $
    180,585Other comprehensive incomeUnrealized income (loss) on cash flow hedging activities
    
    
    (13,731
    )
    
    
    12,311
    
    
    
    (2,492
    )
    
    
    (1,839
    )Comprehensive income
    
    $
    10,798
    
    
    $
    73,489
    
    
    $
    81,544
    
    
    $
    178,746
  4




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##### Table of Contents



COLONIAL REALTY LIMITED PARTNERSHIP
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (in thousands)
 Nine Months EndedSeptember 30,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    84,036
    
    
    $
    180,585Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    126,108
    
    
    
    148,477Loss (income) from partially-owned unconsolidated entities
    
    
    4,105
    
    
    
    (290
    )Gains from sales of property
    
    
    (89,182
    )
    
    
    (195,247
    )Distributions of income from partially-owned unconsolidated entities
    
    
    7,345
    
    
    
    3,075Decrease (increase) in:Restricted cash
    
    
    (7,060
    )
    
    
    (4,770
    )Accounts receivable
    
    
    7,545
    
    
    
    (937
    )Prepaid expenses
    
    
    (980
    )
    
    
    (3,634
    )Other assets
    
    
    (8,340
    )
    
    
    (95
    )Increase (decrease) in:Accounts payable
    
    
    (13,248
    )
    
    
    15,710Accrued interest
    
    
    3,363
    
    
    
    2,832Accrued expenses and other
    
    
    28,212
    
    
    
    9,702Net cash provided by operating activities
    
    
    141,904
    
    
    
    155,408Cash flows from investing activities:Acquisition of properties
    
    
    (306,245
    )
    
    
    (544,297
    )Development expenditures
    
    
    (251,514
    )
    
    
    (144,952
    )Tenant improvements
    
    
    (19,397
    )
    
    
    (20,014
    )Capital expenditures
    
    
    (21,475
    )
    
    
    (13,451
    )Proceeds from sales of property, net of selling costs
    
    
    528,735
    
    
    
    574,187Repayments of notes receivable
    
    
    12,150
    
    
    
    165Issuance of notes receivable
    
    
    (30,964
    )
    
    
    (26,727
    )Direct costs of Cornerstone merger
    
    
    
    
    
    
    (35,405
    )Distributions from partially-owned unconsolidated entities
    
    
    27,648
    
    
    
    2,707Capital contributions to partially-owned unconsolidated entities
    
    
    (10,836
    )
    
    
    (66,508
    )Net cash used in investing activities
    
    
    (71,898
    )
    
    
    (274,295
    )Cash flows from financing activities:Proceeds from dividend reinvestment plan and exercise of stock options
    
    
    22,539
    
    
    
    41,821Principal reductions of debt
    
    
    (186,741
    )
    
    
    (651,321
    )Proceeds from additional borrowings
    
    
    274,011
    
    
    
    625,260Net change in revolving credit balances
    
    
    41,783
    
    
    
    97,443Dividends paid to common and preferred unitholders
    
    
    (136,551
    )
    
    
    (115,593
    )Redemption of Preferred Series C Shares
    
    
    (50,083
    )
    
    
    Redemption of Preferred Series E Shares
    
    
    (28,444
    )
    
    
    Net proceeds from equity offering
    
    
    
    
    
    
    187,463Other financing activities, net
    
    
    (7,958
    )
    
    
    (7,661
    )Net cash provided by (used in) financing activities
    
    
    (71,444
    )
    
    
    177,412Increase (decrease) in cash and cash equivalents
    
    
    (1,438
    )
    
    
    58,525Cash and cash equivalents, beginning of period
    
    
    30,615
    
    
    
    10,725Cash and cash equivalents, end of period
    
    $
    29,177
    
    
    $
    69,250Supplemental disclosure of cash flow information:Cash paid during the period for interest, including amounts capitalized
    
    $
    103,727
    
    
    $
    97,356Cash paid during the period for income taxes
    
    $
    16,876
    
    
    $
    2,431Supplemental disclosure of non-cash transactions:Cash flow hedging activities
    
    $
    2,492
    
    
    $
    1,839
  5




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##### Table of Contents



COLONIAL REALTY LIMITED PARTNERSHIP
 
 NOTES TO
 CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 September 30, 2006
  The consolidated condensed financial statements of Colonial Realty Limited Partnership
have been prepared pursuant to the Securities and Exchange Commission (SEC) rules and
regulations. The following notes, which represent interim disclosures as required by the SEC,
highlight significant changes to the notes to the December 31, 2005 audited consolidated financial
statements of Colonial Realty Limited Partnership and should be read together with the consolidated
financial statements and notes thereto included in the Colonial Realty Limited Partnership 2005
Annual Report on Form 10-K .
 Note 1  Organization and Business
  Merger with Cornerstone Realty Income Trust
   Nine MonthsEndedSeptember 30,(amounts in thousands)
    
    2005Real estate assets acquired
    
    $
    1,461,310Assumption of notes and mortgages
    
    
    836,985Operating assets acquired
    
    
    20,758Operating liabilities acquired
    
    
    28,742Fair value of adjustments on notes and mortgages
    
    
    60,522Investments in partially owned entities acquired
    
    
    13,734Intangible assets acquired
    
    
    50,726Issuance of common units of beneficial interest
    
    
    462,347Issuance of preferred units of beneficial interest
    
    
    132,747Issuance of common units of operating partnership
    
    
    23,788
 6




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##### Table of Contents



Note 2  Summary of Significant Accounting Policies
 Basis of Presentation
  Consolidation of Variable Interest Entities,
 Federal Income Tax Status
   Use of Estimates
  7




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##### Table of Contents



Unaudited Interim Statements
  Revenue Recognition
   Notes Receivable
  Stock-Based Compensation
 Share Based Payment
  8




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##### Table of Contents



Three Months
    
    
    Nine MonthsEnded
    
    
    Ended(amounts in thousands)
    
    September 30, 2006
    
    
    September 30, 2006Beginning balance
    
    $
    9,630
    
    
    $
    3,646Amortization of deferred compensation
    
    
    (1,354
    )
    
    
    (3,143
    )Issuance of restricted shares
    
    
    
    
    
    
    7,773Balance, September 30, 2006
    
    $
    8,276
    
    
    $
    8,276
  For the Nine Months
    
    
    Weighted AverageEnded
    
    
    Grant DateSeptember 30, 2006
    
    
    Fair ValueNonvested Restricted Stock, December 31, 2005
    
    
    157,499
    
    
    $
    36.36Granted
    
    
    2,401
    
    
    $
    44.42Vested
    
    
    (12,179
    )
    
    $
    32.83Cancelled/Forfeited
    
    
    (2,393
    )
    
    $
    39.94Nonvested Restricted Stock, March 31, 2006
    
    
    145,328
    
    
    $
    36.72Granted
    
    
    179,908
    
    
    $
    46.38Vested
    
    
    (50,864
    )
    
    $
    36.88Cancelled/Forfeited
    
    
    (2,295
    )
    
    $
    38.21Nonvested Restricted Stock, June 30, 2006
    
    
    272,077
    
    
    $
    43.21Granted
    
    
    1,731
    
    
    $
    47.04Vested
    
    
    (3,385
    )
    
    $
    37.82Cancelled/Forfeited
    
    
    (1,522
    )
    
    $
    40.75Nonvested Restricted Stock, September 30, 2006
    
    
    268,901
    
    
    $
    43.31
    9




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##### Table of Contents



New Accounting Pronouncements
   Reclassifications
  Note 3 Capital Structure
   10




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##### Table of Contents



Note 4  Acquisition and Disposition Activity
 Property Acquisitions
        11




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##### Table of Contents



Property Dispositions
      Accounting for the Impairment on Disposal of Long-Lived
Assets
 12




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##### Table of Contents



Property
    
    Location
    
    Date Sold
    
    Units/ Square FeetMultifamilyArbor Trace
    
    Norfolk, VA
    
    April 2006
    
    
    148Colonial Village at Estrada
    
    Dallas, TX
    
    March 2006
    
    
    248Copper Crossing
    
    Fort Worth, TX
    
    March 2006
    
    
    400The Meadows I, II & III
    
    Asheville, NC
    
    March 2006
    
    
    392The Trestles
    
    Raleigh, NC
    
    March 2006
    
    
    280Colonial Grand at Caledon Woods
    
    Greenville, SC
    
    January 2006
    
    
    350Colonial Village at Paces Glen
    
    Charlotte, NC
    
    January 2006
    
    
    172Colonial Village at Remington Place
    
    Raleigh, NC
    
    January 2006
    
    
    136Colonial Village at Whitemarsh
    
    Savannah, GA
    
    January 2006
    
    
    352Summerwalk
    
    Charlotte, NC
    
    January 2006
    
    
    160The Timbers
    
    Raleigh, NC
    
    January 2006
    
    
    176The Landing
    
    Raleigh, NC
    
    December 2005
    
    
    200Arbors on Forest Ridge
    
    Fort Worth, TX
    
    October 2005
    
    
    210Cutters Point
    
    Dallas, TX
    
    October 2005
    
    
    196Eagle Crest
    
    Dallas, TX
    
    October 2005
    
    
    484Sierra Ridge
    
    San Antonio, TX
    
    October 2005
    
    
    230Timberglen
    
    Dallas, TX
    
    October 2005
    
    
    304Toscana
    
    Dallas, TX
    
    October 2005
    
    
    192Silverbrook
    
    Fort Worth, TX
    
    October 2005
    
    
    642The Meridian
    
    Austin, TX
    
    October 2005
    
    
    200Colonial Village at Lake Mary
    
    Lake Mary, FL
    
    May 2005
    
    
    504Colonial Village at Ashley Plantation
    
    Bluffton, SC
    
    March 2005
    
    
    414Colonial Village at Gainesville
    
    Gainesville, FL
    
    March 2005
    
    
    560Colonial Village at Galleria Woods
    
    Birmingham, AL
    
    March 2005
    
    
    244Colonial Village at TownPark (Sarasota)
    
    Bradenton, FL
    
    March 2005
    
    
    272Colonial Village at Walton Way
    
    Augusta, GA
    
    March 2005
    
    
    256Colonial Village at Wesleyan
    
    Macon, GA
    
    March 2005
    
    
    328OfficeColonial Bank Centre
    
    Miami, FL
    
    September 2006
    
    
    235,500RetailColonial Mall Macon
    
    Macon, GA
    
    July 2005
    
    
    1,446,000Colonial Mall Burlington
    
    Burlington, NC
    
    July 2005
    
    
    419,200Colonial Mall Temple
    
    Temple, TX
    
    April 2005
    
    
    555,600Colonial Mall Gadsden
    
    Gadsden, AL
    
    March 2005
    
    
    517,000
   13




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(amounts in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Property revenues:Base rent
    
    $
    7,750
    
    
    $
    18,138
    
    
    $
    27,938
    
    
    $
    59,411Percentage rent
    
    
    12
    
    
    
    168
    
    
    
    12
    
    
    
    463Tenant recoveries
    
    
    132
    
    
    
    205
    
    
    
    460
    
    
    
    4,469Other revenue
    
    
    920
    
    
    
    3,686
    
    
    
    3,289
    
    
    
    11,274Total revenues
    
    
    8,814
    
    
    
    22,197
    
    
    
    31,699
    
    
    
    75,617Property operating and administrative expenses
    
    
    4,094
    
    
    
    10,687
    
    
    
    14,190
    
    
    
    32,964Depreciation
    
    
    562
    
    
    
    3,628
    
    
    
    3,926
    
    
    
    11,037Amortization
    
    
    160
    
    
    
    1,945
    
    
    
    589
    
    
    
    4,241Total expenses
    
    
    4,816
    
    
    
    16,260
    
    
    
    18,705
    
    
    
    48,242Interest expense, net
    
    
    (740
    )
    
    
    (2,336
    )
    
    
    (3,094
    )
    
    
    (6,858
    )Income (loss) from investments
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    (170
    )Income from discontinued operations before net gain
on disposition of discontinued operations
    
    
    3,258
    
    
    
    3,585
    
    
    
    9,900
    
    
    
    20,347Net gain on disposition of discontinued operations
    
    
    23,238
    
    
    
    66,448
    
    
    
    40,983
    
    
    
    182,211Minority interest to limited partners
    
    
    7
    
    
    
    (149
    )
    
    
    (2,707
    )
    
    
    (641
    )Income from discontinued operations
    
    $
    26,503
    
    
    $
    69,884
    
    
    $
    48,176
    
    
    $
    201,917
 For-Sale Projects
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(amounts in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Condominium revenues, net
    
    $
    26,475
    
    
    $
    41,280
    
    
    $
    101,369
    
    
    $
    41,280Condominium costs
    
    
    (17,947
    )
    
    
    (33,925
    )
    
    
    (76,032
    )
    
    
    (33,925
    )Gains on condominium sales, before minority interest and income taxes
    
    
    8,528
    
    
    
    7,355
    
    
    
    25,337
    
    
    
    7,355Minority interest
    
    
    413
    
    
    
    (2,878
    )
    
    
    (2,225
    )
    
    
    (2,878
    )Provision for income taxes
    
    
    (2,340
    )
    
    
    (2,072
    )
    
    
    (7,454
    )
    
    
    (2,072
    )Gains on condominium sales, net of minority interest and income taxes
    
    $
    6,601
    
    
    $
    2,405
    
    
    $
    15,658
    
    
    $
    2,405
  14




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##### Table of Contents



Note 5  Net Income Per Unit
  Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,(amounts in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Income
(loss) from continuing operations
    
    $
    (1,974
    )
    
    $
    (8,706
    )
    
    $
    35,860
    
    
    $
    (21,332
    )Less: Distributions to general partner preferred unitholders
    
    
    (4,550
    )
    
    
    (6,232
    )
    
    
    (16,354
    )
    
    
    (16,159
    )Less: Distributions to limited partner preferred unitholders
    
    
    (1,813
    )
    
    
    (1,813
    )
    
    
    (5,438
    )
    
    
    (5,438
    )Less: Preferred unit issuance costs
    
    
    (45
    )
    
    
    
    
    
    
    (2,128
    )
    
    
    Net income available to common unitholders
    
    $
    (8,382
    )
    
    $
    (16,751
    )
    
    $
    11,940
    
    
    $
    (42,929
    )Denominator:Denominator for basic net income per unit  weighted average units
    
    
    56,286
    
    
    
    51,161
    
    
    
    56,084
    
    
    
    46,532Effect of dilutive securities:Trustee and employee stock options, treasury method
    
    
    
    
    
    
    
    
    
    
    486
    
    
    
    Denominator for diluted net income per unit 
adjusted weighted average units
    
    
    56,286
    
    
    
    51,161
    
    
    
    56,570
    
    
    
    46,532
  15




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##### Table of Contents



Note 6  Segment Information
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Segment Revenues:Multifamily
    
    $
    81,089
    
    
    $
    80,919
    
    
    $
    236,488
    
    
    $
    199,441Office
    
    
    41,735
    
    
    
    34,307
    
    
    
    131,659
    
    
    
    89,276Retail
    
    
    26,133
    
    
    
    36,800
    
    
    
    81,312
    
    
    
    122,330Total Segment Revenues
    
    
    148,957
    
    
    
    152,026
    
    
    
    449,459
    
    
    
    411,047Partially-owned unconsolidated entities
    
    
    (17,248
    )
    
    
    (5,572
    )
    
    
    (50,090
    )
    
    
    (15,503
    )Construction revenues
    
    
    6,868
    
    
    
    
    
    
    
    26,793
    
    
    
    Unallocated corporate revenues
    
    
    4,805
    
    
    
    1,631
    
    
    
    13,505
    
    
    
    5,190Discontinued operations property revenues
    
    
    (8,814
    )
    
    
    (20,457
    )
    
    
    (31,699
    )
    
    
    (70,324
    )Total Consolidated Revenues
    
    
    134,568
    
    
    
    127,628
    
    
    
    407,968
    
    
    
    330,410NOI:Segment NOI:Multifamily
    
    
    46,980
    
    
    
    47,400
    
    
    
    140,300
    
    
    
    118,335Office
    
    
    26,435
    
    
    
    23,257
    
    
    
    85,447
    
    
    
    61,044Retail
    
    
    18,339
    
    
    
    25,470
    
    
    
    58,265
    
    
    
    85,190Total Segment NOI
    
    
    91,754
    
    
    
    96,127
    
    
    
    284,012
    
    
    
    264,569Partially-owned unconsolidated entities
    
    
    (9,988
    )
    
    
    (3,317
    )
    
    
    (30,027
    )
    
    
    (9,164
    )Unallocated corporate revenues
    
    
    4,805
    
    
    
    1,631
    
    
    
    13,505
    
    
    
    5,190Discontinued operations property NOI
    
    
    (4,720
    )
    
    
    (10,955
    )
    
    
    (17,509
    )
    
    
    (40,941
    )Construction NOI
    
    
    215
    
    
    
    
    
    
    
    1,113
    
    
    
    General and administrative expenses
    
    
    (12,588
    )
    
    
    (9,993
    )
    
    
    (34,869
    )
    
    
    (26,962
    )Depreciation
    
    
    (35,976
    )
    
    
    (33,608
    )
    
    
    (109,030
    )
    
    
    (86,447
    )Amortization
    
    
    (4,908
    )
    
    
    (20,217
    )
    
    
    (16,347
    )
    
    
    (46,030
    )Other
    
    
    (236
    )
    
    
    39
    
    
    
    (672
    )
    
    
    (47
    )Income from operations
    
    
    28,358
    
    
    
    19,707
    
    
    
    90,176
    
    
    
    60,168Total other expense, net
    
    
    (30,332
    )
    
    
    (28,413
    )
    
    
    (54,316
    )
    
    
    (81,500
    )Income (loss) from continuing operations
    
    $
    (1,974
    )
    
    $
    (8,706
    )
    
    $
    35,860
    
    
    $
    (21,332
    )
 September 30,
    
    
    December 31,(in thousands)
    
    2006
    
    
    2005AssetsSegment AssetsMultifamily
    
    $
    2,511,487
    
    
    $
    2,430,752Office
    
    
    807,827
    
    
    
    958,131Retail
    
    
    679,328
    
    
    
    790,827Total Segment Assets
    
    
    3,998,642
    
    
    
    4,179,710Unallocated corporate assets (1)
    
    
    457,462
    
    
    
    319,517$
    4,456,104
    
    
    $
    4,499,227
 
 (1)
    
    Includes CRLPs investment in partially-owned entities of $115,490 as of September 30, 2006
and $123,700 as of
December 31, 2005. 16




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##### Table of Contents



Note 7  Investment in Partially Owned Entities
  (in thousands)Percent
    
    
    September 30,
    
    
    December 31,Owned
    
    
    2006
    
    
    2005Multifamily:Arbors at Windsor Lake, Columbia, SC
    
    
    10.00
    %
    
    $
    657
    
    
    $
    716Belterra, Ft. Worth, TX
    
    
    10.00
    %
    
    
    991
    
    
    
    Carter Regents Park, Atlanta, GA
    
    
    40.00
    %
    
    
    6,173
    
    
    
    3,000CG at Research Park, Durham, NC
    
    
    20.00
    %
    
    
    1,268
    
    
    
    1,570CG at Huntcliff Village, Atlanta, GA
    
    
    20.00
    %
    
    
    2,402
    
    
    
    CG at Canyon Creek, Austin, TX
    
    
    25.00
    %
    
    
    1,382
    
    
    
    CMS / Colonial Joint Venture I
    
    
    15.00
    %
    
    
    499
    
    
    
    944CMS / Colonial Joint Venture II
    
    
    
    (1)
    
    
    259
    
    
    
    597CMS Florida
    
    
    25.00
    %
    
    
    2,441
    
    
    
    2,721CMS Tennessee
    
    
    25.00
    %
    
    
    2,271
    
    
    
    2,377CV at Matthews Village, Charlotte, NC
    
    
    25.00
    %
    
    
    1,043
    
    
    
    DRA Alabama
    
    
    10.00
    %
    
    
    2,328
    
    
    
    2,403DRA Cunningham, Austin, TX
    
    
    20.00
    %
    
    
    1,052
    
    
    
    1,111DRA Southwest Partnership
    
    
    
    (2)
    
    
    16,264
    
    
    
    18,044DRA The Grove at Riverchase, Birmingham, AL
    
    
    20.00
    %
    
    
    1,564
    
    
    
    1,788Heritage at Deerwood, Jacksonville, FL
    
    
    47.00
    %(3)
    
    
    4,548
    
    
    
    Merritt at Godley Station, Pooler, GA
    
    
    35.00
    %
    
    
    3,084
    
    
    
    3,188Stone Ridge, Columbia, SC
    
    
    10.00
    %
    
    
    529
    
    
    
    49748,755
    
    
    
    38,956Office:600 Building Partnership, Birmingham, AL
    
    
    33.33
    %
    
    
    28
    
    
    
    11Douglas HCI, Coral Gables, FL
    
    
    25.00
    %(4)
    
    
    
    
    
    
    5,807Colonial Center Mansell Joint Venture
    
    
    15.00
    %(5)
    
    
    2,924
    
    
    
    DRA / Colonial Office Joint Venture
    
    
    15.00
    %
    
    
    40,897
    
    
    
    46,89643,849
    
    
    
    52,714Retail:Colonial Promenade Madison, Huntsville, AL
    
    
    25.00
    %
    
    
    2,316
    
    
    
    2,255South Florida Retail Joint Venture
    
    
    10.00
    %
    
    
    5,036
    
    
    
    GPT/Colonial Retail Joint Venture
    
    
    10.00
    %(6)
    
    
    (3,032
    )
    
    
    (2,311
    )Highway 150, LLC, Birmingham, AL
    
    
    10.00
    %
    
    
    62
    
    
    
    80Parkway Place Limited Partnership, Huntsville, AL
    
    
    45.00
    %
    
    
    11,315
    
    
    
    12,984Turkey Creek, Parkside Drive LLC Partnership
    
    
    50.00
    %(5)
    
    
    7,176
    
    
    
    18,98722,873
    
    
    
    31,995Other:Colonial / Polar-BEK Management Company,
Birmingham, AL
    
    
    50.00
    %
    
    
    13
    
    
    
    35$
    115,490
    
    
    $
    123,700
 
 (1)
    
    The CMS / Colonial Joint Venture II holds one property in which CRLP has a 15%
partnership interest and one in which CRLP has a 5% partnership interest.(2)
    
    The DRA Southwest Partnership holds 15 properties, 13 in which CRLP has a 24%
partnership interest and two in which CRLP has a 20% partnership interest.(3)
    
    CRLPs lending relationship with Heritage at Deerwood has characteristics that are
indicative of a real estate joint venture.(4)
    
    CRLPs interest in Douglas HCI was sold in connection with the disposal of CRLPs
interest in Colonnade Properties, LLC (see Note 3).(5)
    
    During the three months ended September 30, 2006,CRLP received distributions of
proceeds from debt financing from Colonial Center Mansell Joint Venture and Turkey Creek,
Parkside Drive LLC Partnership of $13.8 million and $12.0 million, respectively.(6)
    
    Amount includes the value of CRLPs investment of approximately $8.0 million, offset by
the excess basis difference on the transaction of approximately $10.3 million, which will
be amortized over the properties. 17




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##### Table of Contents



Note 8  Financing Activities
        18




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##### Table of Contents



Note 9  Derivatives and Hedging
      19




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##### Table of Contents



Fair ValueAt September 30, 2006Interest
    
    
    
    
    
    Asset (Liability)Product Type
    
    Notional Value
    
    Rate
    
    Maturity
    
    (in thousands)Interest Rate CAP, Cash Flow
    
    $19.7 million
    
    
    6.850
    %
    
    
    6/29/07
    
    
    $
    Interest Rate CAP, Cash Flow
    
    $16.7 million
    
    
    6.850
    %
    
    
    7/3/07
    
    
    
    Interest Rate CAP, Cash Flow
    
    $12.8 million
    
    
    6.000
    %
    
    
    7/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $22.4 million
    
    
    6.000
    %
    
    
    7/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $9.9 million
    
    
    6.000
    %
    
    
    7/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $10.0 million
    
    
    8.373
    %
    
    
    8/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $14.9 million
    
    
    7.543
    %
    
    
    8/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $7.4 million
    
    
    6.983
    %
    
    
    8/1/08
    
    
    
    1Interest Rate CAP, Cash Flow
    
    $6.2 million
    
    
    8.373
    %
    
    
    8/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $13.3 million
    
    
    6.786
    %
    
    
    9/1/08
    
    
    
    2Interest Rate CAP, Cash Flow
    
    $5.5 million
    
    
    7.900
    %
    
    
    2/1/09
    
    
    
    Interest Rate CAP, Cash Flow
    
    $17.6 million
    
    
    8.100
    %
    
    
    2/1/09
    
    
    
    1Interest Rate CAP, Cash Flow
    
    $10.2 million
    
    
    11.200
    %
    
    
    7/1/10
    
    
    
    Interest Rate SWAP, Cash Flow
    
    $100.0 million
    
    
    4.573
    %
    
    
    3/24/08
    
    
    
    702Interest Rate SWAP, Cash Flow
    
    $175.0 million
    
    
    4.877
    %
    
    
    7/13/17
    
    
    
    3,543
   20




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##### Table of Contents



Note 10  Subsequent Events
 Property Acquisition
  Property Disposition
  Distribution
  Strategic
Plan
  21




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
 22




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##### Table of Contents



COLONIAL REALTY LIMITED PARTNERSHIP
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
  
    
    national and local economic, business and real estate conditions including, but
not limited to, the effect of demand for multifamily units, office and retail rental
space, the extent, strength and duration of any economic recovery, such as the
effects on demand for units and rental space and the creation of new multifamily,
office and retail developments, availability and creditworthiness of tenants, the
level of lease rents, and the availability of financing for both tenants and us;
    
    adverse changes in real estate markets, including, but not limited to, the extent
of tenant bankruptcies, financial difficulties and defaults, the extent of future
demand for multifamily units and office and retail space in our core markets and
barriers of entry into new markets which we may seek to enter in the future, the
extent of decreases in rental rates, competition, our ability to identify and
consummate attractive acquisitions on favorable terms, our ability to consummate any
planned dispositions in a timely manner on acceptable terms;
    
    actions, strategies and performance of affiliates that we may not control or
companies, including joint ventures, in which we have made investments;
    
    changes in operating costs, including real estate taxes, utilities, and insurance;
    
    higher than expected construction costs;
    
    development or conversion of for-sale projects could adversely affect our results of operations;
    
    legislative or other regulatory decisions, including government approvals,
actions and initiatives, including the need for compliance with environmental and
safety requirements, and changes in laws and regulations or the interpretation
thereof;
    
    effects of tax legislative action;
    
    our general partners ability to maintain its status as a Real Estate Investment
Trust (REIT) for federal income tax purposes, our ability to maintain our status
as a partnership for federal income tax purposes, the ability of certain of our
subsidiaries to maintain their status as taxable REIT subsidiaries for federal
income tax purposes, and our ability and the ability of our subsidiaries to operate
effectively within the limitations imposed by these rules;
    
    effect of any rating agency actions on the cost and availability of new debt financing;
    
    level and volatility of interest rates or capital market conditions;
    
    effect of any terrorist activity or other heightened geopolitical crisis; and
    
    other factors affecting the real estate industry generally.
  23




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##### Table of Contents



General
 As used herein, the terms CRLP, we, us, our and Operating Partnership refer to
Colonial Realty Limited Partnership, a Delaware limited partnership, and its subsidiaries and other
affiliates, including, Colonial Properties Services Limited Partnership, Colonial Property
Services, Inc., and CLNL Acquisition Sub, LLC or, as the context may require, Colonial Realty
Limited Partnership only. As used herein, the term Company or the Trust includes Colonial
Properties Trust, an Alabama real estate investment trust, and one or more of its subsidiaries and
other affiliates, including CRLP, Colonial Properties Services Limited Partnership, Colonial
Properties Services, Inc. and CLNL Acquisition Sub, LLC or, as the context may require, Colonial
Properties Trust only or Colonial Realty Limited Partnership only.
     24




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##### Table of Contents



Consolidated PropertiesAs of and for the QuarterEnded September 30,2006
    
    2005Multifamily PropertiesPhysical Occupancy
    
    
    96.2
    %
    
    
    96.7
    %Same-Property Economic Occupancy (1)
    
    
    83.7
    %
    
    
    83.2
    %End of Month EffectiveRent per Unit per Month
    
    $
    700
    
    
    $
    675Capital Expenditures per Unit
    
    $
    213
    
    
    $
    173Office PropertiesPhysical Occupancy
    
    
    94.9
    %
    
    
    91.1
    %Base Rent per Square Foot
    
    $
    19.34
    
    
    $
    18.83Capital Expenditures per Square Foot
    
    $
    0.88
    
    
    $
    0.79Retail Properties (2)Physical Occupancy
    
    
    92.5
    %
    
    
    91.5
    %Base Rent per Square Foot
    
    $
    17.77
    
    
    $
    19.18Tenant Gross Sales per Square Foot
    
    $
    267.66
    
    
    $
    273.53
 
 (1)
    
    Economic Occupancy represents scheduled base rents, less vacancy loss, all
concessions adjusted for straight-line (including but not limited to: renewals,
move-ins, models, employee units), and bad debts divided by scheduled base rents.(2)
    
    Ten retail properties were contributed to joint ventures during the fourth
quarter of 2005 and the first quarter of 2006.  
    
    changes in job growth, household formation and population growth in our markets;
    
    changes in interest rates and lending availability;
    
    changes in insurance rates;
    
    supply and demand for apartment properties in our current markets; and
    
    competition, which could limit our ability to secure attractive investment
opportunities, lease apartment properties, or increase or maintain rents.
   25




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##### Table of Contents



Results of Operations  Three Months Ended September 30, 2006 and 2005
 Minimum rent
 Tenant recoveries
 Construction revenues and construction expenses
 Other property related revenue
 Other non-property related revenue
 Total property operating expenses
 26




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##### Table of Contents



General and administrative expenses
 Depreciation and amortization expenses
 Interest expense and debt cost amortization
 Interest income
 Income (loss) from partially owned entities
 Gains from sales of property, net of income taxes
 Income from discontinued operations
 Results of Operations  Nine Months Ended September 30, 2006 and 2005
 Minimum rent
 Tenant recoveries
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Construction revenues and construction expenses
 Other property related revenue
 Other non-property related revenue
 Total property operating expenses
 General and administrative expenses
 Depreciation and amortization expenses
 Interest expense and debt cost amortization
 Loss on retirement of debt
 Interest income
 Income (loss) from partially owned entities
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##### Table of Contents



Gains on hedging activities
 Gains from sales of property, net of income taxes
 Income from discontinued operations
 Liquidity and Capital Resources
    Short-Term Liquidity Needs
    29




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Long-Term Liquidity Needs
     30




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##### Table of Contents



Unsecured Revolving Credit Facilities
       31




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##### Table of Contents



Investing Activities
    Distribution
  Critical Accounting Policies and Estimates
  Derivatives and Hedging
  32




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##### Table of Contents



Fair ValueAt September 30, 2006Interest
    
    
    
    
    
    Asset (Liability)Product Type
    
    Notional Value
    
    Rate
    
    Maturity
    
    (in thousands)Interest Rate CAP, Cash Flow
    
    $19.7 million
    
    
    6.850
    %
    
    
    6/29/07
    
    
    $
    Interest Rate CAP, Cash Flow
    
    $16.7 million
    
    
    6.850
    %
    
    
    7/3/07
    
    
    
    Interest Rate CAP, Cash Flow
    
    $12.8 million
    
    
    6.000
    %
    
    
    7/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $22.4 million
    
    
    6.000
    %
    
    
    7/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $9.9 million
    
    
    6.000
    %
    
    
    7/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $10.0 million
    
    
    8.373
    %
    
    
    8/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $14.9 million
    
    
    7.543
    %
    
    
    8/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $7.4 million
    
    
    6.983
    %
    
    
    8/1/08
    
    
    
    1Interest Rate CAP, Cash Flow
    
    $6.2 million
    
    
    8.373
    %
    
    
    8/1/08
    
    
    
    Interest Rate CAP, Cash Flow
    
    $13.3 million
    
    
    6.786
    %
    
    
    9/1/08
    
    
    
    2Interest Rate CAP, Cash Flow
    
    $5.5 million
    
    
    7.900
    %
    
    
    2/1/09
    
    
    
    Interest Rate CAP, Cash Flow
    
    $17.6 million
    
    
    8.100
    %
    
    
    2/1/09
    
    
    
    1Interest Rate CAP, Cash Flow
    
    $10.2 million
    
    
    11.200
    %
    
    
    7/1/10
    
    
    
    Interest Rate SWAP, Cash Flow
    
    $100.0 million
    
    
    4.573
    %
    
    
    3/24/08
    
    
    
    702Interest Rate SWAP, Cash Flow
    
    $175.0 million
    
    
    4.877
    %
    
    
    7/13/17
    
    
    
    3,543
     33




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Inflation
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
 Item 4. Controls and Procedures
 (a)
    
    Disclosure controls and procedures.
  (b)
    
    Changes in internal control over financial reporting.
  34




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##### Table of Contents



PART
II  OTHER INFORMATION
 
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 6. Exhibits
  35




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##### Table of Contents



SIGNATURES
  COLONIAL REALTY LIMITED PARTNERSHIP,
A Delaware limited partnershipBy:
    
    Colonial Properties Trust,Its General PartnerDate: November 8, 2006
    
    By:
    
    /s/ Weston M. AndressWeston M. AndressPresident and Chief Financial OfficerDate: November 8, 2006
    
    By:
    
    /s/ John E. TomlinsonJohn E. TomlinsonExecutive Vice President &Chief Accounting Officer(Principal Accounting Officer)
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##### Table of Contents



Index of Exhibits
 12.1
    
    Ratio of Earnings to Fixed Charges
    
    Filed herewith15.1
    
    Letter re: Unaudited Interim Financial Information
    
    Filed herewith31.1
    
    CEO Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Filed herewith31.2
    
    CFO Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Filed herewith32.1
    
    CEO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    Filed herewith32.2
    
    CFO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    Filed herewith
 37