##### Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K





þ Annual report pursuant to the Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended
December 31, 2008

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: 1-07533

FEDERAL REALTY INVESTMENT TRUST

(Exact Name of Registrant as Specified in its Declaration of Trust)



|                                                |  |                                  
|----------------------------------------------- |  | ---------------------------------
|Maryland                                        |  | 52-0782497                       
|(State of Organization)                         |  | (IRS Employer Identification No.)
|                                                | 
|1626 East Jefferson Street, Rockville, Maryland |  | 20852                            
|(Address of Principal Executive Offices)        |  | (Zip Code)                       

(301) 998-8100

(Registrants Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of
the Act:



|                                                                                                             |  |                                          
|------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------
|Title of Each Class                                                                                          |  | Name Of Each Exchange On Which Registered
|Common Shares of Beneficial Interest, $.01 par value per share, with associated Common Share Purchase Rights |  | New York Stock Exchange                  

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes     ̈ No

Indicate by check mark if the Registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act.  ̈ Yes    þ No

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 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 the past 90 days. þ Yes     ̈ No

Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ

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 definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):



|                        |  |   |  |                                               |  |                           |  |  
|----------------------- |  | - |  | --------------------------------------------- |  | ------------------------- |  | -
|Large Accelerated Filer |  | þ |  |                                               |  | Accelerated Filer         |  |  ̈
|Non-Accelerated Filer   |  |  ̈ |  | (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  ̈ Yes    þ No

The aggregate market value of
the Registrants common shares held by non-affiliates of the Registrant, based upon the closing sales price of the Registrants common shares on June 30, 2008 was $4.1 billion.

The number of Registrants common shares outstanding on February 24, 2009 was 59,075,627.



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FEDERAL REALTY INVESTMENT TRUST

ANNUAL REPORT ON FORM 10-K

FISCAL YEAR ENDED DECEMBER 31, 2008

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants Proxy Statement to be filed with the Securities and Exchange Commission for Registrants 2009 annual meeting of shareholders to be held in May 2009 will be incorporated by reference into Part III
hereof.

TABLE OF CONTENTS



|           |  |                                                                                                        |  |   
|---------- |  | ------------------------------------------------------------------------------------------------------ |  | --
|PART I     |  |                                                                                                        |  |   
|Item 1.    |  | Business                                                                                               |  | 3 
|Item 1A.   |  | Risk Factors                                                                                           |  | 8 
|Item 1B.   |  | Unresolved Staff Comments                                                                              |  | 17
|Item 2.    |  | Properties                                                                                             |  | 17
|Item 3.    |  | Legal Proceedings                                                                                      |  | 25
|Item 4.    |  | Submission of Matters to a Vote of Shareholders                                                        |  | 25
|           |  |                                                                                                       
|PART II    |  |                                                                                                        |  |   
|Item 5.    |  | Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities |  | 26
|Item 6.    |  | Selected Financial Data                                                                                |  | 28
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                  |  | 30
|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                                             |  | 56
|Item 8.    |  | Financial Statements and Supplementary Data                                                            |  | 57
|Item 9.    |  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure                   |  | 57
|Item 9A.   |  | Controls and Procedures                                                                                |  | 57
|Item 9B.   |  | Other Information                                                                                      |  | 59
|           |  |                                                                                                       
|PART III   |  |                                                                                                        |  |   
|Item 10.   |  | Trustees, Executive Officers and Corporate Governance                                                  |  | 60
|Item 11.   |  | Executive Compensation                                                                                 |  | 60
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters         |  | 60
|Item 13.   |  | Certain Relationships and Related Transactions, and Trustee Independence                               |  | 60
|Item 14.   |  | Principal Accountant Fees and Services                                                                 |  | 60
|           |  |                                                                                                       
|PART IV    |  |                                                                                                        |  |   
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                             |  | 61
|           | 
|SIGNATURES |  | 62                                                                                                    



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PART I

ITEM 1.    BUSINESS

References to we,
us, our or the Trust refer to Federal Realty Investment Trust and our business and operations conducted through our directly or indirectly owned subsidiaries.

General

We are an equity real estate investment trust
(REIT) specializing in the ownership, management, development and redevelopment of high quality retail and mixed-use properties located primarily in densely populated and affluent communities in strategically selected metropolitan
markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California. As of December 31, 2008, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which
are operated as 84 predominantly retail real estate projects comprising approximately 18.1 million square feet. In total, the real estate projects were 95.0% leased and 94.3% occupied at December 31, 2008. A joint venture in which we own a
30% interest owned seven retail real estate projects totaling approximately 1.0 million square feet as of December 31, 2008. In total, the joint venture properties in which we own an interest were 97.4% leased and occupied at
December 31, 2008. We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for 41 consecutive years.

We were founded in 1962 as a real estate investment trust under the laws of the District of Columbia and re-formed as a real estate investment trust in the state of
Maryland in 1999. Our principal executive offices are located at 1626 East Jefferson Street, Rockville, Maryland 20852 and our telephone number is (301) 998-8100. Our Web site address is www.federalrealty.com. The information contained
on our website is not a part of this report.

Business Objectives and Strategies

Our primary business objective is to own, manage, acquire and redevelop a portfolio of high quality retail properties, with the dominant property type being grocery anchored community and neighborhood shopping
centers, that will:



| |  |  | generate higher internal growth than our peers;
| | - |  | -----------------------------------------------



| |  |  | protect investor capital;
| | - |  | -------------------------



| |  |  | provide increasing cash flow for distributions to shareholders; and
| | - |  | -------------------------------------------------------------------



| |  |  | provide potential for capital appreciation.
| | - |  | -------------------------------------------

Our
traditional focus has been and remains on grocery anchored community and neighborhood shopping centers. Late in 1994, recognizing a trend of increased consumer acceptance of retailer expansion to main streets, we expanded our investment strategy to
include street retail and mixed-use properties. The mixed-use properties are typically centered around a retail component but also include office, residential and/or hotel components.

Operating Strategies

Our core operating strategy is to actively
manage our properties to maximize rents and maintain high occupancy levels by attracting and retaining a strong and diverse base of tenants and replacing weaker, underperforming tenants with stronger ones. Our properties are generally located in
some of the most densely populated and affluent areas of the country. In addition, because of the in-fill nature of our locations, our properties generally face less competition per capita than properties owned by our peers. These strong
demographics help our tenants generate higher sales, which has enabled us to maintain high occupancy rates, charge higher rental rates, and maintain steady rent growth, all of which increase the value of our portfolio. Our operating strategies also
include:



| |  |  | increasing rental rates through the renewal of expiring leases or the leasing of space to new tenants at higher rental rates while limiting vacancy and down-time;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | maintaining a diversified tenant base, thereby limiting exposure to any one tenants financial difficulties;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | monitoring the merchandising mix of our tenant base to achieve a balance of strong national and regional tenants with local specialty tenants;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | minimizing overhead and operating costs;
| | - |  | ----------------------------------------



| |  |  | monitoring the physical appearance of our properties and the construction quality, condition and design of the buildings and other improvements located on our
properties to maximize our ability to attract customers and thereby generate higher rents and occupancy rates;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | developing local and regional market expertise in order to capitalize on market and retailing trends;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | leveraging the contacts and experience of our management team to build and maintain long-term relationships with tenants, investors and financing sources; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | providing exceptional customer service.
| | - |  | ---------------------------------------

Investing Strategies

Our investment strategy is to deploy capital at risk-adjusted rates of return that exceed our weighted average cost of
capital in projects that have potential for future income growth.

Our investments primarily fall into one of the following five
categories:



| |  |  | renovating, expanding, reconfiguring and/or retenanting our existing properties to take advantage of under-utilized land or existing square footage to increase
revenue;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | renovating or expanding tenant spaces for tenants capable of producing higher sales, and therefore, paying higher rents, including expanding space available to an
existing tenant that is performing well but is operating out of an old or otherwise inefficient store format;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | acquiring community and neighborhood shopping centers, located in densely populated or affluent areas where barriers to entry for further development are high, and
that have possibilities for enhancing operating performance through renovation, expansion, reconfiguration and/or retenanting;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | developing the retail portions of mixed-use properties and developing other portions of mixed-use properties we already own; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | acquiring, in partnership with longer term investors who contribute a substantial portion of the equity needed to acquire those properties, stabilized community and
neighborhood shopping centers, located in densely populated or affluent areas where barriers to entry for further development are high.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investment Criteria

When we evaluate potential redevelopment, retenanting, expansion and acquisition opportunities, we consider such
factors as:



| |  |  | the expected returns in relation to our cost of capital as well as the anticipated risk we will face in achieving the expected returns;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the anticipated growth rate of operating income generated by the property;
| | - |  | --------------------------------------------------------------------------



| |  |  | the tenant mix at the property, tenant sales performance and the creditworthiness of those tenants;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | the geographic area in which the property is located, including the population density and household incomes, as well as the population and income trends in that
geographic area;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competitive conditions in the vicinity of the property, including competition for tenants and the ability to create competing properties through redevelopment, new
construction or renovation;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | access to and visibility of the property from existing roadways and the potential for new, widened or realigned, roadways within the propertys trade area,
which may affect access and commuting and shopping patterns;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the level and success of our existing investments in the market area;
| | - |  | ---------------------------------------------------------------------



| |  |  | the current market value of the land, buildings and other improvements and the potential for increasing those market values; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | the physical condition of the land, buildings and other improvements, including the structural and environmental condition.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

Financing Strategies

Our financing strategies are designed to enable
us to maintain a strong balance sheet while retaining sufficient flexibility to fund our operating and investing activities in the most cost-efficient way possible. Our financing strategies include:



| |  |  | maintaining a prudent level of overall leverage and an appropriate pool of unencumbered properties that is sufficient to support our unsecured borrowings;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | managing our exposure to variable-rate debt;
| | - |  | --------------------------------------------



| |  |  | maintaining an available line of credit to fund short-term operating needs;
| | - |  | ---------------------------------------------------------------------------



| |  |  | taking advantage of market opportunities to refinance existing debt, reduce interest costs and manage our debt maturity schedule so that a significant portion of
our debt does not mature in any one year;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | selling properties that have limited growth potential or are not a strategic fit within our overall portfolio and redeploying the proceeds to redevelop, renovate,
retenant and/or expand our existing properties, acquire new properties or reduce debt; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | utilizing the most advantageous long-term source of capital available to us to finance redevelopment and acquisition opportunities, which may include:
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the sale of our equity or debt securities through public offerings or private placements,
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | the incurrence of indebtedness through secured or unsecured borrowings,
| | - |  | -----------------------------------------------------------------------



| |  |  | the issuance of operating units in a new or existing downREIT partnership that is controlled and consolidated by us (generally operating units in a
downREIT partnership are issued in exchange for a tax deferred contribution of property; these units receive the same distributions as our common shares and the holders of these units have the right to exchange their units for cash or
the same number of our common shares, at our option), or
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the use of joint venture arrangements.
| | - |  | --------------------------------------

Employees

At February 24, 2009, we had 276 full-time employees and 133 part-time employees. None of our employees are represented by a collective bargaining
unit. We believe that our relationship with our employees is good.

Tax Status

We elected to be taxed as a real estate investment trust for federal income tax purposes beginning with our taxable year ended December 31, 1962. As a REIT, we are generally not subject to federal income tax on
REIT taxable income that we distribute to our shareholders. Under the Internal Revenue Code of 1986, as amended, which we refer to as the Code, REITs are subject to numerous organizational and operational requirements,



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including the requirement to generally distribute at least 90% of REIT taxable income each year. We will be subject to federal income tax on our taxable
income (including any applicable alternative minimum tax) at regular corporate rates if we fail to qualify as a REIT for tax purposes in any taxable year, or to the extent we distribute less than 100% of REIT taxable income. We will also not be
permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost. Even if we qualify as a REIT for federal income tax purposes, we may be subject to certain state and
local income and franchise taxes and to federal income and excise taxes on our undistributed REIT taxable income.

We have elected to treat certain of our
subsidiaries as taxable REIT subsidiaries, which we refer to as a TRS. In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Code. A TRS is subject to federal and
state income taxes. In 2008, 2007, and 2006, our TRS incurred approximately $(0.8) million, $1.5 million and $2.4 million, respectively, of income taxes, primarily related to sales of condominiums at Santana Row, sales of three properties in 2007,
and our investment in certain restaurant joint ventures at Santana Row.

Governmental Regulations Affecting Our Properties

We and our properties are subject to a variety of federal, state and local environmental, health, safety and similar laws, including:



| |  |  | the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, which we refer to as CERCLA;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the Resource Conservation & Recovery Act;
| | - |  | -----------------------------------------



| |  |  | the Federal Clean Water Act;
| | - |  | ----------------------------



| |  |  | the Federal Clean Air Act;
| | - |  | --------------------------



| |  |  | the Toxic Substances Control Act;
| | - |  | ---------------------------------



| |  |  | the Occupational Safety & Health Act; and
| | - |  | -----------------------------------------



| |  |  | the Americans with Disabilities Act.
| | - |  | ------------------------------------

The
application of these laws to a specific property that we own depends on a variety of property-specific circumstances, including the current and former uses of the property, the building materials used at the property and the physical layout of the
property. Under certain environmental laws, principally CERCLA, we, as the owner or operator of properties currently or previously owned, may be required to investigate and clean up certain hazardous or toxic substances, asbestos-containing
materials, or petroleum product releases at the property. We may also be held liable to a governmental entity or third parties for property damage and for investigation and clean up costs incurred in connection with the contamination, whether or not
we knew of, or were responsible for, such contamination. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. As the owner or
operator of real estate, we also may be liable under common law to third parties for damages and injuries resulting from environmental contamination emanating from the real estate. Such costs or liabilities could exceed the value of the affected
real estate. The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell or lease real estate or to borrow using the real estate as collateral.

Neither existing environmental, health, safety and similar laws nor the costs of our compliance with these laws has had a material adverse effect on our financial
condition or results of operations, and management does not believe they will in the future. In addition, we have not incurred, and do not expect to incur, any material costs or liabilities due to environmental contamination at properties we
currently own or have owned in the past. However, we cannot predict the impact of new or changed laws or regulations on properties we currently own or may acquire in the future. We have no current plans for substantial capital expenditures with
respect to compliance with environmental, health, safety and similar laws and we carry environmental insurance which covers a number of environmental risks for most of our properties.



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Competition

Numerous
commercial developers and real estate companies compete with us with respect to the leasing and the acquisition of properties. Some of these competitors may possess greater capital resources than we do, although we do not believe that any single
competitor or group of competitors in any of the primary markets where our properties are located are dominant in that market. This competition may:



| |  |  | reduce the number of properties available for acquisition;
| | - |  | ----------------------------------------------------------



| |  |  | increase the cost of properties available for acquisition;
| | - |  | ----------------------------------------------------------



| |  |  | interfere with our ability to attract and retain tenants, leading to increased vacancy rates and/or reduced rents; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | adversely affect our ability to minimize expenses of operation.
| | - |  | ---------------------------------------------------------------

Retailers at our properties also face increasing competition from outlet stores, discount shopping clubs, superstores, and other forms of marketing of goods and services, such as direct mail, electronic commerce and
telemarketing. This competition could contribute to lease defaults and insolvency of tenants.

Available Information

Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the Investor Information section of our website at www.federalrealty.com as soon as reasonably practicable after we electronically file
the material with, or furnish the material to, the Securities and Exchange Commission, or the SEC.

Our Corporate Governance Guidelines, Code of Business
Conduct, Code of Ethics applicable to our Chief Executive Officer and senior financial officers, Whistleblower Policy, organizational documents and the charters of our audit committee, compensation committee and nominating and corporate governance
committee are all available in the Corporate Governance section of the Investor Information section of our website.

Amendments to the Code of Ethics or
Code of Business Conduct or waivers that apply to any of our executive officers or our senior financial officers will be disclosed in that section of our website as well.

You may obtain a printed copy of any of the foregoing materials from us by writing to us at Investor Relations, Federal Realty Investment Trust, 1626 East Jefferson Street, Rockville, Maryland 20852.



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ITEM 1A.    RISK FACTORS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Also, documents that we incorporate by reference into this Annual Report on Form 10-K, including documents that we subsequently file with the
Securities and Exchange Commission, which we refer to as the SEC, will contain forward-looking statements. When we refer to forward-looking statements or information, sometimes we use words such as may, will,
could, should, plans, intends, expects, believes, estimates, anticipates and continues. In particular, the below risk factors describe
forward-looking information. The risk factors describe risks that may affect these statements but are not all-inclusive, particularly with respect to possible future events. Many things can happen that can cause actual results to be different from
those we describe. These factors include, but are not limited to the following:

Revenue from our properties may be reduced or limited if the retail
operations of our tenants are not successful.

Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of
rent and other charges due under their leases on a timely basis. Some of our leases provide for the payment, in addition to base rent, of additional rent above the base amount according to a specified percentage of the gross sales generated by the
tenants and generally provide for reimbursement of real estate taxes and expenses of operating the property. The current downturn in the economy may impact the success of our tenants retail operations and therefore the amount of rent and
expense reimbursements we receive from our tenants. We have seen tenants experiencing declining sales, vacating early, or filing for bankruptcy, as well as seeking rent relief from us as landlord. Any reduction in our tenants abilities to pay
base rent, percentage rent or other charges, including the filing by any of our tenants for bankruptcy protection, may adversely affect our financial condition and results of operations.

Our net income depends on the success and continued presence of our anchor tenants.

Our net income could
be adversely affected in the event of a downturn in the business, or the bankruptcy or insolvency, of any anchor store or anchor tenant. Anchor tenants generally occupy large amounts of square footage, pay a significant portion of the total rents at
a property and contribute to the success of other tenants by drawing significant numbers of customers to a property. The closing of one or more anchor stores at a property could adversely affect that property and result in lease terminations by, or
reductions in rent from, other tenants whose leases may permit termination or rent reduction in those circumstances or whose own operations may suffer as a result. As a result of the current downturn in the economy, we have seen a decrease in the
number of tenants available to fill anchor spaces due to the recent bankruptcies. Therefore, tenant demand for certain of our anchor spaces may decrease and as a result, we may in certain categories see an increase in vacancy and/or a decrease in
rents for those spaces that could have a negative impact to our net income.

We may experience difficulty or delay in renewing leases or re-leasing
space.

We derive most of our revenue directly or indirectly from rent received from our tenants. We are subject to the risks that, upon expiration or
termination of leases, whether by their terms, as a result of a tenant bankruptcy or otherwise, leases for space in our properties may not be renewed, space may not be re-leased, or the terms of renewal or re-lease, including the cost of required
renovations or concessions to tenants, may be less favorable than current lease terms. As a result, our results of operations and our net income could be reduced.

The amount of debt we have and the restrictions imposed by that debt could adversely affect our business and financial condition.

As of
December 31, 2008, we had approximately $1.7 billion of debt outstanding. Of that outstanding debt, approximately $365.3 million was secured by 17 of our properties and approximately $63.5 million represented capital lease obligations on four
of our properties. In addition, we own a 30% interest in a joint venture that had



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$81.4 million of debt secured by six properties as of December 31, 2008. Approximately $1.4 billion (81%) of our debt as of December 31, 2008,
which includes all of our property secured debt and our capital lease obligations, is fixed rate debt. Our joint ventures debt of $81.4 million is also fixed rate debt. Our organizational documents do not limit the level or amount of debt that
we may incur. The amount of our debt outstanding from time to time could have important consequences to our shareholders. For example, it could:



| |  |  | require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, property
acquisitions, redevelopments and other appropriate business opportunities that may arise in the future;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our ability to make distributions on our outstanding common shares and preferred shares;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | make it difficult to satisfy our debt service requirements;
| | - |  | -----------------------------------------------------------



| |  |  | require us to dedicate increased amounts of our cash flow from operations to payments on fixed rate debt upon refinancing or on our variable rate, unhedged debt, if
interest rates rise;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to, changes in our business and the factors that affect the profitability of our business;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our ability to obtain any additional debt or equity financing we may need in the future for working capital, debt refinancing, capital expenditures,
acquisitions, redevelopments or other general corporate purposes or to obtain such financing on favorable terms; and/or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our flexibility in conducting our business, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness will depend primarily
on our future performance, which to a certain extent is subject to economic, financial, competitive and other factors beyond our control. There can be no assurance that our business will continue to generate sufficient cash flow from operations in
the future to service our debt or meet our other cash needs. If we are unable to generate this cash flow from our business, we may be required to refinance all or a portion of our existing debt, sell assets or obtain additional financing to meet our
debt obligations and other cash needs, including the payment of dividends required to maintain our status as a real estate investment trust. We cannot assure you that any such refinancing, sale of assets or additional financing would be possible on
terms that we would find acceptable.

We are obligated to comply with financial and other covenants pursuant to our debt obligations that could restrict
our operating activities, and the failure to comply with such covenants could result in defaults that accelerate payment under our debt.

Our credit
facility and term loans include financial covenants that may limit our operating activities in the future. We are also required to comply with additional covenants that include, among other things, provisions:



| |  |  | relating to the maintenance of property securing a mortgage;
| | - |  | ------------------------------------------------------------



| |  |  | restricting our ability to pledge assets or create liens;
| | - |  | ---------------------------------------------------------



| |  |  | restricting our ability to incur additional debt;
| | - |  | -------------------------------------------------



| |  |  | restricting our ability to amend or modify existing leases at properties securing a mortgage;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | restricting our ability to enter into transactions with affiliates; and
| | - |  | -----------------------------------------------------------------------



| |  |  | restricting our ability to consolidate, merge or sell all or substantially all of our assets.
| | - |  | ---------------------------------------------------------------------------------------------

As of December 31, 2008, we were in compliance with all of our financial covenants. If we were to breach any of our debt covenants, including the covenants listed
above, and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately



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begin proceedings to take possession of the property securing the loan. Many of our debt arrangements, including our public notes and our credit facility,
are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a covenant under certain of our other debt obligations. As a result,
any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.

Our development activities have inherent risks.

The ground-up
development of improvements on real property, as opposed to the renovation and redevelopment of existing improvements, presents substantial risks. We generally do not intend to undertake on our own construction of any new large-scale mixed-use,
ground-up development projects; however, we do intend to complete the development and construction of remaining phases of projects we already have started, such as Santana Row in San Jose, California. We may undertake development of these and other
projects if it is justifiable on a risk-adjusted return basis. If additional phases of any of our existing projects or if any new projects are not successful, it may adversely affect our financial condition and results of operations.

In addition to the risks associated with real estate investment in general as described elsewhere, the risks associated with our remaining development activities
include:



| |  |  | significant time lag between commencement and stabilization subjects us to greater risks due to fluctuations in the general economy;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | failure or inability to obtain construction or permanent financing on favorable terms;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | expenditure of money and time on projects that may never be completed;
| | - |  | ----------------------------------------------------------------------



| |  |  | inability to achieve projected rental rates or anticipated pace of lease-up;
| | - |  | ----------------------------------------------------------------------------



| |  |  | higher than estimated construction or operating costs, including labor and material costs; and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | possible delay in completion of a project because of a number of factors, including weather, labor disruptions, construction delays or delays in receipt of zoning
or other regulatory approvals, acts of terror or other acts of violence, or acts of God (such as fires, earthquakes or floods).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Redevelopments and acquisitions may fail to perform as expected.

Our investment strategy includes the redevelopment and acquisition of
community and neighborhood shopping centers in densely populated areas with high average household incomes and significant barriers to adding competitive retail supply. The redevelopment and acquisition of properties entails risks that include the
following, any of which could adversely affect our results of operations and our ability to meet our obligations:



| |  |  | our estimate of the costs to improve, reposition or redevelop a property may prove to be too low, or the time we estimate to complete the improvement, repositioning
or redevelopment may be too short. As a result, the property may fail to achieve the returns we have projected, either temporarily or for a longer time;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not be able to integrate an acquisition into our existing operations successfully;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project, within the time frames we project, at the time we make the decision
to invest, which may result in the properties failure to achieve the returns we projected;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs until after the
property is acquired, which could significantly increase our total acquisition costs; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller of such building or property, may fail
to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ability to
grow will be limited if we cannot obtain additional capital.

Our growth strategy is focused on the redevelopment of properties we already own and the
acquisition of additional properties. We believe that it will be difficult to fund our expected growth with cash from operating activities because, in addition to other requirements, we are generally required to distribute to our shareholders at
least 90% of our REIT taxable income each year to continue to qualify as a real estate investment trust, or REIT, for federal income tax purposes. As a result, we must rely primarily upon the availability of debt or equity capital, which may or may
not be available on favorable terms or at all. The debt could include mortgage loans from third parties or the sale of debt securities. The current recession and dislocation in the capital markets, however, has resulted in less favorable terms and
availability than in recent years for debt financings. Equity capital could include our common shares or preferred shares. We cannot guarantee that additional financing, refinancing or other capital will be available in the amounts we desire or on
favorable terms. Our access to debt or equity capital depends on a number of factors, including the markets perception of our growth potential, our ability to pay dividends, and our current and potential future earnings. Depending on the
outcome of these factors as well as the impact of the current recession, we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.

Rising interest rates could adversely affect our cash flow and the market price of our outstanding debt and preferred shares.

Of our approximately $1.7 billion of debt outstanding as of December 31, 2008, approximately $332.9 million bears interest at variable rates and was unhedged.
We may borrow additional funds at variable interest rates in the future. Increases in interest rates would increase the interest expense on our variable rate debt and reduce our cash flow, which could adversely affect our ability to service our debt
and meet our other obligations and also could reduce the amount we are able to distribute to our shareholders. Although we have in the past and may in the future enter into hedging arrangements or other transactions as to a portion of our variable
rate debt to limit our exposure to rising interest rates, the amounts we are required to pay under the variable rate debt to which the hedging or similar arrangements relate may increase in the event of non-performance by the counterparties to any
of our hedging arrangements. In addition, an increase in market interest rates may lead purchasers of our debt securities and preferred shares to demand a higher annual yield, which could adversely affect the market price of our outstanding debt
securities and preferred shares and the cost and/or timing of refinancing or issuing additional debt securities or preferred shares.

Our performance
and value are subject to general risks associated with the real estate industry.

Our economic performance and the value of our real estate assets, and,
consequently, the value of our investments, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay
distributions to our shareholders will be adversely affected. As a real estate company, we are susceptible to the following real estate industry risks:



| |  |  | economic downturns in general, or in the areas where our properties are located;
| | - |  | --------------------------------------------------------------------------------



| |  |  | adverse changes in local real estate market conditions, such as an oversupply or reduction in demand;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | changes in tenant preferences that reduce the attractiveness of our properties to tenants;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | zoning or regulatory restrictions;
| | - |  | ----------------------------------



| |  |  | decreases in market rental rates;
| | - |  | ---------------------------------



| |  |  | weather conditions that may increase or decrease energy costs and other weather-related expenses;
| | - |  | -------------------------------------------------------------------------------------------------



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| |  |  | costs associated with the need to periodically repair, renovate and re-lease space; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | increases in the cost of adequate maintenance, insurance and other operating costs, including real estate taxes, associated with one or more properties, which may
occur even when circumstances such as market factors and competition cause a reduction in revenues from one or more properties, although real estate taxes typically do not increase upon a reduction in such revenues.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Many real estate costs are fixed, even if income from our properties decreases.

Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated with real estate investment, such as real estate taxes, insurance and maintenance costs,
generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the property. As a result, cash flow from the operations of our properties may be reduced if a
tenant does not pay its rent or we are unable to rent our properties on favorable terms. Under those circumstances, we might not be able to enforce our rights as landlord without delays and may incur substantial legal costs. Additionally, new
properties that we may acquire or develop may not produce any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with such new properties until
they are fully leased.

Competition may limit our ability to purchase new properties and generate sufficient income from tenants.

Numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties and properties for acquisition. This competition
may:



| |  |  | reduce properties available for acquisition;
| | - |  | --------------------------------------------



| |  |  | increase the cost of properties available for acquisition;
| | - |  | ----------------------------------------------------------



| |  |  | reduce rents payable to us;
| | - |  | ---------------------------



| |  |  | interfere with our ability to attract and retain tenants;
| | - |  | ---------------------------------------------------------



| |  |  | lead to increased vacancy rates at our properties; and
| | - |  | ------------------------------------------------------



| |  |  | adversely affect our ability to minimize expenses of operation.
| | - |  | ---------------------------------------------------------------

Retailers at our properties also face increasing competition from outlet stores, discount shopping clubs, and other forms of marketing of goods, such as direct mail, internet marketing and telemarketing. This
competition could contribute to lease defaults and insolvency of tenants. If we are unable to continue to attract appropriate retail tenants to our properties, or to purchase new properties in our geographic markets, it could materially affect our
ability to generate net income, service our debt and make distributions to our shareholders.

We may be unable to sell properties when appropriate
because real estate investments are illiquid.

Real estate investments generally cannot be sold quickly. In addition, there are some limitations under
federal income tax laws applicable to real estate and to REITs in particular that may limit our ability to sell our assets. We may not be able to alter our portfolio promptly in response to changes in economic or other conditions including being
unable to sell a property at a return we believe is appropriate due to the current economic environment. Our inability to respond quickly to adverse changes in the performance of our investments could have an adverse effect on our ability to meet
our obligations and make distributions to our shareholders.

Our insurance coverage on our properties may be inadequate.

We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire, flood, rental loss and acts of terrorism. We also currently
carry earthquake insurance on all of our properties in California and environmental insurance on most of our properties. All of these policies contain coverage limitations. We believe these coverages are of the types and amounts customarily obtained
for or by an owner of



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similar types of real property assets located in the areas where our properties are located. We intend to obtain similar insurance coverage on subsequently
acquired properties.

The availability of insurance coverage may decrease and the prices for insurance may increase as a consequence of significant losses
incurred by the insurance industry. As a result, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types
of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there
may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue
from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our
properties were to experience a catastrophic loss, it could disrupt seriously our operations, delay revenue and result in large expenses to repair or rebuild the property. Also, due to inflation, changes in codes and ordinances, environmental
considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed. Events such as these could adversely affect our results of operations and our ability to meet our
obligations, including distributions to our shareholders.

We may have limited flexibility in dealing with our jointly owned investments.

Our organizational documents do not limit the amount of funds that we may invest in properties and assets jointly with other persons or entities and as
of December 31, 2008, excluding our joint venture with affiliates of a discretionary fund created and advised by ING Clarion Partners (Clarion) and properties owned in a downREIT structure, we hold three predominantly
retail real estate projects jointly with other persons. We may make additional joint investments in the future. Our existing and future joint investments may subject us to special risks, including the possibility that our partners or co-investors
might become bankrupt, that those partners or co-investors might have economic or other business interests or goals which are unlike or incompatible with our business interests or goals, and that those partners or co-investors might be in a position
to take action contrary to our suggestions or instructions, or in opposition to our policies or objectives. Although we hold the managing general partnership or membership interest in all of our existing co-investments as of December 31, 2008,
we must obtain the consent of the co-investor or meet defined criteria to sell or to finance these properties. Joint ownership gives a third party the opportunity to influence the return we can achieve on some of our investments and may adversely
affect our ability to make distributions to our shareholders. We may also be liable for the actions of our co-investors.

In addition, on July 1,
2004, we entered into a joint venture with Clarion for purposes of acquiring properties. Although we are the managing general partner of that entity, we have only a 30% ownership interest in that entity. Our partners consent is required to
take certain actions with respect to the properties acquired by the venture, and as a result, we may not be able to take actions that we believe are necessary or desirable to protect or increase the value of the property or the propertys
income stream. Pursuant to the terms of our partnership, we must obtain our partners consent to do the following:



| |  |  | enter into new anchor tenant leases, modify existing anchor tenant leases or enforce remedies against anchor tenants;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | make certain repairs, renovations or other changes or improvements to properties; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | sell or finance the property with secured debt.
| | - |  | -----------------------------------------------

The
terms of our partnership require that certain acquisition opportunities be presented first to the joint venture, which limits our ability to acquire properties for our own account which could, in turn, limit our ability to grow. Our investment in
this joint venture is also subject to the risks described above for jointly owned investments. As of December 31, 2008, this joint venture owned seven properties.



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Environmental laws and regulations could reduce the value or profitability of our properties.

All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and regulations relating to hazardous materials,
environmental protection and human health and safety. Under various federal, state and local laws, ordinances and regulations, we and our tenants may be required to investigate and clean up certain hazardous or toxic substances released on or in
properties we own or operate, and also may be required to pay other costs relating to hazardous or toxic substances. This liability may be imposed without regard to whether we or our tenants knew about the release of these types of substances or
were responsible for their release. The presence of contamination or the failure properly to remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to borrow funds by using those
properties as collateral. The costs or liabilities could exceed the value of the affected real estate. We are not aware of any environmental condition with respect to any of our properties that management believes would have a material adverse
effect on our business, assets or results of operations taken as a whole. The uses of any of our properties prior to our acquisition of the property and the building materials used at the property are among the property-specific factors that will
affect how the environmental laws are applied to our properties. If we are subject to any material environmental liabilities, the liabilities could adversely affect our results of operations and our ability to meet our obligations.

We cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or
interpreted or what environmental conditions may be found to exist on the properties in the future. Compliance with existing and new laws and regulations may require us or our tenants to spend funds to remedy environmental problems. Our tenants,
like many of their competitors, have incurred, and will continue to incur, capital and operating expenditures and other costs associated with complying with these laws and regulations, which will adversely affect their potential profitability.

Generally, our tenants must comply with environmental laws and meet remediation requirements. Our leases typically impose obligations on our tenants to
indemnify us from any compliance costs we may incur as a result of the environmental conditions on the property caused by the tenant. If a lease does not require compliance or if a tenant fails to or cannot comply, we could be forced to pay these
costs. If not addressed, environmental conditions could impair our ability to sell or re-lease the affected properties in the future or result in lower sales prices or rent payments.

The Americans with Disabilities Act of 1990 could require us to take remedial steps with respect to existing or newly acquired properties.

Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990. Investigation of a property may reveal
non-compliance with this Act. The requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further renovations of our properties with respect to access for disabled persons. Future
compliance with this Act may require expensive changes to the properties.

The revenues generated by our tenants could be negatively affected by various
federal, state and local laws to which they are subject.

We and our tenants are subject to a wide range of federal, state and local laws and
regulations, such as local licensing requirements, consumer protection laws and state and local fire, life-safety and similar requirements that affect the use of the properties. The leases typically require that each tenant comply with all laws and
regulations. Failure to comply could result in fines by governmental authorities, awards of damages to private litigants, or restrictions on the ability to conduct business on such properties. Non-compliance of this sort could reduce our revenues
from a tenant, could require us to pay penalties or fines relating to any non-compliance, and could adversely affect our ability to sell or lease a property.



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Failure to qualify as a REIT for federal income tax purposes would cause us to be taxed as a corporation, which would
substantially reduce funds available for payment of distributions.

We believe that we are organized and qualified as a REIT for federal income tax
purposes and currently intend to operate in a manner that will allow us to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the Code). However, we cannot assure you that we will remain qualified as such
in the future.

Qualification as a REIT involves the application of highly technical and complex Code provisions and applicable income tax regulations that
have been issued under the Code. Certain facts and circumstances not entirely within our control may affect our ability to qualify as a REIT. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be derived
from qualifying rents and certain other income. Satisfying this requirement could be difficult, for example, if defaults by tenants were to reduce the amount of income from qualifying rents. As a REIT, we must generally make annual distributions to
shareholders of at least 90% of our REIT taxable income. In addition, new legislation, new regulations, new administrative interpretations or new court decisions may significantly change the tax laws with respect to qualification as a REIT or the
federal income tax consequences of such qualification.

If we fail to qualify as a REIT:



| |  |  | we would not be allowed a deduction for distributions to shareholders in computing taxable income;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | we would be subject to federal income tax at regular corporate rates;
| | - |  | ---------------------------------------------------------------------



| |  |  | we could be subject to the federal alternative minimum tax;
| | - |  | -----------------------------------------------------------



| |  |  | unless we are entitled to relief under specific statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during
which we were disqualified;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we could be required to pay significant income taxes, which would substantially reduce the funds available for investment or for distribution to our shareholders
for each year in which we failed or were not permitted to qualify; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we would no longer be required by law to make any distributions to our shareholders.
| | - |  | ------------------------------------------------------------------------------------

We may be required to incur additional debt to qualify as a REIT.

As
a REIT, we must make generally annual distributions to shareholders of at least 90% of our REIT taxable income. We are subject to income tax on amounts of undistributed REIT taxable income and net capital gain. In addition, we would be subject to a
4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and aggregate undistributed income from prior years. We intend to make distributions to shareholders to comply
with the Codes distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution requirements because:



| |  |  | our income may not be matched by our related expenses at the time the income is considered received for purposes of determining taxable income; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | non-deductible capital expenditures, creation of reserves, or debt service requirements may reduce available cash but not taxable income.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------

In these circumstances, we might have to borrow funds on terms we might otherwise find unfavorable and we may have to borrow funds even
if our management believes the market conditions make borrowing financially unattractive. Alternatively, if we are unable to borrow funds at acceptable terms, we could choose to pay a portion of our distributions in shares instead of cash.

To maintain our status as a REIT, we limit the amount of shares any one shareholder can own.

The Code imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in value of our outstanding shares of capital stock may be
owned, actually or constructively, by five or fewer individuals (as defined in the Code). To protect our REIT status, our declaration of trust prohibits any one



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shareholder from owning (actually or constructively) more than 9.8% in value of the outstanding common shares or of any class or series of outstanding
preferred shares. The constructive ownership rules are complex. Shares of our capital stock owned, actually or constructively, by a group of related individuals and/or entities may be treated as constructively owned by one of those individuals or
entities. As a result, the acquisition of less than 9.8% in value of the outstanding common shares and/or a class or series of preferred shares (or the acquisition of an interest in an entity that owns common shares or preferred shares) by an
individual or entity could cause that individual or entity (or another) to own constructively more than 9.8% in value of the outstanding capital stock. If that happened, either the transfer or ownership would be void or the shares would be
transferred to a charitable trust and then sold to someone who can own those shares without violating the 9.8% ownership limit.

The Board of Trustees may
waive these restrictions on a case-by-case basis. In addition, the Board of Trustees and two-thirds of our shareholders eligible to vote at a shareholder meeting may remove these restrictions if they determine it is no longer in our best interests
to attempt to qualify, or to continue to qualify, as a REIT. The 9.8% ownership restrictions may delay, defer or prevent a transaction or a change of our control that might involve a premium price for the common shares or otherwise be in the
shareholders best interest.

We cannot assure you we will continue to pay dividends at historical rates.

Our ability to continue to pay dividends on our common shares at historical rates or to increase our common share dividend rate, and our ability to pay preferred share
dividends and service our debt securities, will depend on a number of factors, including, among others, the following:



| |  |  | our financial condition and results of future operations;
| | - |  | ---------------------------------------------------------



| |  |  | the performance of lease terms by tenants;
| | - |  | ------------------------------------------



| |  |  | the terms of our loan covenants; and
| | - |  | ------------------------------------



| |  |  | our ability to acquire, finance, develop or redevelop and lease additional properties at attractive rates.
| | - |  | ----------------------------------------------------------------------------------------------------------

If we do not maintain or increase the dividend rate on our common shares, it could have an adverse effect on the market price of our common shares and other securities.
Any preferred shares we may offer in the future may have a fixed dividend rate that would not increase with any increases in the dividend rate of our common shares. Conversely, payment of dividends on our common shares may be subject to payment in
full of the dividends on any preferred shares and payment of interest on any debt securities we may offer.

Certain tax and anti-takeover provisions of
our declaration of trust and bylaws may inhibit a change of our control.

Certain provisions contained in our declaration of trust and bylaws and the
Maryland General Corporation Law, as applicable to Maryland REITs, may discourage a third party from making a tender offer or acquisition proposal to us. If this were to happen, it could delay, deter or prevent a change in control or the removal of
existing management. These provisions also may delay or prevent the shareholders from receiving a premium for their common shares over then-prevailing market prices. These provisions include:



| |  |  | the REIT ownership limit described above;
| | - |  | -----------------------------------------



| |  |  | authorization of the issuance of our preferred shares with powers, preferences or rights to be determined by the Board of Trustees;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | a staggered, fixed-size Board of Trustees consisting of three classes of trustees;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | special meetings of our shareholders may be called only by the chairman of the board, the chief executive officer, the president, by one-third of the trustees or by
shareholders possessing no less than 25% of all the votes entitled to be cast at the meeting;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the Board of Trustees, without a shareholder vote, can classify or reclassify unissued shares of beneficial interest, including the reclassification of common
shares into preferred shares and vice-versa;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a two-thirds shareholder vote is required to approve some amendments to the declaration of trust;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | advance-notice requirements for proposals to be presented at shareholder meetings; and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | a shareholder rights plan that provides, among other things, that when specified events occur, our shareholders will be entitled to purchase from us a number of
common shares equal in value to two times the purchase price, which initially will be equal to $65 per share, subject to certain adjustments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, if we elect to be governed by it in the future, the Maryland control share acquisition law could delay or prevent a change in control. Under Maryland law, unless a REIT elects not to be subject to this law, control
shares acquired in a control share acquisition have no voting rights except to the extent approved by shareholders by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquirer and
by officers or trustees who are employees of the REIT. Control shares are voting shares that would entitle the acquirer to exercise voting power in electing trustees within specified ranges of voting power. A control share
acquisition means the acquisition of control shares, with some exceptions.

Our bylaws state that the Maryland control share acquisition law will not
apply to any acquisition by any person of our common shares. This bylaw provision may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares, by a vote of a majority of the shareholders entitled to
vote, and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

We may
amend or revise our business policies without your approval.

Our Board of Trustees may amend or revise our operating policies without shareholder
approval. Our investment, financing and borrowing policies and policies with respect to all other activities, such as growth, debt, capitalization and operations, are determined by the Board of Trustees. The Board of Trustees may amend or revise
these policies at any time and from time to time at its discretion. A change in these policies could adversely affect our financial condition and results of operations, and the market price of our securities.

The current business plan adopted by our Board of Trustees focuses on our investment in neighborhood and community shopping centers, principally through redevelopments
and acquisitions. If this business plan is not successful, it could have a material adverse effect on our financial condition and results of operations.

Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this Annual Report on Form 10-K. Except as may be required by law, we make no promise to update
any of the forward-looking statements as a result of new information, future events or otherwise. You should carefully review the above risks and the risk factors.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

General

As of December 31, 2008, we owned or had a majority ownership interest in community and neighborhood shopping centers and
mixed-used properties which are operated as 84 predominantly retail real estate projects comprising approximately 18.1 million square feet. These properties are located primarily in densely populated and affluent communities in strategic
metropolitan markets in the Northeast and Mid-Atlantic regions of the



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United States, as well as California. No single property accounted for over 10% of our 2008 total revenue. We believe that our properties are adequately
covered by commercial general liability, fire, flood, earthquake, terrorism and business interruption insurance provided by reputable companies, with commercially reasonable exclusions, deductibles and limits.

Tenant Diversification

As of December 31, 2008, we had
approximately 2,450 leases, with tenants ranging from sole proprietors to major national retailers. No one tenant or affiliated group of tenants accounted for more than 2.6% of our annualized base rent as of December 31, 2008. As a result of
our tenant diversification, we believe our exposure to any one recent or future bankruptcy filing in the retail sector has not been and will not be significant, however, multiple filings by a number of retailers could have a significant impact.

Geographic Diversification

Our 84 real estate
projects are located in 13 states and the District of Columbia. The following table shows, by region and state within the region, the number of projects, the gross leasable area of commercial space and the percentage of total portfolio gross
leasable area of commercial space in each state as of December 31, 2008.



|                     |  |                   |  |                    |  |                                |  
|-------------------- |  | ----------------- |  | ------------------ |  | ------------------------------ | -
|Region and State     |  | Number ofProjects |  | Gross LeasableArea |  | Percentageof GrossLeasableArea |  
|                     |  | (In square feet)  | 
|Maryland             |  | 17                |  | 3,708,000          |  | 20.5                           | %
|Virginia             |  | 15                |  | 3,602,000          |  | 19.9                           | %
|California           |  | 12                |  | 2,453,000          |  | 13.6                           | %
|Pennsylvania(1)      |  | 11                |  | 2,405,000          |  | 13.3                           | %
|New Jersey           |  | 4                 |  | 1,385,000          |  | 7.6                            | %
|Massachusetts        |  | 7                 |  | 1,378,000          |  | 7.6                            | %
|New York             |  | 5                 |  | 1,109,000          |  | 6.1                            | %
|Illinois             |  | 4                 |  | 757,000            |  | 4.2                            | %
|Connecticut (1)      |  | 2                 |  | 308,000            |  | 1.7                            | %
|Florida              |  | 2                 |  | 308,000            |  | 1.7                            | %
|Michigan             |  | 1                 |  | 217,000            |  | 1.2                            | %
|District of Columbia |  | 2                 |  | 168,000            |  | 0.9                            | %
|Texas                |  | 1                 |  | 168,000            |  | 0.9                            | %
|North Carolina       |  | 1                 |  | 153,000            |  | 0.8                            | %
|                     |  |                   |  |                    |  |                                |  
|Total all regions    |  | 84                |  | 18,119,000         |  | 100.0                          | %
|                     |  |                   |  |                    |  |                                |  



|(1) | Additionally, we own two participating mortgages totaling approximately $28.3 million secured by multiple buildings in Manayunk, Pennsylvania, and one $5.5 million loan secured by a
property in Norwalk, Connecticut.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Leases, Lease Terms and Lease Expirations

Our leases are classified as operating leases and typically are structured to require the monthly payment of minimum rents in advance, subject to periodic increases
during the term of the lease, percentage rents based on the level of sales achieved by tenants, and reimbursement of a majority of on-site operating expenses and real estate taxes. These features in our leases generally reduce our exposure to higher
costs and allow us to participate in improved tenant sales.

Commercial property leases generally range from 3 to 10 years; however, certain leases,
primarily with anchor tenants, may be longer. Many of our leases contain tenant options that enable the tenant to extend the term of the lease at expiration at pre-established rental rates that often include fixed rent increases, consumer price
index



18



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##### Table of Contents

adjustments or other market rate adjustments from the prior base rent. Leases on residential units are generally for a period of one year or less and, in
2008, represented approximately 3.7% of total rental income.

The following table sets forth the schedule of lease expirations for our commercial leases in
place as of December 31, 2008 for each of the 10 years beginning with 2009 and after 2018 in the aggregate, in both cases, assuming that none of the tenants exercise future renewal options. Annualized base rents reflect in-place
contractual rents as of December 31, 2008.



|                         |  |                             |  |                                           |   |  |                                                  |             |                                                                 |     |  
|------------------------ |  | --------------------------- |  | ----------------------------------------- | - |  | ------------------------------------------------ | ----------- | --------------------------------------------------------------- | --- | -
|Year of Lease Expiration |  | LeasedSquareFootageExpiring |  | Percentage ofLeased SquareFootageExpiring |   |  | AnnualizedBase RentRepresented byExpiring Leases |             | Percentage of AnnualizedBase Rent Representedby Expiring Leases |    
|2009                     |  | 1,128,000                   |  | 7                                         | % |  |                                                  | 25,533,000  |                                                                 | 7   | %
|2010                     |  | 1,587,000                   |  | 9                                         | % |  |                                                  | 34,589,000  |                                                                 | 9   | %
|2011                     |  | 1,972,000                   |  | 12                                        | % |  |                                                  | 46,300,000  |                                                                 | 13  | %
|2012                     |  | 2,109,000                   |  | 12                                        | % |  |                                                  | 46,894,000  |                                                                 | 13  | %
|2013                     |  | 2,070,000                   |  | 12                                        | % |  |                                                  | 47,803,000  |                                                                 | 13  | %
|2014                     |  | 1,862,000                   |  | 11                                        | % |  |                                                  | 38,065,000  |                                                                 | 10  | %
|2015                     |  | 914,000                     |  | 5                                         | % |  |                                                  | 19,900,000  |                                                                 | 5   | %
|2016                     |  | 800,000                     |  | 5                                         | % |  |                                                  | 19,691,000  |                                                                 | 5   | %
|2017                     |  | 1,056,000                   |  | 6                                         | % |  |                                                  | 24,066,000  |                                                                 | 7   | %
|2018                     |  | 941,000                     |  | 6                                         | % |  |                                                  | 17,840,000  |                                                                 | 5   | %
|Thereafter               |  | 2,565,000                   |  | 15                                        | % |  |                                                  | 49,213,000  |                                                                 | 13  | %
|                         |  |                             |  |                                           |   |  |                                                  |             |                                                                 |     |  
|Total                    |  | 17,004,000                  |  | 100                                       | % |  | $                                                | 369,894,000 |                                                                 | 100 | %
|                         |  |                             |  |                                           |   |  |                                                  |             |                                                                 |     |  



19



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Retail and Residential Properties

The following table sets forth information concerning all real estate projects in which we owned an equity interest, had a leasehold interest, or controlled and are consolidated as of December 31, 2008. Except as
otherwise noted, we are the sole owner of our retail real estate projects. Principal tenants are the largest tenants in the project based on square feet leased or are tenants important to a projects success due to their ability to attract
retail customers.



|                                           |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                       
|------------------------------------------ |  | ------------- |  | ------------ |  | ----------------------------- |  | -------------------------- |  | ------------------- |  | ----------------------------------------------------------------------
|                                           |  | YearCompleted |  | YearAcquired |  | Square Feet(1)/ApartmentUnits |  | Average RentPer SquareFoot |  | PercentageLeased(2) |  | Principal Tenant(s)                                                   
|California                                 |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                       
|150 Post Street San Francisco, CA 94108    |  | 1965          |  | 1997         |  | 102,000                       |  | $39.72                     |  | 98%                 |  | Brooks Brothers H & M                                                 
|Colorado Blvd Pasadena, CA(6)              |  | 1922          |  | 1996-1998    |  | 68,000                        |  | $36.63                     |  | 99%                 |  | Pottery Barn Banana Republic                                          
|Crow Canyon Commons San Ramon, CA(3)       |  | 1980-2006     |  | 2005-2007    |  | 242,000                       |  | $19.40                     |  | 92%                 |  | Save Mart Loehmanns Rite Aid                                         
|Escondido Promenade Escondido, CA 92029(8) |  | 1987          |  | 1996         |  | 222,000                       |  | $23.09                     |  | 95%                 |  | Toys R Us TJ Maxx Cost Plus World Market                              
|Fifth Avenue San Diego, CA                 |  | 1888-1995     |  | 1996-1997    |  | 51,000                        |  | $26.64                     |  | 100%                |  | Urban Outfitters                                                      
|Hermosa Avenue Hermosa Beach, CA           |  | 1922          |  | 1997         |  | 22,000                        |  | $32.49                     |  | 100%                |  |                                                                       
|Hollywood Blvd Hollywood, CA(10)           |  | 1921-1991     |  | 1999         |  | 153,000                       |  | $21.30                     |  | 85%                 |  | DSW L.A. Fitness                                                      
|Kings Court Los Gatos, CA 95032(5)(6)      |  | 1960          |  | 1998         |  | 79,000                        |  | $25.83                     |  | 99%                 |  | Lunardis Supermarket Longs Drug
Store                                
|Old Town Center Los Gatos, CA 95030        |  | 1962, 1998    |  | 1997         |  | 95,000                        |  | $30.65                     |  | 95%                 |  | Borders Books Gap Kids Banana Republic                                
|Santana RowRetail San Jose, CA 95128      |  | 2002          |  | 1997         |  | 563,000                       |  | $44.07                     |  | 98%                 |  | Crate & Barrel Borders Books Container Store Best
Buy CineArts Theatre
|Santana RowResidential San Jose, CA 95128 |  | 2003-2006     |  | 1997         |  | 295 units                     |  | N/A                        |  | 93%                 |  |                                                                       
|Third Street Promenade Santa Monica, CA    |  | 1888-2000     |  | 1996-2000    |  | 211,000                       |  | $58.70                     |  | 99%                 |  | Abercrombie & Fitch J. Crew Old Navy Banana Republic                  
|Westgate San Jose, CA                      |  | 1960-1966     |  | 2004         |  | 645,000                       |  | $13.31                     |  | 96%                 |  | Safeway Target Burlington Coat Factory Barnes & Noble Ross            
|Connecticut                                |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                       
|Bristol Bristol, CT 06010                  |  | 1959          |  | 1995         |  | 272,000                       |  | $12.06                     |  | 86%                 |  | Stop & Shop TJ Maxx                                                   
|Greenwich Avenue Greenwich Avenue, CT      |  | 1993          |  | 1995         |  | 36,000                        |  | $53.00                     |  | 100%                |  | Saks Fifth Avenue                                                     
|District of Columbia                       |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                       
|Friendship Center Washington, D.C 20015    |  | 1998          |  | 2001         |  | 119,000                       |  | $33.15                     |  | 66%                 |  | Maggianos Borders Books                                              
|Sams Park & Shop Washington, DC 20008     |  | 1930          |  | 1995         |  | 49,000                        |  | $35.90                     |  | 94%                 |  | Petco                                                                 



20



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Retail and Residential Propertiescontinued



|                                                       |  |                   |  |               |  |                               |  |                            |  |                     |  |                                                                         
|------------------------------------------------------ |  | ----------------- |  | ------------- |  | ----------------------------- |  | -------------------------- |  | ------------------- |  | ------------------------------------------------------------------------
|                                                       |  | YearCompleted     |  | YearAcquired  |  | Square Feet(1)/ApartmentUnits |  | Average RentPer SquareFoot |  | PercentageLeased(2) |  | Principal Tenant(s)                                                     
|Florida                                                |  |                   |  |               |  |                               |  |                            |  |                     |  |                                                                         
|Courtyard Shops Wellington, FL 33414                   |  | 1990, 1998        |  | 2008          |  | 130,000                       |  | $18.48                     |  | 92%                 |  | Publix                                                                  
|Del Mar Village Boca Raton, FL 33433                   |  | 1982, 1994 & 2007 |  | 2008          |  | 178,000                       |  | $18.41                     |  | 89%                 |  | Winn Dixie CVS                                                          
|Illinois                                               |  |                   |  |               |  |                               |  |                            |  |                     |  |                                                                         
|Crossroads Highland Park, IL 60035                     |  | 1959              |  | 1993          |  | 173,000                       |  | $19.24                     |  | 71%                 |  | Golfsmith Guitar Center                                                 
|Finley Square Downers Grove, IL 60515                  |  | 1974              |  | 1995          |  | 315,000                       |  | $10.05                     |  | 98%                 |  | Bed, Bath & Beyond Petsmart Buy Buy Baby                                
|Garden Market Western Springs, IL 60558                |  | 1958              |  | 1994          |  | 140,000                       |  | $12.64                     |  | 100%                |  | Dominicks Walgreens                                                    
|North Lake Commons Lake Zurich, IL 60047               |  | 1989              |  | 1994          |  | 129,000                       |  | $13.59                     |  | 92%                 |  | Dominicks                                                              
|Maryland                                               |  |                   |  |               |  |                               |  |                            |  |                     |  |                                                                         
|Bethesda Row Bethesda, MD 20814(7)                     |  | 1945-19912001     |  | 1993-20062008 |  | 521,000                       |  | $41.13                     |  | 95%                 |  | Barnes & Noble Giant Food Landmark Theater                              
|Bethesda Row Residential Bethesda, MD 20814(7)         |  | 2008              |  | 1993          |  | 180 units                     |  | N/A                        |  | 94%                 |  |                                                                         
|Congressional Plaza Rockville, MD 20852(4)             |  | 1965              |  | 1965          |  | 334,000                       |  | $29.78                     |  | 95%                 |  | Buy Buy Baby Whole Foods Container Store                                
|Congressional Plaza Residential Rockville, MD 20852(4) |  | 2003              |  | 1965          |  | 146 units                     |  | N/A                        |  | 97%                 |  |                                                                         
|Courthouse Center Rockville, MD 20852                  |  | 1970              |  | 1997          |  | 37,000                        |  | $19.12                     |  | 77%                 |  |                                                                         
|Federal Plaza Rockville, MD 20852                      |  | 1970              |  | 1989          |  | 248,000                       |  | $29.15                     |  | 96%                 |  | Micro Center Ross Dress For Less TJ Maxx                                
|Gaithersburg Square Gaithersburg, MD 20878             |  | 1966              |  | 1993          |  | 209,000                       |  | $22.35                     |  | 93%                 |  | Bed, Bath & Beyond Borders
Books Ross Dress For Less                    
|Governor Plaza Glen Burnie, MD 21961                   |  | 1963              |  | 1985          |  | 269,000                       |  | $15.10                     |  | 100%                |  | Office Depot Bally Total Fitness Aldi                                   
|Laurel Centre Laurel, MD 20707                         |  | 1956              |  | 1986          |  | 386,000                       |  | $17.54                     |  | 99%                 |  | Giant Food Marshalls                                                    
|Mid-Pike Plaza Rockville, MD 20852                     |  | 1963              |  | 1982/2007     |  | 308,000                       |  | $22.50                     |  | 100%                |  | Bally Total Fitness Toys R Us A.C. Moore Filenes Basement              
|Perring Plaza Baltimore, MD 21134                      |  | 1963              |  | 1985          |  | 402,000                       |  | $12.07                     |  | 98%                 |  | Burlington Coat Factory Home Depot Shoppers Food
Warehouse Jo-Ann Stores
|Quince Orchard Gaithersburg, MD 20877(6)               |  | 1975              |  | 1993          |  | 248,000                       |  | $20.05                     |  | 85%                 |  | Magruders Staples                                                       
|Rockville Town Square Rockville, MD 20852              |  | 2006-2007         |  | 2006-2007     |  | 182,000                       |  | $32.09                     |  | 99%                 |  | CVS Golds Gym                                                          



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Retail and Residential Propertiescontinued



|                                                                       |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                          
|---------------------------------------------------------------------- |  | ------------- |  | ------------ |  | ----------------------------- |  | -------------------------- |  | ------------------- |  | -----------------------------------------------------------------------------------------
|                                                                       |  | YearCompleted |  | YearAcquired |  | Square Feet(1)/ApartmentUnits |  | Average RentPer SquareFoot |  | PercentageLeased(2) |  | Principal Tenant(s)                                                                      
|Rollingwood Apartments Silver Spring, MD 20910 9 three-story buildings |  | 1960          |  | 1971         |  | 282 units                     |  | N/A                        |  | 96%                 |  |                                                                                          
|THE AVENUE at White Marsh Baltimore, MD 21236(12)                      |  | 1997          |  | 2007         |  | 298,000                       |  | $20.48                     |  | 100%                |  | AMC Loews Old Navy Barnes & Noble A.C. Moore                                             
|The Shoppes at Nottingham Square Baltimore, MD 21236                   |  | 2005-2006     |  | 2007         |  | 52,000                        |  | $36.26                     |  | 100%                |  |                                                                                          
|White Marsh Other Baltimore, MD 21236                                  |  | 1985          |  | 2007         |  | 49,000                        |  | $21.84                     |  | 100%                |  |                                                                                          
|White Marsh Plaza Baltimore, MD 21236                                  |  | 1987          |  | 2007         |  | 80,000                        |  | $18.97                     |  | 98%                 |  | Giant Food                                                                               
|Wildwood Bethesda, MD 20814                                            |  | 1958          |  | 1969         |  | 85,000                        |  | $69.19                     |  | 100%                |  | CVS Balduccis                                                                           
|Massachusetts                                                          |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                          
|Assembly Square Somerville, MA 02145                                   |  | 2005          |  | 2005-2008    |  | 332,000                       |  | $16.25                     |  | 100%                |  | Bed, Bath & Beyond Christmas Tree Shops Kmart Staples TJ
Maxx A.C. Moore Sports Authority
|Chelsea Commons Chelsea, MA 02150                                      |  | 1962-1969     |  | 2006-2008    |  | 222,000                       |  | $10.16                     |  | 91%                 |  | Sav-A-Lot Home Depot                                                                     
|Dedham Dedham, MA 02026                                                |  | 1959          |  | 1993         |  | 242,000                       |  | $14.69                     |  | 89%                 |  | Star Market                                                                              
|Linden Square Wellesley, MA 02481                                      |  | 1960          |  | 2006         |  | 214,000                       |  | $41.34                     |  | 83%                 |  | Roche Brothers Supermarket CVS Fitness Club for Women Wellesley Volkswagen, Buick        
|North Dartmouth North Dartmouth, MA 02747                              |  | 2004          |  | 2006         |  | 48,000                        |  | $13.80                     |  | 100%                |  | Stop & Shop                                                                              
|Queen Anne Plaza Norwell, MA 02061                                     |  | 1967          |  | 1994         |  | 149,000                       |  | $15.03                     |  | 100%                |  | TJ Maxx Hannaford                                                                        
|Saugus Plaza Saugus, MA 01906                                          |  | 1976          |  | 1996         |  | 171,000                       |  | $10.53                     |  | 94%                 |  | Kmart Super
Stop & Shop                                                                  
|Michigan                                                               |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                          
|Gratiot Plaza Roseville, MI 48066                                      |  | 1964          |  | 1973         |  | 217,000                       |  | $11.28                     |  | 99%                 |  | Bed, Bath & Beyond Best Buy Kroger DSW                                                   
|North Carolina                                                         |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                          
|Eastgate Chapel Hill, NC 27514                                         |  | 1963          |  | 1986         |  | 153,000                       |  | $19.59                     |  | 97%                 |  | Stein Mart                                                                               
|New Jersey                                                             |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                          
|Brick Plaza Brick Township, NJ 08723(6)                                |  | 1958          |  | 1989         |  | 409,000                       |  | $15.11                     |  | 100%                |  | A&P Supermarket Barnes & Noble AMC Loews Sports
Authority                                



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Retail and Residential Propertiescontinued

|                                                 |  |               |  |              |  |                               |  |                            |  |                     |  |                                                            
|------------------------------------------------ |  | ------------- |  | ------------ |  | ----------------------------- |  | -------------------------- |  | ------------------- |  | -----------------------------------------------------------
|                                                 |  | YearCompleted |  | YearAcquired |  | Square Feet(1)/ApartmentUnits |  | Average RentPer SquareFoot |  | PercentageLeased(2) |  | Principal Tenant(s)                                        
|Ellisburg Circle Cherry Hill, NJ 08034           |  | 1959          |  | 1992         |  | 268,000                       |  | $14.51                     |  | 99%                 |  | Genuardis Buy Buy Baby Stein Mart                         
|Mercer Mall Lawrenceville, NJ 08648(3)           |  | 1975          |  | 2003         |  | 501,000                       |  | $19.80                     |  | 99%                 |  | Raymour & Flanigan Bed, Bath & Beyond
DSW TJ Maxx Shop Rite
|Troy Parsippany-Troy, NJ 07054                   |  | 1966          |  | 1980         |  | 207,000                       |  | $17.13                     |  | 86%                 |  | Pathmark                                                   
|New York                                         |  |               |  |              |  |                               |  |                            |  |                     |  |                                                            
|Forest Hills Forest Hills, NY                    |  | 1937-1987     |  | 1997         |  | 46,000                        |  | $24.49                     |  | 100%                |  | Midway Theatre                                             
|Fresh Meadows Queens, NY 11365                   |  | 1949          |  | 1997         |  | 403,000                       |  | $24.41                     |  | 99%                 |  | AMC Loews Filenes Basement Kohls Island
of Gold          
|Hauppauge Hauppauge, NY 11788                    |  | 1963          |  | 1998         |  | 133,000                       |  | $24.05                     |  | 98%                 |  | Shop Rite A.C. Moore                                       
|Huntington Huntington, NY 11746                  |  | 1962          |  | 1988/2007    |  | 279,000                       |  | $19.06                     |  | 100%                |  | Barnes & Noble Bed, Bath & Beyond Buy Buy Baby Toys R Us   
|Melville Mall Huntington, NY 11747(9)            |  | 1974          |  | 2006         |  | 248,000                       |  | $16.45                     |  | 100%                |  | Waldbaums Marshalls Kohls                                
|Pennsylvania                                     |  |               |  |              |  |                               |  |                            |  |                     |  |                                                            
|Andorra Philadelphia, PA 19128                   |  | 1953          |  | 1988         |  | 267,000                       |  | $13.58                     |  | 94%                 |  | Acme Markets Kohls Staples L.A. Fitness                   
|Bala Cynwyd Bala Cynwyd, PA 19004                |  | 1955          |  | 1993         |  | 280,000                       |  | $17.01                     |  | 100%                |  | Acme Markets Lord & Taylor L.A. Fitness                    
|Feasterville Feasterville, PA 19047              |  | 1958          |  | 1980         |  | 111,000                       |  | $13.71                     |  | 89%                 |  | Genuardis OfficeMax                                       
|Flourtown Flourtown, PA 19031                    |  | 1957          |  | 1980         |  | 191,000                       |  | $20.69                     |  | 87%                 |  | Genuardis                                                 
|Lancaster Lancaster, PA 17601(3)                 |  | 1958          |  | 1980         |  | 107,000                       |  | $15.24                     |  | 94%                 |  | Giant Food Michaels                                        
|Langhorne Square Levittown, PA 19056             |  | 1966          |  | 1985         |  | 216,000                       |  | $14.14                     |  | 97%                 |  | Marshalls Redners Warehouse
Market                        
|Lawrence Park Broomall, PA 19008                 |  | 1972          |  | 1980         |  | 353,000                       |  | $17.83                     |  | 100%                |  | Acme Markets TJ Maxx CHI Home Goods                        
|Northeast Philadelphia, PA 19114                 |  | 1959          |  | 1983         |  | 285,000                       |  | $10.62                     |  | 92%                 |  | Burlington Coat Factory Marshalls                          
|Town Center of New Britain New Britain, PA 18901 |  | 1969          |  | 2006         |  | 124,000                       |  | $9.86                      |  | 87%                 |  | Giant Food Rite Aid                                        
|Willow Grove Willow Grove, PA 19090              |  | 1953          |  | 1984         |  | 216,000                       |  | $19.21                     |  | 99%                 |  | Barnes & Noble Marshalls Toys R
Us                         
|Wynnewood Wynnewood, PA 19096                    |  | 1948          |  | 1996         |  | 255,000                       |  | $23.88                     |  | 97%                 |  | Bed, Bath & Beyond Borders Books Genuardis Old Navy       



23



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Retail and Residential Propertiescontinued



|                                                                        |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                  
|----------------------------------------------------------------------- |  | ------------- |  | ------------ |  | ----------------------------- |  | -------------------------- |  | ------------------- |  | ---------------------------------------------------------------------------------
|                                                                        |  | YearCompleted |  | YearAcquired |  | Square Feet(1)/ApartmentUnits |  | Average RentPer SquareFoot |  | PercentageLeased(2) |  | Principal Tenant(s)                                                              
|Texas                                                                   |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                  
|Houston Street San Antonio, TX                                          |  | 1890-1935     |  | 1998         |  | 168,000                       |  | $19.68                     |  | 76%                 |  | Hotel Valencia                                                                   
|Virginia                                                                |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                  
|Barracks Road Charlottesville, VA 22905                                 |  | 1958          |  | 1985         |  | 488,000                       |  | $20.17                     |  | 94%                 |  | Bed, Bath & Beyond Harris Teeter Kroger
Barnes & Noble Old Navy                  
|Falls Plaza/Falls PlazaEast Falls Church, VA 22046                     |  | 1960-1962     |  | 1967-1972    |  | 143,000                       |  | $26.74                     |  | 99%                 |  | Giant Food CVS Staples                                                           
|Idylwood Plaza Falls Church, VA 22030                                   |  | 1991          |  | 1994         |  | 73,000                        |  | $42.80                     |  | 100%                |  | Whole Foods                                                                      
|Leesburg Plaza Leesburg, VA 20176(5)                                    |  | 1967          |  | 1998         |  | 236,000                       |  | $21.33                     |  | 99%                 |  | Giant Food Pier 1 Imports Office Depot Petsmart                                  
|Loehmanns Plaza Fairfax, VA 22042                                      |  | 1971          |  | 1983         |  | 268,000                       |  | $25.96                     |  | 97%                 |  | Bally Total Fitness Giant Food
Loehmanns Dress Shop                             
|Mount Vernon/South Valley/ 7770 Richmond Hwy Alexandria, VA 22306(5)(6) |  | 1966-1974     |  | 2003-2006    |  | 565,000                       |  | $15.07                     |  | 95%                 |  | Shoppers Food Warehouse Bed, Bath & Beyond Michaels Home Depot TJ Maxx Golds Gym
|Old Keene Mill Springfield, VA 22152                                    |  | 1968          |  | 1976         |  | 92,000                        |  | $27.31                     |  | 99%                 |  | Whole Foods                                                                      
|Pan Am Fairfax, VA 22031                                                |  | 1979          |  | 1993         |  | 227,000                       |  | $17.76                     |  | 100%                |  | Michaels Micro Center Safeway                                                    
|Pentagon Row Arlington, VA 22202(6)                                     |  | 2001-2002     |  | 1998         |  | 296,000                       |  | $33.44                     |  | 99%                 |  | Harris Teeter Bed, Bath & Beyond Cost Plus World Market Bally Total Fitness DSW  
|Pike 7 Plaza Vienna, VA 22180(5)                                        |  | 1968          |  | 1997         |  | 164,000                       |  | $31.13                     |  | 100%                |  | DSW Staples TJ Maxx                                                              
|Shoppers World Charlottesville, VA 23230                               |  | 1975-2001     |  | 2007         |  | 169,000                       |  | $11.43                     |  | 97%                 |  | Whole Foods Staples                                                              
|Shops at Willow Lawn Richmond, VA 23230                                 |  | 1957          |  | 1983         |  | 476,000                       |  | $16.09                     |  | 87%                 |  | Kroger Old Navy Ross Staples                                                     
|Tower Shopping Center Springfield, VA 22150                             |  | 1960          |  | 1998         |  | 112,000                       |  | $25.43                     |  | 69%                 |  | Talbots                                                                          
|Tysons Station Falls Church, VA 22043                                  |  | 1954          |  | 1978         |  | 49,000                        |  | $37.89                     |  | 98%                 |  | Trader Joes                                                                      
|Village at Shirlington Arlington, VA 22206(11)                          |  | 1940          |  | 1995         |  | 244,000                       |  | $30.59                     |  | 98%                 |  | AMC Loews Carlyle Grand Café Harris
Teeter                                       
|                                                                        |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                  
|Total All RegionsRetail                                                |  |               |  |              |  | 18,119,000                    |  |                            |  | 95%                 |  |                                                                                  
|Total All RegionsResidential                                           |  |               |  |              |  | 903 units                     |  |                            |  | 95%                 |  |                                                                                  
|                                                                        |  |               |  |              |  |                               |  |                            |  |                     |  |                                                                                  



24



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|(1) | Represents the physical square footage of the commercial portion of the property, which may differ from the gross leasable square footage used to express percentage leased. Some of
our properties include office space which is included in this square footage but is not material in total.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Retail percentage leased is expressed as a percentage of rentable commercial square feet occupied or subject to a lease under which rent is currently payable and includes square
feet covered by leases for stores not yet opened. Residential percentage leased is expressed as a percentage of units occupied or subject to a lease.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | We have a leasehold interest in this property.
|--- | ----------------------------------------------

|(4) | We own a 64.1% membership interest in this property.
|--- | ----------------------------------------------------

|(5) | We own this property in a downREIT structure.
|--- | -----------------------------------------------

|(6) | All or a portion of this property is owned pursuant to a ground lease.
|--- | ----------------------------------------------------------------------

|(7) | This property contains nine buildings; six are owned 100% by us, one is subject to a leasehold interest, and two are subject to a ground lease.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(8) | We own the controlling interest in this center.
|--- | -----------------------------------------------

|(9) | The Trust controls Melville Mall through a 20 year master lease and secondary financing to the owner. The master lease includes a purchase option in 2021 for $5.0 million plus the
assumption of the owners $25.8 million first mortgage. Because the Trust controls this property and retains substantially all of the economic benefit and risk associated with it, we consolidate this property and its operations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | We own a 90% general partnership interest in these buildings.
|---- | -------------------------------------------------------------

|(11) | A portion of this property is subject to a capital lease obligation.
|---- | --------------------------------------------------------------------

|(12) | 50% of the ownership of this property is in a downREIT partnership, of which a wholly owned subsidiary of the Trust is the sole general partner, with third party
partners holding operating partnership units.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 3.    LEGAL PROCEEDINGS

In May 2003, First National Mortgage Company filed a complaint against us in the United States District Court for the Northern District of California.
The complaint alleged that a one page document entitled Final Proposal, which included language that it was subject to approval of formal documentation, constituted a ground lease of a parcel of property located adjacent to our Santana
Row property and gave First National Mortgage Company the option to require that we acquire the property at a price determined in accordance with a formula included in the Final Proposal. A trial as to liability only was held in June
2006 and a jury rendered a verdict against us. A trial on the issue of damages was held in April 2008; however, the judge has not yet issued a ruling. Reports from our experts and the plaintiffs experts show potential damages ranging from
$600,000 to $24 million. Pending the judges ruling, we cannot make a reasonable estimate of potential damages. We will evaluate whether to appeal the jury verdict after the judge issues his ruling on damages taking into account a variety of
factors including the amount of damages awarded. If we choose not to appeal or we appeal and are not successful in overturning the jury verdict, we will be liable for damages. Depending on the amount of damages awarded, it is possible, there could
be a material adverse impact on our net income in the period in which it becomes both probable that we will have to pay the damages and such damages can be reasonably estimated. In any event, management does not believe this matter will have a
material impact on our financial position.

We are also involved in a litigation matter relating to a shopping center in New Jersey where a former tenant
has alleged that we and our management agent acted improperly by failing to disclose a condemnation action at the property that was pending when the lease was signed. A trial as to liability only was concluded in April 2007, and in May 2008, a
judgment was entered that ruled in our favor on certain legal issues and against us on other legal issues. In December 2008, we reached a settlement with the plaintiff of those matters where the court ruled against us and determined that we are
liable. The total settlement was $2.3 million of which we paid $1.15 million and the third party management agent paid $1.15 million. We are currently in the process of settling the amount of the portion of the plaintiffs legal fees which we
are required to pay; we expect the amount to be approximately $1.0 million of which we will pay 50% and the third party management agent will pay 50%. Our share of the total estimated settlement of $1.6 million is included in general and
administrative expense in the statement of operations.

ITEM 4.    SUBMISSION OF MATTERS TO A
VOTE OF SHAREHOLDERS

No matters were submitted to a vote of our shareholders during the fourth quarter of the fiscal year ended December 31, 2008.



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##### Table of Contents

PART II



|ITEM 5. | MARKET FOR OUR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------

Our common shares trade on the New York Stock Exchange under the symbol FRT. Listed below are the high and low closing prices of our common shares as reported
on the New York Stock Exchange and the dividends declared for each of the periods indicated.



|               |  |                 |       |                            |   |       |  |   |      
|-------------- |  | --------------- | ----- | -------------------------- | - | ----- |  | - | -----
|               |  | Price Per Share |       | DividendsDeclaredPer Share
|               |  | High            |       | Low                        |  
|2008           |  |                 |       |                            |   |       |  |   |      
|Fourth quarter |  | $               | 84.96 |                            | $ | 43.46 |  | $ | 0.650
|Third quarter  |  | $               | 95.00 |                            | $ | 61.87 |  | $ | 0.650
|Second quarter |  | $               | 85.00 |                            | $ | 68.25 |  | $ | 0.610
|First quarter  |  | $               | 83.41 |                            | $ | 61.60 |  | $ | 0.610
|2007           |  |                 |       |                            |   |       |  |   |      
|Fourth quarter |  | $               | 95.19 |                            | $ | 78.58 |  | $ | 0.610
|Third quarter  |  | $               | 88.92 |                            | $ | 73.82 |  | $ | 0.610
|Second quarter |  | $               | 92.59 |                            | $ | 75.27 |  | $ | 0.575
|First quarter  |  | $               | 97.12 |                            | $ | 81.93 |  | $ | 0.575

On February 24, 2009, there were 4,115 holders of record of our common shares.

Our ongoing operations generally will not be subject to federal income taxes as long as we maintain our REIT status and distribute to shareholders at least 100% of our
REIT taxable income. Under the Code, REITs are subject to numerous organizational and operational requirements, including the requirement to generally distribute at least 90% of REIT taxable income.

Future distributions will be at the discretion of our Board of Trustees and will depend on our actual net income available for common shareholders, financial condition,
capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Trustees deems relevant. We have paid quarterly dividends to our shareholders continuously since our founding in
1962 and have increased our regular annual dividend rate for 41 consecutive years.

Our total annual dividends paid per common share for 2008 and 2007 were
$2.480 per share and $2.335 per share, respectively. The annual dividend amounts are different from dividends as calculated for federal income tax purposes. Distributions to the extent of our current and accumulated earnings and profits for federal
income tax purposes generally will be taxable to a shareholder as ordinary dividend income. Distributions in excess of current and accumulated earnings and profits will be treated as a nontaxable reduction of the shareholders basis in such
shareholders shares, to the extent thereof, and thereafter as taxable capital gain. Distributions that are treated as a reduction of the shareholders basis in its shares will have the effect of increasing the amount of gain, or reducing
the amount of loss, recognized upon the sale of the shareholders shares. No assurances can be given regarding what portion, if any, of distributions in 2009 or subsequent years will constitute a return of capital for federal income tax
purposes. During a year in which a REIT earns a net long-term capital gain, the REIT can elect under Code Sec. 857(b)(3) to designate a portion of dividends paid to shareholders as capital gain dividends. If this election is made, then the capital
gain dividends are taxable to the shareholder as long-term capital gains.



26



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##### Table of Contents

The following table reflects the income tax status of distributions per share paid to common shareholders:



|                                            |  |                        |       |      |   |      
|------------------------------------------- |  | ---------------------- | ----- | ---- | - | -----
|                                            |  | Year EndedDecember 31,
|                                            |  | 2008                   |       | 2007
|Ordinary dividend                           |  | $                      | 2.455 |      | $ | 2.174
|Ordinary dividend eligible for 15% tax rate |  |                        | 0.025 |      |   | 0.044
|Capital gain                                |  |                        |      |      |   | 0.117
|                                            |  |                        |       |      |   |      
|                                            |  | $                      | 2.480 |      | $ | 2.335
|                                            |  |                        |       |      |   |      

Distributions on our 5.417% Series 1 Cumulative Convertible Preferred Shares were paid at the rate of $1.354 per
share per annum commencing on the issuance date of March 8, 2007. We do not believe that the preferential rights available to the holders of our preferred shares or the financial covenants contained in our debt agreements had or will have an
adverse effect on our ability to pay dividends in the normal course of business to our common shareholders or to distribute amounts necessary to maintain our qualification as a REIT.

Recent Sales of Unregistered Shares

Under the terms of various operating partnership agreements of certain of our
affiliated limited partnerships, the interest of limited partners in those limited partnerships may be redeemed, subject to certain conditions, for cash or an equivalent number of our common shares, at our option. During the three months ended
December 31, 2008, 3,000 operating partnership units were redeemed for cash. All other equity securities sold by us during 2008 that were not registered have been previously reported in a Quarterly Report on Form 10-Q.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

No equity securities were purchased by us during 2008. However, 13,961 common shares were placed into treasury as a result of restricted shares forfeited by former employees.



27



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##### Table of Contents

ITEM 6.    SELECTED FINANCIAL DATA

The following table includes certain financial information on a consolidated historical basis. You should read this section in conjunction with Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data. Our selected operating data, other data and balance sheet data for the years ended
2004 through 2007 has been reclassified to conform to the presentation for the year ended 2008.



|                                                                                       |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ------------------------------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | -------- | - |  | - | -------- | -
|                                                                                       |  | For the Year Ended December 31,                  |         
|                                                                                       |  | 2008                                             |          |   | 2007 |   |          | 2006 |  |   | 2005     |   |  | 2004 |         
|                                                                                       |  | (In thousands, except per share data and ratios) |         
|Operating Data:                                                                        |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Rental income                                                                          |  | $                                                | 501,964  |   |      | $ | 465,728  |      |  | $ | 414,261  |   |  | $    | 375,655  |   |  | $ | 350,837  |  
|Property operating income(1)                                                           |  | $                                                | 355,093  |   |      | $ | 336,862  |      |  | $ | 301,513  |   |  | $    | 273,398  |   |  | $ | 245,022  |  
|Income from continuing operations                                                      |  | $                                                | 115,338  |   |      | $ | 94,009   |      |  | $ | 89,952   |   |  | $    | 83,058   |   |  | $ | 63,566   |  
|Gain on sale of real estate                                                            |  | $                                                | 12,572   |   |      | $ | 94,768   |      |  | $ | 23,956   |   |  | $    | 30,748   |   |  | $ | 14,052   |  
|Net income                                                                             |  | $                                                | 129,787  |   |      | $ | 195,537  |      |  | $ | 118,712  |   |  | $    | 114,612  |   |  | $ | 84,156   |  
|Net income available for common shareholders                                           |  | $                                                | 129,246  |   |      | $ | 195,095  |      |  | $ | 103,514  |   |  | $    | 103,137  |   |  | $ | 72,681   |  
|Net cash provided by operating activities(2)                                           |  | $                                                | 228,285  |   |      | $ | 214,209  |      |  | $ | 186,654  |   |  | $    | 174,941  |   |  | $ | 174,148  |  
|Net cash used in investing activities(2)                                               |  | $                                                | (207,567 | ) |      | $ | (151,439 | )    |  | $ | (317,429 | ) |  | $    | (152,730 | ) |  | $ | (157,611 | )
|Net cash (used in) provided by financing activities(2)                                 |  | $                                                | (56,186  | ) |      | $ | (23,574  | )    |  | $ | 133,631  |   |  | $    | (44,047  | ) |  | $ | (21,030  | )
|Dividends declared on common shares                                                    |  | $                                                | 148,444  |   |      | $ | 135,102  |      |  | $ | 133,066  |   |  | $    | 124,928  |   |  | $ | 101,969  |  
|Weighted average number of common shares outstanding:                                  |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Basic                                                                                  |  |                                                  | 58,665   |   |      |   | 56,108   |      |  |   | 53,469   |   |  |      | 52,533   |   |  |   | 51,008   |  
|Diluted                                                                                |  |                                                  | 58,914   |   |      |   | 56,543   |      |  |   | 53,962   |   |  |      | 53,050   |   |  |   | 51,547   |  
|Earnings per common share, basic:                                                      |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Continuing operations                                                                  |  | $                                                | 1.96     |   |      | $ | 1.67     |      |  | $ | 1.40     |   |  | $    | 1.36     |   |  | $ | 1.02     |  
|Discontinued operations                                                                |  |                                                  | 0.24     |   |      |   | 1.81     |      |  |   | 0.40     |   |  |      | 0.60     |   |  |   | 0.40     |  
|Gain on sale of real estate                                                            |  |                                                  |         |   |      |   |         |      |  |   | 0.14     |   |  |      |         |   |  |   |         |  
|                                                                                       |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Total                                                                                  |  | $                                                | 2.20     |   |      | $ | 3.48     |      |  | $ | 1.94     |   |  | $    | 1.96     |   |  | $ | 1.42     |  
|                                                                                       |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Earnings per common share, diluted:                                                    |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Continuing operations                                                                  |  | $                                                | 1.95     |   |      | $ | 1.65     |      |  | $ | 1.39     |   |  | $    | 1.35     |   |  | $ | 1.01     |  
|Discontinued operations                                                                |  |                                                  | 0.24     |   |      |   | 1.80     |      |  |   | 0.39     |   |  |      | 0.59     |   |  |   | 0.40     |  
|Gain on sale of real estate                                                            |  |                                                  |         |   |      |   |         |      |  |   | 0.14     |   |  |      |         |   |  |   |         |  
|                                                                                       |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Total                                                                                  |  | $                                                | 2.19     |   |      | $ | 3.45     |      |  | $ | 1.92     |   |  | $    | 1.94     |   |  | $ | 1.41     |  
|                                                                                       |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Dividends declared per common share(3)                                                 |  | $                                                | 2.52     |   |      | $ | 2.37     |      |  | $ | 2.46     |   |  | $    | 2.37     |   |  | $ | 1.99     |  
|                                                                                       |  |                                                  |          |   |     
|Other Data:                                                                            |  |                                                  |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Funds from operations available to common shareholders(4)(5)(6)                        |  | $                                                | 229,176  |   |      | $ | 206,762  |      |  | $ | 177,113  |   |  | $    | 163,544  |   |  | $ | 148,671  |  
|EBITDA(7)                                                                              |  | $                                                | 339,099  |   |      | $ | 417,560  |      |  | $ | 316,783  |   |  | $    | 292,465  |   |  | $ | 258,143  |  
|Adjusted EBITDA(7)                                                                     |  | $                                                | 326,527  |   |      | $ | 322,792  |      |  | $ | 292,827  |   |  | $    | 261,717  |   |  | $ | 244,091  |  
|Ratio of EBITDA to combined fixed charges and preferred share dividends(7)(8)          |  |                                                  | 3.2x     |   |      |   | 3.3x     |      |  |   | 2.6x     |   |  |      | 2.7x     |   |  |   | 2.5x     |  
|Ratio of Adjusted EBITDA to combined fixed charges and preferred share dividends(7)(8) |  |                                                  | 3.1x     |   |      |   | 2.5x     |      |  |   | 2.4x     |   |  |      | 2.4x     |   |  |   | 2.4x     |  



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|                                                |  |                                       |           |      |   |           |  |      |           |      |   |           |  |   |          
|----------------------------------------------- |  | ------------------------------------- | --------- | ---- | - | --------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                                |  | As of December 31,                   
|                                                |  | 2008                                  |           | 2007 |   | 2006      |  | 2005 |           | 2004
|                                                |  | (In thousands, except per share data)
|Balance Sheet Data:                             |  |                                       |           |      |   |           |  |      |           |      |   |           |  |   |          
|Real estate, at cost                            |  | $                                     | 3,673,685 |      | $ | 3,452,847 |  | $    | 3,204,258 |      | $ | 2,829,321 |  | $ | 2,666,276
|Total assets                                    |  | $                                     | 3,092,776 |      | $ | 2,989,297 |  | $    | 2,688,606 |      | $ | 2,350,852 |  | $ | 2,266,896
|Mortgages payable and capital lease obligations |  | $                                     | 452,810   |      | $ | 450,084   |  | $    | 460,398   |      | $ | 419,713   |  | $ | 410,885  
|Notes payable                                   |  | $                                     | 336,391   |      | $ | 210,820   |  | $    | 109,024   |      | $ | 316,755   |  | $ | 325,051  
|Senior notes and debentures                     |  | $                                     | 956,584   |      | $ | 977,556   |  | $    | 1,127,508 |      | $ | 653,675   |  | $ | 568,121  
|Preferred stock                                 |  | $                                     | 9,997     |      | $ | 9,997     |  | $    |          |      | $ | 135,000   |  | $ | 135,000  
|Shareholders equity                            |  | $                                     | 1,114,602 |      | $ | 1,114,632 |  | $    | 784,078   |      | $ | 774,847   |  | $ | 790,534  
|Number of common shares outstanding             |  |                                       | 58,986    |      |   | 58,646    |  |      | 55,321    |      |   | 52,891    |  |   | 52,137   



|(1) | Property operating income consists of rental income, other property income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally
to evaluate the performance of property operations and we consider it to be a significant measure.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Determined in accordance with Financial Accounting Standards Board (FASB) Statement No. 95, Statement of Cash Flows.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(3) | The 2006 and 2005 dividends declared per common share each include a special dividend of $0.20 resulting from the sales of condominiums at Santana Row.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Funds from Operations (FFO) is a supplemental non-GAAP financial measure of real estate companies operating performances. The National Association of Real Estate
Investment Trusts (NAREIT) defines FFO as follows: net income, computed in accordance with the U.S. GAAP, plus depreciation and amortization of real estate assets and excluding extraordinary items and gains on the sale of real estate. We
compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO available for common shareholders in addition to our net income.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily because it excludes the assumption
that the value of the real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means of assessing our operating performance in
comparison with other REITs. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs. Additional
information regarding our calculation of FFO is contained in Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.

The reconciliation of net income to funds from operations available for common shareholders is as follows:



|                                                        |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                        |  | 2008           |         |   | 2007 |   |         | 2006 |  |   | 2005    |   |  | 2004 |        
|                                                        |  | (In thousands) |        
|Net income                                              |  | $              | 129,787 |   |      | $ | 195,537 |      |  | $ | 118,712 |   |  | $    | 114,612 |   |  | $ | 84,156  |  
|Gain on sale of real estate                             |  |                | (12,572 | ) |      |   | (94,768 | )    |  |   | (23,956 | ) |  |      | (30,748 | ) |  |   | (14,052 | )
|Depreciation and amortization of real estate assets     |  |                | 101,450 |   |      |   | 95,565  |      |  |   | 88,649  |   |  |      | 82,752  |   |  |   | 81,649  |  
|Amortization of initial direct costs of leases          |  |                | 8,771   |   |      |   | 8,473   |      |  |   | 7,390   |   |  |      | 6,972   |   |  |   | 7,151   |  
|Depreciation of joint venture real estate assets        |  |                | 1,331   |   |      |   | 1,241   |      |  |   | 768     |   |  |      | 630     |   |  |   | 187     |  
|                                                        |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Funds from operations                                   |  |                | 228,767 |   |      |   | 206,048 |      |  |   | 191,563 |   |  |      | 174,218 |   |  |   | 159,091 |  
|Dividends on preferred stock                            |  |                | (541    | ) |      |   | (442    | )    |  |   | (10,423 | ) |  |      | (11,475 | ) |  |   | (11,475 | )
|Income attributable to operating partnership units      |  |                | 950     |   |      |   | 1,156   |      |  |   | 748     |   |  |      | 801     |   |  |   | 1,055   |  
|Preferred stock redemption costs                        |  |                |        |   |      |   |        |      |  |   | (4,775  | ) |  |      |        |   |  |   |        |  
|                                                        |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Funds from operations available for common shareholders |  | $              | 229,176 |   |      | $ | 206,762 |      |  | $ | 177,113 |   |  | $    | 163,544 |   |  | $ | 148,671 |  
|                                                        |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  



29



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|(5) | Includes a charge of $1.6 million in 2008 related to the settlement of a litigation matter relating to a shopping center in New Jersey. The matter is further discussed in Note 8 of
the financial statements.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes $3.1 million of insurance recoveries in 2004 attributable to rental income lost at Santana Row as a result of the August 2002 fire. Insurance recoveries received in
2005 were insignificant.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | The SEC has stated that EBITDA is a non-GAAP measure as calculated in the table below. Adjusted EBITDA is a non-GAAP measure that means net income or loss plus net interest expense,
income taxes, depreciation and amortization, gain or loss on sale of real estate and impairments of real estate if any. Adjusted EBITDA is presented because we believe that it provides useful information to investors regarding our ability to service
debt and because it approximates a key covenant in material notes. Adjusted EBITDA should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP. Adjusted EBITDA as presented
may not be comparable to other similarly titled measures used by other REITs.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The reconciliation of Adjusted EBITDA to net
income for the periods presented is as follows:



|                              |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                              |  | 2008           |         |   | 2007 |   |         | 2006 |  |   | 2005    |   |  | 2004 |        
|                              |  | (In thousands) |        
|Net income                    |  | $              | 129,787 |   |      | $ | 195,537 |      |  | $ | 118,712 |   |  | $    | 114,612 |   |  | $ | 84,156  |  
|Depreciation and amortization |  |                | 111,068 |   |      |   | 105,966 |      |  |   | 97,879  |   |  |      | 91,503  |   |  |   | 90,438  |  
|Interest expense              |  |                | 99,163  |   |      |   | 117,394 |      |  |   | 102,808 |   |  |      | 88,566  |   |  |   | 85,058  |  
|Other interest income         |  |                | (919    | ) |      |   | (1,337  | )    |  |   | (2,616  | ) |  |      | (2,216  | ) |  |   | (1,509  | )
|                              |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|EBITDA                        |  |                | 339,099 |   |      |   | 417,560 |      |  |   | 316,783 |   |  |      | 292,465 |   |  |   | 258,143 |  
|Gain on sale of real estate   |  |                | (12,572 | ) |      |   | (94,768 | )    |  |   | (23,956 | ) |  |      | (30,748 | ) |  |   | (14,052 | )
|                              |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Adjusted EBITDA               |  | $              | 326,527 |   |      | $ | 322,792 |      |  | $ | 292,827 |   |  | $    | 261,717 |   |  | $ | 244,091 |  
|                              |  |                |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  

|(8) | Fixed charges consist of interest on borrowed funds (including capitalized interest), amortization of debt discount and expense and the portion of rent expense representing an
interest factor. Preferred share dividends consist of dividends paid on preferred shares and preferred stock redemption costs. Our Series B preferred shares were redeemed in full in November 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing in Item 8. Financial Statements and Supplementary Data of this report.

Overview

We are an equity real estate investment
trust specializing in the ownership, management, development and redevelopment of high quality retail and mixed-use properties. As of December 31, 2008, we owned or had a majority interest in community and neighborhood shopping centers and
mixed-use properties which are operated as 84 predominantly retail real estate projects comprising approximately 18.1 million square feet. These properties are located primarily in densely populated and affluent communities in strategic
metropolitan markets in the Mid-Atlantic and Northeast regions of the United States, as well as in California. In total, the real estate projects were 95.0% leased and 94.3% occupied at December 31, 2008. A joint venture in which we own a 30%
interest owned seven retail real estate projects totaling approximately 1.0 million square feet as of December 31, 2008. In total, the joint venture properties in which we own an interest were 97.4% leased and occupied at December 31,
2008. We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for 41 consecutive years.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America, which we refer to as GAAP, requires management to make estimates and assumptions that in



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certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses.
These estimates are prepared using managements best judgment, after considering past and current events and economic conditions. In addition, information relied upon by management in preparing such estimates includes internally generated
financial and operating information, external market information, when available, and when necessary, information obtained from consultations with third party experts. Actual results could differ from these estimates. A discussion of possible risks
which may affect these estimates is included in Item 1A. Risk Factors of this report. Management considers an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated results of
operations or financial condition.

The most significant accounting policies, which involve the use of estimates and assumptions as to future uncertainties
and, therefore, may result in actual amounts that differ from estimates, are as follows:

Revenue Recognition and Accounts Receivable

Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed escalations which occur at specified times during the term of the
lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, net of valuation adjustments, based on managements assessment of credit, collection and other business
risk. Percentage rents, which represent additional rents based upon the level of sales achieved by certain tenants, are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved and the percentage
rents are collectible. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related expenditures are incurred. For a tenant to terminate its lease agreement prior to the end of the agreed
term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees for which the tenant has relinquished control of the space are generally recognized on the termination date. When a lease is terminated early but the
tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement.

We make estimates of the collectibility of our accounts receivable related to minimum rents, straight-line rents, expense reimbursements and other revenue or income. In some cases, primarily relating to straight-line
rents, the collection of these amounts extends beyond one year. Our experience relative to unbilled straight-line rents is that a certain portion of the amounts otherwise recognizable as revenue is never billed to or collected from tenants due to
early lease terminations, lease modifications, bankruptcies and other factors. Accordingly, the extended collection period for straight-line rents along with our evaluation of tenant credit risk may result in the nonrecognition of a portion of
straight-line rental income until the collection of such income is reasonably assured. If our evaluation of tenant credit risk changes indicating more straight-line revenue is reasonably collectible than previously estimated and realized, the
additional straight-line rental income is recognized as revenue. If our evaluation of tenant credit risk changes indicating a portion of realized straight-line rental income is no longer collectible, a reserve and bad debt expense is recorded. At
December 31, 2008 and 2007, accounts receivable include approximately $37.2 million and $32.0 million, respectively, related to straight-line rents. These estimates have a direct impact on our net income.

At December 31, 2008 and 2007, our allowance for doubtful accounts was $11.8 million and $7.0 million, respectively. Historically, we have recognized bad debt
expense between 0.4% and 1.4% of rental income and it was 1.2% in 2008. An increase in our bad debt expense would decrease our net income. For example, if we had experienced an increase in bad debt of 0.5% of rental income in 2008, our net income
would have been reduced by approximately $2.5 million.

Real Estate

The nature of our business as an owner, redeveloper and operator of retail shopping centers and mixed-use properties means that we invest significant amounts of capital. Depreciation and maintenance costs relating to
our properties constitute substantial costs for us as well as the industry as a whole. We capitalize real estate



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investments and depreciate them in accordance with GAAP and consistent with industry standards based on our best estimates of the assets physical and
economic useful lives. The cost of our real estate investments, less salvage value, if any, is charged to depreciation expense over the estimated life of the asset using straight-line rates for financial statement purposes. We periodically review
the estimated lives of our assets and implement changes, as necessary, to these estimates and, therefore, to our depreciation rates. These reviews take into account the historical retirement and replacement of our assets, the repairs required to
maintain the condition of our assets, the cost of redevelopments that may extend the useful lives of our assets and general economic and real estate factors. A newly developed neighborhood shopping center building would typically have an economic
useful life of 50 to 60 years, but since many of our assets are not newly developed buildings, estimating the useful lives of assets that are long-lived as well as their salvage value requires significant management judgment. Certain events
could occur that would materially affect our estimates and assumptions related to depreciation. Unforeseen competition or changes in customer shopping habits could substantially alter our assumptions regarding our ability to realize the expected
return on investment in the property and therefore reduce the economic life of the asset and affect the amount of depreciation expense to be charged against both the current and future revenues. These assessments have a direct impact on our net
income. The longer the economic useful life, the lower the depreciation charged to that asset in a fiscal period will be, which in turn will increase our net income. Similarly, having a shorter economic useful life would increase the depreciation
for a fiscal period and decrease our net income.

Land, buildings and real estate under development are recorded at cost. We compute depreciation using the
straight-line method with useful lives ranging generally from 35 years to a maximum of 50 years on buildings and major improvements. Maintenance and repair costs are charged to operations as incurred. Tenant work and other major improvements,
which improve or extend the life of the asset, are capitalized and depreciated over the life of the lease or the estimated useful life of the improvements, whichever is shorter. Minor improvements, furniture and equipment are capitalized and
depreciated over useful lives ranging from 3 to 20 years. Certain external and internal costs directly related to the development, redevelopment and leasing of real estate, including applicable salaries and the related direct costs, are capitalized.
The capitalized costs associated with developments and redevelopments are depreciated over the life of the improvement. Capitalized costs associated with leases are depreciated or amortized over the base term of the lease. Unamortized leasing costs
are charged to operating expense if the applicable tenant vacates before the expiration of its lease. Undepreciated tenant work is charged to operations if the applicable tenant vacates and the tenant work is replaced or has no future value.

When applicable, as lessee, we classify our leases of land and building as operating or capital leases in accordance with the provisions of Statement of
Financial Accounting Standard (SFAS) No. 13, Accounting for Leases. We are required to use judgment and make estimates in determining the lease term, the estimated economic life of the property and the interest rate to be used in
applying the provisions of SFAS No. 13. These estimates determine whether or not the lease meets the qualification of a capital lease and is recorded as an asset.

Interest costs on developments and major redevelopments are capitalized as part of developments and redevelopments not yet placed in service. Capitalization of interest commences when development activities and
expenditures begin and end upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended use upon completion of tenant improvements, but no later
than one year from completion of major construction activity. We make judgments as to the time period over which to capitalize such costs and these assumptions have a direct impact on net income because capitalized costs are not subtracted in
calculating net income. If the time period for capitalizing interest is extended, more interest is capitalized, thereby decreasing interest expense and increasing net income during that period.

Real Estate Acquisitions

Upon acquisition of operating real estate
properties, we estimate the fair value of acquired tangible assets (consisting of land, building and improvements), identified intangible assets and liabilities (consisting of above-market and below-market leases, in-place leases and tenant
relationships), and assumed debt in accordance with



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SFAS No. 141, Business Combinations. Based on these estimates, we allocate the purchase price to the applicable assets and liabilities. We
utilize methods similar to those used by independent appraisers in estimating the fair value of acquired assets and liabilities. The value allocated to in-place leases is amortized over the related lease term and reflected as rental income in the
statement of operations. If a tenant vacates its space prior to contractual termination of its lease, the unamortized balance of any in-place lease value is written off to rental income.

Long-Lived Assets

There are estimates and assumptions made by management in preparing the consolidated financial
statements for which the actual results will be determined over long periods of time. This includes the recoverability of long-lived assets, including our properties that have been acquired or developed. Management must evaluate properties for
possible impairment of value and, for those properties where impairment may be indicated, make estimates of future cash flows including revenues, operating expenses, required maintenance and development expenditures, market conditions, demand for
space by tenants and rental rates over very long periods. Because our properties typically have a very long life, the assumptions used to estimate the future recoverability of book value requires significant management judgment. Actual results could
be significantly different from the estimates. These estimates have a direct impact on net income, because recording an impairment charge results in a negative adjustment to net income.

SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, requires the presentation of discontinued operations to include components of an entity comprising operations and cash
flows that can be distinguished operationally and for financial reporting purposes from the rest of the entity. As a result, the sale of a property, or the classification of a property as held for sale, typically requires us to reclassify the
revenues and expenses associated with the property from continuing operations to discontinued operations for all periods presented.

Contingencies

We are sometimes involved in lawsuits, warranty claims, and environmental matters arising in the ordinary course of business.
Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters.

Any difference between
our estimate of a potential loss and the actual outcome would result in an increase or decrease to net income. In addition, we reserve for estimated losses, if any, associated with warranties given to a buyer at the time an asset is sold or other
potential liabilities relating to that sale, taking any insurance policies into account. These warranties may extend up to ten years and the calculation of potential liability requires significant judgment. Any changes to our estimated warranty
losses would result in an increase or decrease in net income.

Self-Insurance

We are self-insured for general liability costs up to predetermined retained amounts per claim, and we believe that we maintain adequate accruals to cover our retained liability. We currently do not maintain third
party stop-loss insurance policies to cover liability costs in excess of predetermined retained amounts. Our accrual for self-insurance liability is determined by management and is based on claims filed and an estimate of claims incurred but not yet
reported. Management considers a number of factors, including third-party actuarial analysis and future increases in costs of claims, when making these determinations. If our liability costs differ from these accruals, it will increase or decrease
our net income.



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New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies to accounting pronouncements that require or permit fair value measurements, except for share-based
payments under SFAS No. 123(R). We adopted the recognition and disclosure provisions of SFAS No. 157 for financial assets and financial liabilities and for nonfinancial assets and nonfinancial liabilities that are re-measured at least
annually effective January 1, 2008; the adoption did not have a material impact on our financial position, results of operations or cash flows. In accordance with the FASB Staff Position (FSP) SFAS No. 157-2, Effective
Date of FASB Statement No. 157, we are required to adopt the provisions of SFAS No. 157 for all other nonfinancial assets and nonfinancial liabilities effective January 1, 2009 and do not expect the adoption to have a material
impact on our financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS No. 159). This standard permits entities to choose to measure many financial instruments and certain other items at
fair value and is effective for the first fiscal year beginning after November 15, 2007. We did not make this fair value election when we adopted SFAS No. 159 effective January 1, 2008, and, therefore, it did not have an impact on our
financial position, results of operations, or cash flows.

On December 4, 2007, the FASB issued Statement No. 141 (R), Business
Combinations (SFAS No. 141 (R)). SFAS No. 141 (R) broadens and clarifies the definition of a business which will result in significantly more of our acquisitions being treated as business combinations rather than
asset acquisitions. FAS 141 (R) is effective for business combinations for which the acquisition date is on or after January 1, 2009. Early adoption is not permitted and therefore, this will only impact prospective acquisitions with no
change to the accounting for acquisitions completed prior to or on December 31, 2008. The new standard requires us to expense as incurred all acquisition related transaction costs which could include broker fees, transfer taxes, legal,
accounting, valuation, and other professional and consulting fees; for acquisitions prior to January 1, 2009, these costs were capitalized as part of the acquisition cost. The impact to our financial statements will vary significantly depending
on the number of acquisitions, size of the acquisitions, and location of the acquisitions. Based on acquisitions in the last three years, transaction costs for single asset acquisitions typically ranged from $0.1 million to $1.0 million with
significantly higher transaction costs for an acquisition of a larger portfolio. The new standard includes several other changes to the accounting for business combinations including requiring contingent consideration to be measured at fair value at
acquisition and subsequently remeasured through the income statement if accounted for as a liability as the fair value changes, any adjustments during the purchase price allocation period to be pushed back to the acquisition date with
prior periods being adjusted for any changes, and the business combination to be accounted for on the acquisition date or the date control is obtained. During 2008, we expensed all acquisition related costs for acquisitions which did not close prior
to December 31, 2008.

On December 4, 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB 51 (SFAS No. 160). The new standard significantly changes the accounting and reporting of minority interests in the consolidated financial statements. The new standard requires a
non-controlling interest, which is currently referred to as a minority interest, to be recognized as a component of equity rather than included in the mezzanine section of the balance sheet where it is currently presented. The terminology
minority interest is changed to noncontrolling interest. The minority interest caption on the statement of operations will be reflected as net income attributable to the noncontrolling interests and
shown after consolidated net income and will be an adjustment to reconcile to net income. This is a presentation only change for minority interest on both the balance sheet and statement of operations and will have no impact to net income, total
liabilities and equity, and earnings per share. The statement also requires the recognition of 100% of the fair values of assets acquired and liabilities assumed in acquisitions of less than 100% controlling interest with subsequent acquisitions of
the non-controlling interest recorded as equity transactions. SFAS No. 160 is effective January 1, 2009 and is to be applied prospectively except for the presentation changes to the balance sheet and income



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statement which will be applied retrospectively in the 2009 financial statements. Effective January 1, 2009, we will reclassify $32.4 million from the
mezzanine section of the balance sheet to shareholders equity. The additional impact on the financial statements will vary depending on the level of transactions with entities involving non-controlling interests.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133 (SFAS No. 161). SFAS No. 161 requires enhanced disclosures about an entitys derivative instruments and hedging activities and is effective for fiscal years beginning after November 15, 2008. We do
not expect the adoption of SFAS No. 161 to have a material impact on our consolidated financial statements.

In June 2008, the FASB issued FSP EITF
No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF No. 03-6-1). Under the FSP, unvested share-based payment awards that contain
non-forfeitable rights to receive dividends (whether paid or unpaid) are participating securities, and should be included in computation of EPS pursuant to the two-class method. As part of our stock based compensation program, we issue restricted
shares which vest over a three to six year period; these shares have non-forfeitable rights to dividends immediately after issuance. We currently exclude the unvested shares from the basic EPS calculation and include them using the treasury stock
method in diluted earnings per share. We expect the adoption of FSP EITF No. 03-6-1 to result in a minimal decrease to our basic and diluted earnings per share calculations for all periods presented. The FSP is effective for fiscal years
beginning after December 15, 2008 and will require retrospective application to all prior period EPS data presented in the financial statements; early adoption is not permitted.

In November 2008, the EITF issued Issue 08-6, Equity Method Investment Accounting Considerations (EITF 08-6), which clarified the accounting for certain transactions and impairment
considerations involving equity method investments. EITF 08-6 clarified that equity method investments should initially be measured at cost, the issuance of shares by the investee would result in a gain or loss on issuance of shares reflected in the
income statement of the equity investor, and that a loss in value of an equity investment which is other than a temporary decline should be recognized in accordance with APB 18, The Equity Method of Accounting for Investments in Common
Stock. The consensus is effective on a prospective basis beginning on January 1, 2009; we do not expect EITF 08-6 to have a material impact on our financial position, results of operations, or cash flows.



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Property Acquisitions and Dispositions

A summary of our significant acquisitions in 2008 and 2007 is as follows:



|                             |  |                                  |  |                     |  |                    |  |               |       |    
|---------------------------- |  | -------------------------------- |  | ------------------- |  | ------------------ |  | ------------- | ----- | ---
|Date                         |  | Property                         |  | City, State         |  | Gross LeasableArea |  | PurchasePrice |      
|                             |  |                                  |  |                     |  | (In square feet)   |  | (In millions) |      
|Year ended December 31, 2008 |  |                                  |  |                     | 
|May 30                       |  | Del Mar Village                  |  | Boca Raton, FL      |  | 154,000            |  | $             | 41.7  | (1)
|July 11                      |  | 7015 & 7045 Beracasa Way         |  | Boca Raton, FL      |  | 24,000             |  |               | 6.7   | (2)
|July 16                      |  | Chelsea Commons Phase II         |  | Chelsea, MA         |  | 26,000             |  |               | 8.0   | (3)
|September 4                  |  | Courtyard Shops                  |  | Wellington, FL      |  | 127,000            |  |               | 37.9  | (4)
|September 25 and 30          |  | Bethesda Row                     |  | Bethesda, MD        |  | N/A                |  |               | 38.8  | (5)
|                             |  |                                  |  |                     |  |                    |  |               |       |    
|                             |  |                                  |  | Total               |  | 331,000            |  | $             | 133.1 |    
|                             |  |                                  |  |                     |  |                    |  |               |       |    
|                             |  |                                 
|Year ended December 31, 2007 |  |                                  |  |                     | 
|February 28                  |  | Crow Canyon Crest                |  | San Ramon, CA       |  | 17,000             |  | $             | 10.9  |    
|March 8                      |  | The White Marsh Portfolio:(6)    |  | White Marsh, MD     |  |                    |  |               | 189.4 |    
|                             |  | THE AVENUE at White Marsh        |  |                     |  | 296,000            |  |               |       |    
|                             |  | The Shoppes at Nottingham Square |  |                     |  | 186,000            |  |               |       |    
|                             |  | White Marsh Plaza                |  |                     |  | 79,000             |  |               |       |    
|                             |  | White Marsh Other                |  |                     |  | 53,000             |  |               |       |    
|May 30                       |  | Shoppers World                  |  | Charlottesville, VA |  | 169,000            |  |               | 27.2  |    
|October 26                   |  | Mid-Pike Plaza                   |  | Rockville, MD       |  |                   |  |               | 45.2  | (7)
|October 26                   |  | Huntington Shopping Center       |  | Huntington, NY      |  |                   |  |               | 37.7  | (7)
|                             |  |                                  |  |                     |  |                    |  |               |       |    
|                             |  |                                  |  | Total               |  | 800,000            |  | $             | 310.4 |    
|                             |  |                                  |  |                     |  |                    |  |               |       |    



|(1) | Approximately $1.7 million and $7.4 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Approximately $0.2 million of the net assets acquired were allocated to other assets for above market leases. The two buildings acquired are adjacent to our Del Mar
Village shopping center.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Approximately $0.2 million and $0.3 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively. This property includes four pad sites that are adjacent to our Chelsea Commons property.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Approximately $0.6 million and $1.0 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | On September 25 and 30, 2008, we completed exchange transactions whereby we sold our fee interest in four land parcels that were subject to long-term ground leases with tenants
and acquired the fee interest in two land parcels under our Bethesda Row property. Prior to the transactions, the land parcels at Bethesda Row were encumbered by capital lease obligations which were extinguished as part of the transactions. The
transactions were completed as 1031 tax deferred exchange transactions and involved net cash paid to us of $23.2 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The White Marsh Portfolio was purchased using $11.5 million of cash plus a combination of common stock and convertible preferred stock, downREIT operating partnership units, and the
assumption of mortgage loans through a merger with Nottingham Properties, Inc. The acquisition also included ground leases covering 50,000 square feet of office space and a hotel which are not included in gross leasable area.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | On October 26, 2007, we completed an exchange transaction whereby we sold our leasehold interests in six New Jersey properties and acquired the fee interests in Mid-Pike Plaza
and Huntington Shopping Center. Prior to the transaction, we held leasehold interests in all eight properties. The transaction was completed as a 1031 tax-deferred exchange and involved a cash payment of $17.2 million. All eight properties were
previously encumbered by capital lease obligations which were extinguished as part of the transaction.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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On November 16, 2007, we purchased the 10% minority interest in three properties located at our Fifth Avenue,
Hermosa Avenue and Third Street Promenade projects for $5.7 million. We now own 100% of these properties.

Generally, our acquisitions are initially
financed by available cash and borrowings under our revolving credit facility which may be repaid later with funds raised through the issuance of new equity or new long-term debt. On occasion we also finance our acquisitions through the issuance of
common stock, preferred stock, or downREIT units as well as through the assumption of mortgages.

A summary of our
significant dispositions in 2008 and 2007 is as follows:



|                             |  |                                  |  |                     |  |                      |  |                    |     |  |               |       |      |   |       |    
|---------------------------- |  | -------------------------------- |  | ------------------- |  | -------------------- |  | ------------------ | --- |  | ------------- | ----- | ---- | - | ----- | ---
|Sale Date                    |  | Property                         |  | Location            |  | YearAcquiredor Built |  | Gross LeasableArea |     |  | SalesPrice    |       | Gain |  
|                             |  |                                  |  |                     |  |                      |  | (In square feet)   |     |  | (In millions) |      
|Year ended December 31, 2008 |  |                                  |  |                     |  |                      |  |                    |     | 
|September 25 and 30          |  | Four Land Parcels:(1)            |  |                     |  |                      |  |                    |     |  | $             | 38.8  |      | $ | 0.9   |    
|                             |  | The Shoppes at Nottingham Square |  | White Marsh, MD     |  | 2007                 |  | 134,000            |     |  |               |       |      |   |       |    
|                             |  | White Marsh Other                |  | White Marsh, MD     |  | 2007                 |  | N/A                | (2) |  |               |       |      |   |       |    
|                             |  | White Marsh Other                |  | White Marsh, MD     |  | 2007                 |  | 3,000              |     |  |               |       |      |   |       |    
|                             |  | North Dartmouth                  |  | North Dartmouth, MA |  | 2006                 |  | 135,000            |     |  |               |       |      |   |       |    
|December 29                  |  | Greenwich Avenue                 |  | Greenwich, CT       |  | 1995                 |  | 7,000              |     |  |               | 7.2   |      |   | 5.2   | (3)
|                             |  |                                  |  |                     |  |                      |  |                    |     |  |               |       |      |   |       |    
|                             |  |                                  |  | Total               |  |                      |  | 279,000            |     |  | $             | 46.0  |      | $ | 6.1   |    
|                             |  |                                  |  |                     |  |                      |  |                    |     |  |               |       |      |   |       |    
|                             |  |                                  |  |                    
|Year ended December 31, 2007 |  |                                  |  |                     |  |                      |  |                    |     | 
|April 5                      |  | Bath Shopping Center             |  | Bath, ME            |  | 2006                 |  | 101,000            |     |  | $             | 21.8  |      | $ | 0.6   | (4)
|June 20                      |  | Key Road Plaza                   |  | Keene, NH           |  | 2006                 |  | 76,000             |     |  |               | 15.3  |      |   | 0.4   | (5)
|June 20                      |  | Riverside Plaza                  |  | Keene, NH           |  | 2006                 |  | 218,000            |     |  |               | 25.9  |      |   | 0.5   | (6)
|October 11                   |  | Forest Hills                     |  | Forest Hills, NY    |  | 1997                 |  | 39,500             |     |  |               | 33.2  |      |   | 19.1  | (7)
|October 26                   |  | New Jersey Leasehold Interests:  |  |                     |  |                      |  |                    |     |  |               | 65.7  |      |   | 79.6  | (8)
|                             |  | Allwood Shopping Center          |  | Clifton, NJ         |  | 1988                 |  | 50,000             |     |  |               |       |      |   |       |    
|                             |  | Blue Star Shopping Center        |  | Watchung, NJ        |  | 1988                 |  | 410,000            |     |  |               |       |      |   |       |    
|                             |  | Brunswick Shopping Center        |  | North Brunswick, NJ |  | 1988                 |  | 303,000            |     |  |               |       |      |   |       |    
|                             |  | Clifton Shopping Center          |  | Clifton, NJ         |  | 1988                 |  | 80,000             |     |  |               |       |      |   |       |    
|                             |  | Hamilton Shopping Center         |  | Hamilton, NJ        |  | 1988                 |  | 190,000            |     |  |               |       |      |   |       |    
|                             |  | Rutgers Shopping Center          |  | Franklin, NJ        |  | 1988                 |  | 267,000            |     |  |               |       |      |   |       |    
|                             |  |                                  |  |                     |  |                      |  |                    |     |  |               |       |      |   |       |    
|                             |  |                                  |  | Total               |  |                      |  | 1,734,500          |     |  | $             | 161.9 |      | $ | 100.2 |    
|                             |  |                                  |  |                     |  |                      |  |                    |     |  |               |       |      |   |       |    



|(1) | On September 25 and 30, 2008, we completed exchange transactions whereby we sold our fee interest in four land parcels that were subject to long-term ground leases with tenants
and acquired the fee interest in two land parcels under our Bethesda Row property. Three of the land parcels we sold were in White Marsh, MD, and one parcel was in North Dartmouth, MA. The transactions were completed as 1031 tax deferred exchange
transactions and involved net cash paid to us of $23.2 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This land parcel was subject to a ground lease covering 50,000 square feet of office space not included in our gross leasable area.
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(3) | We sold one of two retail buildings located in Greenwich, CT.
|--- | -------------------------------------------------------------

|(4) | Gain of $0.6 million is net of $0.3 million in taxes.
|--- | -----------------------------------------------------

|(5) | Gain of $0.4 million is net of $0.1 million in taxes.
|--- | -----------------------------------------------------

|(6) | Gain of $0.5 million is net of $0.1 million in taxes.
|--- | -----------------------------------------------------

|(7) | We sold two of three retail buildings located in Forest Hills, NY.
|--- | ------------------------------------------------------------------

|(8) | On October 26, 2007, we completed an exchange transaction whereby we sold our leasehold interests in six New Jersey properties and acquired the fee interests in Mid-Pike Plaza
and Huntington Shopping Center. The transaction was completed as a 1031 tax-deferred exchange and involved a cash payment of $17.2 million. All eight properties were previously encumbered by capital lease obligations which were extinguished as part
of the transaction.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The proceeds from our dispositions were used to pay down our revolving credit facility and for general corporate
purposes.

In 2005 and 2006, warranty reserves for condominium units sold at Santana Row were established to cover potential costs for materials, labor and
other items associated with warranty-type claims that may arise within the ten-year statutorily mandated latent construction defect warranty period. In 2006 and 2007, we increased our warranty reserves by $2.5 million and $5.1 million, respectively,
net of taxes, related to defective work done by third party contractors while upgrades were made to certain units being prepared for sale. During 2007 and 2008, we evaluated the potentially affected units, and as of December 31, 2008, have
completed the inspections and repairs. The extent of the damages encountered in the units and the resulting costs to repair varied considerably amongst the units. As a result, we have adjusted the warranty reserve to reflect the actual costs
incurred related to these issues which is approximately $2.4 million, net of $1.5 million of taxes. The change in the reserve of $5.2 million is included in Discontinued operationsgain on sale of real estate in 2008. These amounts
do not reflect any amounts we may recover in the future from insurance or the contractors responsible for the defective work. Due to the inherent uncertainty related to the recovery from insurance or the contractor, we are unable to estimate an
expected recovery; any recovery will be reflected in our financial statements once the amount is determinable, considered probable, and collectible.

Litigation Settlement

During the fourth quarter 2008, we entered into an agreement to settle a litigation matter relating to a shopping
center in New Jersey where a former tenant alleged that we and our management agent acted improperly by failing to disclose a condemnation action at the property that was pending when the lease was signed. In June 2008, we entered into an agreement
with the management agent that provided a framework for sharing litigation costs and payment of any damages to the plaintiff. The final settlement totaled $2.3 million of which we paid $1.15 million and the third party management agent paid $1.15
million. We are currently in the process of settling the amount of the portion of the plaintiffs legal fees which we are required to pay; we expect the amount to be approximately $1.0 million of which we will pay 50% and the third party
management agent will pay 50%. Our share of the total estimated settlement of $1.6 million is included in general and administrative expense in the statement of operations.

2008 Significant Debt and Equity Transactions

On February 21, 2008, we entered into two interest rate swap
agreements to fix the variable portion of our $200 million term loan through November 6, 2008. The first swap fixed the variable rate at 2.725% on a notional amount of $100 million and the second swap fixed the variable rate at 2.852% on a
notional amount of $100 million for a combined fixed rate of 2.789%. Both swaps were designated and qualified as cash flow hedges and were recorded at fair value until the swaps ended on November 6, 2008.

On July 1, 2008, we repaid the $9.6 million mortgage loan on Leesburg Plaza which had an original maturity date of October 1, 2008. This loan was repaid
with funds borrowed on our $300 million revolving credit facility.

On July 15, 2008, we exercised a one-year extension for our $200 million term loan
extending the maturity date to November 6, 2009.

On August 15, 2008, one of the holders redeemed $20.8 million of the outstanding $50.0 million
balance of our 7.48% debentures. The notice period for additional redemptions has expired. These debentures were repaid with funds borrowed on our $300 million revolving credit facility.



38



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In connection with the acquisition of Courtyard Shops and two land parcels at Bethesda Row, we assumed three mortgage
notes as follows:



|                |  |               |      |               |                  |                            |      |  
|--------------- |  | ------------- | ---- | ------------- | ---------------- | -------------------------- | ---- | -
|Property        |  | Fair Value(1) |      | Maturity Date |                  | Stated AnnualInterest Rate |     
|                |  | (In millions) |      |               |                  |                            |     
|Courtyard Shops |  | $             | 8.1  |               | July 1, 2012     |                            | 6.87 | %
|Bethesda Row    |  | $             | 20.0 |               | January 1, 2013  |                            | 5.37 | %
|Bethesda Row    |  | $             | 4.4  |               | February 1, 2013 |                            | 5.05 | %



|(1) | The aggregate face amount of the mortgage notes is $32.2 million. However, in accordance with GAAP, these mortgage notes were recorded at their aggregate fair value of $32.5
million.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On September 25 and 30, 2008, we acquired the fee interest in two land parcels under our Bethesda Row property. Prior to
the transactions, we had capital lease obligations totaling $11.5 million on the two land parcels which were extinguished as part of the transactions.

On
December 31, 2008, we repaid the $1.1 million mortgage loan on one of our properties in White Marsh, MD, on its maturity date. This loan was repaid with funds borrowed on our $300 million revolving credit facility.

Outlook

We seek growth in earnings, funds from operations, and cash
flows primarily through a combination of the following:



| |  |  | growth in our same-center portfolio,
| | - |  | ------------------------------------



| |  |  | growth in our portfolio from property redevelopments, and
| | - |  | ---------------------------------------------------------



| |  |  | expansion of our portfolio through property acquisitions.
| | - |  | ---------------------------------------------------------

Our same-center growth is primarily driven by increases in rental rates on new leases and lease renewals. The infill nature and strong demographics of our properties provide a strategic advantage allowing us to maintain relatively high
occupancy and increase rental rates. We seek to maintain a mix of strong national, regional, and local retailers. At December 31, 2008, no single tenant accounted for more than 2.6% of annualized base rent.

We continue to see a positive impact from redevelopment of our shopping centers. In 2009 and 2010, we have redevelopment projects stabilizing with projected costs of
approximately $73 million and $16 million, respectively. As redevelopment properties are completed, spaces that were out of service and newly created spaces begin generating revenue. In addition, spaces that were not out of service and that have
expiring leases may generate higher revenue because we generally receive higher rent on new leases at improved centers.

We continue to review acquisition
opportunities in our primary markets that complement our portfolio and provide long term opportunities. Additionally, in 2008, we acquired two properties in South Florida and continue to evaluate further acquisitions in the South Florida market.
Generally, our acquisitions do not initially contribute significantly to earnings growth; however, they provide long term re-leasing growth, redevelopment opportunities, and other strategic opportunities. Any growth from acquisitions is contingent
on our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both the price that must
be paid to acquire a property, as well as our ability to economically finance the property acquisition.

The current downturn in the economy may impact the
success of our tenants retail operations and therefore the amount of rent and expense reimbursements we receive from our tenants. We have seen tenants experiencing declining sales, vacating early, or filing for bankruptcy, as well as seeking
rent relief from us as landlord. Any reduction in our tenants abilities to pay base rent, percentage rent or other charges, will adversely affect our



39



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##### Table of Contents

financial condition and results of operations. Further, our ability to re-lease vacant spaces may be negatively impacted by the current economic environment.
While we believe the locations of our centers and diverse tenant base should decrease the negative impact of the economic environment, we are likely to see an increase in vacancy that could have a negative impact to our revenue. We continue to
monitor our tenants operating performances as well as trends in the retail industry to evaluate the future impact.

We continue to maintain a strong
balance sheet and a conservative capital structure. We seek to maintain a schedule of debt maturities such that the amount of debt maturing in any one year is manageable with respect to our overall borrowing capacity.

At December 31, 2008, the leasable square feet in our shopping centers was 94.3% occupied and 95.0% leased. The leased rate is higher than the occupied rate due to
leased spaces that are being redeveloped or improved or that are awaiting permits and, therefore, are not yet ready to be occupied. Our occupancy and leased rates are subject to variability over time due to factors including acquisitions, the timing
of the start and stabilization of our redevelopment projects, lease expirations and tenant bankruptcies.

Results of Operations

Throughout this section, we have provided certain information on a same-center basis. Information provided on a same-center basis includes the results of
properties that we owned and operated for the entirety of both periods being compared except for properties for which significant development, redevelopment or expansion occurred during either of the periods being compared and properties classified
as discontinued operations.

YEAR ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED DECEMBER 31, 2007



|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |       |  
|----------------------------------------------------------- |  | ----------------------------- | -------- | - | ---- | - | -------- | ------- |  | - | ------- | - |  | ----- | -
|                                                            |  |                               |          |   |      |   |          | Change  | 
|                                                            |  | 2008                          |          |   | 2007 |   |          | Dollars |  |   | %       |  
|                                                            |  | (Dollar amounts in thousands) |         
|Rental income                                               |  | $                             | 501,964  |   |      | $ | 465,728  |         |  | $ | 36,236  |   |  | 7.8   | %
|Other property income                                       |  |                               | 14,013   |   |      |   | 12,834   |         |  |   | 1,179   |   |  | 9.2   | %
|Mortgage interest income                                    |  |                               | 4,548    |   |      |   | 4,560    |         |  |   | (12     | ) |  | -0.3  | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |       |  
|Total property revenues                                     |  |                               | 520,525  |   |      |   | 483,122  |         |  |   | 37,403  |   |  | 7.7   | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |       |  
|Rental expenses                                             |  |                               | 109,718  |   |      |   | 99,363   |         |  |   | 10,355  |   |  | 10.4  | %
|Real estate taxes                                           |  |                               | 55,714   |   |      |   | 46,897   |         |  |   | 8,817   |   |  | 18.8  | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |       |  
|Total property expenses                                     |  |                               | 165,432  |   |      |   | 146,260  |         |  |   | 19,172  |   |  | 13.1  | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |       |  
|Property operating income                                   |  |                               | 355,093  |   |      |   | 336,862  |         |  |   | 18,231  |   |  | 5.4   | %
|Other interest income                                       |  |                               | 916      |   |      |   | 921      |         |  |   | (5      | ) |  | -0.5  | %
|Income from real estate partnership                         |  |                               | 1,612    |   |      |   | 1,395    |         |  |   | 217     |   |  | 15.6  | %
|Interest expense                                            |  |                               | (99,163  | ) |      |   | (111,365 | )       |  |   | 12,202  |   |  | -11.0 | %
|General and administrative expense                          |  |                               | (26,732  | ) |      |   | (26,581  | )       |  |   | (151    | ) |  | 0.6   | %
|Depreciation and amortization                               |  |                               | (111,022 | ) |      |   | (101,633 | )       |  |   | (9,389  | ) |  | 9.2   | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |       |  
|Total other, net                                            |  |                               | (234,389 | ) |      |   | (237,263 | )       |  |   | 2,874   |   |  | -1.2  | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |       |  
|Income from continuing operations before minority interests |  |                               | 120,704  |   |      |   | 99,599   |         |  |   | 21,105  |   |  | 21.2  | %
|Minority interests                                          |  |                               | (5,366   | ) |      |   | (5,590   | )       |  |   | 224     |   |  | -4.0  | %
|Discontinued operationsincome                              |  |                               | 1,877    |   |      |   | 6,760    |         |  |   | (4,883  | ) |  | -72.2 | %
|Discontinued operationsgain on sale of real estate         |  |                               | 12,572   |   |      |   | 94,768   |         |  |   | (82,196 | ) |  | -86.7 | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |       |  
|Net income                                                  |  | $                             | 129,787  |   |      | $ | 195,537  |         |  | $ | (65,750 | ) |  | -33.6 | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |       |  



40



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##### Table of Contents

Property Revenues

Total property revenue increased $37.4 million, or 7.7%, to $520.5 million in 2008 compared to $483.1 million in 2007. The percentage occupied at our shopping centers decreased to 94.3% at December 31, 2008 compared to 95.4%
at December 31, 2007. Changes in the components of property revenue are discussed below.

Rental Income

Rental income consists primarily of minimum rent, cost recoveries from tenants and percentage rent. Rental income increased $36.2 million, or 7.8%, to $502.0 million
in 2008 compared to $465.7 million in 2007, due primarily to the following:



| |  |  | an increase of $14.2 million at same-center properties due to increased rental rates on new and renewal leases, increased cost reimbursements and increased
percentage rent,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $12.8 million attributable to properties acquired in 2008 and 2007,
| | - |  | ----------------------------------------------------------------------------------



| |  |  | an increase of $11.0 million at redevelopment properties due primarily to increased rental rates on new leases including newly created retail and residential spaces
generating revenue and increased cost reimbursements,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

partially offset by



| |  |  | a decrease of $1.7 million related to the demolition of an operating property in 2008 for use in future development.
| | - |  | --------------------------------------------------------------------------------------------------------------------

Other Property Income

Other property income increased $1.2 million,
or 9.2%, to $14.0 million in 2008 compared to $12.8 million in 2007. Included in other property income are items which, although recurring, tend to fluctuate more than rental income from period to period, such as lease termination fees. In
2008, the increase is primarily due to an increase in lease termination fees at redevelopment properties partially offset by a decrease in income from our restaurant joint ventures.

Property Expenses

Total property expenses increased $19.2 million, or 13.1%, to $165.4 million in 2008 compared to
$146.3 million in 2007. Changes in the components of property expenses are discussed below.

Rental Expenses

Rental expenses increased $10.4 million, or 10.4%, to $109.7 million in 2008 compared to $99.4 million in 2007. This increase is due primarily to the
following:



| |  |  | an increase of $3.7 million in bad debt expense at same-center properties,
| | - |  | --------------------------------------------------------------------------



| |  |  | an increase of $2.9 million attributable to properties acquired in 2008 and 2007
| | - |  | --------------------------------------------------------------------------------



| |  |  | an increase of $2.9 million in repairs and maintenance at same-center and redevelopment properties,
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | an increase of $1.0 million in utility expense at same-center and redevelopment properties,
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | an increase of $1.0 million in marketing expense at redevelopment properties primarily due to costs related to Arlington East (Bethesda Row) which opened during
2008,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

partially offset by



| |  |  | a decrease of $1.4 million in insurance expense at same-center and redevelopment properties.
| | - |  | --------------------------------------------------------------------------------------------



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##### Table of Contents

As a result of the changes in rental income, rental expenses and other property income described above, rental expenses
as a percentage of rental income plus other property income increased to 21.3% in 2008 from 20.8% in 2007.

Real Estate Taxes

Real estate tax expense increased $8.8 million, or 18.8%, to $55.7 million in 2008 compared to $46.9 million in 2007. This increase is due primarily to an increase
of $6.7 million related to higher assessments at same-center and redevelopment properties and $2.2 million related to properties acquired in 2008 and 2007.

Property Operating Income

Property operating income increased $18.2 million, or 5.4%, to $355.1 million in 2008 compared to
$336.9 million in 2007. As discussed above, this increase is due primarily to the following:



| |  |  | growth in earnings at redevelopment properties,
| | - |  | -----------------------------------------------



| |  |  | earnings attributable to properties acquired in 2008 and 2007, and
| | - |  | ------------------------------------------------------------------



| |  |  | growth in same-center earnings.
| | - |  | -------------------------------

Other

Interest Expense

Interest expense decreased $12.2
million, or 11.0%, to $99.2 million in 2008 compared to $111.4 million in 2007. This decrease is primarily due to the following:



| |  |  | a decrease of $7.4 million due to a lower overall weighted average borrowing rate,
| | - |  | ----------------------------------------------------------------------------------



| |  |  | a decrease of $4.7 million due to the termination of the Mid-Pike and Huntington capital leases on October 26, 2007, as part of the acquisition of the fee
interests in these properties,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a decrease of $2.7 million due to lower borrowings,
| | - |  | ---------------------------------------------------

partially offset by



| |  |  | a decrease of $2.6 million in capitalized interest due primarily to substantial completion of our Arlington East (Bethesda Row) and Linden Square projects.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

Gross interest costs were $104.5 million and $119.2 million in 2008 and 2007, respectively. Capitalized interest amounted to
$5.3 million and $7.9 million in 2008 and 2007, respectively.

General and Administrative Expense

General and administrative expense increased $0.2 million, or 0.6%, to $26.7 million in 2008 from $26.6 million in 2007. This is due to a $1.6 million litigation
settlement in 2008 related to a shopping center in New Jersey partially offset by lower personnel related costs.

Depreciation and Amortization

Depreciation and amortization expense increased $9.4 million, or 9.2%, to $111.0 million in 2008 from $101.6 million in 2007. This increase
is due primarily to acquisitions, placing into service newly completed redevelopment projects, and capital improvements at same-center and redevelopment properties.

Discontinued OperationsIncome

Income from discontinued operations represents the income of properties that
have been disposed, or will be disposed, which is required to be reported separately from results of ongoing operations. The reported income of $1.9 million and $6.8 million in 2008 and 2007, respectively, represents the income for the
period during which we owned properties sold in 2008 and 2007.



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##### Table of Contents

Discontinued OperationsGain on Sale of Real Estate

The gain on sale of real estate from discontinued operations of $12.6 million for 2008 consists primarily of a $5.2 million gain on the sale of one property in
Connecticut, a $5.2 million decrease in the warranty reserve for condominium units sold at Santana Row in 2005 and 2006, $1.1 million in accrued state tax refunds applied for in 2008 related to the initial sales of the condominium units at Santana
Row, and a $0.9 million gain on the sale of four land parcels in Maryland and Massachusetts.

The gain on sale of real estate from discontinued operations
of $94.8 million for 2007 is due to a $100.2 million gain primarily related to the sales of Bath Shopping Center, Key Road Plaza, Riverside Plaza, two properties in Forest Hills, and Allwood, Blue Star, Brunswick, Clifton, Hamilton and Rutgers
Shopping Centers, partially offset by a $5.1 million increase in the reserve, net of taxes, for the reassessment of damages in 2007 of defective work completed when making upgrades to certain condominiums sold in 2005 and 2006 at Santana Row.

YEAR ENDED DECEMBER 31, 2007 COMPARED TO YEAR ENDED DECEMBER 31, 2006



|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|----------------------------------------------------------- |  | ----------------------------- | -------- | - | ---- | - | -------- | ------- |  | - | ------- | - |  | ------ | -
|                                                            |  |                               |          |   |      |   |          | Change  | 
|                                                            |  | 2007                          |          |   | 2006 |   |          | Dollars |  |   | %       |  
|                                                            |  | (Dollar amounts in thousands) |         
|Rental income                                               |  | $                             | 465,728  |   |      | $ | 414,261  |         |  | $ | 51,467  |   |  | 12.4   | %
|Other property income                                       |  |                               | 12,834   |   |      |   | 7,460    |         |  |   | 5,374   |   |  | 72.0   | %
|Mortgage interest income                                    |  |                               | 4,560    |   |      |   | 5,095    |         |  |   | (535    | ) |  | -10.5  | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Total property revenues                                     |  |                               | 483,122  |   |      |   | 426,816  |         |  |   | 56,306  |   |  | 13.2   | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Rental expenses                                             |  |                               | 99,363   |   |      |   | 84,164   |         |  |   | 15,199  |   |  | 18.1   | %
|Real estate taxes                                           |  |                               | 46,897   |   |      |   | 41,139   |         |  |   | 5,758   |   |  | 14.0   | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Total property expenses                                     |  |                               | 146,260  |   |      |   | 125,303  |         |  |   | 20,957  |   |  | 16.7   | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Property operating income                                   |  |                               | 336,862  |   |      |   | 301,513  |         |  |   | 35,349  |   |  | 11.7   | %
|Other interest income                                       |  |                               | 921      |   |      |   | 2,042    |         |  |   | (1,121  | ) |  | -54.9  | %
|Income from real estate partnership                         |  |                               | 1,395    |   |      |   | 656      |         |  |   | 739     |   |  | 112.7  | %
|Interest expense                                            |  |                               | (111,365 | ) |      |   | (95,234  | )       |  |   | (16,131 | ) |  | 16.9   | %
|General and administrative expense                          |  |                               | (26,581  | ) |      |   | (21,921  | )       |  |   | (4,660  | ) |  | 21.3   | %
|Depreciation and amortization                               |  |                               | (101,633 | ) |      |   | (92,751  | )       |  |   | (8,882  | ) |  | 9.6    | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Total other, net                                            |  |                               | (237,263 | ) |      |   | (207,208 | )       |  |   | (30,055 | ) |  | 14.5   | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Income from continuing operations before minority interests |  |                               | 99,599   |   |      |   | 94,305   |         |  |   | 5,294   |   |  | 5.6    | %
|Minority interests                                          |  |                               | (5,590   | ) |      |   | (4,353   | )       |  |   | (1,237  | ) |  | 28.4   | %
|Discontinued operationsincome                              |  |                               | 6,760    |   |      |   | 4,804    |         |  |   | 1,956   |   |  | 40.7   | %
|Discontinued operationsgain on sale of real estate         |  |                               | 94,768   |   |      |   | 16,515   |         |  |   | 78,253  |   |  | 473.8  | %
|Gain on sale of real estate                                 |  |                               |         |   |      |   | 7,441    |         |  |   | (7,441  | ) |  | -100.0 | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Net income                                                  |  | $                             | 195,537  |   |      | $ | 118,712  |         |  | $ | 76,825  |   |  | 64.7   | %
|                                                            |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  

Property Revenues

Total property revenues increased $56.3 million, or 13.2%, to $483.1 million in 2007 compared to $426.8 million in 2006. The percentage occupied at our shopping centers remained unchanged at 95.4% at December 31, 2007 and
2006. Changes in the components of property revenue are discussed below.



43



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##### Table of Contents

Rental income

Rental
income consists primarily of minimum rent, cost recoveries from tenants, and percentage rent. Rental income increased $51.5 million, or 12.4%, to $465.7 million in 2007 compared to $414.3 million in 2006. This increase is due primarily to the
following:



| |  |  | an increase of $30.0 million attributable to the properties acquired in 2007 and 2006 and the completion of the power-center at Assembly Square Mall,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $11.6 million at same-center properties due to increased rental rates on new leases and increased cost reimbursements,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $8.9 million at redevelopment properties due primarily to increased occupancy, increased rental rates on new leases and increased cost
reimbursements,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $2.2 million at Santana Row residential due primarily to leasing of residential units,
| | - |  | -----------------------------------------------------------------------------------------------------

partially offset by



| |  |  | a decrease of $0.8 million related to the sale of Greenlawn Plaza to our unconsolidated real estate partnership in June 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

Other Property Income

Other property income increased
$5.4 million, or 72.0%, to $12.8 million in 2007 compared to $7.5 million in 2006. Included in other property income are items which, although recurring, tend to fluctuate more than rental income from period to period, such as lease
termination fees. In 2007, the increase is primarily due to an increase in lease and other termination fees at our same-center properties, an increase in marketing income and an increase in management fee income.

Property Expenses

Total property operating expenses increased $21.0
million, or 16.7%, to $146.3 million in 2007 compared to $125.3 million in 2006. Changes in the components of property expenses are discussed below.

Rental Expenses

Rental expenses increased $15.2 million, or 18.1%, to $99.4 million in 2007 compared to $84.2 million in
2006. This increase is primarily due to the following:



| |  |  | an increase of $5.7 million in expenses attributable to properties acquired in 2007 and 2006 and the completion of the power-center at Assembly Square Mall,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $4.6 million in repairs and maintenance expense at same-center and redevelopment properties due primarily to higher snow removal and maintenance
costs,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $1.3 million in bad debt expense at same-center and redevelopment properties primarily due to amounts recovered in 2006 of receivables
previously deemed uncollectible,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $1.1 million in utilities at same-center and redevelopment properties,
| | - |  | -------------------------------------------------------------------------------------



| |  |  | an increase of $0.8 million in insurance at same-center and redevelopment properties, and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | an increase of $0.7 million at Santana Row residential.
| | - |  | -------------------------------------------------------

As a result of these changes in rental expenses, rental income and other property income, rental expense as a percentage of rental income plus other property income increased to 20.8% in 2007 from 20.0% in 2006.



44



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##### Table of Contents

Real Estate Taxes

Real estate tax expense increased $5.8 million, or 14.0%, to $46.9 million in 2007 compared to $41.1 million in 2006. This increase is due primarily to increased taxes of $3.5 million related to properties acquired in 2007 and 2006 and
Assembly Square Mall and $2.3 million related to higher assessments and at our same-center, redevelopment and Santana Row residential properties.

Property Operating Income

Property operating income increased $35.3 million, or 11.7%, to $336.9 million in 2007 compared to
$301.5 million in 2006. As discussed above, this increase is due primarily to the following:



| |  |  | earnings attributable to properties acquired in 2007 and 2006 and the completion of the power-center as Assembly Square Mall,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | growth in same-center earnings,
| | - |  | -------------------------------



| |  |  | growth in earnings at redevelopment properties, and
| | - |  | ---------------------------------------------------



| |  |  | growth in earnings at Santana Row residential.
| | - |  | ----------------------------------------------

Other

Interest Expense

Interest
expense increased $16.1 million, or 16.9%, to $111.4 million in 2007 compared to $95.2 million in 2006. This increase is due primarily to the following:



| |  |  | an increase of $23.4 million due to higher borrowings to finance our acquisitions,
| | - |  | ----------------------------------------------------------------------------------

partially offset by



| |  |  | an increase of $3.8 million in capitalized interest,
| | - |  | ----------------------------------------------------



| |  |  | a decrease of $1.8 million due to a lower overall weighted average borrowing rate, and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | a decrease of $1.4 million due to the termination of the Mid-Pike and Huntington capital leases on October 26, 2007, as a part of the acquisition of the fee
interests in these properties.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gross interest costs were $119.2 million and $99.3 million in 2007 and 2006, respectively.
Capitalized interest amounted to $7.9 million and $4.1 million in 2007 and 2006, respectively. Capitalized interest increased due primarily to redevelopment at Linden Square, which was acquired in 2006, and redevelopment at Arlington East
(Bethesda Row).

General and Administrative Expense

General and administrative expenses increased by $4.7 million, or 21.3%, to $26.6 million in 2007 compared to $21.9 million in 2006. This is primarily due to an increase in personnel, primarily in our asset management
department, and increased share-based and other compensation expense. Approximately $1.0 million of the increase is due to additional stock and other compensation expense related to the departure of Larry Finger, our former Chief Financial Officer,
effective December 31, 2007.

Depreciation and Amortization

Depreciation and amortization expense increased $8.9 million, or 9.6%, to $101.6 million in 2007 compared to $92.8 million in 2006. This increase is due primarily to acquisitions and capital improvements at
same-center and redevelopment properties.

Minority Interests

Income to minority partners increased $1.2 million, or 28.4%, to $5.6 million in 2007 from $4.4 million in 2006. This increase is due primarily to an increase in earnings at properties held in non-wholly owned partnerships
and an increase in operating units issued to acquire the White Marsh portfolio in March 2007.



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##### Table of Contents

Discontinued OperationsIncome

Income from discontinued operations represents the income of properties that have been disposed or will be disposed, which is required to be reported separately from results of ongoing operations. The reported income
of $6.8 million and $4.8 million for 2007 and 2006, respectively, represents the income for the period during which we owned properties sold in 2008, 2007 and 2006.

Discontinued OperationsGain on Sale of Real Estate

The gain on sale of real estate from discontinued
operations of $94.8 million for the year ended December 31, 2007 is due to a $100.2 million gain primarily related to the sales of Bath Shopping Center, Key Road Plaza, Riverside Plaza, two properties in Forest Hills, and Allwood, Blue Star,
Brunswick, Clifton, Hamilton and Rutgers Shopping Centers, partially offset by a $5.1 million increase in the reserve, net of taxes, for the reassessment of damages in 2007 of defective work completed when making upgrades to certain
condominiums sold in 2005 and 2006 at Santana Row. The gain on sale of real estate from discontinued operations of $16.5 million for the year ended December 31, 2006, was due to the sale of condominiums at Santana Row.

Gain on Sale of Real Estate

The gain on sale of real estate includes
properties in which we maintained continuing involvement through our unconsolidated real estate partnership. No properties in which we maintained continuing involvement were sold in 2007. One property, Greenlawn Plaza, was sold in 2006 to our
unconsolidated real estate partnership, which resulted in a $7.4 million gain.

Segment Results

The following table provides selected key segment data by geographic region for 2008, 2007 and 2006. While we believe we have only one reportable segment as defined by
SFAS No. 131, we have provided additional information by geographic region as presented below. The results of properties classified as discontinued operations have been excluded from rental income, total revenue, and property operating income
in the following table.



|                                                        |  |                                        |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------- |  | -------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                        |  | 2008                                   |         |   | 2007 |   |         | 2006 | 
|                                                        |  | (Dollars and square feet in thousands) |        
|East                                                    |  |                                        |         |   |      |   |         |      |  |   |         |  
|Rental income                                           |  | $                                      | 389,569 |   |      | $ | 360,928 |      |  | $ | 317,458 |  
|Total revenue                                           |  | $                                      | 404,440 |   |      | $ | 373,087 |      |  | $ | 325,209 |  
|Property operating income(1)                            |  | $                                      | 281,479 |   |      | $ | 265,291 |      |  | $ | 236,326 |  
|Property operating income as a percent of total revenue |  |                                        | 69.6    | % |      |   | 71.1    | %    |  |   | 72.7    | %
|Gross leasable square feet                              |  |                                        | 15,498  |   |      |   | 15,568  |      |  |   | 16,195  |  
|West                                                    |  |                                        |         |   |      |   |         |      |  |   |         |  
|Rental income                                           |  | $                                      | 112,395 |   |      | $ | 104,800 |      |  | $ | 96,803  |  
|Total revenue                                           |  | $                                      | 116,085 |   |      | $ | 110,035 |      |  | $ | 101,607 |  
|Property operating income(1)                            |  | $                                      | 73,614  |   |      | $ | 71,571  |      |  | $ | 65,187  |  
|Property operating income as a percent of total revenue |  |                                        | 63.4    | % |      |   | 65.0    | %    |  |   | 64.2    | %
|Gross leasable square feet                              |  |                                        | 2,621   |   |      |   | 2,627   |      |  |   | 2,605   |  



|(1) | Property operating income consists of rental income, other property income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally
to evaluate the performance of our regional operations, and we consider it to be a significant measure.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

East

Rental income for the East region increased $28.6 million, or 7.9%, to $389.6 million in 2008 compared to $360.9 million in 2007 due primarily to the following:



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##### Table of Contents

| |  |  | an increase of $12.6 million attributable to properties acquired in 2008 and 2007,
| | - |  | ----------------------------------------------------------------------------------



| |  |  | an increase of $10.5 million at redevelopment properties due primarily to increased rental rates on new leases including newly created retail and residential spaces
generating revenue and increased cost reimbursements,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $7.2 million at same-center properties due to increased rental rates on new and renewal leases and increased cost reimbursements,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

partially offset by



| |  |  | a decrease of $1.7 million related to the demolition of an operating property in 2008 for use in future development.
| | - |  | --------------------------------------------------------------------------------------------------------------------

Property operating income for the East region increased $16.2 million in 2008 due primarily to the increase in rental income discussed above and an increase in lease
termination fees. These increases in income were partially offset by an $8.2 million increase in rental expense, and a $6.9 million increase in real estate taxes due primarily to the acquisition of properties and higher assessments on our
same-center and redevelopment properties. As a result of these changes, the ratio of property operating income to total revenue for the East region decreased to 69.6% in 2008 from 71.1% in 2007.

Rental income for the East region increased $43.5 million, or 13.7%, to $360.9 million in 2007 compared to $317.5 million in 2006 due primarily to the following:



| |  |  | an increase of $29.3 million attributable to properties acquired in 2007 and 2006, and the completion of the power-center at Assembly Square Mall,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $9.0 million at same-center properties due to increased rental rates on new leases and increased cost reimbursements,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $6.4 million at redevelopment properties,
| | - |  | --------------------------------------------------------

partially offset by



| |  |  | a decrease of $0.8 million related to the sale of Greenlawn Plaza to our unconsolidated real estate partnership in June 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

Property operating income for the East region increased $29.0 million in 2007 due primarily to the increase in rental income discussed above and an increase in lease and
other termination fees. These increases in income were partially offset by a $13.7 million increase in rental expense primarily due to the acquisition of properties, increased snow removal costs, repairs and maintenance costs, insurance costs and
additional legal costs and a $5.2 million increase in real estate taxes due primarily to the acquisition of properties and higher assessments at our same-center and redevelopment properties. As a result of these changes, the ratio of property
operating income to total revenue for the East region decreased to 71.1% in 2007 from 72.7% in 2006.

The gross leasable area in the East region decreased
0.7 million square feet from 2006 to 2008 due primarily to the sale of six properties in New Jersey in October 2007 and the sale of four land parcels in September 2008, the results of which are included in discontinued operations. The decrease
was partially offset by 2007 and 2008 acquisitions.

West

Rental income for the West region increased $7.6 million, or 7.2%, to $112.4 million in 2008 from $104.8 million in 2007 due primarily to the following:



| |  |  | an increase of $6.9 million at same-center properties due primarily to increased residential rental rates at Santana Row, increased rental rates on new and renewal
retail leases, and increased percentage rent,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $0.5 million at redevelopment properties, and
| | - |  | ------------------------------------------------------------



| |  |  | an increase of $0.2 million attributable to a property acquired in 2007.
| | - |  | ------------------------------------------------------------------------



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##### Table of Contents

Property operating income for the West region increased $2.0 million in 2008 due primarily to the increase in rental
income discussed above, partially offset by a $2.1 million increase in rental expense and $1.9 million real estate taxes. As a result of these changes, the ratio of property operating income to total revenue for the West region decreased to 63.4% in
2008 from 65.0% in 2007.

Rental income for the West region increased $8.0 million, or 8.3%, to $104.8 million in 2007 from $96.8 million in 2006 due
primarily to the following:



| |  |  | an increase of $4.0 million at Santana Row due to leasing residential units throughout 2006, increased retail occupancy, and increased rental rates on new retail
leases,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $2.5 million at a redevelopment project,
| | - |  | -------------------------------------------------------



| |  |  | an increase of $0.8 million at same-center properties, and
| | - |  | ----------------------------------------------------------



| |  |  | an increase of $0.7 million attributable to the acquisition of a property in 2007.
| | - |  | ----------------------------------------------------------------------------------

Property operating income for the West region increased $6.4 million in 2007 due primarily to the increase in rental income discussed above, partially offset by a $2.0 million increase in rental expense and real
estate taxes primarily at Santana Row and a $0.4 million decrease in mortgage interest income due to an amendment of our $17.7 million mortgage note receivable secured by the hotel at our Santana Row project, which was executed on
August 14, 2006, and decreased the interest rate from 14% per annum to 9% per annum. The ratio of property operating income to total revenue for the West region increased to 65.0% in 2007 from 64.2% in 2006.

Liquidity and Capital Resources

Due to the nature of our business
and strategy, we generally generate significant amounts of cash from operations. The cash generated from operations is primarily paid to our common and preferred shareholders in the form of dividends. As a REIT, we must generally make annual
distributions to shareholders of at least 90% of our REIT taxable income.

Our short-term liquidity requirements consist primarily of obligations under our
capital and operating leases, normal recurring operating expenses, regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities), recurring expenditures, non-recurring
expenditures (such as tenant improvements and redevelopments) and dividends to common and preferred shareholders. Our long-term capital requirements consist primarily of maturities under our long-term debt agreements, development and redevelopment
costs and potential acquisitions.

We intend to operate with and maintain a conservative capital structure that will allow us to maintain strong debt
service coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings. In the short and long term, we may seek to obtain funds through the issuance of additional equity, unsecured and/or secured debt
financings, joint venture relationships relating to existing properties or new acquisitions, and property dispositions that are consistent with this conservative structure.

We have approximately $380 million of debt maturing in 2009, of which $200 million matures in November 2009 and $175 million matures in December 2009. While the maturities do not occur until the end of 2009, we have
commenced negotiations under several different alternatives to refinance the debt including a new term loan and encumbering additional properties with mortgage financing. We have identified assets that can provide up to $350 million of secured
financing proceeds. The current recession and dislocation in the capital markets, however, has resulted in less favorable interest rates for debt financings. Notwithstanding adverse market conditions, we currently believe that cash flows from
operations, secured and unsecured refinancing opportunities, and our revolving credit facility will be sufficient to finance our operations and fund our capital expenditures. Alternatively, if we are unable to access the secured and unsecured debt
markets at acceptable terms, we may choose to issue common equity to meet our capital needs or pay a portion of our distributions in shares instead of cash. As we expect to address the fourth quarter 2009 maturities several months in advance, we
expect to incur additional interest expense due to higher interest rates on such debt and due to a temporary increase in our debt outstanding until we can use the proceeds to retire maturing debt.



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##### Table of Contents

Our overall capital requirements in 2009 will depend not only on refinancing of the debt maturities, but also upon
acquisition opportunities, the level of improvements and redevelopments on existing properties and the timing and cost of development of future phases of existing properties. During 2008, 2007, and 2006, we expended approximately $104.2 million,
$111.6 million, and $95.7 million, respectively, for development and redevelopment capital expenditures and approximately $33.8 million, $25.8 million, and $24.0 million, respectively for other capital expenditures. While the amount of future
expenditures will depend on numerous factors, we expect to incur similar levels of capital expenditures in 2009 which will be funded on a short-term basis with the revolving credit facility and on a long-term basis, with longer term debt or equity.
Although there is no intent at this time, if market conditions continue to deteriorate, we may also delay the timing of certain development and redevelopment projects as well as limit future acquisitions, reduce our operating expenditures, or
re-evaluate our dividend policy.

In addition to the adverse conditions in the capital markets which could affect our ability to access those markets, the
following factors could affect our ability to meet our liquidity requirements:



| |  |  | restrictions in our debt instruments or preferred stock may limit us from incurring debt or issuing equity at all, or on acceptable terms under then-prevailing
market conditions; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may be unable to service additional or replacement debt due to increases in interest rates or a decline in our operating performance.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents were $15.2 million and $50.7 million at December 31, 2008 and 2007, respectively, however, cash and cash
equivalents are not a good indicator of our liquidity. We have a $300 million unsecured revolving credit facility that matures July 27, 2010, subject to a one-year extension at our option, of which $123.5 million was outstanding at
December 31, 2008. During 2008, the maximum amount of borrowings outstanding under our revolving credit facility was $159.0 million and the weighted average amount of borrowings outstanding was $61.4 million. We expect to continue to utilize
our credit facility to fund short-term operating needs, including funding capital expenditures. To date, lenders have funded all of our draw requests under our credit facility and we expect our lenders will continue to fund those draws.

Summary of Cash Flows for 2008 and 2007



|                                                 |  |                         |          |   |      |   |          |  
|------------------------------------------------ |  | ----------------------- | -------- | - | ---- | - | -------- | -
|                                                 |  | Year Ended December 31, |         
|                                                 |  | 2008                    |          |   | 2007 |  
|                                                 |  | (In thousands)          |         
|Cash provided by operating activities            |  | $                       | 228,285  |   |      | $ | 214,209  |  
|Cash used in investing activities                |  |                         | (207,567 | ) |      |   | (151,439 | )
|Cash used in financing activities                |  |                         | (56,186  | ) |      |   | (23,574  | )
|                                                 |  |                         |          |   |      |   |          |  
|(Decrease) increase in cash and cash equivalents |  |                         | (35,468  | ) |      |   | 39,196   |  
|Cash and cash equivalents, beginning of year     |  |                         | 50,691   |   |      |   | 11,495   |  
|                                                 |  |                         |          |   |      |   |          |  
|Cash and cash equivalents, end of year           |  | $                       | 15,223   |   |      | $ | 50,691   |  
|                                                 |  |                         |          |   |      |   |          |  

Net cash provided by operating activities increased by $14.1 million to $228.3 million during the year ended
December 31, 2008 from $214.2 million during the year ended December 31, 2007. The increase was primarily attributable to:



| |  |  | $25.0 million higher net income before gain on sale of real estate, depreciation and amortization, minority interest and other non-cash items,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------

partially offset by



| |  |  | $10.9 million decrease in cash provided for working capital due primarily to lower accounts payable and accrued expense balances and lower prepaid rent balances.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Net cash used in investing activities increased approximately $56.1 million to $207.6 million during the year ended
December 31, 2008 from $151.4 million during the year ended December 31, 2007. The increase was due primarily to:



| |  |  | $39.1 million decrease in proceeds from the sale of real estate,
| | - |  | ----------------------------------------------------------------



| |  |  | $30.1 million increase in acquisitions of real estate, and
| | - |  | ----------------------------------------------------------



| |  |  | $5.9 million increase in cash used for net issuance of mortgage and other notes receivables primarily related to the funding of a $5.5 million secured loan in 2008,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

partially offset by



| |  |  | $20.4 million decrease in contributions to our unconsolidated real estate partnership due to two acquisitions by the real estate partnership in 2007 and no capital
contributions in 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net cash used in financing activities increased approximately $32.6 million to $56.2 million during the year
ended December 31, 2008 from $23.6 million during the year ended December 31, 2007. The increase was due primarily to:



| |  |  | $199.5 million in net proceeds from the issuance of our $200 million term loan in 2007 and no issuances of notes payable in 2008,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | $159.3 million decrease in net proceeds from the issuance of common shares,
| | - |  | ---------------------------------------------------------------------------



| |  |  | $15.0 million increase in dividends paid to shareholders due to an increase in the dividend rate and increased number of shares outstanding, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $10.9 million increase in repayment of mortgages, capital leases and notes payable,
| | - |  | -----------------------------------------------------------------------------------

partially offset by



| |  |  | $221.5 million increase in net borrowings on our revolving credit facility, and
| | - |  | -------------------------------------------------------------------------------



| |  |  | $129.2 million decrease in repayment of senior notes primarily due to the repayment of our $150 million 6.125% senior notes in November 2007.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------

Off-Balance Sheet Arrangements

We
have a joint venture arrangement (the Partnership) with affiliates of a discretionary fund created and advised by ING Clarion Partners (Clarion). We own 30% of the equity in the Partnership, and Clarion owns 70%. As of
December 31, 2008, the Partnership owned seven retail real estate projects. We are the manager of the Partnership and its properties, earning fees for acquisitions, management, leasing, and financing. We also have the opportunity to receive
performance-based earnings through our Partnership interest. We account for our interest in the partnership using the equity method and our investment in the Partnership was $29.3 million and $29.6 million at December 31, 2008 and 2007,
respectively. In total, at December 31, 2008, the Partnership had $81.4 million of mortgage notes outstanding.

Other than the joint venture described
above and items disclosed in the Contractual Commitments Table below, we have no off-balance sheet arrangements as of December 31, 2008 that are reasonably likely to have a current or future material effect on our financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources.



50



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##### Table of Contents

Contractual Commitments

The following table provides a summary of our fixed, noncancelable obligations as of December 31, 2008:



|                                          |  |                           |           |                 |   |           |  |           |         |              |   |         |  |   |          
|----------------------------------------- |  | ------------------------- | --------- | --------------- | - | --------- |  | --------- | ------- | ------------ | - | ------- |  | - | ---------
|                                          |  | Commitments Due by Period
|                                          |  | Total                     |           | Less Than1 Year |   | 1-3 Years |  | 3-5 Years |         | After 5Years
|                                          |  | (In thousands)           
|Current and long-term debt                |  | $                         | 1,680,310 |                 | $ | 387,542   |  | $         | 252,834 |              | $ | 384,879 |  | $ | 655,055  
|Capital lease obligations                 |  |                           | 182,011   |                 |   | 5,590     |  |           | 11,180  |              |   | 11,201  |  |   | 154,040  
|Operating leases                          |  |                           | 200,977   |                 |   | 3,122     |  |           | 6,298   |              |   | 6,120   |  |   | 185,437  
|Real estate commitments                   |  |                           | 96,592    |                 |   |          |  |           | 7,136   |              |   |        |  |   | 89,456   
|Development and redevelopment obligations |  |                           | 52,541    |                 |   | 52,404    |  |           | 85      |              |   | 52      |  |   |         
|Contractual operating obligations         |  |                           | 10,350    |                 |   | 6,544     |  |           | 3,806   |              |   |        |  |   |         
|                                          |  |                           |           |                 |   |           |  |           |         |              |   |         |  |   |          
|Total contractual cash obligations        |  | $                         | 2,222,781 |                 | $ | 455,202   |  | $         | 281,339 |              | $ | 402,252 |  | $ | 1,083,988
|                                          |  |                           |           |                 |   |           |  |           |         |              |   |         |  |   |          

In addition to the amounts set forth in the table above, the following potential
commitments exist:

(a) Under the terms of the Congressional Plaza partnership agreement, from and after January 1, 1986, an
unaffiliated third party has the right to require us and the two other minority partners to purchase between one-half to all of its 29.47% interest in Congressional Plaza at the interests then-current fair market value. Based on
managements current estimate of fair market value as of December 31, 2008, our estimated maximum liability upon exercise of the put option would range from approximately $42 million to $49 million.

(b) Under the terms of one other partnership which owns a project in southern California, if certain leasing and revenue levels are obtained for the
property owned by the partnership, the other partner may require us to purchase their partnership interest at a formula price based upon property operating income. The purchase price for the partnership will be paid using our common shares or,
subject to certain conditions, cash. If the other partner does not redeem their interest, we may choose to purchase the limited partnership interest upon the same terms.

(c) Under the terms of various other partnership agreements for entities, the partners have the right to exchange their operating units for cash or the same number of our common shares, at our option. As of
December 31, 2008, a total of 373,260 operating units are outstanding.

(d) In addition to our contractual obligations, we have other
short-term liquidity requirements consisting primarily of normal recurring operating expenses, regular debt service requirements (including debt service relating to additional and replacement debt), recurring corporate expenditures including
compensation agreements, non-recurring corporate expenditures (such as tenant improvements and redevelopments) and dividends to common and preferred shareholders. Overall capital requirements will depend upon acquisition opportunities, the level of
improvements and redevelopments on existing properties and the timing and cost of future phases of existing properties, including Santana Row and Assembly Square.

(e) At December 31, 2008, we had letters of credit outstanding of approximately $10.5 million which are collateral for existing indebtedness and other obligations of the Trust.



51



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##### Table of Contents

Debt Financing Arrangements

The following is a summary of our total debt outstanding as of December 31, 2008:



|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                      |  |             
|---------------------------------------- |  | ---------------------- |  | --------------------------------------- | --------- | - | ------------------------------------------ | ------------- | - | ------------- | -------------------- |  | ------------
|Description of Debt                      |  | OriginalDebtIssued     |  | Principal Balanceas ofDecember 31, 2008 |           |   | Stated Interest Rateas ofDecember 31, 2008 |               |   | Maturity Date
|                                         |  | (Dollars in thousands) |  |                                         |           |   |                                            |               |   |              
|Mortgage loans(1)                        |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Secured fixed rate                       |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Mercer Mall(2)                           |  | Acquired               |  | $                                       | 4,370     |   |                                            | 8.375         | % |               | April 1, 2009       
|Federal Plaza                            |  | 36,500                 |  |                                         | 33,128    |   |                                            | 6.750         | % |               | June 1, 2011        
|Tysons Station                           |  | 7,000                  |  |                                         | 6,070     |   |                                            | 7.400         | % |               | September 1, 2011   
|Courtyard Shops                          |  | Acquired               |  |                                         | 7,731     |   |                                            | 6.870         | % |               |                      |  | July 1, 2012
|Bethesda Row                             |  | Acquired               |  |                                         | 19,996    |   |                                            | 5.370         | % |               | January 1, 2013     
|Bethesda Row                             |  | Acquired               |  |                                         | 4,437     |   |                                            | 5.050         | % |               | February 1, 2013    
|White Marsh Plaza(3)                     |  | Acquired               |  |                                         | 10,122    |   |                                            | 6.040         | % |               | April 1, 2013       
|Crow Canyon                              |  | Acquired               |  |                                         | 21,214    |   |                                            | 5.400         | % |               | August 11, 2013     
|Melville Mall(4)                         |  | Acquired               |  |                                         | 24,456    |   |                                            | 5.250         | % |               | September 1, 2014   
|THE AVENUE at White Marsh                |  | Acquired               |  |                                         | 60,016    |   |                                            | 5.460         | % |               | January 1, 2015     
|Barracks Road                            |  | 44,300                 |  |                                         | 41,368    |   |                                            | 7.950         | % |               | November 1, 2015    
|Hauppauge                                |  | 16,700                 |  |                                         | 15,595    |   |                                            | 7.950         | % |               | November 1, 2015    
|Lawrence Park                            |  | 31,400                 |  |                                         | 29,322    |   |                                            | 7.950         | % |               | November 1, 2015    
|Wildwood                                 |  | 27,600                 |  |                                         | 25,773    |   |                                            | 7.950         | % |               | November 1, 2015    
|Wynnewood                                |  | 32,000                 |  |                                         | 29,882    |   |                                            | 7.950         | % |               | November 1, 2015    
|Brick Plaza                              |  | 33,000                 |  |                                         | 30,633    |   |                                            | 7.415         | % |               | November 1, 2015    
|Shoppers World                          |  | Acquired               |  |                                         | 5,865     |   |                                            | 5.910         | % |               | January 31, 2021    
|Mount Vernon(5)                          |  | 13,250                 |  |                                         | 11,640    |   |                                            | 5.660         | % |               | April 15, 2028      
|Chelsea                                  |  | Acquired               |  |                                         | 8,101     |   |                                            | 5.360         | % |               | January 15, 2031    
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Subtotal                                 |  |                        |  |                                         | 389,719   |   |                                            |               |   |               |                     
|Net unamortized discount                 |  |                        |  |                                         | (401      | ) |                                            |               |   |               |                     
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Total mortgage loans                     |  |                        |  |                                         | 389,318   |   |                                            |               |   |               |                     
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Notes payable                            |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Unsecured fixed rate                     |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Other                                    |  | 2,221                  |  |                                         | 2,296     |   |                                            | 6.50          | % |               | April 1, 2012       
|Perring Plaza renovation                 |  | 3,087                  |  |                                         | 1,195     |   |                                            | 10.000        | % |               | January 31, 2013    
|Unsecured variable rate                  |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Term loan(6)                             |  | 200,000                |  |                                         | 200,000   |   |                                            | LIBOR + 0.575 | % |               | November 6, 2009    
|Revolving credit facility(7)             |  | 300,000                |  |                                         | 123,500   |   |                                            | LIBOR + 0.425 | % |               | July 27, 2010       
|Escondido (Municipal bonds)(8)           |  | 9,400                  |  |                                         | 9,400     |   |                                            | 1.878         | % |               | October 1, 2016     
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                      |  |             
|Total notes payable                      |  |                        |  |                                         | 336,391   |   |                                            |               |   |               |                     
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                      |  |             
|Senior notes and debentures              |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Unsecured fixed rate                     |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|8.75% notes(9)                           |  | 175,000                |  |                                         | 175,000   |   |                                            | 8.750         | % |               | December 1, 2009    
|4.50% notes                              |  | 75,000                 |  |                                         | 75,000    |   |                                            | 4.500         | % |               | February 15, 2011   
|6.00% notes                              |  | 175,000                |  |                                         | 175,000   |   |                                            | 6.000         | % |               | July 15, 2012       
|5.40% notes                              |  | 135,000                |  |                                         | 135,000   |   |                                            | 5.400         | % |               | December 1, 2013    
|5.65% notes                              |  | 125,000                |  |                                         | 125,000   |   |                                            | 5.650         | % |               | June 1, 2016        
|6.20% notes                              |  | 200,000                |  |                                         | 200,000   |   |                                            | 6.200         | % |               | January 15, 2017    
|7.48% debentures(10)                     |  | 50,000                 |  |                                         | 29,200    |   |                                            | 7.480         | % |               | August 15, 2026     
|6.82% medium term notes                  |  | 40,000                 |  |                                         | 40,000    |   |                                            | 6.820         | % |               | August 1, 2027      
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                      |  |             
|Subtotal                                 |  |                        |  |                                         | 954,200   |   |                                            |               |   |               |                     
|Net unamortized premium                  |  |                        |  |                                         | 2,384     |   |                                            |               |   |               |                     
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                      |  |             
|Total senior notes and debentures        |  |                        |  |                                         | 956,584   |   |                                            |               |   |               |                     
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                      |  |             
|Capital lease obligations                |  |                        |  |                                         |           |   |                                            |               |   |               |                     
|Various                                  |  |                        |  |                                         | 63,492    |   |                                            | Various       |   |               | Various through 2106
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                      |  |             
|Total debt and capital lease obligations |  |                        |  | $                                       | 1,745,785 |   |                                            |               |   |               |                     
|                                         |  |                        |  |                                         |           |   |                                            |               |   |               |                      |  |             



|(1) | Mortgage loans do not include our 30% share ($24.4 million) of the $81.4 million debt of the partnership with a discretionary fund created and advised by ING Clarion Partners.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On January 5, 2009, we repaid the $4.4 million mortgage with funds borrowed on our $300 million revolving credit facility.
|--- | --------------------------------------------------------------------------------------------------------------------------



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|(3) | The stated interest rate represents the weighted average interest rate for two mortgage loans secured by this property. The loan balance represents an interest-only loan of $4.35
million at a stated rate of 6.18% and the remaining balance at a stated rate of 5.96%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The Trust acquired control of Melville Mall through a 20-year master lease and secondary financing. Because the Trust controls this property and retains substantially all of the
economic benefit and risk associated with it, this property is consolidated and the mortgage loan is reflected on the balance sheet, though it is not a legal obligation of the Trust.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The interest rate is fixed at 5.66% for the first ten years and then will be reset to a market rate in 2013. The lender has the option to call the loan on April 15, 2013 or any
time thereafter.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | In July 2008, we exercised our option extending the maturity date from November 6, 2008 to November 6, 2009. On February 21, 2008 we entered into two interest rate
swap agreements to fix the variable portion of this debt through November 6, 2008. The first swap fixed the variable rate at 2.725% on a notional amount of $100 million and the second swap fixed the variable rate at 2.852% on a notional amount
of $100 million for a combined rate of 2.789%. The swap ended on November 6, 2008. The weighted average effective interest rate, before amortization of debt fees, was 3.56% for the year ended December 31, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | The maximum amount drawn under the credit facility during 2008 was $159.0 million. The weighted average effective interest rate on borrowings under our revolving credit
facility, before amortization of debt fees, was 3.0% for the year ended December 31, 2008. This credit facility matures on July 27, 2010, subject to a one-year extension at our option.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | The bonds require monthly interest only payments through maturity. The bonds bear interest at a variable rate determined weekly, which would enable the bonds to be remarketed at
100% of their principal amount. The property is not encumbered by a lien.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | On January 12, 2009 and February 5, 2009, we purchased and retired $5.0 million and $0.9 million, respectively, of the outstanding $175.0 million balance using funds
borrowed on our $300 million revolving credit facility.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | On August 15, 2008, one of the holders redeemed $20.8 million of the outstanding $50.0 million balance. The notice period for additional redemptions has expired.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

Our credit facility and other debt agreements include financial and other covenants that may limit our operating activities in the future.
As of December 31, 2008, we were in compliance with all of the financial and other covenants. If we were to breach any of our debt covenants and did not cure the breach within any applicable cure period, our lenders could require us to repay
the debt immediately and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan. Many of our debt arrangements, including our public notes and our credit facility, are cross-defaulted, which
means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a covenant under certain of our other debt obligations. As a result, any default under our debt
covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares. Our organizational documents do not limit the level or amount of debt that we may
incur.

The following is a summary of our debt maturities as of December 31, 2008:



|           |  |                |         |               |   |           |  |   |           |     |  |   |           |    
|---------- |  | -------------- | ------- | ------------- | - | --------- |  | - | --------- | --- |  | - | --------- | ---
|           |  | Secured        |         | CapitalLeases |   | Unsecured |  |   | Total     |    
|           |  | (In thousands) |        
|2009       |  | $              | 11,389  |               | $ | 1,220     |  | $ | 376,153   |     |  | $ | 388,762   | (1)
|2010       |  |                | 7,714   |               |   | 1,305     |  |   | 124,361   | (2) |  |   | 133,380   |    
|2011       |  |                | 45,039  |               |   | 1,399     |  |   | 75,720    |     |  |   | 122,158   |    
|2012       |  |                | 14,662  |               |   | 1,500     |  |   | 175,727   |     |  |   | 191,889   |    
|2013       |  |                | 59,460  |               |   | 1,609     |  |   | 135,030   |     |  |   | 196,099   |    
|Thereafter |  |                | 251,455 |               |   | 56,459    |  |   | 403,600   |     |  |   | 711,514   |    
|           |  |                |         |               |   |           |  |   |           |     |  |   |           |    
|           |  | $              | 389,719 |               | $ | 63,492    |  | $ | 1,290,591 |     |  | $ | 1,743,802 | (3)
|           |  |                |         |               |   |           |  |   |           |     |  |   |           |    



|(1) | On January 2, 2009, we repaid the $4.4 million mortgage loan on Mercer Mall. On January 12, 2009 and February 5, 2009, we purchased and retired $5.0 million and $0.9
million, respectively, of the outstanding $175.0 million balance on our 8.75% notes. All repayments were made using funds borrowed on our $300 million revolving credit facility.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Our $300 million four-year revolving credit facility matures on July 27, 2010, subject to a one-year extension at our option. As of December 31, 2008, there is $123.5
million drawn under this credit facility.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Total debt maturities differs from the total reported on the consolidated balance sheet due to unamortized discounts and premiums as of December 31, 2008.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



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Interest Rate Hedging

We use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates
rising prior to the issuance of debt. We enter into derivative instruments that qualify as cash flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and do not enter into derivative
instruments for speculative purposes. As of December 31, 2008, we had no outstanding hedging instruments.

Our cash flow hedges are recorded at fair
value. We assess effectiveness of our cash flow hedges both at inception and on an ongoing basis. The effective portion of changes in fair value of our cash flow hedges is recorded in other comprehensive income, and the ineffective portion of
changes in fair value of our cash flow hedges is recognized in earnings in the period affected. Hedge ineffectiveness did not have a significant impact on earnings in 2008, 2007 and 2006, and we do not anticipate it will have a significant effect in
the future.

On February 21, 2008, we entered into two interest rate swap agreements to fix the variable portion of our $200 million term loan through
November 6, 2008. The first swap fixed the variable rate at 2.725% on a notional amount of $100 million and the second swap fixed the variable rate at 2.852% on a notional amount of $100 million for a combined fixed rate of 2.789%. Both swaps
were designated and qualified as cash flow hedges and were recorded at fair value until the swaps ended on November 6, 2008.

REIT Qualification

We intend to maintain our qualification as a REIT under Section 856(c) of the Code. As a REIT, we generally will not be subject to corporate
federal income taxes on income we distribute to our shareholders as long as we satisfy certain technical requirements of the Code, including the requirement to distribute at least 90% of our REIT taxable income to our shareholders.

Funds From Operations

Funds from operations (FFO) is a
supplemental non-GAAP financial measure of real estate companies operating performance. The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as follows: net income, computed in accordance with the U.S.
GAAP, plus depreciation and amortization of real estate assets and excluding extraordinary items and gains and losses on the sale of real estate. We compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO
available for common shareholders in addition to our net income and net cash provided by operating activities. It should be noted that FFO:



| |  |  | does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other
events in the determination of net income);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | should not be considered an alternative to net income as an indication of our performance; and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | is not necessarily indicative of cash flow as a measure of liquidity or ability to fund cash needs, including the payment of dividends.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily because it
excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means of assessing our
operating performance in comparison with other REITs. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used
by such REITs.



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An increase or decrease in FFO available for common shareholders does not necessarily result in an increase or decrease
in aggregate distributions because our Board of Trustees is not required to increase distributions on a quarterly basis. However, we must generally distribute 90% of our REIT taxable income (including net capital gain) to remain qualified as a REIT.
Therefore, a significant increase in FFO will generally require an increase in distributions to shareholders although not necessarily on a proportionate basis.

The reconciliation of net income to funds from operations available for common shareholders is as follows:



|                                                                           |  |                                       |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                           |  | For the Year Ended December 31,       |        
|                                                                           |  | 2008                                  |         |   | 2007 |   |         | 2006 | 
|                                                                           |  | (In thousands, except per share data) |        
|Net income                                                                 |  | $                                     | 129,787 |   |      | $ | 195,537 |      |  | $ | 118,712 |  
|Gain on sale of real estate                                                |  |                                       | (12,572 | ) |      |   | (94,768 | )    |  |   | (23,956 | )
|Depreciation and amortization of real estate assets                        |  |                                       | 101,450 |   |      |   | 95,565  |      |  |   | 88,649  |  
|Amortization of initial direct costs of leases                             |  |                                       | 8,771   |   |      |   | 8,473   |      |  |   | 7,390   |  
|Depreciation of joint venture real estate assets                           |  |                                       | 1,331   |   |      |   | 1,241   |      |  |   | 768     |  
|                                                                           |  |                                       |         |   |      |   |         |      |  |   |         |  
|Funds from operations                                                      |  |                                       | 228,767 |   |      |   | 206,048 |      |  |   | 191,563 |  
|Dividends on preferred stock                                               |  |                                       | (541    | ) |      |   | (442    | )    |  |   | (10,423 | )
|Income attributable to operating partnership units                         |  |                                       | 950     |   |      |   | 1,156   |      |  |   | 748     |  
|Preferred stock redemption costs                                           |  |                                       |        |   |      |   |        |      |  |   | (4,775  | )
|                                                                           |  |                                       |         |   |      |   |         |      |  |   |         |  
|Funds from operations available for common shareholders                    |  | $                                     | 229,176 |   |      | $ | 206,762 |      |  | $ | 177,113 |  
|                                                                           |  |                                       |         |   |      |   |         |      |  |   |         |  
|Weighted average number of common shares, diluted                          |  |                                       | 59,292  |   |      |   | 56,999  |      |  |   | 54,351  |  
|Funds from operations available for common shareholders, per diluted share |  | $                                     | 3.87    |   |      | $ | 3.63    |      |  | $ | 3.26    |  



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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

Our use of financial instruments, such as debt instruments, subjects us to market risk which may affect our future earnings and cash flows, as
well as the fair value of our assets. Market risk generally refers to the risk of loss from changes in interest rates and market prices. We manage our market risk by attempting to match anticipated inflow of cash from our operating, investing and
financing activities with anticipated outflow of cash to fund debt payments, dividends to common and preferred shareholders, investments, capital expenditures and other cash requirements.

As of December 31, 2008, we were not party to any open derivative financial instruments. We may enter into certain types of derivative financial instruments to
further reduce interest rate risk. We use interest rate protection and swap agreements, for example, to convert some of our variable rate debt to a fixed-rate basis or to hedge anticipated financing transactions. We use derivatives for hedging
purposes rather than speculation and do not enter into financial instruments for trading purposes.

Interest Rate Risk

The following discusses the effect of hypothetical changes in market rates of interest on interest expense for our variable rate debt and on the fair value of our total
outstanding debt, including our fixed-rate debt. Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our debt. Quoted market prices were used to estimate the fair value of our marketable senior
notes and debentures and discounted cash flow analysis is generally used to estimate the fair value of our mortgages and notes payable. Considerable judgment is necessary to estimate the fair value of financial instruments. This analysis does not
purport to take into account all of the factors that may affect our debt, such as the effect that a changing interest rate environment could have on the overall level of economic activity or the action that our management might take to reduce our
exposure to the change. This analysis assumes no change in our financial structure.

Fixed Interest Rate Debt

The majority of our outstanding debt obligations (maturing at various times through 2031 or through 2106 including capital lease obligations) have fixed interest rates
which limit the risk of fluctuating interest rates. However, interest rate fluctuations may affect the fair value of our fixed rate debt instruments. At December 31, 2008 we had $1.4 billion of fixed-rate debt outstanding. If interest rates on
our fixed-rate debt instruments at December 31, 2008 had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately $47.0 million. If interest rates on our fixed-rate debt instruments at
December 31, 2008 had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately $49.5 million.

Variable Interest Rate Debt

We believe that our primary interest rate risk is due to fluctuations in interest rates on our variable rate
debt. At December 31, 2008, we had $332.9 million of variable rate debt outstanding. Based upon this amount of variable rate debt, if interest rates increased by 1.0% our annual interest expense would increase by approximately $3.3 million, and
our net income and cash flows for the year would decrease by approximately $3.3 million. Conversely, if interest rates decreased by 1.0%, our annual interest expense would decrease by approximately $3.3 million, and our net income and cash
flows for the year would increase by approximately $3.3 million.



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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and supplementary data are included as a separate section of this Annual Report on Form 10-K commencing on page
F-1 and are incorporated herein by reference.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.



|ITEM | 9A.    CONTROLS AND PROCEDURES
|---- | ------------------------------

Quarterly
Assessment

We carried out an assessment as of December 31, 2008 of the effectiveness of the design and operation of our disclosure controls and
procedures and our internal control over financial reporting. This assessment was done under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer. Rules adopted by the SEC
require that we present the conclusions of our principal executive officer and our principal financial officer about the effectiveness of our disclosure controls and procedures and the conclusions of our management about the effectiveness of our
internal control over financial reporting as of the end of the period covered by this annual report.

Principal Executive Officer and Principal
Financial Officer Certifications

Included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are forms of Certification of our
principal executive officer and our principal financial officer. The forms of Certification are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002. This section of this Annual Report on Form 10-K that you currently
are reading is the information concerning the assessment referred to in the Section 302 certifications and this information should be read in conjunction with the Section 302 certifications for a more complete understanding of the topics
presented.

Disclosure Controls and Procedures

We
maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports, such as this report on Form 10-K, 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 President and Chief Executive Officer and Senior Vice President and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure. These controls and procedures are based closely on the definition of disclosure controls and procedures in Rule 13a-15(e) promulgated under the Exchange
Act. Rules adopted by the SEC require that we present the conclusions of the Chief Executive Officer and Chief Financial Officer about the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual
report.

Internal Control over Financial Reporting

Establishing and maintaining internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, as
appropriate, and effected by our employees, including management and our Board of Trustees, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the United States of America. This process includes policies and procedures that:



| |  |  | pertain to the maintenance of records that accurately and fairly reflect the transactions and dispositions of our assets in reasonable detail;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are made only in accordance with the authorization procedures we have established; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of any of our assets in circumstances that
could have a material adverse effect on our financial statements.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Limitations on the Effectiveness of Controls

Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or internal control over
financial reporting will prevent all errors and fraud. In designing and evaluating our control system, management recognized that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of
achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been or
will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts
of some persons, by collusion of two or more people, or by managements override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions that cannot be anticipated at the present time, or the degree of
compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Scope of the Evaluations

The evaluation by our Chief Executive
Officer and our Chief Financial Officer of our disclosure controls and procedures and our internal control over financial reporting included a review of our procedures and procedures performed by internal audit, as well as discussions with our
Disclosure Committee, independent public accountants and others in our organization, as appropriate. In conducting this evaluation, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal ControlIntegrated Framework. In the course of the evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements,
were being undertaken. The evaluation of our disclosure controls and procedures and our internal control over financial reporting is done on a quarterly basis, so that the conclusions concerning the effectiveness of such controls can be reported in
our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

Our internal control over financial reporting is also assessed on an ongoing basis by
personnel in our Accounting department and by our independent auditors in connection with their audit and review activities. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and our
internal control over financial reporting and to make modifications as necessary. Our intent in this regard is that the disclosure controls and procedures and internal control over financial reporting will be maintained and updated (including with
improvements and corrections) as conditions warrant. Among other matters, we sought in our evaluation to determine whether there were any significant deficiencies or material weaknesses in our internal control over financial
reporting, or whether we had identified any acts of fraud involving personnel who have a significant role in our internal control over financial reporting. This information is important both for the evaluation generally and because the
Section 302 certifications require that our Chief Executive Officer and our



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Chief Financial Officer disclose that information to the Audit Committee of our Board of Trustees and our independent auditors and also require us to report
on related matters in this section of the Annual Report on Form 10-K. In the Public Company Accounting Oversight Boards Auditing Standard No. 5, a significant deficiency is a deficiency, or a combination of deficiencies,
in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the companys financial reporting. A deficiency in internal
control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A
material weakness is defined in Auditing Standard No. 5 as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the
companys annual or interim financial statements will not be prevented or detected on a timely basis. We also sought to deal with other control matters in the evaluation, and in any case in which a problem was identified, we considered what
revision, improvement and/or correction was necessary to be made in accordance with our on-going procedures.

Periodic Evaluation and Conclusion of
Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that such controls and procedures were
effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed in our Exchange Act reports 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 to allow timely decisions regarding required disclosure.

Periodic Evaluation and Conclusion of Internal Control over Financial Reporting

Our Chief Executive Officer and
Chief Financial Officer have conducted an evaluation of the effectiveness of the design and operation of our internal control over financial reporting as of the end of our most recent fiscal year. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that such internal control over financial reporting was effective as of the end of our most recent fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

Statement of Our Management

Our management has issued a report on its assessment of the Trusts internal control over financial
reporting, which appears on page F-2 of this Annual Report on Form 10-K.

Statement of Our Independent Registered Public Accounting Firm

Grant Thornton LLP, our independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, has issued an
attestation report on the Trusts internal control over financial reporting, which appears on page F-3 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during our fourth
fiscal quarter of 2008 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

Not applicable.



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##### Table of Contents

PART III

Certain information required in Part III is omitted from this Report but is incorporated herein by reference from our Proxy Statement for the 2009 Annual Meeting of Shareholders (the Proxy Statement).



|ITEM 10. | TRUSTEES, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | -----------------------------------------------------

a.) The
tables and narrative in the Proxy Statement identifying our Trustees and Board committees under the caption Election of Trustees and Corporate Governance and the section of the Proxy Statement entitled Executive
Officers are incorporated herein by reference.

b.) The information included under the section of the Proxy Statement entitled Section 16(a)
Beneficial Ownership Reporting Compliance is incorporated herein by reference.

c.) We have adopted a Code of Ethics, which is applicable to our
Chief Executive Officer and senior financial officers. The Code of Ethics is available in the Corporate Governance section of the Investor Information section of our website at www.federalrealty.com.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The sections of the Proxy Statement
entitled Summary Compensation Table, Compensation Committee Interlocks and Insider Participation, Compensation Committee Report, Trustee Compensation and Compensation Discussion and
Analysis are incorporated herein by reference.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The sections of the Proxy Statement entitled Share Ownership and Equity Compensation Plan Information are incorporated herein by reference.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND TRUSTEE INDEPENDENCE
|-------- | ------------------------------------------------------------------------

The sections of the Proxy Statement entitled Certain Relationship and Related Transactions and Independence of Trustees are incorporated herein by reference.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The sections of the Proxy
Statement entitled Ratification of Independent Registered Public Accounting Firm and Relationship with Independent Registered Public Accounting Firm are incorporated herein by reference.



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##### Table of Contents

PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a)(1) Financial
Statements

Our consolidated financial statements and notes thereto, together with Managements Report on Internal Control over Financial Reporting
and Report of Independent Registered Public Accounting Firm are included as a separate section of this Annual Report on Form 10-K commencing on page F-1.

(2) Financial Statement Schedules

Our financial statement schedules are included in a separate section of this Annual Report on
Form 10-K commencing on page F-37.

(3) Exhibits

A
list of exhibits to this Annual Report on Form 10-K is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.

(b) See Exhibit Index

(c) Not Applicable



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly
authorized this 26th day of February, 2009.



Federal Realty Investment TrustBy:

/S/    DONALD C.
WOODDonald C. Wood Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed
below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated. Each person whose signature appears below hereby constitutes and appoints each of Donald C. Wood and Dawn M. Becker as his or her
attorney-in-fact and agent, with full power of substitution and resubstitution for him or her in any and all capacities, to sign any or all amendments to this Report and to file same, with exhibits thereto and other documents in connection
therewith, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that such
attorney-in-fact and agent or his or her substitutes may do or cause to be done by virtue hereof.



|                                                   |  |                                                                                                           |  |                  
|-------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | -----------------
|Signature                                          |  | Title                                                                                                     |  | Date             
|                                                   |  |                                                                                                          
|/S/    DONALD C.
WOOD Donald C. Wood               |  | Chief Executive Officer, Trustee (Principal Executive Officer)                                            |  | February 26, 2009
|                                                   |  |                                                                                                          
|/S/    ANDREW P.
BLOCHER Andrew P. Blocher         |  | Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |  | February 26, 2009
|                                                   |  |                                                                                                          
|/S/    JOSEPH
S. VASSALLUZZO Joseph S. Vassalluzzo |  | Non-Executive Chairman                                                                                    |  | February 26, 2009
|                                                   |  |                                                                                                          
|/S/    JON E. BORTZ Jon Bortz                      |  | Trustee                                                                                                   |  | February 26, 2009
|                                                   |  |                                                                                                          
|/S/    DAVID W.
FAEDER David W. Faeder             |  | Trustee                                                                                                   |  | February 26, 2009
|                                                   |  |                                                                                                          
|/S/    KRISTIN
GAMBLE Kristin Gamble               |  | Trustee                                                                                                   |  | February 26, 2009
|                                                   |  |                                                                                                          
|/S/    GAIL P.
STEINEL Gail P. Steinel             |  | Trustee                                                                                                   |  | February 26, 2009
|                                                   |  |                                                                                                          
|/S/    WARREN M.
THOMPSON Warren M. Thompson       |  | Trustee                                                                                                   |  | February 26, 2009



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Item 8 and Item 15(a)(1) and (2)

Index to Consolidated Financial Statements and Schedules



|                                                                          |  |          
|------------------------------------------------------------------------- |  | ---------
|Consolidated Financial Statements                                         |  | Page No. 
|Management Assessment Report on Internal Control over Financial Reporting |  | F-2      
|Report of Independent Registered Public Accounting Firm                   |  | F-3      
|Report of Independent Registered Public Accounting Firm                   |  | F-4      
|Consolidated Balance Sheets                                               |  | F-5      
|Consolidated Statements of Operations                                     |  | F-6      
|Consolidated Statement of Shareholders Equity                            |  | F-7      
|Consolidated Statements of Cash Flows                                     |  | F-8      
|Notes to Consolidated Financial Statements                                |  | F-9-F-36 
|                                                                          | 
|Financial Statement Schedules                                             |  |          
|Schedule IIISummary of Real Estate and Accumulated Depreciation          |  | F-37-F-43
|Schedule IVMortgage Loans on Real Estate                                 |  | F-44-F-45

All other schedules have been omitted either because the information is not applicable, not
material, or is disclosed in our consolidated financial statements and related notes.



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##### Table of Contents

Management Assessment Report on Internal Control over Financial Reporting

The management of Federal Realty is responsible for establishing and maintaining adequate internal control over financial reporting. Establishing and maintaining internal
control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, as appropriate, and effected by our employees, including
management and our Board of Trustees, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
This process includes policies and procedures that:



| |  |  | pertain to the maintenance of records that accurately and fairly reflect the transactions and dispositions of our assets in reasonable detail;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are made only in accordance with the authorization procedures we have established; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of any of our assets in circumstances that
could have a material adverse effect on our financial statements.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management, including our Chief Executive Officer and
Chief Financial Officer, do not expect that our internal control over financial reporting will prevent all errors and fraud. In designing and evaluating our control system, management recognized that any control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily
was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, that may affect our operation have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by managements override of the control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management conducted an assessment of the effectiveness of the Trusts internal control over financial reporting as of December 31, 2008. In making this assessment, it used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on this assessment, management concluded that our internal control over financial reporting is effective, based on
those criteria, as of December 31, 2008.

Grant Thornton LLP, the independent registered public accounting firm that audited the Trusts
consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Trusts internal control over financial reporting, which appears on page F-3 of this Annual Report on Form 10-K.



F-2



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

Trustees and Shareholders of Federal Realty Investment Trust

We have audited Federal Realty Investment Trust (a Maryland real estate investment trust) and subsidiaries (the Trust) internal control over financial reporting as of December 31, 2008, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Federal Realty Investment Trusts management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Assessment Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on Federal Realty Investment Trusts internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Federal Realty Investment Trust and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2008, based on criteria established in Internal ControlIntegrated Framework issued by COSO.

We also have audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Federal Realty Investment Trust and subsidiaries as of December 31, 2008 and 2007, and the related consolidated
statements of operations, shareholders equity, and cash flows for each of the three years in the period ended December 31, 2008 and our report dated February 25, 2009 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

McLean, Virginia

February 25, 2009



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

Trustees and Shareholders of Federal Realty Investment Trust

We have audited the accompanying consolidated balance sheets of Federal Realty Investment Trust (a Maryland real estate investment trust) and subsidiaries (the Trust) as of December 31, 2008 and 2007, and the
related consolidated statements of operations, shareholders equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits of the basic financial statements included the financial statement schedules
listed in the index appearing under Item 15(a) (1) and (2). These financial statements and financial statement schedules are the responsibility of the Trusts management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of the Trust as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Trusts internal control over financial reporting as of December 31, 2008, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and our report dated February 25, 2009 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

McLean, Virginia

February 25, 2009



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##### Table of Contents

Federal Realty Investment Trust

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                 |  |                |           |   |      |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | --------- | - | ---- | - | --------- | -
|                                                                                                                                                 |  | December 31,   |          
|                                                                                                                                                 |  | 2008           |           |   | 2007 |  
|                                                                                                                                                 |  | (In thousands) |          
|ASSETS                                                                                                                                           |  |                |           |   |      |   |           |  
|Real estate, at cost                                                                                                                             |  |                |           |   |      |   |           |  
|Operating                                                                                                                                        |  | $              | 3,567,035 |   |      | $ | 3,265,020 |  
|Construction-in-progress                                                                                                                         |  |                | 106,650   |   |      |   | 147,925   |  
|Assets held for sale (discontinued operations)                                                                                                   |  |                |          |   |      |   | 39,902    |  
|                                                                                                                                                 |  |                |           |   |      |   |           |  
|                                                                                                                                                 |  |                | 3,673,685 |   |      |   | 3,452,847 |  
|Less accumulated depreciation and amortization                                                                                                   |  |                | (846,258  | ) |      |   | (756,703  | )
|                                                                                                                                                 |  |                |           |   |      |   |           |  
|Net real estate                                                                                                                                  |  |                | 2,827,427 |   |      |   | 2,696,144 |  
|Cash and cash equivalents                                                                                                                        |  |                | 15,223    |   |      |   | 50,691    |  
|Accounts and notes receivable                                                                                                                    |  |                | 73,688    |   |      |   | 61,108    |  
|Mortgage notes receivable                                                                                                                        |  |                | 45,780    |   |      |   | 40,638    |  
|Investment in real estate partnership                                                                                                            |  |                | 29,252    |   |      |   | 29,646    |  
|Prepaid expenses and other assets                                                                                                                |  |                | 95,344    |   |      |   | 103,620   |  
|Debt issuance costs, net of accumulated amortization of $6,484 and $4,815, respectively                                                          |  |                | 6,062     |   |      |   | 7,450     |  
|                                                                                                                                                 |  |                |           |   |      |   |           |  
|TOTAL ASSETS                                                                                                                                     |  | $              | 3,092,776 |   |      | $ | 2,989,297 |  
|                                                                                                                                                 |  |                |           |   |      |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                             |  |                |           |   |      |   |           |  
|Liabilities                                                                                                                                      |  |                |           |   |      |   |           |  
|Mortgages payable                                                                                                                                |  | $              | 389,318   |   |      | $ | 373,975   |  
|Capital lease obligations                                                                                                                        |  |                | 63,492    |   |      |   | 76,109    |  
|Notes payable                                                                                                                                    |  |                | 336,391   |   |      |   | 210,820   |  
|Senior notes and debentures                                                                                                                      |  |                | 956,584   |   |      |   | 977,556   |  
|Accounts payable and accrued expenses                                                                                                            |  |                | 86,950    |   |      |   | 99,360    |  
|Dividends payable                                                                                                                                |  |                | 38,719    |   |      |   | 36,142    |  
|Security deposits payable                                                                                                                        |  |                | 11,309    |   |      |   | 10,703    |  
|Other liabilities and deferred credits                                                                                                           |  |                | 63,059    |   |      |   | 58,182    |  
|                                                                                                                                                 |  |                |           |   |      |   |           |  
|Total liabilities                                                                                                                                |  |                | 1,945,822 |   |      |   | 1,842,847 |  
|Minority interests                                                                                                                               |  |                | 32,352    |   |      |   | 31,818    |  
|Commitments and contingencies (Note 8)                                                                                                           |  |                |           |   |      |   |           |  
|Shareholders equity                                                                                                                             |  |                |           |   |      |   |           |  
|Preferred stock, authorized 15,000,000 shares, $.01 par:                                                                                         |  |                |           |   |      |   |           |  
|5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation preference $25 per share), 399,896 shares issued and
outstanding |  |                | 9,997     |   |      |   | 9,997     |  
|Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, 60,487,244 and 60,133,270 issued, respectively                    |  |                | 605       |   |      |   | 601       |  
|Additional paid-in capital                                                                                                                       |  |                | 1,559,381 |   |      |   | 1,541,020 |  
|Accumulated dividends in excess of net income                                                                                                    |  |                | (426,574  | ) |      |   | (407,376  | )
|Treasury shares at cost, 1,501,566 and 1,487,605 shares, respectively                                                                            |  |                | (28,807   | ) |      |   | (28,807   | )
|Notes receivable from issuance of common shares                                                                                                  |  |                |          |   |      |   | (803      | )
|                                                                                                                                                 |  |                |           |   |      |   |           |  
|Total shareholders equity                                                                                                                       |  |                | 1,114,602 |   |      |   | 1,114,632 |  
|                                                                                                                                                 |  |                |           |   |      |   |           |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                       |  | $              | 3,092,776 |   |      | $ | 2,989,297 |  
|                                                                                                                                                 |  |                |           |   |      |   |           |  

The accompanying notes are an integral part of these consolidated statements.



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##### Table of Contents

Federal Realty Investment Trust

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|----------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                            |  | Year Ended December 31,               |        
|                                                            |  | 2008                                  |         |   | 2007 |   |          | 2006 | 
|                                                            |  | (In thousands, except per share data) |        
|REVENUE                                                     |  |                                       |         |   |      |   |          |      |  |   |         |  
|Rental income                                               |  | $                                     | 501,964 |   |      | $ | 465,728  |      |  | $ | 414,261 |  
|Other property income                                       |  |                                       | 14,013  |   |      |   | 12,834   |      |  |   | 7,460   |  
|Mortgage interest income                                    |  |                                       | 4,548   |   |      |   | 4,560    |      |  |   | 5,095   |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|Total revenue                                               |  |                                       | 520,525 |   |      |   | 483,122  |      |  |   | 426,816 |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|EXPENSES                                                    |  |                                       |         |   |      |   |          |      |  |   |         |  
|Rental expenses                                             |  |                                       | 109,718 |   |      |   | 99,363   |      |  |   | 84,164  |  
|Real estate taxes                                           |  |                                       | 55,714  |   |      |   | 46,897   |      |  |   | 41,139  |  
|General and administrative                                  |  |                                       | 26,732  |   |      |   | 26,581   |      |  |   | 21,921  |  
|Depreciation and amortization                               |  |                                       | 111,022 |   |      |   | 101,633  |      |  |   | 92,751  |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|Total operating expenses                                    |  |                                       | 303,186 |   |      |   | 274,474  |      |  |   | 239,975 |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|OPERATING INCOME                                            |  |                                       | 217,339 |   |      |   | 208,648  |      |  |   | 186,841 |  
|Other interest income                                       |  |                                       | 916     |   |      |   | 921      |      |  |   | 2,042   |  
|Interest expense                                            |  |                                       | (99,163 | ) |      |   | (111,365 | )    |  |   | (95,234 | )
|Income from real estate partnership                         |  |                                       | 1,612   |   |      |   | 1,395    |      |  |   | 656     |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS |  |                                       | 120,704 |   |      |   | 99,599   |      |  |   | 94,305  |  
|Minority interests                                          |  |                                       | (5,366  | ) |      |   | (5,590   | )    |  |   | (4,353  | )
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|INCOME FROM CONTINUING OPERATIONS                           |  |                                       | 115,338 |   |      |   | 94,009   |      |  |   | 89,952  |  
|DISCONTINUED OPERATIONS                                     |  |                                       |         |   |      |   |          |      |  |   |         |  
|Discontinued operationsincome                              |  |                                       | 1,877   |   |      |   | 6,760    |      |  |   | 4,804   |  
|Discontinued operationsgain on sale of real estate         |  |                                       | 12,572  |   |      |   | 94,768   |      |  |   | 16,515  |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|Results from discontinued operations                        |  |                                       | 14,449  |   |      |   | 101,528  |      |  |   | 21,319  |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|INCOME BEFORE GAIN ON SALE OF REAL ESTATE                   |  |                                       | 129,787 |   |      |   | 195,537  |      |  |   | 111,271 |  
|Gain on sale of real estate                                 |  |                                       |        |   |      |   |         |      |  |   | 7,441   |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|NET INCOME                                                  |  |                                       | 129,787 |   |      |   | 195,537  |      |  |   | 118,712 |  
|Dividends on preferred stock                                |  |                                       | (541    | ) |      |   | (442     | )    |  |   | (10,423 | )
|Preferred stock redemption costs                            |  |                                       |        |   |      |   |         |      |  |   | (4,775  | )
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS                |  | $                                     | 129,246 |   |      | $ | 195,095  |      |  | $ | 103,514 |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|EARNINGS PER COMMON SHARE, BASIC                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|Continuing operations                                       |  | $                                     | 1.96    |   |      | $ | 1.67     |      |  | $ | 1.40    |  
|Discontinued operations                                     |  |                                       | 0.24    |   |      |   | 1.81     |      |  |   | 0.40    |  
|Gain on sale of real estate                                 |  |                                       |        |   |      |   |         |      |  |   | 0.14    |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|                                                            |  | $                                     | 2.20    |   |      | $ | 3.48     |      |  | $ | 1.94    |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|Weighted average number of common shares, basic             |  |                                       | 58,665  |   |      |   | 56,108   |      |  |   | 53,469  |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|EARNINGS PER COMMON SHARE, DILUTED                          |  |                                       |         |   |      |   |          |      |  |   |         |  
|Continuing operations                                       |  | $                                     | 1.95    |   |      | $ | 1.65     |      |  | $ | 1.39    |  
|Discontinued operations                                     |  |                                       | 0.24    |   |      |   | 1.80     |      |  |   | 0.39    |  
|Gain on sale of real estate                                 |  |                                       |        |   |      |   |         |      |  |   | 0.14    |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|                                                            |  | $                                     | 2.19    |   |      | $ | 3.45     |      |  | $ | 1.92    |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  
|Weighted average number of common shares, diluted           |  |                                       | 58,914  |   |      |   | 56,543   |      |  |   | 53,962  |  
|                                                            |  |                                       |         |   |      |   |          |      |  |   |         |  

The accompanying notes are an integral part of these consolidated statements.



F-6



---

##### Table of Contents

Federal Realty Investment Trust

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY



|                                                    |  |                                   |   |  |               |          |                          |        |            |                                            |   |     |                 |        |           |                                         |        |   |                                                |   |  |                                            |   |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |           |  
|--------------------------------------------------- |  | --------------------------------- | - |  | ------------- | -------- | ------------------------ | ------ | ---------- | ------------------------------------------ | - | --- | --------------- | ------ | --------- | --------------------------------------- | ------ | - | ---------------------------------------------- | - |  | ------------------------------------------ | - |  | ------------------------ | ------- | - |  | - | ------ | - |  | - | ------ | - |  | - | ------ | - |  | - | --------- | -
|                                                    |  | Preferred Stock                   |   |  | Common Shares |          | AdditionalPaid-inCapital |        |            | AccumulatedDividends InExcess ofNet Income |   |     | Treasury Shares |        |           | DeferredCompensationOn RestrictedShares |        |   | NotesReceivableFrom theIssuance ofCommonShares |   |  | AccumulatedOtherComprehensiveIncome (Loss) |   |  | TotalShareholdersEquity |        
|                                                    |  | Shares                            |   |  | Amount        |          |                          | Shares |            | Amount                                     |   |     |                 | Shares |           |                                         | Amount |   |                                                |   |  |                                           
|                                                    |  | (In thousands, except share data) |  
|BALANCE AT DECEMBER 31, 2005                        |  | 5,400                             |   |  | $             | 135,000  |                          |        | 54,371,057 |                                            | $ | 544 |                 | $      | 1,114,732 |                                         |        | $ | (437,817                                       | ) |  | (1,480,360                                 | ) |  | $                        | (28,794 | ) |  | $ | (9,704 | ) |  | $ | (1,792 | ) |  | $ | 2,678  |   |  | $ | 774,847   |  
|Comprehensive income:                               |  |                                   |   |  |               |          |                          |        |            |                                            |   |     |                 |        |           |                                         |        |   |                                                |   |  |                                            |   |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |           |  
|Net income                                          |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   | 118,712                                        |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 118,712   |  
|Change in valuation on interest rate swaps          |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   | (1,493 | ) |  |   | (1,493    | )
|                                                    |  |                                   |   |  |               |          |                          |        |            |                                            |   |     |                 |        |           |                                         |        |   |                                                |   |  |                                            |   |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |           |  
|Total comprehensive income                          |  |                                   |   |  |               |          |                          |        |            |                                            |   |     |                 |        |           |                                         |        |   |                                                |   |  |                                            |   |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   | 117,219   |  
|Change due to termination of hedge relationship     |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   | (1,185 | ) |  |   | (1,185    | )
|Dividends declared to common shareholders           |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   | (133,066                                       | ) |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | (133,066  | )
|Dividends declared to preferred shareholders        |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   | (10,423                                        | ) |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | (10,423   | )
|Common shares issued                                |  |                                  |   |  |               |         |                          |        | 2,002,670  |                                            |   | 20  |                 |        | 149,077   |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 149,097   |  
|Exercise of stock options                           |  |                                  |   |  |               |         |                          |        | 266,579    |                                            |   | 2   |                 |        | 8,843     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 8,845     |  
|Shares issued under dividend reinvestment plan      |  |                                  |   |  |               |         |                          |        | 44,077     |                                            |   |    |                 |        | 3,101     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 3,101     |  
|Share-based compensation expense (SFAS No.123 (R))  |  |                                  |   |  |               |         |                          |        | 84,217     |                                            |   | 1   |                 |        | 6,490     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 6,491     |  
|Cumulative effect of change in accounting principle |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        | (6,416    | )                                       |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   | 9,704  |   |  |   |       |   |  |   |       |   |  |   | 3,288     |  
|Conversion and redemption of OP units               |  |                                  |   |  |               |         |                          |        | 37,216     |                                            |   | 1   |                 |        | 615       |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 616       |  
|Preferred shares redeemed                           |  | (5,400                            | ) |  |               | (135,000 | )                        |        |           |                                            |   |    |                 |        | 4,775     |                                         |        |   | (4,775                                         | ) |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | (135,000  | )
|Unvested shares forfeited                           |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   |                                               |   |  | (4,919                                     | ) |  |                          | (13     | ) |  |   |       |   |  |   |       |   |  |   |       |   |  |   | (13       | )
|Loans paid                                          |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   | 261    |   |  |   |       |   |  |   | 261       |  
|                                                    |  |                                   |   |  |               |          |                          |        |            |                                            |   |     |                 |        |           |                                         |        |   |                                                |   |  |                                            |   |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |           |  
|BALANCE AT DECEMBER 31, 2006                        |  |                                  |   |  |               |         |                          |        | 56,805,816 |                                            |   | 568 |                 |        | 1,281,217 |                                         |        |   | (467,369                                       | ) |  | (1,485,279                                 | ) |  |                          | (28,807 | ) |  |   |       |   |  |   | (1,531 | ) |  |   |       |   |  |   | 784,078   |  
|Net income/comprehensive income                     |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   | 195,537                                        |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 195,537   |  
|Dividends declared to common shareholders           |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   | (135,102                                       | ) |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | (135,102  | )
|Dividends declared to preferred shareholders        |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   | (442                                           | ) |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | (442      | )
|Common shares issued                                |  |                                  |   |  |               |         |                          |        | 2,884,099  |                                            |   | 29  |                 |        | 240,162   |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 240,191   |  
|Exercise of stock options                           |  |                                  |   |  |               |         |                          |        | 106,117    |                                            |   | 1   |                 |        | 5,066     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 5,067     |  
|Shares issued under dividend reinvestment plan      |  |                                  |   |  |               |         |                          |        | 32,615     |                                            |   |    |                 |        | 2,821     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 2,821     |  
|Share-based compensation expense (SFAS No.123 (R))  |  |                                  |   |  |               |         |                          |        | 127,867    |                                            |   | 1   |                 |        | 8,039     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 8,040     |  
|Conversion and redemption of OP units               |  |                                  |   |  |               |         |                          |        | 176,756    |                                            |   | 2   |                 |        | 3,715     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 3,717     |  
|Preferred shares issued                             |  | 399,896                           |   |  |               | 9,997    |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 9,997     |  
|Unvested shares forfeited                           |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   |                                               |   |  | (2,326                                     | ) |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   |          |  
|Loans paid                                          |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   | 728    |   |  |   |       |   |  |   | 728       |  
|                                                    |  |                                   |   |  |               |          |                          |        |            |                                            |   |     |                 |        |           |                                         |        |   |                                                |   |  |                                            |   |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |           |  
|BALANCE AT DECEMBER 31, 2007                        |  | 399,896                           |   |  |               | 9,997    |                          |        | 60,133,270 |                                            |   | 601 |                 |        | 1,541,020 |                                         |        |   | (407,376                                       | ) |  | (1,487,605                                 | ) |  |                          | (28,807 | ) |  |   |       |   |  |   | (803   | ) |  |   |       |   |  |   | 1,114,632 |  
|Net income/comprehensive income                     |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   | 129,787                                        |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 129,787   |  
|Dividends declared to common shareholders           |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   | (148,444                                       | ) |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | (148,444  | )
|Dividends declared to preferred shareholders        |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   | (541                                           | ) |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | (541      | )
|Common shares issued                                |  |                                  |   |  |               |         |                          |        | 274        |                                            |   |    |                 |        | 19        |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 19        |  
|Exercise of stock options                           |  |                                  |   |  |               |         |                          |        | 214,853    |                                            |   | 2   |                 |        | 8,006     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 8,008     |  
|Shares issued under dividend reinvestment plan      |  |                                  |   |  |               |         |                          |        | 39,343     |                                            |   |    |                 |        | 2,755     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 2,755     |  
|Share-based compensation expense (SFAS No.123 (R))  |  |                                  |   |  |               |         |                          |        | 99,504     |                                            |   | 2   |                 |        | 7,776     |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | 7,778     |  
|Conversion and redemption of OP units               |  |                                  |   |  |               |         |                          |        |           |                                            |   |     |                 |        | (195      | )                                       |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   | (195      | )
|Unvested shares forfeited                           |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   |                                               |   |  | (13,961                                    | ) |  |                          |        |   |  |   |       |   |  |   |       |   |  |   |       |   |  |   |          |  
|Loans paid                                          |  |                                  |   |  |               |         |                          |        |           |                                            |   |    |                 |        |          |                                         |        |   |                                               |   |  |                                           |   |  |                          |        |   |  |   |       |   |  |   | 803    |   |  |   |       |   |  |   | 803       |  
|                                                    |  |                                   |   |  |               |          |                          |        |            |                                            |   |     |                 |        |           |                                         |        |   |                                                |   |  |                                            |   |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |           |  
|BALANCE AT DECEMBER 31, 2008                        |  | 399,896                           |   |  | $             | 9,997    |                          |        | 60,487,244 |                                            | $ | 605 |                 | $      | 1,559,381 |                                         |        | $ | (426,574                                       | ) |  | (1,501,566                                 | ) |  | $                        | (28,807 | ) |  | $ |       |   |  | $ |       |   |  | $ |       |   |  | $ | 1,114,602 |  
|                                                    |  |                                   |   |  |               |          |                          |        |            |                                            |   |     |                 |        |           |                                         |        |   |                                                |   |  |                                            |   |  |                          |         |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |           |  

The accompanying notes are an integral part of these consolidated statements.



F-7



---

##### Table of Contents

Federal Realty Investment Trust

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|---------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                   |  | Year Ended December 31, |         
|                                                                                   |  | 2008                    |          |   | 2007 |   |          | 2006 | 
|                                                                                   |  | (In thousands)          |         
|OPERATING ACTIVITIES                                                               |  |                         |          |   |      |   |          |      |  |   |          |  
|Net income                                                                         |  | $                       | 129,787  |   |      | $ | 195,537  |      |  | $ | 118,712  |  
|Adjustment to reconcile net income to net cash provided by operating activities    |  |                         |          |   |      |   |          |      |  |   |          |  
|Depreciation and amortization, including discontinued operations                   |  |                         | 111,069  |   |      |   | 105,966  |      |  |   | 97,879   |  
|Gain on sale of real estate                                                        |  |                         | (12,572  | ) |      |   | (94,768  | )    |  |   | (23,956  | )
|Equity in income from real estate partnership                                      |  |                         | (1,612   | ) |      |   | (1,395   | )    |  |   | (656     | )
|Minority interests                                                                 |  |                         | 5,366    |   |      |   | 5,590    |      |  |   | 4,353    |  
|Other, net                                                                         |  |                         | 1,585    |   |      |   | (2,267   | )    |  |   | 2,328    |  
|Changes in assets and liabilities net of effects of acquisitions and dispositions: |  |                         |          |   |      |   |          |      |  |   |          |  
|Increase in accounts receivable                                                    |  |                         | (6,303   | ) |      |   | (6,743   | )    |  |   | (3,786   | )
|Decrease (increase) in prepaid expenses and other assets                           |  |                         | 2,668    |   |      |   | 3,002    |      |  |   | (11,792  | )
|(Decrease) increase in accounts payable and accrued expenses                       |  |                         | (4,329   | ) |      |   | 266      |      |  |   | 2,846    |  
|Increase in security deposits and other liabilities                                |  |                         | 2,626    |   |      |   | 9,021    |      |  |   | 726      |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash provided by operating activities                                          |  |                         | 228,285  |   |      |   | 214,209  |      |  |   | 186,654  |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|INVESTING ACTIVITIES                                                               |  |                         |          |   |      |   |          |      |  |   |          |  
|Acquisition of real estate                                                         |  |                         | (99,625  | ) |      |   | (69,487  | )    |  |   | (266,984 | )
|Capital expendituresdevelopment and redevelopment                                 |  |                         | (104,196 | ) |      |   | (111,600 | )    |  |   | (95,718  | )
|Capital expendituresother                                                         |  |                         | (33,790  | ) |      |   | (25,755  | )    |  |   | (23,961  | )
|Proceeds from sale of real estate                                                  |  |                         | 44,890   |   |      |   | 83,979   |      |  |   | 82,345   |  
|Investment in real estate partnership                                              |  |                         |         |   |      |   | (20,427  | )    |  |   | (4,960   | )
|Distribution from real estate partnership in excess of earnings                    |  |                         | 363      |   |      |   | 967      |      |  |   | 631      |  
|Leasing costs                                                                      |  |                         | (9,921   | ) |      |   | (9,756   | )    |  |   | (8,628   | )
|(Issuance) repayment of mortgage and other notes receivable, net                   |  |                         | (5,288   | ) |      |   | 640      |      |  |   | (154     | )
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash used in investing activities                                              |  |                         | (207,567 | ) |      |   | (151,439 | )    |  |   | (317,429 | )
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|FINANCING ACTIVITIES                                                               |  |                         |          |   |      |   |          |      |  |   |          |  
|Net borrowings (repayment) under revolving credit facility, net of costs           |  |                         | 123,500  |   |      |   | (98,000  | )    |  |   | 41,209   |  
|Issuance of note payable, net of costs                                             |  |                         |         |   |      |   | 199,525  |      |  |   | 149,979  |  
|Issuance of senior notes                                                           |  |                         |         |   |      |   |         |      |  |   | 509,887  |  
|Repayment of senior notes                                                          |  |                         | (20,800  | ) |      |   | (150,000 | )    |  |   | (40,500  | )
|Repayment of mortgages, capital leases and notes payable                           |  |                         | (18,512  | ) |      |   | (7,603   | )    |  |   | (405,552 | )
|Extension fee on term loan                                                         |  |                         | (200     | ) |      |   |         |      |  |   |         |  
|Redemption of Series B preferred shares                                            |  |                         |         |   |      |   |         |      |  |   | (135,000 | )
|Issuance of common shares                                                          |  |                         | 11,585   |   |      |   | 170,855  |      |  |   | 161,292  |  
|Dividends paid to common and preferred shareholders                                |  |                         | (146,418 | ) |      |   | (131,443 | )    |  |   | (142,947 | )
|Distributions to minority interests                                                |  |                         | (5,341   | ) |      |   | (6,908   | )    |  |   | (4,737   | )
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash (used in) provided by financing activities                                |  |                         | (56,186  | ) |      |   | (23,574  | )    |  |   | 133,631  |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                   |  |                         | (35,468  | ) |      |   | 39,196   |      |  |   | 2,856    |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                       |  |                         | 50,691   |   |      |   | 11,495   |      |  |   | 8,639    |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                                             |  | $                       | 15,223   |   |      | $ | 50,691   |      |  | $ | 11,495   |  
|                                                                                   |  |                         |          |   |      |   |          |      |  |   |          |  

The accompanying notes are an integral part of these consolidated statements.



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Federal Realty Investment Trust

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008, 2007 and 2006

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Organization

Federal Realty Investment Trust (the
Trust) is an equity real estate investment trust specializing in the ownership, management, development and redevelopment of retail and mixed-use properties. Our properties are located primarily in densely populated and affluent
communities in strategically selected metropolitan markets in the Mid-Atlantic and Northeast regions of the United States, as well as in California. As of December 31, 2008, we owned or had a majority interest in community and neighborhood
shopping centers and mixed-use properties which are operated as 84 predominantly retail real estate projects.

We operate in a manner intended to enable us
to qualify as a real estate investment trust (or REIT) for federal income tax purposes. A REIT that distributes at least 90% of its taxable income to its shareholders each year and meets certain other conditions is not taxed on that portion of its
taxable income which is distributed to its shareholders. Therefore, federal income taxes on our REIT taxable income have been and are generally expected to be immaterial. We are obligated to pay state taxes, generally consisting of franchise or
gross receipts taxes in certain states. Such state taxes also have not been material.

We have elected to treat certain of our subsidiaries as taxable REIT
subsidiaries, which we refer to as a TRS. In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Internal Revenue Code of 1986, as amended (the Code). A
TRS is subject to federal and state income taxes. The sales of condominiums at Santana Row, which occurred between August 2005 and August 2006 were conducted through a TRS. Other than these sales, our TRS activities have not been material.

Principles of Consolidation and Estimates

Our
consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity. The
equity interests of other investors are reflected as minority interests. All significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint ventures, which we do not control or manage, using
the equity method of accounting.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States
of America, referred to as GAAP, requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and
expenses. These estimates are prepared using managements best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.

Reclassifications

Certain 2007 and
2006 amounts have been reclassified to conform to current period presentation.

Revenue Recognition and Accounts Receivable

Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed escalations which occur at specified times during the term of the
lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, net of valuation adjustments, based on managements assessment of credit, collection and other business
risk. Percentage rents, which represent



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additional rents based upon the level of sales achieved by certain tenants, are recognized at the end of the lease year or earlier if we have determined the
required sales level is achieved and the percentage rents are collectible. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related expenditures are incurred. For a tenant to terminate
its lease agreement prior to the end of the agreed term, we may require that they pay a fee to cancel the lease agreement. Lease termination fees for which the tenant has relinquished control of the space are generally recognized on the termination
date. When a lease is terminated early but the tenant continues to control the space under a modified lease agreement, the lease termination fee is generally recognized evenly over the remaining term of the modified lease agreement.

We make estimates of the collectibility of our accounts receivable related to minimum rents, straight-line rents, expense reimbursements and other revenue or income. In
some cases, primarily relating to straight-line rents, the collection of these amounts extends beyond one year. Our experience relative to unbilled straight-line rents is that a certain portion of the amounts otherwise recognizable as revenue is
never billed to or collected from tenants due to early lease terminations, lease modifications, bankruptcies and other factors. Accordingly, the extended collection period for straight-line rents along with our evaluation of tenant credit risk may
result in the nonrecognition of a portion of straight-line rental income until the collection of such income is reasonably assured. If our evaluation of tenant credit risk changes indicating more straight-line revenue is reasonably collectible than
previously estimated and realized, the additional straight-line rental income is recognized as revenue. If our evaluation of tenant credit risk changes indicating a portion of realized straight-line rental income is no longer collectible, a reserve
and bad debt expense is recorded. At December 31, 2008 and 2007, accounts receivable include approximately $37.2 million and $32.0 million, respectively, related to straight-line rents. At December 31, 2008 and 2007, our allowance for
doubtful accounts was $11.8 million and $7.0 million, respectively.

Real Estate

Land, buildings and improvements are recorded at cost. Depreciation is computed using the straight-line method. Estimated useful lives range generally from 35 years to a maximum of 50 years on buildings and major
improvements. Minor improvements, furniture and equipment are capitalized and depreciated over useful lives ranging from 3 to 20 years. Maintenance and repairs that do not improve or extend the useful lives of the related assets are charged to
operations as incurred. Tenant improvements are capitalized and depreciated over the life of the related lease or their estimated useful life, whichever is shorter. If a tenant vacates its space prior to contractual termination of its lease, the
undepreciated balance of any tenant improvements are written off if they are replaced or have no future value. In 2008, 2007 and 2006, depreciation expense was $101.3 million, $96.5 million and $89.6 million, respectively, including amounts included
in discontinued operations and assets under capital lease obligations.

In accordance with Statement of Financial Accounting Standard (SFAS)
No. 66, Accounting for Sales of Real Estate, sales are recognized at closing only when sufficient down payments have been obtained, possession and other attributes of ownership have been transferred to the buyer and we have no
significant continuing involvement. The application of SFAS No. 66 can be complex and requires us to make assumptions. We believe the criteria of SFAS No. 66 was met for all real estate sold during 2008, 2007 and 2006.

In accordance with SFAS No. 141, Business Combinations, our methodology of allocating the cost of acquisitions to assets acquired and liabilities
assumed is based on estimated fair values, replacement cost and appraised values. When we acquire operating real estate properties, the purchase price is allocated to land and buildings, intangibles such as in-place leases and to current assets and
liabilities acquired, if any. The value allocated to in-place leases is amortized over the related lease term and reflected as rental income in the statement of operations. If a tenant vacates its space prior to contractual termination of its lease,
the unamortized balance of any in-place lease value is written off to rental income.

We are the lessee of certain land and buildings. We classify our
leases of land and building as operating or capital leases in accordance with the provisions of SFAS No. 13, Accounting for Leases.



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In accordance with SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate
Projects, we capitalize certain costs related to the development and redevelopment of real estate including pre-construction costs, real estate taxes, insurance, construction costs and salaries and related costs of personnel directly involved.
Additionally, in accordance with SFAS No. 34, Capitalization of Interest Costs, we capitalize interest costs related to development and redevelopment activities. Capitalization of these costs begin when the activities and related
expenditures commence and cease when the project is substantially complete and ready for its intended use at which time the project is placed-in service and depreciation commences.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we review for impairment on a property by property basis. Impairment is recognized on properties held
for use when the expected undiscounted cash flows for a property are less than its carrying amount at which time the property is written-down to fair value. Properties held for sale are recorded at the lower of the carrying amount or the expected
sales price less costs to sell. SFAS No. 144 also requires the sale or disposal of a component of an entity to be treated as discontinued operations. The properties sold by us typically meet the definition of a component of an
entity and as such the revenues and expenses associated with sold properties are reclassified to discontinued operations for all periods presented.

In
June 2006, we sold Greenlawn Plaza to our unconsolidated real estate partnership resulting in a gain of $7.4 million. Due to our continuing involvement in the property, Greenlawn Plaza did not qualify for discontinued operations classification under
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Accordingly, the results of operations through the date of sale are included in continuing operations and the gain on sale is included in gain on sale of
real estate.

Cash and Cash Equivalents

We
define cash and cash equivalents as cash on hand, demand deposits with financial institutions and short term liquid investments with an initial maturity under three months. Cash balances in individual banks may exceed insurable amounts.

Prepaid Expenses and Other Assets

Prepaid expenses and other
assets consist primarily of lease costs, prepaid property taxes and acquired above market leases. Capitalized lease costs are direct costs incurred which were essential to originate a lease and would not have been incurred had the leasing
transaction not taken place and include third party commissions and salaries and related costs of personnel directly related to time spent obtaining a lease. Capitalized lease costs are amortized over the life of the related lease. If a tenant
vacates its space prior to the contractual termination of its lease, the unamortized balance of any lease costs are written off. Other assets also include the premiums paid for split dollar life insurance covering several officers and former
officers which were approximately $4.6 million at December 31, 2008 and 2007.

Debt Issuance Costs

Costs related to the issuance of debt instruments are capitalized and are amortized as interest expense over the estimated life of the related issue using the
straight-line method which approximates the effective interest method.

Derivative Instruments

We use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps to manage our exposure to variable interest
rate risk and treasury locks to manage the risk of interest rates rising prior to the issuance of debt. We enter into derivative instruments that qualify as cash flow hedges under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities and do not enter into derivative instruments for speculative purposes. As of December 31, 2008 and 2007, we had no outstanding hedging instruments.



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Our cash flow hedges are recorded at fair value. We assess effectiveness of our cash flow hedges both at inception and on
an ongoing basis. The effective portion of changes in fair value of our cash flow hedges is recorded in other comprehensive income, and the ineffective portion of changes in fair value of our cash flow hedges is recognized in earnings in the period
affected. Hedge ineffectiveness did not have a significant impact on earnings in 2008, 2007 and 2006, and we do not anticipate it will have a significant effect in the future.

Acquisition, Development and Construction Loan Arrangements

We have made certain mortgage loans that, because of
their nature, qualify as loan receivables. At the time the loans were made, we did not intend for the arrangement to be anything other than a financing and did not contemplate a real estate investment. Using guidance set forth in the Third Notice to
Practitioners issued by the AICPA in February 1986 entitled ADC Arrangements (the Third Notice), we evaluate each investment to determine whether the loan arrangement qualifies under the Third Notice as a loan, joint
venture or real estate investment and the appropriate accounting thereon. Such determination affects our balance sheet classification of these investments and the recognition of interest income derived therefrom. Generally, we receive additional
interest on these loans, however we never receive in excess of 50% of the residual profit in the project (as defined in the Third Notice) and because the borrower has either a substantial investment in the project or has guaranteed all or a portion
of our loan (or a combination thereof) the loans qualify for loan accounting. The amounts under ADC arrangements are presented as mortgage notes receivable at December 31, 2008 and 2007.

Share Based Compensation

Effective January 1, 2006, we adopted
the fair value recognition provisions of SFAS No. 123(R), Share-Based Payment, using the modified-prospective-transition method. Under this transition method, compensation cost recognized beginning January 1, 2006 includes:
(a) compensation costs for all share-based payments granted prior to, but not vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and
(b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R).

On January 1, 2006, we recorded the cumulative effect of adopting SFAS No. 123(R). This cumulative effect resulted in decreasing accrued liabilities by $3.3
million and increasing shareholders equity by $3.3 million. These balance sheet changes related to deferred compensation on unvested shares. Under SFAS No. 123(R), deferred compensation is no longer recorded at the time unvested shares
are issued. Share-based compensation expense is now recorded over the requisite service period with an offsetting credit to equity (generally additional paid-in capital).

Redemption of Preferred Stock

On November 27, 2006, we redeemed our $135 million 8.5% Series B
Cumulative Redeemable Preferred Shares at their face value. The original issuance costs of $4.8 million were charged to shareholders equity when the shares were issued. On July 31, 2003, the Emerging Issues Task Force provided
clarification on the treatment of the difference between the redemption value and the carrying value, adjusting for issuance costs, for GAAP financial reporting. As a result, our Consolidated Statement of Operations for the year ended
December 31, 2006 reflects a charge of $4.8 million in Preferred stock redemption costs as a reduction of net income in computing net income available for common shareholders.

Variable Interest Entities

In January 2003, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 46 (revised December 2003) (FIN 46-R), Consolidation of Variable Interest Entities. FIN 46-R clarifies the application of Accounting Research
Bulletin 51, Consolidated Financial Statements, for certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial



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support from other parties or in which equity investors do not have the characteristics of a controlling financial interest (variable interest
entities). Variable interest entities within the scope of FIN 46-R are required to be consolidated by their primary beneficiary. The primary beneficiary of a variable interest entity is determined to be the party that absorbs a majority of the
entitys expected losses, receives a majority of its expected returns, or both. We have evaluated the applicability of FIN 46-R to our investments in certain joint ventures including our real estate partnership with affiliates of a
discretionary fund created and advised by ING Clarion Partners and determined that these joint ventures do not meet the requirements of a variable interest entity and, therefore, consolidation of these ventures is not required. These investments are
accounted for using the equity method. We have also evaluated the applicability of FIN 46-R to our mortgage loans receivable and determined that they are not variable interest entities. Our investment balances from our real estate partnership and
mortgage notes receivable are presented in our consolidated balance sheets.

On October 16, 2006, we acquired the leasehold interest in Melville Mall
under a 20 year master lease. Additionally, we loaned the owner of Melville Mall $34.2 million secured by a second mortgage on the property. We have an option to purchase the shopping center on or after October 16, 2021 for a price of $5.0
million plus the assumption of the first mortgage and repayment of the second mortgage. We have determined that this property is held in a variable interest entity for which we are the primary beneficiary. Accordingly, beginning October 16,
2006, we consolidated this property and its operations. As of December 31, 2008 and 2007, $24.5 million and $25.1 million, respectively, is included in mortgages payable for the mortgage loan secured by Melville Mall, however, the loan is not
our legal obligation. At December 31, 2008, net real estate assets related to Melville Mall included in our consolidated balance sheet are approximately $66.5 million.

In conjunction with the acquisitions of several of our properties, we entered into Reverse Section 1031 like-kind exchange agreements with a third party intermediary. The exchange agreements are for a
maximum of 180 days and allow us, for tax purposes, to defer gains on sale of other properties sold within this period. Until the earlier of termination of the exchange agreements or 180 days after the respective acquisition dates, the third
party intermediary is the legal owner of each property, although we control each property and retain all of the economic benefits and risks associated with the property. Each property is held by a third party intermediary in a variable interest
entity for which we are the primary beneficiary. Accordingly, we consolidate these properties and their operations even during the period they are held by a third party intermediary.

From December 29, 2005 to June 5, 2006, a third party intermediary was the legal owner of Crow Canyon Commons, but we controlled the property and retained all
of the economic benefit and risk associated with the property. Accordingly, we consolidated the property and its operations beginning December 29, 2005.

From May 30, 2007 to October 11, 2007, a third party intermediary was the legal owner of Shoppers World, but we controlled the property and retained all of the economic benefit and risk associated with the property.
Accordingly, we consolidated the property and its operations beginning May 30, 2007.

From May 30, 2008 to November 25, 2008, a third party
intermediary was the legal owner of Del Mar Village, but we controlled the property and retained all of the economic benefit and risk associated with the property. Accordingly, we consolidated the property and its operations beginning May 30,
2008.

Effective on July 11, 2008 with the acquisition of 7015 & 7045 Beracasa Way and September 4, 2008 with the acquisition of
Courtyard Shops, a third party intermediary was the legal owner of the respective property. Since we control both properties and retain all economic benefits and risks associated with the properties, we consolidated the properties and their
operations effective on their respective acquisition dates. Quantitative information regarding significant assets and liabilities of these variable interest entities is included in Note 2 and Note 6 to these consolidated financial statements.



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Accounting for Income Taxes

In July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes which is an interpretation of FASB Statement No. 109, Accounting for Income Taxes.
FIN 48 was issued to reduce the diversity in practice associated with certain aspects of recognition, disclosure and measurement related to accounting for uncertain income tax positions. We adopted FIN 48 effective January 1, 2007. The adoption
of FIN 48 did not have a material impact on our financial position, results of operations, or cash flows. We recognize penalties and interest accrued related to unrecognized tax benefits as income tax expense. With few exceptions, we are no longer
subject to U.S. federal, state, and local tax examinations by tax authorities for years before 2003. As of December 31, 2008 and 2007, we had no material unrecognized tax benefits.

New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS
No. 157 applies to accounting pronouncements that require or permit fair value measurements, except for share-based payments under SFAS No. 123(R). We adopted the recognition and disclosure provisions of SFAS No. 157 for financial
assets and financial liabilities and for nonfinancial assets and nonfinancial liabilities that are re-measured at least annually effective January 1, 2008; the adoption did not have a material impact on our financial position, results of
operations or cash flows. In accordance with FSP SFAS No. 157-2, Effective Date of FASB Statement No. 157, we are required to adopt the provisions of SFAS No. 157 for all other nonfinancial assets and nonfinancial
liabilities effective January 1, 2009 and do not expect the adoption to have a material impact on our financial position, results of operations or cash flows.

SFAS No. 157 establishes a hierarchy for inputs used in measuring fair value as follows:



| | 1. | Level 1 Inputsquoted prices in active markets for identical assets or liabilities
| | -- | ----------------------------------------------------------------------------------



| | 2. | Level 2 Inputsobservable inputs other than quoted prices in active markets for identical assets and liabilities
| | -- | ----------------------------------------------------------------------------------------------------------------



| | 3. | Level 3 Inputsunobservable inputs
| | -- | ----------------------------------

In certain cases, the inputs
used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to
the fair value measurement. Our derivative instruments, as further discussed in Note 6, were measured using Level 2 inputs.

In February 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS No. 159). This standard permits entities to choose to
measure many financial instruments and certain other items at fair value and is effective for the first fiscal year beginning after November 15, 2007. We did not make this fair value election when we adopted SFAS No. 159 effective
January 1, 2008, and, therefore, it did not have an impact on our financial position, results of operations, or cash flows.

On December 4, 2007,
the FASB issued Statement No. 141 (R), Business Combinations (SFAS No. 141 (R)). SFAS No. 141 (R) broadens and clarifies the definition of a business which will result in significantly more of our
acquisitions being treated as business combinations rather than asset acquisitions. FAS 141 (R) is effective for business combinations for which the acquisition date is on or after January 1, 2009. Early adoption is not permitted and
therefore, this will only impact prospective acquisitions with no change to the accounting for acquisitions completed prior to or on December 31, 2008. The new standard requires us to expense as incurred all acquisition related transaction
costs which could include broker fees, transfer taxes, legal, accounting, valuation,



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and other professional and consulting fees; for acquisitions prior to January 1, 2009, these costs were capitalized as part of the acquisition cost. The
impact to our financial statements will vary significantly depending on the number of acquisitions, size of the acquisitions, and location of the acquisitions. Based on acquisitions in the last three years, transaction costs for single asset
acquisitions typically ranged from $0.1 million to $1.0 million with significantly higher transaction costs for an acquisition of a larger portfolio. The new standard includes several other changes to the accounting for business combinations
including requiring contingent consideration to be measured at fair value at acquisition and subsequently remeasured through the income statement if accounted for as a liability as the fair value changes, any adjustments during the purchase price
allocation period to be pushed back to the acquisition date with prior periods being adjusted for any changes, and the business combination to be accounted for on the acquisition date or the date control is obtained. During 2008, we
expensed all acquisition related costs for acquisitions which did not close prior to December 31, 2008.

On December 4, 2007, the FASB issued
Statement No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB 51 (SFAS No. 160). The new standard significantly changes the accounting and reporting of minority interests
in the consolidated financial statements. The new standard requires a non-controlling interest, which is currently referred to as a minority interest, to be recognized as a component of equity rather than included in the mezzanine section of the
balance sheet where it is currently presented. The terminology minority interest is changed to noncontrolling interest. The minority interest caption on the statement of operations will be reflected as net
income attributable to the noncontrolling interests and shown after consolidated net income and will be an adjustment to reconcile to net income. This is a presentation only change for minority interest on both the balance sheet and statement
of operations and will have no impact to net income, total liabilities and equity, and earnings per share. The statement also requires the recognition of 100% of the fair values of assets acquired and liabilities assumed in acquisitions of less than
100% controlling interest with subsequent acquisitions of the non-controlling interest recorded as equity transactions. SFAS No. 160 is effective January 1, 2009 and is to be applied prospectively except for the presentation changes to the
balance sheet and income statement which will be applied retrospectively in the 2009 financial statements. Effective January 1, 2009, we will reclassify $32.4 million from the mezzanine section of the balance sheet to shareholders equity.
The additional impact on the financial statements will vary depending on the level of transactions with entities involving non-controlling interests.

In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires enhanced
disclosures about an entitys derivative instruments and hedging activities and is effective for fiscal years beginning after November 15, 2008. We do not expect the adoption of SFAS No. 161 to have a material impact on our
consolidated financial statements.

In June 2008, the FASB issued FSP EITF No. 03-6-1, Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities (FSP EITF No. 03-6-1). Under the FSP, unvested share-based payment awards that contain non-forfeitable rights to receive dividends (whether paid or unpaid) are participating
securities, and should be included in computation of EPS pursuant to the two-class method. As part of our stock based compensation program, we issue restricted shares which vest over a three to six year period; these shares have non-forfeitable
rights to dividends immediately after issuance. We currently exclude the unvested shares from the basic EPS calculation and include them using the treasury stock method in diluted earnings per share. We expect the adoption of FSP EITF
No. 03-6-1 to result in a minimal decrease to our basic and diluted earnings per share calculations for all periods presented. The FSP is effective for fiscal years beginning after December 15, 2008 and will require retrospective
application to all prior period EPS data presented in the financial statements; early adoption is not permitted.

In November 2008, the EITF issued Issue
08-6, Equity Method Investment Accounting Considerations (EITF 08-6), which clarified the accounting for certain transactions and impairment considerations involving equity method investments. EITF 08-6 clarified that
equity method investments should initially be measured at cost, the issuance of shares by the investee would result in a gain or loss on issuance of shares reflected in the income statement of the equity investor, and that a loss in value of an
equity investment which is other than a



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temporary decline should be recognized in accordance with APB 18, The Equity Method of Accounting for Investments in Common Stock. The consensus
is effective on a prospective basis beginning on January 1, 2009; we do not expect EITF 08-6 to have a material impact on our financial position, results of operations, or cash flows.

Consolidated Statements of Cash Flows  Supplemental Disclosures

The following table provides additional information related to the Consolidated Statements of Cash Flows:



|                                                              |  |                |         |   |      |   |         |      |  |   |         |    
|------------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | ---
|                                                              |  | 2008           |         |   | 2007 |   |         | 2006 | 
|                                                              |  | (In thousands) |        
|SUPPLEMENTAL DISCLOSURES:                                     |  |                |         |   |      |   |         |      |  |   |         |    
|Total interest costs incurred                                 |  | $              | 104,464 |   |      | $ | 125,259 |      |  | $ | 106,877 |    
|Interest capitalized                                          |  |                | (5,301  | ) |      |   | (7,865  | )    |  |   | (4,069  | )  
|Interest expense related to discontinued operations           |  |                |        |   |      |   | (6,029  | )    |  |   | (7,574  | )  
|                                                              |  |                |         |   |      |   |         |      |  |   |         |    
|Interest expense                                              |  | $              | 99,163  |   |      | $ | 111,365 |      |  | $ | 95,234  |    
|                                                              |  |                |         |   |      |   |         |      |  |   |         |    
|Cash paid for interest, net of amounts capitalized            |  | $              | 95,897  |   |      | $ | 117,125 |      |  | $ | 91,484  |    
|                                                              |  |                |         |   |      |   |         |      |  |   |         |    
|Cash paid for income taxes                                    |  | $              | 444     |   |      | $ | 1,427   |      |  | $ | 5,098   | (1)
|                                                              |  |                |         |   |      |   |         |      |  |   |         |    
|NON-CASH INVESTING AND FINANCING TRANSACTIONS:                |  |                |         |   |      |   |         |      |  |   |         |    
|Mortgage loans assumed with acquisitions                      |  | $              | 32,452  |   |      | $ | 79,987  |      |  | $ | 44,297  |    
|Extinguishment of capital lease obligations                   |  | $              | 11,545  |   |      | $ | 76,449  |      |  | $ |        |    
|Note payable issued with acquisitions                         |  | $              | 2,221   |   |      | $ |        |      |  | $ |        |    
|Common shares issued with acquisitions                        |  | $              |        |   |      | $ | 77,957  |      |  | $ |        |    
|DownREIT operating partnership units issued with acquisitions |  | $              |        |   |      | $ | 16,358  |      |  | $ |        |    
|Preferred shares issued with acquisitions                     |  | $              |        |   |      | $ | 9,997   |      |  | $ |        |    



|(1) | Cash paid for income taxes for 2006 includes $4.1 million related to the sales of condominiums at Santana Row which were conducted through a TRS.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 2.   REAL ESTATE

A summary of our real estate
investments and related encumbrances is as follows:



|                                       |  |                |           |                                         |   |          |              |  |   |        
|-------------------------------------- |  | -------------- | --------- | --------------------------------------- | - | -------- | ------------ |  | - | -------
|                                       |  | Cost           |           | AccumulatedDepreciation andAmortization |   |          | Encumbrances
|                                       |  | (In thousands)
|December 31, 2008                      |  |                |           |                                         |   |          |             
|Retail and mixed-use properties        |  | $              | 3,530,539 |                                         | $ | (811,636 | )            |  | $ | 389,318
|Retail properties under capital leases |  |                | 115,784   |                                         |   | (25,556  | )            |  |   | 63,492 
|Residential                            |  |                | 27,362    |                                         |   | (9,066   | )            |  |   |       
|                                       |  |                |           |                                         |   |          |              |  |   |        
|                                       |  | $              | 3,673,685 |                                         | $ | (846,258 | )            |  | $ | 452,810
|                                       |  |                |           |                                         |   |          |              |  |   |        
|December 31, 2007                      |  |                |           |                                         |   |          |             
|Retail and mixed-use properties        |  | $              | 3,224,196 |                                         | $ | (717,257 | )            |  | $ | 373,975
|Retail properties under capital leases |  |                | 201,544   |                                         |   | (30,957  | )            |  |   | 76,109 
|Residential                            |  |                | 27,107    |                                         |   | (8,489   | )            |  |   |       
|                                       |  |                |           |                                         |   |          |              |  |   |        
|                                       |  | $              | 3,452,847 |                                         | $ | (756,703 | )            |  | $ | 450,084
|                                       |  |                |           |                                         |   |          |              |  |   |        

Retail and mixed-use properties includes the residential portion of Santana Row and for 2008, Arlington East
(Bethesda Row). The residential property investments are comprised of our investments in Rollingwood Apartments and Crest Apartments at Congressional Plaza.



F-16



---

##### Table of Contents

A summary of our significant acquisitions in 2008 and 2007 is as follows:



|                             |  |                                  |  |                     |  |                    |  |               |       |     
|---------------------------- |  | -------------------------------- |  | ------------------- |  | ------------------ |  | ------------- | ----- | ----
|Date                         |  | Property                         |  | City, State         |  | GrossLeasable Area |  | PurchasePrice |      
|                             |  |                                  |  |                     |  | (In square feet)   |  | (In millions) |      
|Year ended December 31, 2008 |  |                                  |  |                     |  |                    | 
|May 30                       |  | Del Mar Village                  |  | Boca Raton, FL      |  | 154,000            |  | $             | 41.7  | (1) 
|July 11                      |  | 7015 & 7045 Beracasa Way         |  | Boca Raton, FL      |  | 24,000             |  |               | 6.7   | (2) 
|July 16                      |  | Chelsea Commons Phase II         |  | Chelsea, MA         |  | 26,000             |  |               | 8.0   | (3) 
|September 4                  |  | Courtyard Shops                  |  | Wellington, FL      |  | 127,000            |  |               | 37.9  | (4) 
|September 25 and 30          |  | Bethesda Row                     |  | Bethesda, MD        |  | N/A                |  |               | 38.8  | (5) 
|                             |  |                                  |  |                     |  |                    |  |               |       |     
|                             |  |                                  |  | Total               |  | 331,000            |  | $             | 133.1 |     
|                             |  |                                  |  |                     |  |                    |  |               |       |     
|                             |  |                                  | 
|Year ended December 31, 2007 |  |                                  |  |                     |  |                    | 
|February 28                  |  | Crow Canyon Crest                |  | San Ramon, CA       |  | 17,000             |  | $             | 10.9  | (6) 
|March 8                      |  | The White Marsh Portfolio:(7)    |  | White Marsh, MD     |  |                    |  |               | 189.4 | (8) 
|                             |  | THE AVENUE at White Marsh        |  |                     |  | 296,000            |  |               |       |     
|                             |  | The Shoppes at Nottingham Square |  |                     |  | 186,000            |  |               |       |     
|                             |  | White Marsh Plaza                |  |                     |  | 79,000             |  |               |       |     
|                             |  | White Marsh Other                |  |                     |  | 53,000             |  |               |       |     
|May 30                       |  | Shoppers World                  |  | Charlottesville, VA |  | 169,000            |  |               | 27.2  | (9) 
|October 26                   |  | Mid-Pike Plaza                   |  | Rockville, MD       |  |                   |  |               | 45.2  | (10)
|October 26                   |  | Huntington Shopping Center       |  | Huntington, NY      |  |                   |  |               | 37.7  | (10)
|                             |  |                                  |  |                     |  |                    |  |               |       |     
|                             |  |                                  |  | Total               |  | 800,000            |  | $             | 310.4 |     
|                             |  |                                  |  |                     |  |                    |  |               |       |     



|(1) | Approximately $1.7 million and $7.4 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Approximately $0.2 million of the net assets acquired were allocated to other assets for above market leases. The two buildings acquired are adjacent to our Del Mar
Village shopping center.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Approximately $0.2 million and $0.3 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively. This property includes four pad sites that are adjacent to our Chelsea Commons property.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Approximately $0.6 million and $1.0 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | On September 25 and 30, 2008, we completed exchange transactions whereby we sold our fee interest in four land parcels that were subject to long-term ground leases with tenants
and acquired the fee interest in two land parcels under our Bethesda Row property. Prior to the transactions, the land parcels at Bethesda Row were encumbered by capital lease obligations which were extinguished as part of the transactions. The
transactions were completed as 1031 tax deferred exchange transactions and involved net cash paid to us of $23.2 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Approximately $0.4 million and $1.8 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | The White Marsh Portfolio was purchased using $11.5 million of cash plus a combination of common stock and convertible preferred stock, downREIT operating partnership units, and the
assumption of mortgage loans through a merger with Nottingham Properties, Inc. The acquisition also included ground leases covering 50,000 square feet of office space and a hotel which are not included in gross leasable area.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Approximately $3.6 million and $9.3 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Approximately $0.8 million and $2.1 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | On October 26, 2007, we completed an exchange transaction whereby we sold our leasehold interests in six New Jersey properties and acquired the fee interests in Mid-Pike Plaza
and Huntington Shopping Center. Prior to the transaction, we held leasehold interests in all eight properties. The transaction was completed as a 1031 tax-deferred exchange and involved a cash payment of $17.2 million. All eight properties were
previously encumbered by capital lease obligations which were extinguished as part of the transaction.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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---

##### Table of Contents

On November 16, 2007, we purchased the 10% minority interest in three properties located at our Fifth Avenue,
Hermosa Avenue and Third Street Promenade projects for $5.7 million. We now own 100% of these properties.

A summary of
our significant dispositions in 2008 and 2007 is as follows:



|                             |  |                                  |  |                     |  |                      |  |                   |     |  |               |       |      |   |       |    
|---------------------------- |  | -------------------------------- |  | ------------------- |  | -------------------- |  | ----------------- | --- |  | ------------- | ----- | ---- | - | ----- | ---
|Sale Date                    |  | Property                         |  | Location            |  | YearAcquiredor Built |  | GrossLeasableArea |     |  | SalesPrice    |       | Gain |  
|                             |  |                                  |  |                     |  |                      |  | (In square feet)  |     |  | (In millions) |      
|Year ended December 31, 2008 |  |                                  |  |                     |  |                      |  |                   |     |  |               |      
|September 25 and 30          |  | Four Land Parcels:(1)            |  |                     |  |                      |  |                   |     |  | $             | 38.8  |      | $ | 0.9   |    
|                             |  | The Shoppes at Nottingham Square |  | White Marsh, MD     |  | 2007                 |  | 134,000           |     |  |               |       |      |   |       |    
|                             |  | White Marsh Other                |  | White Marsh, MD     |  | 2007                 |  | N/A               | (2) |  |               |       |      |   |       |    
|                             |  | White Marsh Other                |  | White Marsh, MD     |  | 2007                 |  | 3,000             |     |  |               |       |      |   |       |    
|                             |  | North Dartmouth                  |  | North Dartmouth, MA |  | 2006                 |  | 135,000           |     |  |               |       |      |   |       |    
|December 29                  |  | Greenwich Avenue                 |  | Greenwich, CT       |  | 1995                 |  | 7,000             |     |  |               | 7.2   |      |   | 5.2   | (3)
|                             |  |                                  |  |                     |  |                      |  |                   |     |  |               |       |      |   |       |    
|                             |  |                                  |  | Total               |  |                      |  | 279,000           |     |  | $             | 46.0  |      | $ | 6.1   |    
|                             |  |                                  |  |                     |  |                      |  |                   |     |  |               |       |      |   |       |    
|                             |  |                                  |  |                     | 
|Year ended December 31, 2007 |  |                                  |  |                     |  |                      |  |                   |     |  |               |      
|April 5                      |  | Bath Shopping Center             |  | Bath, ME            |  | 2006                 |  | 101,000           |     |  | $             | 21.8  |      | $ | 0.6   | (4)
|June 20                      |  | Key Road Plaza                   |  | Keene, NH           |  | 2006                 |  | 76,000            |     |  |               | 15.3  |      |   | 0.4   | (5)
|June 20                      |  | Riverside Plaza                  |  | Keene, NH           |  | 2006                 |  | 218,000           |     |  |               | 25.9  |      |   | 0.5   | (6)
|October 11                   |  | Forest Hills                     |  | Forest Hills, NY    |  | 1997                 |  | 39,500            |     |  |               | 33.2  |      |   | 19.1  | (7)
|October 26                   |  | New Jersey Leasehold Interests:  |  |                     |  |                      |  |                   |     |  |               | 65.7  |      |   | 79.6  | (8)
|                             |  | Allwood Shopping Center          |  | Clifton, NJ         |  | 1988                 |  | 50,000            |     |  |               |       |      |   |       |    
|                             |  | Blue Star Shopping Center        |  | Watchung, NJ        |  | 1988                 |  | 410,000           |     |  |               |       |      |   |       |    
|                             |  | Brunswick Shopping Center        |  | North Brunswick, NJ |  | 1988                 |  | 303,000           |     |  |               |       |      |   |       |    
|                             |  | Clifton Shopping Center          |  | Clifton, NJ         |  | 1988                 |  | 80,000            |     |  |               |       |      |   |       |    
|                             |  | Hamilton Shopping Center         |  | Hamilton, NJ        |  | 1988                 |  | 190,000           |     |  |               |       |      |   |       |    
|                             |  | Rutgers Shopping Center          |  | Franklin, NJ        |  | 1988                 |  | 267,000           |     |  |               |       |      |   |       |    
|                             |  |                                  |  |                     |  |                      |  |                   |     |  |               |       |      |   |       |    
|                             |  |                                  |  | Total               |  |                      |  | 1,734,500         |     |  | $             | 161.9 |      | $ | 100.2 |    
|                             |  |                                  |  |                     |  |                      |  |                   |     |  |               |       |      |   |       |    



|(1) | On September 25 and 30, 2008, we completed exchange transactions whereby we sold our fee interest in four land parcels that were subject to long-term ground leases with tenants
and acquired the fee interest in two land parcels under our Bethesda Row property. Three of the land parcels we sold were in White Marsh, MD, and one parcel was in North Dartmouth, MA. The transactions were completed as 1031 tax deferred exchange
transactions and involved net cash paid to us of $23.2 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This land parcel was subject to a ground lease covering 50,000 square feet of office space not included in our gross leasable area.
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(3) | We sold one of two retail buildings located in Greenwich, CT.
|--- | -------------------------------------------------------------

|(4) | Gain of $0.6 million is net of $0.3 million in taxes.
|--- | -----------------------------------------------------

|(5) | Gain of $0.4 million is net of $0.1 million in taxes.
|--- | -----------------------------------------------------

|(6) | Gain of $0.5 million is net of $0.1 million in taxes.
|--- | -----------------------------------------------------

|(7) | We sold two of three retail buildings located in Forest Hills, NY.
|--- | ------------------------------------------------------------------

|(8) | On October 26, 2007, we completed an exchange transaction whereby we sold our leasehold interests in six New Jersey properties and acquired the fee interests in Mid-Pike Plaza
and Huntington Shopping Center. The transaction was completed as a 1031 tax-deferred exchange and involved a cash payment of $17.2 million. All eight properties were previously encumbered by capital lease obligations which were extinguished as part
of the transaction.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

NOTE 3.   MORTGAGE NOTES RECEIVABLE

At December 31, 2008 and 2007, we had mortgage notes receivable with an aggregate carrying amount of $45.8 million and $40.6 million, respectively, which are net of a valuation allowance of $4.2 million and
$4.6 million, respectively. These mortgage notes are due over various terms from November 2009 to May 2021. At December 31, 2008 and 2007, our mortgages had a weighted average interest rate of 9.9%. Interest income is accrued as earned.
Under the terms of certain of these mortgages, we receive additional interest based upon the gross income of the secured properties and, upon sale of the properties, we will share in the appreciation of the properties.

On November 5, 2008, we entered into an agreement to loan a third party up to $7.3 million which is secured by two properties. The loan has an initial term of
one year and bears interest at LIBOR plus 725 basis points at a minimum of 10.0%. The borrower has two one-year extension options with interest at LIBOR plus 925 basis points at a minimum of 12.0%. Interest is due monthly in arrears and is
payable out of net cash flow from the two properties. Any unpaid interest is due at maturity. The loan can be repaid at any time prior to maturity without penalty. As of December 31, 2008, we have funded $5.5 million to the borrower which
is secured by one property.

NOTE 4.   REAL ESTATE PARTNERSHIP

We have a joint venture arrangement (the Partnership) with affiliates of a discretionary fund created and advised by ING Clarion Partners (Clarion). We own 30% of the equity in the Partnership,
and Clarion owns 70%. As of December 31, 2008, the Partnership owned seven retail real estate projects. We are the manager of the Partnership and its properties, earning fees for acquisitions, dispositions, management, leasing, and financing. We
also have the opportunity to receive performance-based earnings through our Partnership interest. As of December 31, 2008, we have made total contributions of $34.8 million and received total distributions of $6.4 million. We account for our
interest in the Partnership using the equity method.

The following tables provide summarized operating results and the financial position of the
Partnership:



|                                                     |  |                         |        |      |   |        |  |   |       
|---------------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ |  | - | ------
|                                                     |  | Year Ended December 31,
|                                                     |  | 2008                    |        | 2007 |   | 2006  
|                                                     |  | (In thousands)         
|OPERATING RESULTS                                    |  |                         |        |      |   |        |  |   |       
|Revenue                                              |  | $                       | 19,111 |      | $ | 17,566 |  | $ | 10,523
|Expenses                                             |  |                         |        |      |   |        |  |   |       
|Other operating expenses                             |  |                         | 5,185  |      |   | 4,478  |  |   | 2,828 
|Depreciation and amortization                        |  |                         | 4,792  |      |   | 4,471  |  |   | 2,767 
|Interest expense                                     |  |                         | 4,537  |      |   | 4,478  |  |   | 3,506 
|                                                     |  |                         |        |      |   |        |  |   |       
|Total expenses                                       |  |                         | 14,514 |      |   | 13,427 |  |   | 9,101 
|                                                     |  |                         |        |      |   |        |  |   |       
|Net income                                           |  | $                       | 4,597  |      | $ | 4,139  |  | $ | 1,422 
|                                                     |  |                         |        |      |   |        |  |   |       
|Our share of net income from real estate partnership |  | $                       | 1,612  |      | $ | 1,395  |  | $ | 656   
|                                                     |  |                         |        |      |   |        |  |   |       



F-19



---

##### Table of Contents

|                                          |  |                |         |      |   |        
|----------------------------------------- |  | -------------- | ------- | ---- | - | -------
|                                          |  | December 31,  
|                                          |  | 2008           |         | 2007
|                                          |  | (In thousands)
|BALANCE SHEETS                            |  |                |         |      |   |        
|Real estate, net                          |  | $              | 187,910 |      | $ | 191,747
|Cash                                      |  |                | 2,604   |      |   | 1,453  
|Other assets                              |  |                | 7,066   |      |   | 7,173  
|                                          |  |                |         |      |   |        
|Total assets                              |  | $              | 197,580 |      | $ | 200,373
|                                          |  |                |         |      |   |        
|Mortgages payable                         |  | $              | 81,365  |      | $ | 81,540 
|Other liabilities                         |  |                | 7,363   |      |   | 8,691  
|Partners capital                         |  |                | 108,852 |      |   | 110,142
|                                          |  |                |         |      |   |        
|Total liabilities and partners capital   |  | $              | 197,580 |      | $ | 200,373
|                                          |  |                |         |      |   |        
|Our share of unconsolidated debt          |  | $              | 24,410  |      | $ | 24,462 
|                                          |  |                |         |      |   |        
|Our investment in real estate partnership |  | $              | 29,252  |      | $ | 29,646 
|                                          |  |                |         |      |   |        

Our unconsolidated real estate partnership made no acquisitions in 2008. The following table provides a summary of
acquisitions made by our unconsolidated real estate partnership in 2007:



|            |  |                                  |  |                  |  |                    |  |               |     
|----------- |  | -------------------------------- |  | ---------------- |  | ------------------ |  | ------------- | ----
|Date        |  | Property                         |  | City, State      |  | GrossLeasable Area |  | PurchasePrice
|            |  |                                  |  |                  |  | (In square feet)   |  | (In millions)
|February 15 |  | Free State Shopping Center       |  | Bowie, MD        |  | 278,000            |  | $             | 64.1
|February 20 |  | Lake Barcroft Shopping Center(1) |  | Falls Church, VA |  | 9,000              |  |               | 6.0 
|            |  |                                  |  |                  |  |                    |  |               |     
|            |  |                                  |  | Total            |  | 287,000            |  | $             | 70.1
|            |  |                                  |  |                  |  |                    |  |               |     



|(1) | The property acquired is adjacent to and operated as part of Barcroft Plaza which is also owned by the Partnership.
|--- | -------------------------------------------------------------------------------------------------------------------

On April 10, 2007, our unconsolidated real estate partnership entered into a mortgage note for approximately $4.2 million. The mortgage note is secured by the Lake
Barcroft property, which was acquired in February 2007, and by Barcroft Plaza. The Lake Barcroft property is adjacent to and operated as part of Barcroft Plaza. The note matures on July 1, 2016, bears interest at 5.71% per annum and
requires monthly payments of interest only.

NOTE 5.   ACQUIRED IN-PLACE LEASES

Acquired above market leases are included in prepaid expenses and other assets and had a balance of $19.1 million and $17.6 million at December 31, 2008 and 2007,
respectively, and accumulated amortization of $6.6 million and $4.7 million at December 31, 2008 and 2007, respectively. Acquired below market leases are included in other liabilities and deferred credits and had a balance of $53.1 million and
$46.0 million at December 31, 2008 and 2007, respectively, and accumulated amortization of $16.6 million and $13.3 million at December 31, 2008 and 2007, respectively. The value allocated to in-place leases is amortized over the related
lease term and reflected as additional rental income for below market leases or a reduction of rental income for above market leases in the statement of operations. Rental income included net amortization from acquired in-place leases of $2.2
million, $2.9 million and $2.5 million in 2008, 2007 and 2006, respectively. The remaining weighted-average amortization period as of December 31, 2008, is 8.9 years and 14.9 years for above market leases and below market leases, respectively.



F-20



---

##### Table of Contents

The amortization for acquired in-place leases during the next five years and thereafter, assuming no early lease
terminations, is as follows:



|                         |  |                    |        |                    |   |       
|------------------------ |  | ------------------ | ------ | ------------------ | - | ------
|                         |  | Above MarketLeases |        | Below MarketLeases
|                         |  | (In thousands)    
|Year ending December 31, |  |                    |        |                    |   |       
|2009                     |  | $                  | 2,247  |                    | $ | 4,055 
|2010                     |  |                    | 1,871  |                    |   | 3,437 
|2011                     |  |                    | 1,550  |                    |   | 3,100 
|2012                     |  |                    | 1,175  |                    |   | 2,805 
|2013                     |  |                    | 881    |                    |   | 2,396 
|Thereafter               |  |                    | 4,787  |                    |   | 20,669
|                         |  |                    |        |                    |   |       
|                         |  | $                  | 12,511 |                    | $ | 36,462
|                         |  |                    |        |                    |   |       



F-21



---

##### Table of Contents

NOTE 6.   DEBT

The following is a summary of our total debt outstanding as of December 31, 2008 and 2007:



|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|---------------------------------------- |  | ----------------------------------- | --------- | - | ----------------------------------------- | - | --------- | ------------- |  | ----------- | - |  | --------------------
|                                         |  | Principal Balance as ofDecember 31, |           |   | StatedInterest Rate as ofDecember 31,2008 |   |           | Maturity Date
|Description of Debt                      |  | 2008                                |           |   | 2007                                      |   |           |              
|                                         |  | (Dollars in thousands)              |           |   |                                          
|Mortgage loans                           |  |                                     |           |   |                                           |   |           |               | 
|Leesburg Plaza                           |  | $                                   |          |   |                                           | $ | 9,631     |               |  | 6.510       | % |  | October 1, 2008     
|164 E. Houston Street                    |  |                                     |          |   |                                           |   | 46        |               |  | 7.500       | % |  | October 6, 2008     
|White Marsh Other                        |  |                                     |          |   |                                           |   | 1,149     |               |  | 6.060       | % |  | December 31, 2008   
|Mercer Mall                              |  |                                     | 4,370     |   |                                           |   | 4,441     |               |  | 8.375       | % |  | April 1, 2009       
|Federal Plaza                            |  |                                     | 33,128    |   |                                           |   | 33,675    |               |  | 6.750       | % |  | June 1, 2011        
|Tysons Station                           |  |                                     | 6,070     |   |                                           |   | 6,217     |               |  | 7.400       | % |  | September 1, 2011   
|Courtyard Shops                          |  |                                     | 7,731     |   |                                           |   |          |               |  | 6.870       | % |  | July 1, 2012        
|Bethesda Row                             |  |                                     | 19,996    |   |                                           |   |          |               |  | 5.370       | % |  | January 1, 2013     
|Bethesda Row                             |  |                                     | 4,437     |   |                                           |   |          |               |  | 5.050       | % |  | February 1, 2013    
|White Marsh Plaza                        |  |                                     | 10,122    |   |                                           |   | 10,350    |               |  | 6.040       | % |  | April 1, 2013       
|Crow Canyon                              |  |                                     | 21,214    |   |                                           |   | 21,588    |               |  | 5.400       | % |  | August 11, 2013     
|Melville Mall                            |  |                                     | 24,456    |   |                                           |   | 25,095    |               |  | 5.250       | % |  | September 1, 2014   
|THE AVENUE at White Marsh                |  |                                     | 60,016    |   |                                           |   | 61,035    |               |  | 5.460       | % |  | January 1, 2015     
|Barracks Road                            |  |                                     | 41,368    |   |                                           |   | 41,988    |               |  | 7.950       | % |  | November 1, 2015    
|Hauppauge                                |  |                                     | 15,595    |   |                                           |   | 15,828    |               |  | 7.950       | % |  | November 1, 2015    
|Lawrence Park                            |  |                                     | 29,322    |   |                                           |   | 29,761    |               |  | 7.950       | % |  | November 1, 2015    
|Wildwood                                 |  |                                     | 25,773    |   |                                           |   | 26,159    |               |  | 7.950       | % |  | November 1, 2015    
|Wynnewood                                |  |                                     | 29,882    |   |                                           |   | 30,330    |               |  | 7.950       | % |  | November 1, 2015    
|Brick Plaza                              |  |                                     | 30,633    |   |                                           |   | 31,128    |               |  | 7.415       | % |  | November 1, 2015    
|Shoppers World                          |  |                                     | 5,865     |   |                                           |   | 5,980     |               |  | 5.910       | % |  | January 31, 2021    
|Mount Vernon                             |  |                                     | 11,640    |   |                                           |   | 11,962    |               |  | 5.660       | % |  | April 15, 2028      
|Chelsea                                  |  |                                     | 8,101     |   |                                           |   | 8,240     |               |  | 5.360       | % |  | January 15, 2031    
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|Subtotal                                 |  |                                     | 389,719   |   |                                           |   | 374,603   |               |  |             |   |  |                     
|Net unamortized discount                 |  |                                     | (401      | ) |                                           |   | (628      | )             |  |             |   |  |                     
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|Total mortgage loans                     |  |                                     | 389,318   |   |                                           |   | 373,975   |               |  |             |   |  |                     
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|Notes payable                            |  |                                     |           |   |                                           |   |           |               | 
|Term loan                                |  |                                     | 200,000   |   |                                           |   | 200,000   |               |  | LIBOR+0.575 | % |  | November 6, 2009    
|Revolving credit facility                |  |                                     | 123,500   |   |                                           |   |          |               |  | LIBOR+0.425 | % |  | July 27, 2010       
|Other                                    |  |                                     | 2,296     |   |                                           |   |          |               |  | 6.500       | % |  | April 1, 2012       
|Perring Plaza renovation                 |  |                                     | 1,195     |   |                                           |   | 1,420     |               |  | 10.000      | % |  | January 31, 2013    
|Escondido (Municipal bonds)              |  |                                     | 9,400     |   |                                           |   | 9,400     |               |  | 1.878       | % |  | October 1, 2016     
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|Total notes payable                      |  |                                     | 336,391   |   |                                           |   | 210,820   |               |  |             |   |  |                     
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|Senior notes and debentures              |  |                                     |           |   |                                           |   |           |               | 
|8.75% notes                              |  |                                     | 175,000   |   |                                           |   | 175,000   |               |  | 8.750       | % |  | December 1, 2009    
|4.50% notes                              |  |                                     | 75,000    |   |                                           |   | 75,000    |               |  | 4.500       | % |  | February 15, 2011   
|6.00% notes                              |  |                                     | 175,000   |   |                                           |   | 175,000   |               |  | 6.000       | % |  | July 15, 2012       
|5.40% notes                              |  |                                     | 135,000   |   |                                           |   | 135,000   |               |  | 5.400       | % |  | December 1, 2013    
|5.65% notes                              |  |                                     | 125,000   |   |                                           |   | 125,000   |               |  | 5.650       | % |  | June 1, 2016        
|6.20% notes                              |  |                                     | 200,000   |   |                                           |   | 200,000   |               |  | 6.200       | % |  | January 15, 2017    
|7.48% debentures                         |  |                                     | 29,200    |   |                                           |   | 50,000    |               |  | 7.480       | % |  | August 15, 2026     
|6.82% medium term notes                  |  |                                     | 40,000    |   |                                           |   | 40,000    |               |  | 6.820       | % |  | August 1, 2027      
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|Subtotal                                 |  |                                     | 954,200   |   |                                           |   | 975,000   |               |  |             |   |  |                     
|Net unamortized premium                  |  |                                     | 2,384     |   |                                           |   | 2,556     |               |  |             |   |  |                     
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|Total senior notes and debentures        |  |                                     | 956,584   |   |                                           |   | 977,556   |               |  |             |   |  |                     
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|Capital lease obligations                |  |                                     | 63,492    |   |                                           |   | 76,109    |               |  | Various     |   |  | Various through 2106
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     
|Total debt and capital lease obligations |  | $                                   | 1,745,785 |   |                                           | $ | 1,638,460 |               |  |             |   |  |                     
|                                         |  |                                     |           |   |                                           |   |           |               |  |             |   |  |                     



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On February 21, 2008, we entered into two interest rate swap agreements to fix the variable portion of our $200
million term loan through November 6, 2008. The first swap fixed the variable rate at 2.725% on a notional amount of $100 million and the second swap fixed the variable rate at 2.852% on a notional amount of $100 million for a combined fixed
rate of 2.789%. Both swaps were designated and qualified as cash flow hedges and were recorded at fair value until the swaps ended on November 6, 2008.

On July 1, 2008, we repaid the $9.6 million mortgage loan on Leesburg Plaza which had an original maturity date of October 1, 2008. This loan was repaid with funds borrowed on our $300 million revolving credit facility.

On July 15, 2008, we exercised a one-year extension for our $200 million term loan extending the maturity date to November 6, 2009.

On August 15, 2008, one of the holders redeemed $20.8 million of the outstanding $50.0 million balance of our 7.48% debentures. The notice period for additional
redemptions has expired. These debentures were repaid with funds borrowed on our $300 million revolving credit facility.

In connection with the
acquisition of Courtyard Shops and two land parcels at Bethesda Row, we assumed three mortgage notes as follows:



|                |  |               |      |               |                  |                             |      |  
|--------------- |  | ------------- | ---- | ------------- | ---------------- | --------------------------- | ---- | -
|Property        |  | Fair Value(1) |      | Maturity Date |                  | Stated Annual Interest Rate |     
|                |  | (In millions) |      |               |                  |                             |     
|Courtyard Shops |  | $             | 8.1  |               | July 1, 2012     |                             | 6.87 | %
|Bethesda Row    |  | $             | 20.0 |               | January 1, 2013  |                             | 5.37 | %
|Bethesda Row    |  | $             | 4.4  |               | February 1, 2013 |                             | 5.05 | %



|(1) | The aggregate face amount of the mortgage notes is $32.2 million. However, in accordance with GAAP, these mortgage notes were recorded at their aggregate fair value of $32.5
million.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On September 25 and 30, 2008, we acquired the fee interest in two land parcels under our Bethesda Row property. Prior to
the transactions, we had capital lease obligations totaling $11.5 million on the two land parcels which were extinguished as part of the transactions.

On
December 31, 2008, we repaid the $1.1 million mortgage loan on one of our properties in White Marsh, MD, on its maturity date. This loan was repaid with funds borrowed on our $300 million revolving credit facility.

The maximum amount of borrowings outstanding under our $300 million revolving credit facility during 2008, 2007 and 2006 was $159.0 million, $244.0 million and $297.0
million, respectively. The weighted average amount of borrowings outstanding was $61.4 million, $154.3 million and $106.0 million for 2008, 2007 and 2006, respectively. Our revolving credit facility had a weighted average interest rate, before
amortization of debt fees, of 3.0%, 5.6% and 5.6% for 2008, 2007 and 2006, respectively. In addition, we are required to pay an annual facility fee of $0.5 million. The loan matures on July 27, 2010, subject to a one-year extension at our
option.

Our credit facility and certain notes require us to comply with various financial covenants, including the maintenance of minimum
shareholders equity and debt coverage ratios and a maximum ratio of debt to net worth. As of December 31, 2008, we were in compliance with all loan covenants.



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Scheduled principal payments on mortgage loans, notes payable, senior notes and debentures as of December 31, 2008
are as follows:



|                         |  |                |         |              |   |         |                            |  |                |         |  |   |           |    
|------------------------ |  | -------------- | ------- | ------------ | - | ------- | -------------------------- |  | -------------- | ------- |  | - | --------- | ---
|                         |  | MortgageLoans  |         | NotesPayable |   |         | Senior Notes andDebentures |  | TotalPrincipal |        
|                         |  | (In thousands) |        
|Year ending December 31, |  |                |         |              |   |         |                            |  |                |         |  |   |           |    
|2009                     |  | $              | 11,389  |              | $ | 201,153 |                            |  | $              | 175,000 |  | $ | 387,542   |    
|2010                     |  |                | 7,714   |              |   | 124,361 | (1)                        |  |                |        |  |   | 132,075   |    
|2011                     |  |                | 45,039  |              |   | 720     |                            |  |                | 75,000  |  |   | 120,759   |    
|2012                     |  |                | 14,662  |              |   | 727     |                            |  |                | 175,000 |  |   | 190,389   |    
|2013                     |  |                | 59,460  |              |   | 30      |                            |  |                | 135,000 |  |   | 194,490   |    
|Thereafter               |  |                | 251,455 |              |   | 9,400   |                            |  |                | 394,200 |  |   | 655,055   |    
|                         |  |                |         |              |   |         |                            |  |                |         |  |   |           |    
|                         |  | $              | 389,719 |              | $ | 336,391 |                            |  | $              | 954,200 |  | $ | 1,680,310 | (2)
|                         |  |                |         |              |   |         |                            |  |                |         |  |   |           |    



|(1) | Our $300 million four-year revolving credit facility matures on July 27, 2010, subject to a one-year extension at our option. As of December 31, 2008, there is $123.5
million drawn under this credit facility.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The total debt maturities differs from the total reported on the consolidated balance sheet due to the unamortized discount or premium on certain senior notes, debentures and
mortgage payables.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Future minimum lease payments and their present value for property under capital leases as of December 31, 2008, are
as follows:



|                                  |  |                |          |  
|--------------------------------- |  | -------------- | -------- | -
|                                  |  | (In thousands) |         
|Year Ending December 31,          |  |                |          |  
|2009                              |  | $              | 5,590    |  
|2010                              |  |                | 5,590    |  
|2011                              |  |                | 5,590    |  
|2012                              |  |                | 5,599    |  
|2013                              |  |                | 5,602    |  
|Thereafter                        |  |                | 154,040  |  
|                                  |  |                |          |  
|                                  |  |                | 182,011  |  
|Less amount representing interest |  |                | (118,519 | )
|                                  |  |                |          |  
|Present value                     |  | $              | 63,492   |  
|                                  |  |                |          |  

Certain of our capital lease obligations required payments based on the performance of the related properties in
addition to the minimum payment amounts set forth above. The additional performance based payments were $4.1 million and $5.6 million in 2007 and 2006, respectively and are included in discontinued operationsincome. All capital
leases with performance based payments were extinguished in October 2007.



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NOTE 7.   FAIR VALUE OF FINANCIAL INSTRUMENTS

Except as disclosed below, the carrying amount of our financial instruments approximates their fair value. The fair value of our mortgages payable, notes payable, and
senior notes and debentures is sensitive to fluctuations in interest rates. Quoted market prices were used to estimate the fair value of our marketable senior notes and debentures and discounted cash flow analysis is generally used to estimate the
fair value of our mortgages and notes payable. Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized
upon disposition of the financial instruments. A summary of the carrying amount and fair value of our mortgages payable, notes payable and senior notes and debentures is as follows:



|                            |  |                   |         |                   |   |               |  |            |         |  |   |        
|--------------------------- |  | ----------------- | ------- | ----------------- | - | ------------- |  | ---------- | ------- |  | - | -------
|                            |  | December 31, 2008 |         | December 31, 2007
|                            |  | CarryingValue     |         | Fair Value        |   | CarryingValue |  | Fair Value
|                            |  | (In thousands)   
|Mortgages and notes payable |  | $                 | 725,709 |                   | $ | 722,908       |  | $          | 584,795 |  | $ | 603,200
|Senior notes and debentures |  | $                 | 956,584 |                   | $ | 799,241       |  | $          | 977,556 |  | $ | 979,562

NOTE 8.   COMMITMENTS AND CONTINGENCIES

We are sometimes involved in lawsuits, warranty claims, and environmental matters arising in the ordinary course of business. Management makes assumptions and estimates
concerning the likelihood and amount of any potential loss relating to these matters.

We are currently a party to various legal proceedings. Other than as
described below, we do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is
subject to inherent uncertainties. Also under our leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us (1) as owner of the properties due to certain
matters relating to the operation of the properties by the tenant, and (2) where appropriate, due to certain matters relating to the ownership of the properties prior to their acquisition by us.

We have a litigation matter filed against us in May 2003 which alleges that a one page document entitled Final Proposal, which included language that it was
subject to approval of formal documentation, constituted a ground lease of a parcel of property located adjacent to our Santana Row property and gave the plaintiff the option to require that we acquire the property at a price determined in
accordance with a formula included in the Final Proposal. A trial as to liability only was held in June 2006 and a jury rendered a verdict against us. A trial on the issue of damages was held in April 2008; however, the judge has not yet
issued a ruling. Reports from our experts and the plaintiffs experts show potential damages ranging from $600,000 to $24 million. Pending the judges ruling, we cannot make a reasonable estimate of potential damages. We will evaluate
whether to appeal the jury verdict after the judge issues his ruling on damages taking into account a variety of factors including the amount of damages awarded. If we choose not to appeal or we appeal and are not successful in overturning the jury
verdict, we will be liable for damages. Depending on the amount of damages awarded, it is possible there could be a material adverse impact on our net income in the period in which it becomes both probable that we will have to pay the damages and
such damages can be reasonably estimated. In any event, management does not believe that this matter will have a material impact on our financial position.

We are also involved in a litigation matter relating to a shopping center in New Jersey where a former tenant has alleged that we and our management agent acted improperly by failing to disclose a condemnation action at the property that
was pending when the lease was signed. A trial as to liability only was concluded in April 2007, and in May 2008, a judgment was entered that ruled in our favor on certain legal issues and against us on other legal issues. In December 2008, we
reached a settlement with the plaintiff of those matters where the court ruled against us and determined that we are liable. The total settlement amount was $2.3 million of which we paid $1.15 million and the third party management agent paid $1.15
million. We are currently in the process of



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##### Table of Contents

settling the amount of the portion of the plaintiffs legal fees which we are required to pay; we expect the amount to be approximately $1.0 million of
which we will pay 50% and the third party management agent will pay 50%. Our share of the total estimated settlement of $1.6 million is included in general and administrative expense in the statement of operations.

We reserve for estimated losses, if any, associated with warranties given to a buyer at the time real estate is sold or other potential liabilities relating to that
sale, taking any insurance policies into account. These warranties may extend up to ten years and require significant judgment. Any increases to our estimated warranty losses would usually result in a decrease in net income.

In 2005 and 2006, warranty reserves for condominium units sold at Santana Row were established to cover potential costs for materials, labor and other items associated
with warranty-type claims that may arise within the ten-year statutorily mandated latent construction defect warranty period. In 2006 and 2007, we increased our warranty reserves by $2.5 million and $5.1 million, respectively, net of taxes, related
to defective work done by third party contractors while upgrades were made to certain units being prepared for sale. During 2007 and 2008, we evaluated the potentially affected units, and as of December 31, 2008, have substantially completed
the inspections and repairs. The extent of the damages encountered in the units and the resulting costs to repair varied considerably amongst the units. As a result, we have adjusted the warranty reserve to reflect the actual costs incurred related
to these issues which is approximately $2.4 million, net of $1.5 million of taxes. The change in the reserve of $5.2 million is included in Discontinued operationsgain on sale of real estate in 2008. These amounts do not reflect
any amounts we may recover in the future from insurance or the contractors responsible for the defective work. Due to the inherent uncertainty related to the recovery from insurance or the contractor, we are unable to estimate an expected recovery;
any recovery will be reflected in our financial statements once the amount is determinable, considered probable, and collectible.

We are self-insured for
general liability costs up to predetermined retained amounts per claim, and we believe that we maintain adequate accruals to cover our retained liability. We currently do not maintain third party stop-loss insurance policies to cover liability costs
in excess of predetermined retained amounts. Our accrual for self-insurance liability is determined by management and is based on claims filed and an estimate of claims incurred but not yet reported. Management considers a number of factors,
including third-party actuarial analysis and future increases in costs of claims, when making these determinations. If our liability costs exceed these accruals, it will reduce our net income.

At December 31, 2008 and 2007, our reserves for warranties and general liability costs were $8.6 million and $16.0 million, respectively. Any potential losses
which exceed our estimates would result in a decrease in our net income. During 2008 and 2007, we made payments from these reserves of $2.5 million and $2.4 million, respectively. Although we consider the reserve to be adequate, there can be no
assurance that the reserve will prove to be adequate over-time to cover losses due to the difference between the assumptions used to estimate the reserve and actual losses.

At December 31, 2008, we had letters of credit outstanding of approximately $10.5 million which are collateral for existing indebtedness and other obligations of the Trust.

Under the terms of the Congressional Plaza partnership agreement, from and after January 1, 1986, an unaffiliated third party has the right to require us and the
two other minority partners to purchase between one-half to all of its 29.47% interest in Congressional Plaza at the interests then-current fair market value. Based on managements current estimate of fair market value as of
December 31, 2008, our estimated maximum liability upon exercise of the put option would range from approximately $42 million to $49 million.

Under
the terms of one other partnership which owns a project in southern California, if certain leasing and revenue levels are obtained for the property owned by the partnership, the other partner may require us to purchase their partnership interest at
a formula price based upon property operating income. The purchase price for the partnership will be paid using our common shares or, subject to certain conditions, cash. If the other partner does not redeem their interest, we may choose to purchase
the limited partnership interest upon the same terms.



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##### Table of Contents

Under the terms of various other partnership agreements for entities, the partners have the right to exchange their
operating units for cash or the same number of our common shares, at our option. As of December 31, 2008, a total of 373,260 operating units are outstanding.

We have one ground lease in which the lessor has a put option, which would require us to purchase the property during the remaining lease term. If the lessor were to exercise this option in 2009, the purchase price would be approximately
$7.1 million.

A master lease for Mercer Mall includes a fixed purchase price option for $55 million in 2023. If we fail to exercise our purchase option,
the owner of Mercer Mall has a put option which would require us to purchase Mercer Mall for $60 million in 2025.

A master lease for Melville Mall
includes a fixed purchase price option in 2021 for $5 million and the assumption of the owners debt which is $24.5 million at December 31, 2008. If we fail to exercise our purchase option, the owner of Melville Mall has a put option which
would require us to purchase Melville Mall in 2023 for $5 million and the assumption of the owners debt.

As of December 31, 2008 in connection
with renovation and development projects, the Trust has contractual obligations of approximately $52.5 million.

We are obligated under ground lease
agreements on several shopping centers requiring minimum annual payments as follows, as of December 31, 2008:



|                         |  |                |        
|------------------------ |  | -------------- | -------
|                         |  | (In thousands)
|Year Ending December 31, |  |                |        
|2009                     |  |                | 3,122  
|2010                     |  |                | 3,131  
|2011                     |  |                | 3,167  
|2012                     |  |                | 3,056  
|2013                     |  |                | 3,064  
|Thereafter               |  |                | 185,437
|                         |  |                |        
|                         |  | $              | 200,977
|                         |  |                |        

NOTE 9.   SHAREHOLDERS EQUITY

We have a Dividend Reinvestment Plan, whereby shareholders may use their dividends and optional cash payments to purchase shares. In 2008, 2007 and 2006, 39,343 shares, 32,615 shares, and 44,077 shares, respectively,
were issued under the Plan.

On March 8, 2007, as part of the consideration to acquire the White Marsh portfolio, we issued (i) 884,066 common
shares at $88.18 per share, par value $0.01 per share, (ii) 399,896 shares of 5.417% Series 1 Cumulative Convertible Preferred Shares (Series 1 Preferred Shares) at the liquidation preference of $25 per share, par value $0.01 per
share, and (iii) 185,504 downREIT operating partnership units at $88.18 per share. The Series 1 Preferred Shares accrue dividends at a rate of 5.417% per year and are convertible at any time by the holders to our common shares at a
conversion rate of $104.69 per share. The Series 1 Preferred Shares are also convertible under certain circumstances at our election. The holders of the Series 1 Preferred Shares have no voting rights.

On December 27, 2007, we issued 2.0 million common shares at $81.21 per share, for cash proceeds of approximately $162.4 million before other expenses of the
offering. The proceeds were used to reduce the amount outstanding on our revolving credit facility.



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##### Table of Contents

NOTE 10.   DIVIDENDS

A summary of dividends declared and paid per share is as follows:



|                                                    |  |                         |       |      |   |          |  |      |       |          |   |       |      |   |       |     |  |   |       |    
|--------------------------------------------------- |  | ----------------------- | ----- | ---- | - | -------- |  | ---- | ----- | -------- | - | ----- | ---- | - | ----- | --- |  | - | ----- | ---
|                                                    |  | Year Ended December 31, |      
|                                                    |  | 2008                    |       | 2007 |   | 2006     | 
|                                                    |  | Declared                |       | Paid |   | Declared |  | Paid |       | Declared |   |       | Paid |  
|Common shares                                       |  | $                       | 2.520 |      | $ | 2.480    |  | $    | 2.370 |          | $ | 2.335 |      | $ | 2.460 | (1) |  | $ | 2.440 | (1)
|5.417% Series 1 Cumulative Convertible Preferred(2) |  | $                       | 1.354 |      | $ | 1.354    |  | $    | 1.106 |          | $ | 0.767 |      | $ |      |     |  | $ |      |    
|8.5% Series B Cumulative Redeemable Preferred(3)    |  | $                       |      |      | $ |         |  | $    |      |          | $ |      |      | $ | 1.753 |     |  | $ | 2.284 |    



|(1) | Includes a special dividend declared and paid of $0.20 resulting from the sales of condominiums at Santana Row.
|--- | ---------------------------------------------------------------------------------------------------------------

|(2) | On March 8, 2007, as part of the consideration to acquire the White Marsh portfolio, we issued 399,896 shares of 5.417% Series 1 Cumulative Convertible Preferred shares.
Dividends are paid on a quarterly basis at a rate of 5.417% per year.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On November 27, 2006, the Trust redeemed all 5,400,000 outstanding shares of its Series B Cumulative Redeemable Preferred Shares. Dividends on the Series B Preferred Shares
ceased to accrue on November 27, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A summary of the income tax status of dividends per share paid is as follows:



|                                                 |  |                         |       |      |   |       |  |   |      
|------------------------------------------------ |  | ----------------------- | ----- | ---- | - | ----- |  | - | -----
|                                                 |  | Year Ended December 31,
|                                                 |  | 2008                    |       | 2007 |   | 2006 
|Common shares                                    |  |                         |       |      |   |       |  |   |      
|Ordinary dividend                                |  | $                       | 2.455 |      | $ | 2.174 |  | $ | 1.813
|Ordinary dividend eligible for 15% rate          |  |                         | 0.025 |      |   | 0.044 |  |   | 0.066
|Return of capital                                |  |                         |      |      |   |      |  |   | 0.561
|Capital gain                                     |  |                         |      |      |   | 0.117 |  |   |     
|                                                 |  |                         |       |      |   |       |  |   |      
|                                                 |  | $                       | 2.480 |      | $ | 2.335 |  | $ | 2.440
|                                                 |  |                         |       |      |   |       |  |   |      
|5.417% Series 1 Cumulative Convertible Preferred |  |                         |       |      |   |       |  |   |      
|Ordinary dividend                                |  | $                       | 1.341 |      | $ | 0.714 |  | $ |     
|Ordinary dividend eligible for 15% rate          |  |                         | 0.013 |      |   | 0.015 |  |   |     
|Capital gain                                     |  |                         |      |      |   | 0.038 |  |   |     
|                                                 |  |                         |       |      |   |       |  |   |      
|                                                 |  | $                       | 1.354 |      | $ | 0.767 |  | $ |     
|                                                 |  |                         |       |      |   |       |  |   |      
|8.5% Series B Cumulative Redeemable Preferred    |  |                         |       |      |   |       |  |   |      
|Ordinary dividend                                |  | $                       |      |      | $ |      |  | $ | 2.284
|Capital gain                                     |  |                         |      |      |   |      |  |   |     
|                                                 |  |                         |       |      |   |       |  |   |      
|                                                 |  | $                       |      |      | $ |      |  | $ | 2.284
|                                                 |  |                         |       |      |   |       |  |   |      

On October 29, 2008, the Trustees declared a quarterly cash dividend of $0.65 per common share, payable
January 15, 2009 to common shareholders of record on January 2, 2009.

NOTE 11.   OPERATING LEASES

At December 31, 2008, our 84 predominantly retail shopping center and mixed use properties are located in 13 states and the District of Columbia. There are
approximately 2,450 leases with tenants providing a wide range of retail products and services. These tenants range from sole proprietorships to national retailers; no one tenant or corporate group of tenants accounts for more than 2.6% of
annualized base rent.



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##### Table of Contents

Our leases with commercial property and residential tenants are classified as operating leases. Commercial property
leases generally range from three to ten years (certain leases with anchor tenants may be longer), and in addition to minimum rents, usually provide for percentage rents based on the tenants level of sales achieved and cost recoveries for the
tenants share of certain operating costs. Leases on apartments are generally for a period of one year or less.

As of December 31, 2008, minimum
future commercial property rentals from noncancelable operating leases, before any reserve for uncollectible amounts and assuming no early lease terminations, at our operating properties are as follows:



|                         |  |                |          
|------------------------ |  | -------------- | ---------
|                         |  | (In thousands)
|Year Ending December 31, |  |                |          
|2009                     |  |                | 367,354  
|2010                     |  |                | 343,076  
|2011                     |  |                | 305,344  
|2012                     |  |                | 265,742  
|2013                     |  |                | 215,761  
|Thereafter               |  |                | 1,224,073
|                         |  |                |          
|                         |  | $              | 2,721,350
|                         |  |                |          

NOTE 12.   COMPONENTS OF RENTAL INCOME AND EXPENSE

The principal components of rental income are as follows:



|                      |  |                         |         |      |   |         |  |   |        
|--------------------- |  | ----------------------- | ------- | ---- | - | ------- |  | - | -------
|                      |  | Year Ended December 31,
|                      |  | 2008                    |         | 2007 |   | 2006   
|                      |  | (In thousands)         
|Minimum rents         |  |                         |         |      |   |         |  |   |        
|Retail and commercial |  | $                       | 366,380 |      | $ | 345,486 |  | $ | 310,955
|Residential           |  |                         | 18,326  |      |   | 15,312  |  |   | 12,805 
|Cost reimbursement    |  |                         | 103,381 |      |   | 91,164  |  |   | 77,617 
|Percentage rent       |  |                         | 8,415   |      |   | 7,884   |  |   | 6,921  
|Other                 |  |                         | 5,462   |      |   | 5,882   |  |   | 5,963  
|                      |  |                         |         |      |   |         |  |   |        
|                      |  | $                       | 501,964 |      | $ | 465,728 |  | $ | 414,261
|                      |  |                         |         |      |   |         |  |   |        

Minimum rents include $5.8 million, $8.1 million and $5.7 million for 2008, 2007 and 2006, respectively, to
recognize minimum rents on a straight-line basis. In addition, minimum rents include $2.2 million, $2.9 million and $2.5 million for 2008, 2007 and 2006, respectively, to recognize income from the amortization of in-place leases in accordance with
SFAS No. 141.



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The principal components of rental expenses are as follows:



|                          |  |                         |         |      |   |        |  |   |       
|------------------------- |  | ----------------------- | ------- | ---- | - | ------ |  | - | ------
|                          |  | Year Ended December 31,
|                          |  | 2008                    |         | 2007 |   | 2006  
|                          |  | (In thousands)         
|Repairs and maintenance   |  | $                       | 38,969  |      | $ | 35,403 |  | $ | 28,371
|Utilities                 |  |                         | 18,112  |      |   | 16,837 |  |   | 14,814
|Management fees and costs |  |                         | 14,082  |      |   | 13,127 |  |   | 12,479
|Payroll properties        |  |                         | 8,093   |      |   | 7,445  |  |   | 6,896 
|Bad debt expense          |  |                         | 6,228   |      |   | 1,660  |  |   | 547   
|Ground rent               |  |                         | 5,875   |      |   | 6,002  |  |   | 6,041 
|Insurance                 |  |                         | 5,510   |      |   | 6,888  |  |   | 5,491 
|Marketing                 |  |                         | 5,953   |      |   | 4,539  |  |   | 3,953 
|Other operating           |  |                         | 6,896   |      |   | 7,462  |  |   | 5,572 
|                          |  |                         |         |      |   |        |  |   |       
|                          |  | $                       | 109,718 |      | $ | 99,363 |  | $ | 84,164
|                          |  |                         |         |      |   |        |  |   |       

NOTE 13.   DISCONTINUED OPERATIONS

Results of properties sold constitute discontinued operations and as such, the operations of these properties are classified as discontinued operations for all periods presented. A summary of the financial information
for the discontinued operations is as follows:



|                                     |  |                         |       |      |   |        |  |   |       
|------------------------------------ |  | ----------------------- | ----- | ---- | - | ------ |  | - | ------
|                                     |  | Year Ended December 31,
|                                     |  | 2008                    |       | 2007 |   | 2006  
|                                     |  | (In thousands)         
|Revenue from discontinued operations |  | $                       | 2,724 |      | $ | 23,990 |  | $ | 25,050
|Income from discontinued operations  |  | $                       | 1,877 |      | $ | 6,760  |  | $ | 4,804 

In September 2008, we applied for a refund of taxes paid to the state of California related to our TRS activities,
primarily the condominium units sold in 2005 and 2006 at Santana Row. The refund related to the condominium units of $1.1 million is included in Discontinued operationsgain on sale of real estate.

NOTE 14.   SHARE-BASED COMPENSATION PLANS

A summary of
share-based compensation expense included in net income is as follows:



|                                     |  |                         |        |   |      |   |       |      |  |   |       |  
|------------------------------------ |  | ----------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                     |  | Year Ended December 31, |       
|                                     |  | 2008                    |        |   | 2007 |   |       | 2006 | 
|                                     |  | (In thousands)          |       
|Share-based compensation incurred    |  |                         |        |   |      |   |       |      |  |   |       |  
|Grants of common shares              |  | $                       | 6,442  |   |      | $ | 6,867 |      |  | $ | 5,156 |  
|Grants of options                    |  |                         | 1,336  |   |      |   | 1,173 |      |  |   | 1,334 |  
|                                     |  |                         |        |   |      |   |       |      |  |   |       |  
|                                     |  |                         | 7,778  |   |      |   | 8,040 |      |  |   | 6,490 |  
|Capitalized share-based compensation |  |                         | (1,208 | ) |      |   | (805  | )    |  |   | (620  | )
|                                     |  |                         |        |   |      |   |       |      |  |   |       |  
|Share-based compensation expensed    |  | $                       | 6,570  |   |      | $ | 7,235 |      |  | $ | 5,870 |  
|                                     |  |                         |        |   |      |   |       |      |  |   |       |  

As of December 31, 2008, we have grants outstanding under two share-based compensation plans. In May 2007,
our shareholders approved an amendment to the 2001 Long Term Incentive Plan (the 2001 Plan), originally established in May 2001, which increased the authorization to grant share options, common shares and other share-based awards from
1,750,000 common shares of beneficial interest to 3,250,000 common shares of beneficial interest. Our 1993 Long Term Incentive Plan (the 1993 Plan) authorized the grant of share options, common shares and other share-based awards for up
to 5,500,000 common shares of beneficial interest. The 1993 Plan expired in May 2003.



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Option awards under the 2001 Plan and the 1993 Plan are required to have an exercise price at least equal to the closing
trading price of our common shares on the date of grant. Options and share awards under these plans generally vest over 3 to 5 years and option awards typically have a 10-year contractual term. We pay dividends on unvested shares. Certain options
and share awards provide for accelerated vesting if there is a change in control. Additionally, the vesting on certain option and share awards can accelerate in part or in full upon retirement based on the age of the retiree or upon termination
without cause.

Effective December 31, 2007, Larry Finger, our former Chief Financial Officer, was no longer employed by the Trust. Under his existing
severance agreement, his departure was treated as a termination without cause. As a result, we recognized approximately $0.6 million related to the accelerated vesting of unvested shares and options and $0.4 million related to a cash payment to
Mr. Finger. These amounts are included in general and administrative expenses in the 2007 consolidated statement of operations.

As a result of the
exercise of options, we had notes outstanding from our officers and employees for $0.8 million at December 31, 2007; the notes were fully repaid during 2008. These notes bore interest at LIBOR plus a market-rate spread with the rate adjusted
annually on the anniversary date and were collateralized by the shares with recourse to the borrower. Option awards made in 2001 and later do not provide for employees to be able to exercise their options with a loan from the Trust.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities, term, dividend yields, employee exercises and
employee terminations are primarily based on historical data. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of each share award is determined based on the closing trading price
of our common shares on the grant date.

The following table provides a summary of the weighted-average assumption used to value options:



|                         |  |                         |   |  |      |   |  |      |  
|------------------------ |  | ----------------------- | - |  | ---- | - |  | ---- | -
|                         |  | Year Ended December 31, |  
|                         |  | 2008                    |   |  | 2007 |   |  | 2006 |  
|Volatility               |  | 21.4                    | % |  | 20.0 | % |  | 18.7 | %
|Expected dividend yield  |  | 3.6                     | % |  | 3.4  | % |  | 4.9  | %
|Expected term (in years) |  | 5.4                     |   |  | 4.1  |   |  | 3.8  |  
|Risk free interest rate  |  | 2.7                     | % |  | 4.7  | % |  | 4.6  | %

The following table provides a summary of option activity for 2008:



|                                 |  |                   |   |  |                               |       |                                           |     |                         |   |      
|-------------------------------- |  | ----------------- | - |  | ----------------------------- | ----- | ----------------------------------------- | --- | ----------------------- | - | -----
|                                 |  | SharesUnderOption |   |  | Weighted-AverageExercisePrice |       | Weighted-AverageRemainingContractual Term |     | AggregateIntrinsicValue
|                                 |  |                   |   |  |                               |       | (In years)                                |     | (In thousands)         
|Outstanding at December 31, 2007 |  | 850,628           |   |  | $                             | 49.13 |                                           |     |                         |   |      
|Granted                          |  | 206,117           |   |  |                               | 73.15 |                                           |     |                         |   |      
|Exercised                        |  | (214,853          | ) |  |                               | 37.36 |                                           |     |                         |   |      
|Forfeited or expired             |  | (16,546           | ) |  |                               | 82.91 |                                           |     |                         |   |      
|                                 |  |                   |   |  |                               |       |                                           |     |                         |   |      
|Outstanding at December 31, 2008 |  | 825,346           |   |  | $                             | 57.52 |                                           | 6.4 |                         | $ | 9,410
|                                 |  |                   |   |  |                               |       |                                           |     |                         |   |      
|Exercisable at December 31, 2008 |  | 424,333           |   |  | $                             | 42.71 |                                           | 4.6 |                         | $ | 9,410
|                                 |  |                   |   |  |                               |       |                                           |     |                         |   |      

The weighted-average grant-date fair value of options granted during 2008, 2007 and 2006 was $10.46 per share,
$14.48 per share and $7.97 per share, respectively. The total cash received from options exercised during 2008, 2007 and 2006 was $8.0 million, $5.1 million and $8.8 million, respectively. The total intrinsic value of options exercised during the
year ended December 31, 2008, 2007 and 2006 was $9.3 million, $4.1 million and $10.9 million, respectively.



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The following table provides a summary of restricted share activity for 2008:



|                              |  |         |   |  |                                      |      
|----------------------------- |  | ------- | - |  | ------------------------------------ | -----
|                              |  | Shares  |   |  | Weighted-AverageGrant-Date FairValue
|Unvested at December 31, 2007 |  | 198,406 |   |  | $                                    | 77.21
|Granted                       |  | 99,504  |   |  |                                      | 72.98
|Vested                        |  | (98,658 | ) |  |                                      | 66.73
|Forfeited                     |  | (13,961 | ) |  |                                      | 86.93
|                              |  |         |   |  |                                      |      
|Unvested at December 31, 2008 |  | 185,291 |   |  | $                                    | 79.49
|                              |  |         |   |  |                                      |      

The weighted-average grant-date fair value of stock awarded in 2008, 2007 and 2006 was $72.98, $91.13 and $68.18,
respectively. The total vesting-date fair value of shares vested during the year ended December 31, 2008, 2007 and 2006 was $5.9 million, $10.7 million and $7.0 million, respectively.

As of December 31, 2008, there was $12.5 million of total unrecognized compensation cost related to unvested share-based compensation arrangements (i.e. options and
unvested shares) granted under our plans. This cost is expected to be recognized over the next 5.1 years with a weighted-average period of 1.4 years.

Subsequent to December 31, 2008, common shares and options were awarded under various incentive compensation plans as follows:



|                  |  |                          |  |              |  |                           
|----------------- |  | ------------------------ |  | ------------ |  | --------------------------
|Date              |  | Award                    |  | Vesting Term |  | Beneficiary               
|February 17, 2009 |  | 71,975 Restricted shares |  | 3 to 5 years |  | Officers and key employees
|February 17, 2009 |  | 193,036 Options          |  | 5 years      |  | Officers and key employees
|January 2, 2009   |  | 6,039 Shares             |  | Immediate    |  | Trustees                  

NOTE 15.   SAVINGS AND RETIREMENT PLANS

We have a savings and retirement plan in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Generally, employees can elect, at their
discretion, to contribute a portion of their compensation up to a maximum of $15,500, $15,500 and $15,000 for 2008, 2007 and 2006, respectively. Under the plan, we contribute 50% of each employees first 5% of contributions. In addition, we may
make discretionary contributions within the limits of deductibility set forth by the Code. Our employees are immediately eligible to become plan participants. Employees are eligible to receive matching contributions immediately on their
participation, however, these matching payments will not vest until their first anniversary of employment. Our expense for the years ended December 31, 2008, 2007 and 2006 was approximately $397,000, $365,000 and $342,000, respectively.

A non-qualified deferred compensation plan for our officers and certain other employees was established in 1994 that allows the participants to defer a
portion of their income. As of December 31, 2008, we are liable to participants for approximately $3.8 million under this plan. Although this is an unfunded plan, we have purchased certain investments to match this obligation. Our obligation
under this plan and the related investments are both included in the accompanying financial statements.



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NOTE 16.   EARNINGS PER SHARE

We calculate basic and diluted earnings per share in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share (EPS) is computed by dividing net income available for
common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into
common shares and then shared in our earnings. In 2008, 2007 and 2006, operating partnership units and Series 1 Preferred Shares were excluded from diluted EPS as the conversion of these units would have resulted in an anti-dilutive effect. Certain
stock options and unvested shares have also been excluded from the calculation of diluted earnings per share as they are anti-dilutive.

The following
table sets forth the reconciliation between basic and diluted EPS:



|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                    |  | Year Ended December 31,               |        
|                                                                    |  | 2008                                  |         |   | 2007 |   |         | 2006 | 
|                                                                    |  | (In thousands, except per share data) |        
|NUMERATOR                                                           |  |                                       |         |   |      |   |         |      |  |   |         |  
|Income from continuing operations                                   |  | $                                     | 115,338 |   |      | $ | 94,009  |      |  | $ | 89,952  |  
|Preferred stock dividends                                           |  |                                       | (541    | ) |      |   | (442    | )    |  |   | (10,423 | )
|Preferred stock redemption costs                                    |  |                                       |        |   |      |   |        |      |  |   | (4,775  | )
|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|Income from continuing operations available for common shareholders |  |                                       | 114,797 |   |      |   | 93,567  |      |  |   | 74,754  |  
|Discontinued operationsincome                                      |  |                                       | 1,877   |   |      |   | 6,760   |      |  |   | 4,804   |  
|Discontinued operationsgain on sale of real estate                 |  |                                       | 12,572  |   |      |   | 94,768  |      |  |   | 16,515  |  
|Gain on sale of real estate                                         |  |                                       |        |   |      |   |        |      |  |   | 7,441   |  
|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|Net income available for common shareholders, basic and dilutive    |  | $                                     | 129,246 |   |      | $ | 195,095 |      |  | $ | 103,514 |  
|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|DENOMINATOR                                                         |  |                                       |         |   |      |   |         |      |  |   |         |  
|Weighted average common shares outstandingbasic                    |  |                                       | 58,665  |   |      |   | 56,108  |      |  |   | 53,469  |  
|Effect of dilutive securities:                                      |  |                                       |         |   |      |   |         |      |  |   |         |  
|Stock options                                                       |  |                                       | 223     |   |      |   | 365     |      |  |   | 389     |  
|Unvested stock                                                      |  |                                       | 26      |   |      |   | 70      |      |  |   | 104     |  
|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|Weighted average common shares outstandingdilutive                 |  |                                       | 58,914  |   |      |   | 56,543  |      |  |   | 53,962  |  
|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|EARNINGS PER COMMON SHARE, BASIC                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|Continuing operations                                               |  | $                                     | 1.96    |   |      | $ | 1.67    |      |  | $ | 1.40    |  
|Discontinued operations                                             |  |                                       | 0.24    |   |      |   | 1.81    |      |  |   | 0.40    |  
|Gain on sale of real estate                                         |  |                                       |        |   |      |   |        |      |  |   | 0.14    |  
|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|                                                                    |  | $                                     | 2.20    |   |      | $ | 3.48    |      |  | $ | 1.94    |  
|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|EARNINGS PER COMMON SHARE, DILUTED                                  |  |                                       |         |   |      |   |         |      |  |   |         |  
|Continuing operations                                               |  | $                                     | 1.95    |   |      | $ | 1.65    |      |  | $ | 1.39    |  
|Discontinued operations                                             |  |                                       | 0.24    |   |      |   | 1.80    |      |  |   | 0.39    |  
|Gain on sale of real estate                                         |  |                                       |        |   |      |   |        |      |  |   | 0.14    |  
|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  
|                                                                    |  | $                                     | 2.19    |   |      | $ | 3.45    |      |  | $ | 1.92    |  
|                                                                    |  |                                       |         |   |      |   |         |      |  |   |         |  



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NOTE 17.   SEGMENT INFORMATION

FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS No. 131) requires disclosure of certain operating and financial data with respect to
separate business activities within an enterprise. Our primary business is the ownership, management, development, and redevelopment of retail and mixed use properties. During 2008, we restructured our asset management and property operations groups
and consequently, re-evaluated our reportable segments. We review operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. We evaluate financial performance
using property operating income defined as total revenues less rental expenses and real estate taxes. No individual property constitutes more than 10% of our revenues or property operating income and we have no operations outside of the United
States of America. Therefore, we have aggregated our properties into one reportable segment as the properties share similar long-term economic characteristics and have other similarities including they are operated using consistent business
strategies, are typically located in major metropolitan areas, and have similar tenant mixes. While we believe we have only one reportable segment as defined by SFAS No. 131, we have continued to provide additional information by geographic
region as presented below.



|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|----------------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | ------- | ----- |  | - | -------- | - |  | - | --------- | -
|                                                            |  | Year Ended December 31, 2008 |          
|                                                            |  | East                         |           |   | West |   |         | Other |  |   | Total    |  
|                                                            |  | (In thousands)               |          
|Rental income                                               |  | $                            | 389,569   |   |      | $ | 112,395 |       |  | $ |         |   |  | $ | 501,964   |  
|Other property income                                       |  |                              | 11,828    |   |      |   | 2,185   |       |  |   |         |   |  |   | 14,013    |  
|Mortgage interest income                                    |  |                              | 3,043     |   |      |   | 1,505   |       |  |   |         |   |  |   | 4,548     |  
|Rental expenses                                             |  |                              | (78,717   | ) |      |   | (31,001 | )     |  |   |         |   |  |   | (109,718  | )
|Real estate taxes                                           |  |                              | (44,244   | ) |      |   | (11,470 | )     |  |   |         |   |  |   | (55,714   | )
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Property operating income                                   |  |                              | 281,479   |   |      |   | 73,614  |       |  |   |         |   |  |   | 355,093   |  
|General and administrative expense                          |  |                              |          |   |      |   |        |       |  |   | (26,732  | ) |  |   | (26,732   | )
|Depreciation and amortization                               |  |                              | (78,631   | ) |      |   | (31,576 | )     |  |   | (815     | ) |  |   | (111,022  | )
|Other interest income                                       |  |                              | 645       |   |      |   | 271     |       |  |   |         |   |  |   | 916       |  
|Interest expense                                            |  |                              |          |   |      |   |        |       |  |   | (99,163  | ) |  |   | (99,163   | )
|Income from real estate partnership                         |  |                              |          |   |      |   |        |       |  |   | 1,612    |   |  |   | 1,612     |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Income from continuing operations before minority interests |  | $                            | 203,493   |   |      | $ | 42,309  |       |  | $ | (125,098 | ) |  | $ | 120,704   |  
|Minority interests                                          |  |                              |          |   |      |   |        |       |  |   | (5,366   | ) |  |   | (5,366    | )
|Discontinued operationsincome                              |  |                              |          |   |      |   |        |       |  |   | 1,877    |   |  |   | 1,877     |  
|Discontinued operationsgain on sale of real estate         |  |                              |          |   |      |   |        |       |  |   | 12,572   |   |  |   | 12,572    |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Net income                                                  |  | $                            | 203,493   |   |      | $ | 42,309  |       |  | $ | (116,015 | ) |  | $ | 129,787   |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Total assets                                                |  | $                            | 2,112,910 |   |      | $ | 907,760 |       |  | $ | 72,106   |   |  | $ | 3,092,776 |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  



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|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|----------------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | ------- | ----- |  | - | -------- | - |  | - | --------- | -
|                                                            |  | Year Ended December 31, 2007 |          
|                                                            |  | East                         |           |   | West |   |         | Other |  |   | Total    |  
|                                                            |  | (In thousands)               |          
|Rental income                                               |  | $                            | 360,928   |   |      | $ | 104,800 |       |  | $ |         |   |  | $ | 465,728   |  
|Other property income                                       |  |                              | 9,156     |   |      |   | 3,678   |       |  |   |         |   |  |   | 12,834    |  
|Mortgage interest income                                    |  |                              | 3,003     |   |      |   | 1,557   |       |  |   |         |   |  |   | 4,560     |  
|Rental expenses                                             |  |                              | (70,490   | ) |      |   | (28,873 | )     |  |   |         |   |  |   | (99,363   | )
|Real estate taxes                                           |  |                              | (37,306   | ) |      |   | (9,591  | )     |  |   |         |   |  |   | (46,897   | )
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Property operating income                                   |  |                              | 265,291   |   |      |   | 71,571  |       |  |   |         |   |  |   | 336,862   |  
|General and administrative expense                          |  |                              |          |   |      |   |        |       |  |   | (26,581  | ) |  |   | (26,581   | )
|Depreciation and amortization                               |  |                              | (70,306   | ) |      |   | (30,285 | )     |  |   | (1,042   | ) |  |   | (101,633  | )
|Other interest income                                       |  |                              | 754       |   |      |   | 167     |       |  |   |         |   |  |   | 921       |  
|Interest expense                                            |  |                              |          |   |      |   |        |       |  |   | (111,365 | ) |  |   | (111,365  | )
|Income from real estate partnership                         |  |                              |          |   |      |   |        |       |  |   | 1,395    |   |  |   | 1,395     |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Income from continuing operations before minority interests |  | $                            | 195,739   |   |      | $ | 41,453  |       |  | $ | (137,593 | ) |  | $ | 99,599    |  
|Minority interests                                          |  |                              |          |   |      |   |        |       |  |   | (5,590   | ) |  |   | (5,590    | )
|Discontinued operationsincome                              |  |                              |          |   |      |   |        |       |  |   | 6,760    |   |  |   | 6,760     |  
|Discontinued operationsgain on sale of real estate         |  |                              |          |   |      |   |        |       |  |   | 94,768   |   |  |   | 94,768    |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Net income                                                  |  | $                            | 195,739   |   |      | $ | 41,453  |       |  | $ | (41,655  | ) |  | $ | 195,537   |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Total assets                                                |  | $                            | 1,988,181 |   |      | $ | 887,112 |       |  | $ | 114,004  |   |  | $ | 2,989,297 |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  



|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|----------------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | ------- | ----- |  | - | -------- | - |  | - | --------- | -
|                                                            |  | Year Ended December 31, 2006 |          
|                                                            |  | East                         |           |   | West |   |         | Other |  |   | Total    |  
|                                                            |  | (In thousands)               |          
|Rental income                                               |  | $                            | 317,458   |   |      | $ | 96,803  |       |  | $ |         |   |  | $ | 414,261   |  
|Other property income                                       |  |                              | 4,588     |   |      |   | 2,872   |       |  |   |         |   |  |   | 7,460     |  
|Mortgage interest income                                    |  |                              | 3,163     |   |      |   | 1,932   |       |  |   |         |   |  |   | 5,095     |  
|Rental expenses                                             |  |                              | (56,779   | ) |      |   | (27,385 | )     |  |   |         |   |  |   | (84,164   | )
|Real estate taxes                                           |  |                              | (32,104   | ) |      |   | (9,035  | )     |  |   |         |   |  |   | (41,139   | )
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Property operating income                                   |  |                              | 236,326   |   |      |   | 65,187  |       |  |   |         |   |  |   | 301,513   |  
|General and administrative expense                          |  |                              |          |   |      |   |        |       |  |   | (21,921  | ) |  |   | (21,921   | )
|Depreciation and amortization                               |  |                              | (61,560   | ) |      |   | (29,433 | )     |  |   | (1,758   | ) |  |   | (92,751   | )
|Other interest income                                       |  |                              | 1,649     |   |      |   | 393     |       |  |   |         |   |  |   | 2,042     |  
|Interest expense                                            |  |                              |          |   |      |   |        |       |  |   | (95,234  | ) |  |   | (95,234   | )
|Income from real estate partnership                         |  |                              |          |   |      |   |        |       |  |   | 656      |   |  |   | 656       |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Income from continuing operations before minority interests |  | $                            | 176,415   |   |      | $ | 36,147  |       |  | $ | (118,257 | ) |  | $ | 94,305    |  
|Minority interests                                          |  |                              |          |   |      |   |        |       |  |   | (4,353   | ) |  |   | (4,353    | )
|Discontinued operationsincome                              |  |                              |          |   |      |   |        |       |  |   | 4,804    |   |  |   | 4,804     |  
|Discontinued operationsgain on sale of real estate         |  |                              |          |   |      |   |        |       |  |   | 16,515   |   |  |   | 16,515    |  
|Gain on sale of real estate                                 |  |                              |          |   |      |   |        |       |  |   | 7,441    |   |  |   | 7,441     |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Net income                                                  |  | $                            | 176,415   |   |      | $ | 36,147  |       |  | $ | (93,850  | ) |  | $ | 118,712   |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Total assets                                                |  | $                            | 1,745,273 |   |      | $ | 881,676 |       |  | $ | 61,657   |   |  | $ | 2,688,606 |  
|                                                            |  |                              |           |   |      |   |         |       |  |   |          |   |  |   |           |  



F-35



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##### Table of Contents

NOTE 18.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data is as follows:



|                                             |  |                                       |         |               |   |              |  |               |         |  |   |        
|-------------------------------------------- |  | ------------------------------------- | ------- | ------------- | - | ------------ |  | ------------- | ------- |  | - | -------
|                                             |  | FirstQuarter                          |         | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|                                             |  | (In thousands, except per share data)
|2008                                         |  |                                       |         |               |   |              |  |               |         |  |   |        
|Revenue(1)                                   |  | $                                     | 126,369 |               | $ | 128,837      |  | $             | 131,683 |  | $ | 133,636
|Operating Income                             |  | $                                     | 54,387  |               | $ | 53,584       |  | $             | 55,363  |  | $ | 54,005 
|Net income                                   |  | $                                     | 29,986  |               | $ | 28,974       |  | $             | 37,102  |  | $ | 33,725 
|Net income available for common shareholders |  | $                                     | 29,851  |               | $ | 28,839       |  | $             | 36,966  |  | $ | 33,590 
|Earnings per common sharebasic              |  | $                                     | 0.51    |               | $ | 0.49         |  | $             | 0.63    |  | $ | 0.57   
|Earnings per common sharediluted            |  | $                                     | 0.51    |               | $ | 0.49         |  | $             | 0.63    |  | $ | 0.57   
|                                             |  |                                       |         |              
|                                             |  | FirstQuarter                          |         | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|                                             |  | (In thousands, except per share data)
|2007                                         |  |                                       |         |               |   |              |  |               |         |  |   |        
|Revenue(1)                                   |  | $                                     | 114,804 |               | $ | 118,241      |  | $             | 123,491 |  | $ | 126,586
|Operating Income                             |  | $                                     | 49,462  |               | $ | 51,969       |  | $             | 54,041  |  | $ | 53,176 
|Net income                                   |  | $                                     | 23,136  |               | $ | 26,718       |  | $             | 23,515  |  | $ | 122,168
|Net income available for common shareholders |  | $                                     | 23,100  |               | $ | 26,583       |  | $             | 23,379  |  | $ | 122,033
|Earnings per common sharebasic              |  | $                                     | 0.42    |               | $ | 0.47         |  | $             | 0.42    |  | $ | 2.16   
|Earnings per common sharediluted            |  | $                                     | 0.41    |               | $ | 0.47         |  | $             | 0.41    |  | $ | 2.14   



|(1) | As required by SFAS No. 144, revenue has been reduced to reflect the results of discontinued operations. Revenue from discontinued operations, by quarter, is summarized as
follows:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                          |  |                |       |               |   |              |  |               |       |  |   |      
|----------------------------------------- |  | -------------- | ----- | ------------- | - | ------------ |  | ------------- | ----- |  | - | -----
|                                          |  | FirstQuarter   |       | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|                                          |  | (In thousands)
|2008 revenue from discontinued operations |  | $              | 854   |               | $ | 856          |  | $             | 834   |  | $ | 180  
|2007 revenue from discontinued operations |  | $              | 8,196 |               | $ | 6,805        |  | $             | 6,496 |  | $ | 2,493

NOTE 19.   SUBSEQUENT EVENTS

On January 5, 2009, we repaid the $4.4 million mortgage loan on Mercer Mall which had an original maturity date of April 1, 2009. This loan was repaid with funds borrowed on our $300 million revolving
credit facility.

On January 12, 2009 and February 5, 2009, we purchased and retired $5.0 million and $0.9 million, respectively, of the
outstanding $175.0 million balance of our 8.75% notes. The notes were repaid with funds borrowed on our $300 million revolving credit facility.



F-36



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE
AND ACCUMULATED

DEPRECIATION

December 31, 2008

(Dollars in thousands)



|                                     |  |    |      |             |                          |                         |  |                                        |  |                                                 |  |                                        |  |                    |  |                 |  |                                                              |  |                  |  |                                     |  |            
|------------------------------------ |  | -- | ---- | ----------- | ------------------------ | ----------------------- |  | -------------------------------------- |  | ----------------------------------------------- |  | -------------------------------------- |  | ------------------ |  | --------------- |  | ------------------------------------------------------------ |  | ---------------- |  | ----------------------------------- |  | -----------
|COLUMN A                             |  |    |      | COLUMN B    |                          | COLUMN C                |  |                                        |  | COLUMN D                                        |  | COLUMN E                               |  |                    |  |                 |  | COLUMN F                                                     |  | COLUMN G         |  | COLUMN H                            |  | COLUMN I   
|Descriptions                         |  |    |      | Encumbrance |                          | Initial cost to company |  | CostCapitalizedSubsequenttoAcquisition |  | Gross amount at which carried at close ofperiod |  | AccumulatedDepreciationandAmortization |  | DateofConstruction |  | Date(s)Acquired |  | Life onwhichdepreciationin
latestincomestatementsis computed
|                                     |  |    | Land |             | Building andImprovements |                         |  | Land                                   |  | Building andImprovements                        |  | Total                                  |  |                    |  |                
|150 POST STREET (San Francisco)      |  | CA |      |            |                          | 11,685                  |  | 9,181                                  |  | 16,643                                          |  | 11,685                                 |  | 25,824             |  | 37,509          |  | 9,413                                                        |  | 1908             |  | 10/23/97                            |  | 35 years   
|ANDORRA (Pennsylvania)               |  | PA |      |            |                          | 2,432                   |  | 12,346                                 |  | 8,282                                           |  | 2,432                                  |  | 20,628             |  | 23,060          |  | 12,265                                                       |  | 1953             |  | 01/12/88                            |  | 35 years   
|ASSEMBLY SQUARE (Massachusetts)      |  | MA |      |            |                          | 38,319                  |  | 34,196                                 |  | 64,722                                          |  | 47,647                                 |  | 89,590             |  | 137,237         |  | 6,854                                                        |  | 2005             |  | 2005-2008                           |  | 35 years   
|THE AVENUE AT WHITE MARSH (Maryland) |  | MD |      | 60,067      |                          | 20,682                  |  | 72,432                                 |  | 1,297                                           |  | 20,682                                 |  | 73,729             |  | 94,411          |  | 4,834                                                        |  | 1997             |  | 03/08/07                            |  | 35 years   
|BALA CYNWYD (Pennsylvania)           |  | PA |      |            |                          | 3,565                   |  | 14,466                                 |  | 16,180                                          |  | 3,566                                  |  | 30,645             |  | 34,211          |  | 10,018                                                       |  | 1955             |  | 09/22/93                            |  | 35 years   
|BARRACKS ROAD (Virginia)             |  | VA |      | 41,368      |                          | 4,363                   |  | 16,459                                 |  | 24,492                                          |  | 4,363                                  |  | 40,951             |  | 45,314          |  | 28,295                                                       |  | 1958             |  | 12/31/85                            |  | 35 years   
|BETHESDA ROW (Maryland)              |  | MD |      | 25,412      |                          | 36,971                  |  | 35,406                                 |  | 117,100                                         |  | 35,272                                 |  | 154,205            |  | 189,477         |  | 24,856                                                       |  | 1945-2008        |  | 12/31/93,1/20/06,9/25/08, & 9/30/08 |  | 35-50 years
|BRICK PLAZA (New Jersey)             |  | NJ |      | 30,633      |                          |                         |  | 24,715                                 |  | 31,675                                          |  | 3,788                                  |  | 52,602             |  | 56,390          |  | 32,091                                                       |  | 1958             |  | 12/28/89                            |  | 35 years   
|BRISTOL (Connecticut)                |  | CT |      |            |                          | 3,856                   |  | 15,959                                 |  | 6,799                                           |  | 3,856                                  |  | 22,758             |  | 26,614          |  | 8,596                                                        |  | 1959             |  | 09/22/95                            |  | 35 years   
|CHELSEA COMMONS (Massachusetts)      |  | MA |      | 7,711       |                          | 9,417                   |  | 19,466                                 |  | 136                                             |  | 9,417                                  |  | 19,602             |  | 29,019          |  | 1,070                                                        |  | 1962/1969/2008   |  | 08/25/06,1/30/07, & 7/16/08         |  | 35 years   
|COLORADO BLVD (California)           |  | CA |      |            |                          | 5,262                   |  | 4,071                                  |  | 7,339                                           |  | 5,262                                  |  | 11,410             |  | 16,672          |  | 5,397                                                        |  | 1905/1915/1980   |  | 12/31/96& 8/14/98                   |  | 35 years   
|CONGRESSIONAL PLAZA (Maryland)       |  | MD |      |            |                          | 2,793                   |  | 7,424                                  |  | 60,064                                          |  | 2,793                                  |  | 67,488             |  | 70,281          |  | 34,664                                                       |  | 1965/2003        |  | 04/01/65                            |  | 35 years   
|COURTHOUSE CENTER (Maryland)         |  | MD |      |            |                          | 1,750                   |  | 1,869                                  |  | 604                                             |  | 1,750                                  |  | 2,473              |  | 4,223           |  | 923                                                          |  | 1975             |  | 12/17/97                            |  | 35 years   
|COURTYARD SHOPS (Florida)            |  | FL |      | 7,978       |                          | 16,862                  |  | 21,851                                 |  | 76                                              |  | 16,862                                 |  | 21,927             |  | 38,789          |  | 261                                                          |  | 1990             |  | 09/04/08                            |  | 35 years   
|CROSSROADS (Illinois)                |  | IL |      |            |                          | 4,635                   |  | 11,611                                 |  | 7,669                                           |  | 4,635                                  |  | 19,280             |  | 23,915          |  | 9,420                                                        |  | 1959             |  | 07/19/93                            |  | 35 years   
|CROW CANYON COMMONS (California)     |  | CA |      | 21,214      |                          | 8,638                   |  | 54,575                                 |  | 1,782                                           |  | 8,638                                  |  | 56,357             |  | 64,995          |  | 4,854                                                        |  | Late 1970's/2006 |  | 12/29/05& 02/28/07                  |  | 35 years   



F-37



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATIONCONTINUED

December 31, 2008

(Dollars in thousands)



|                                         |  |    |      |             |                          |                         |  |                                        |  |                          |                                                 |       |                                        |  |                    |  |                 |  |                                                              |  |           |  |                    |  |             
|---------------------------------------- |  | -- | ---- | ----------- | ------------------------ | ----------------------- |  | -------------------------------------- |  | ------------------------ | ----------------------------------------------- | ----- | -------------------------------------- |  | ------------------ |  | --------------- |  | ------------------------------------------------------------ |  | --------- |  | ------------------ |  | ------------
|COLUMN A                                 |  |    |      | COLUMN B    |                          | COLUMN C                |  |                                        |  | COLUMN D                 |                                                 |       | COLUMN E                               |  |                    |  |                 |  | COLUMN F                                                     |  | COLUMN G  |  | COLUMN H           |  | COLUMN I    
|Descriptions                             |  |    |      | Encumbrance |                          | Initial cost to company |  | CostCapitalizedSubsequenttoAcquisition |  |                          | Gross amount at which carried at close ofperiod |       | AccumulatedDepreciationandAmortization |  | DateofConstruction |  | Date(s)Acquired |  | Life onwhichdepreciationin
latestincomestatementsis computed
|                                         |  |    | Land |             | Building andImprovements |                         |  | Land                                   |  | Building andImprovements |                                                 | Total |                                        |  |                    | 
|DEDHAM PLAZA (Massachusetts)             |  | MA |      |            |                          | 12,287                  |  | 12,918                                 |  | 6,023                    |                                                 |       | 12,287                                 |  | 18,941             |  | 31,228          |  | 8,588                                                        |  | 1959      |  | 12/31/93           |  | 35 years    
|DEL MAR VILLAGE (Florida)                |  | FL |      |            |                          | 14,218                  |  | 39,559                                 |  | 84                       |                                                 |       | 14,218                                 |  | 39,643             |  | 53,861          |  | 741                                                          |  | 1982/1984 |  | 5/30/08& 7/11/08   |  | 35 years    
|EASTGATE (North Carolina)                |  | NC |      |            |                          | 1,608                   |  | 5,775                                  |  | 17,663                   |                                                 |       | 1,608                                  |  | 23,438             |  | 25,046          |  | 10,717                                                       |  | 1963      |  | 12/18/86           |  | 35 years    
|ELLISBURG CIRCLE (New Jersey)            |  | NJ |      |            |                          | 4,028                   |  | 11,309                                 |  | 12,369                   |                                                 |       | 4,013                                  |  | 23,693             |  | 27,706          |  | 13,295                                                       |  | 1959      |  | 10/16/92           |  | 35 years    
|ESCONDIDO PROMENADE (California)         |  | CA |      |            |                          | 11,505                  |  | 12,147                                 |  | 4,712                    |                                                 |       | 11,505                                 |  | 16,859             |  | 28,364          |  | 5,372                                                        |  | 1987      |  | 12/31/96           |  | 35 years    
|FALLS PLAZA (Virginia)                   |  | VA |      |            |                          | 1,798                   |  | 1,270                                  |  | 8,886                    |                                                 |       | 1,819                                  |  | 10,135             |  | 11,954          |  | 5,995                                                        |  | 1960/1962 |  | 09/30/67& 10/05/72 |  | 25 years    
|FEASTERVILLE (Pennsylvania)              |  | PA |      |            |                          | 1,431                   |  | 1,600                                  |  | 8,858                    |                                                 |       | 1,452                                  |  | 10,437             |  | 11,889          |  | 7,226                                                        |  | 1958      |  | 07/23/80           |  | 20 years    
|FEDERAL PLAZA (Maryland)                 |  | MD |      | 33,128      |                          | 10,216                  |  | 17,895                                 |  | 34,036                   |                                                 |       | 10,216                                 |  | 51,931             |  | 62,147          |  | 27,884                                                       |  | 1970      |  | 06/29/89           |  | 35 years    
|FIFTH AVENUE (California)(4)             |  | CA |      |            |                          | 3,844                   |  | 1,352                                  |  | 7,773                    |                                                 |       | 3,874                                  |  | 9,095              |  | 12,969          |  | 3,293                                                        |  | 1888-1995 |  | 1996-1997          |  | 35 years    
|FINLEY SQUARE (Illinois)                 |  | IL |      |            |                          | 9,252                   |  | 9,544                                  |  | 12,494                   |                                                 |       | 9,252                                  |  | 22,038             |  | 31,290          |  | 10,666                                                       |  | 1974      |  | 04/27/95           |  | 35 years    
|FLOURTOWN (Pennsylvania)                 |  | PA |      |            |                          | 1,345                   |  | 3,943                                  |  | 10,109                   |                                                 |       | 1,470                                  |  | 13,927             |  | 15,397          |  | 6,402                                                        |  | 1957      |  | 04/25/80           |  | 35 years    
|FOREST HILLS (New York)                  |  | NY |      |            |                          | 2,885                   |  | 2,885                                  |  | 2,319                    |                                                 |       | 3,010                                  |  | 5,079              |  | 8,089           |  | 1,817                                                        |  | 1937-1987 |  | 12/16/97           |  | 35 years    
|FRESH MEADOWS (New York)                 |  | NY |      |            |                          | 24,625                  |  | 25,255                                 |  | 18,888                   |                                                 |       | 24,627                                 |  | 44,141             |  | 68,768          |  | 17,531                                                       |  | 1946-1949 |  | 12/05/97           |  | 35 years    
|FRIENDSHIP CENTER (District of Columbia) |  | DC |      |            |                          | 12,696                  |  | 20,803                                 |  | (155                     | )                                               |       | 12,696                                 |  | 20,648             |  | 33,344          |  | 4,343                                                        |  | 1998      |  | 09/21/01           |  | 35 years    
|GAITHERSBURG SQUARE (Maryland)           |  | MD |      |            |                          | 7,701                   |  | 5,271                                  |  | 11,031                   |                                                 |       | 5,973                                  |  | 18,030             |  | 24,003          |  | 11,498                                                       |  | 1966      |  | 04/22/93           |  | 35 years    
|GARDEN MARKET (Illinois)                 |  | IL |      |            |                          | 2,677                   |  | 4,829                                  |  | 4,018                    |                                                 |       | 2,677                                  |  | 8,847              |  | 11,524          |  | 4,022                                                        |  | 1958      |  | 07/28/94           |  | 35 years    
|GOVERNOR PLAZA (Maryland)                |  | MD |      |            |                          | 2,068                   |  | 4,905                                  |  | 15,036                   |                                                 |       | 2,068                                  |  | 19,941             |  | 22,009          |  | 11,283                                                       |  | 1963      |  | 10/01/85           |  | 35 years    
|GRATIOT PLAZA (Michigan)                 |  | MI |      |            |                          | 525                     |  | 1,601                                  |  | 16,600                   |                                                 |       | 525                                    |  | 18,201             |  | 18,726          |  | 10,092                                                       |  | 1964      |  | 03/29/73           |  | 25 3/4 years
|GREENWICH AVENUE (Connecticut)           |  | CT |      |            |                          | 7,484                   |  | 5,445                                  |  | 1,007                    |                                                 |       | 7,484                                  |  | 6,452              |  | 13,936          |  | 2,435                                                        |  | 1900-1993 |  | 1995               |  | 35 years    



F-38



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATIONCONTINUED

December 31, 2008

(Dollars in thousands)



|                                                        |  |    |      |             |                          |                         |  |                                        |  |                                                 |  |                                        |  |                    |  |                 |  |                                                              |  |                |  |                            |  |            
|------------------------------------------------------- |  | -- | ---- | ----------- | ------------------------ | ----------------------- |  | -------------------------------------- |  | ----------------------------------------------- |  | -------------------------------------- |  | ------------------ |  | --------------- |  | ------------------------------------------------------------ |  | -------------- |  | -------------------------- |  | -----------
|COLUMN A                                                |  |    |      | COLUMN B    |                          | COLUMN C                |  |                                        |  | COLUMN D                                        |  | COLUMN E                               |  |                    |  |                 |  | COLUMN F                                                     |  | COLUMN G       |  | COLUMN H                   |  | COLUMN I   
|Descriptions                                            |  |    |      | Encumbrance |                          | Initial cost to company |  | CostCapitalizedSubsequenttoAcquisition |  | Gross amount at which carried at close ofperiod |  | AccumulatedDepreciationandAmortization |  | DateofConstruction |  | Date(s)Acquired |  | Life onwhichdepreciationin latestincomestatementsis computed
|                                                        |  |    | Land |             | Building andImprovements |                         |  | Land                                   |  | Building andImprovements                        |  | Total                                  |  |                    |  |                
|HAUPPAUGE (New York)                                    |  | NY |      | 15,595      |                          | 8,791                   |  | 15,262                                 |  | 3,740                                           |  | 8,791                                  |  | 19,002             |  | 27,793          |  | 5,775                                                        |  | 1963           |  | 08/06/98                   |  | 35 years   
|HERMOSA AVE (California)                                |  | CA |      |            |                          | 1,116                   |  | 280                                    |  | 4,020                                           |  | 1,368                                  |  | 4,048              |  | 5,416           |  | 1,513                                                        |  | 1923           |  | 09/17/97                   |  | 35 years   
|HOLLYWOOD BLVD. (California)                            |  | CA |      |            |                          | 8,300                   |  | 16,920                                 |  | 13,883                                          |  | 8,300                                  |  | 30,803             |  | 39,103          |  | 3,883                                                        |  | 1929/1991      |  | 3/22/99& 6/18/99           |  | 35 years   
|HOUSTON STREET (Texas)(9)                               |  | TX |      |            |                          | 14,680                  |  | 1,976                                  |  | 50,754                                          |  | 14,778                                 |  | 52,632             |  | 67,410          |  | 15,057                                                       |  | var            |  | 1998                       |  | 35 years   
|HUNTINGTON (New York)                                   |  | NY |      |            |                          |                        |  | 16,008                                 |  | 22,555                                          |  | 11,713                                 |  | 26,850             |  | 38,563          |  | 6,360                                                        |  | 1962           |  | 12/12/88& 10/26/07         |  | 35 years   
|IDYLWOOD PLAZA (Virginia)                               |  | VA |      |            |                          | 4,308                   |  | 10,026                                 |  | 1,315                                           |  | 4,308                                  |  | 11,341             |  | 15,649          |  | 4,837                                                        |  | 1991           |  | 04/15/94                   |  | 35 years   
|KINGS COURT (California)                                |  | CA |      |            |                          |                        |  | 10,714                                 |  | 862                                             |  |                                       |  | 11,576             |  | 11,576          |  | 4,791                                                        |  | 1960           |  | 08/24/98                   |  | 26 years   
|LANCASTER (Pennsylvania)                                |  | PA |      | 4,907       |                          |                        |  | 2,103                                  |  | 8,737                                           |  |                                       |  | 10,840             |  | 10,840          |  | 5,798                                                        |  | 1958           |  | 04/24/80                   |  | 22 years   
|LANGHORNE SQUARE (Pennsylvania)                         |  | PA |      |            |                          | 720                     |  | 2,974                                  |  | 15,269                                          |  | 720                                    |  | 18,243             |  | 18,963          |  | 9,590                                                        |  | 1966           |  | 01/31/85                   |  | 35 years   
|LAUREL (Maryland)                                       |  | MD |      |            |                          | 7,458                   |  | 22,525                                 |  | 17,837                                          |  | 7,576                                  |  | 40,244             |  | 47,820          |  | 26,090                                                       |  | 1956           |  | 08/15/86                   |  | 35 years   
|LAWRENCE PARK (Pennsylvania)                            |  | PA |      | 29,322      |                          | 5,723                   |  | 7,160                                  |  | 16,743                                          |  | 5,734                                  |  | 23,892             |  | 29,626          |  | 19,653                                                       |  | 1972           |  | 07/23/80                   |  | 22 years   
|LEESBURG PLAZA (Virginia)                               |  | VA |      |            |                          | 8,184                   |  | 10,722                                 |  | 15,328                                          |  | 8,184                                  |  | 26,050             |  | 34,234          |  | 5,739                                                        |  | 1967           |  | 09/15/98                   |  | 35 years   
|LINDEN SQUARE (Massachusetts)                           |  | MA |      |            |                          | 79,382                  |  | 19,247                                 |  | 42,662                                          |  | 79,370                                 |  | 61,921             |  | 141,291         |  | 1,706                                                        |  | 1960-2008      |  | 08/24/06                   |  | 35 years   
|LOEHMANN'S PLAZA (Virginia)                             |  | VA |      |            |                          | 1,237                   |  | 15,096                                 |  | 16,076                                          |  | 1,248                                  |  | 31,161             |  | 32,409          |  | 18,129                                                       |  | 1971           |  | 07/21/83                   |  | 35 years   
|MELVILLE MALL(New York)                                 |  | NY |      | 24,012      |                          | 35,622                  |  | 32,882                                 |  | 101                                             |  | 35,622                                 |  | 32,983             |  | 68,605          |  | 2,114                                                        |  | 1974           |  | 10/16/06                   |  | 35 years   
|MERCER MALL(New Jersey)                                 |  | NJ |      | 55,664      |                          | 4,488                   |  | 70,076                                 |  | 30,503                                          |  | 5,032                                  |  | 100,035            |  | 105,067         |  | 17,908                                                       |  | 1975           |  | 10/14/03                   |  | 25-35 years
|MID PIKE PLAZA (Maryland)                               |  | MD |      |            |                          |                        |  | 10,335                                 |  | 33,963                                          |  | 7,517                                  |  | 36,781             |  | 44,298          |  | 4,759                                                        |  | 1963           |  | 05/18/82& 10/26/07         |  | 50 years   
|MOUNT VERNON/SOUTH VALLEY/7770 RICHMOND HWY. (Virginia) |  | VA |      | 11,640      |                          | 10,068                  |  | 33,501                                 |  | 33,509                                          |  | 10,147                                 |  | 66,931             |  | 77,078          |  | 9,970                                                        |  | 1972/1966/1974 |  | 03/31/03,3/21/03,& 1/27/06 |  | 35 years   
|TOWN CENTER OF NEW BRITAIN (Pennsylvania)               |  | PA |      |            |                          | 1,282                   |  | 12,285                                 |  | 558                                             |  | 1,262                                  |  | 12,863             |  | 14,125          |  | 959                                                          |  | 1969           |  | 06/29/06                   |  | 35 years   



F-39



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATIONCONTINUED

December 31, 2008

(Dollars in thousands)



|                                         |  |    |      |             |                          |                         |  |                                        |  |                          |                                                 |       |                                        |  |                    |  |                 |  |                                                              |  |                 |  |            |  |             
|---------------------------------------- |  | -- | ---- | ----------- | ------------------------ | ----------------------- |  | -------------------------------------- |  | ------------------------ | ----------------------------------------------- | ----- | -------------------------------------- |  | ------------------ |  | --------------- |  | ------------------------------------------------------------ |  | --------------- |  | ---------- |  | ------------
|COLUMN A                                 |  |    |      | COLUMN B    |                          | COLUMN C                |  |                                        |  | COLUMN D                 |                                                 |       | COLUMN E                               |  |                    |  |                 |  | COLUMN F                                                     |  | COLUMN G        |  | COLUMN H   |  | COLUMN I    
|Descriptions                             |  |    |      | Encumbrance |                          | Initial cost to company |  | CostCapitalizedSubsequenttoAcquisition |  |                          | Gross amount at which carried at close ofperiod |       | AccumulatedDepreciationandAmortization |  | DateofConstruction |  | Date(s)Acquired |  | Life onwhichdepreciationin
latestincomestatementsis computed
|                                         |  |    | Land |             | Building andImprovements |                         |  | Land                                   |  | Building andImprovements |                                                 | Total |                                        |  |                    | 
|NORTH DARTMOUTH (Massachusetts)          |  | MA |      |            |                          | 27,214                  |  |                                       |  | (17,846                  | )                                               |       | 9,366                                  |  | 2                  |  | 9,368           |  |                                                             |  | 2004            |  | 08/24/06   |  |            
|NORTHEAST (Pennsylvania)                 |  | PA |      |            |                          | 1,152                   |  | 10,596                                 |  | 10,776                   |                                                 |       | 1,153                                  |  | 21,371             |  | 22,524          |  | 14,111                                                       |  | 1959            |  | 08/30/83   |  | 35 years    
|NORTH LAKE COMMONS (Illinois)            |  | IL |      |            |                          | 2,782                   |  | 8,604                                  |  | 2,304                    |                                                 |       | 2,628                                  |  | 11,062             |  | 13,690          |  | 4,606                                                        |  | 1989            |  | 04/27/94   |  | 35 years    
|OLD KEENE MILL (Virginia)                |  | VA |      |            |                          | 638                     |  | 998                                    |  | 4,451                    |                                                 |       | 638                                    |  | 5,449              |  | 6,087           |  | 4,554                                                        |  | 1968            |  | 06/15/76   |  | 33 1/3 years
|OLD TOWN CENTER (California)             |  | CA |      |            |                          | 3,420                   |  | 2,765                                  |  | 27,868                   |                                                 |       | 3,420                                  |  | 30,633             |  | 34,053          |  | 12,441                                                       |  | 1962, 1997-1998 |  | 10/22/97   |  | 35 years    
|PAN AM SHOPPING CENTER (Virginia)        |  | VA |      |            |                          | 8,694                   |  | 12,929                                 |  | 6,602                    |                                                 |       | 8,695                                  |  | 19,530             |  | 28,225          |  | 9,414                                                        |  | 1979            |  | 02/05/93   |  | 35 years    
|PENTAGON ROW (Virginia)                  |  | VA |      |            |                          |                        |  | 2,955                                  |  | 84,847                   |                                                 |       |                                       |  | 87,802             |  | 87,802          |  | 22,431                                                       |  | 1999 - 2002     |  | 1998       |  | 35 years    
|PERRING PLAZA (Maryland)                 |  | MD |      |            |                          | 2,800                   |  | 6,461                                  |  | 17,348                   |                                                 |       | 2,800                                  |  | 23,809             |  | 26,609          |  | 15,679                                                       |  | 1963            |  | 10/01/85   |  | 35 years    
|PIKE 7 (Virginia)                        |  | VA |      |            |                          | 9,709                   |  | 22,799                                 |  | 2,327                    |                                                 |       | 9,709                                  |  | 25,126             |  | 34,835          |  | 9,103                                                        |  | 1968            |  | 03/31/97   |  | 35 years    
|QUEEN ANNE PLAZA (Massachusetts)         |  | MA |      |            |                          | 3,319                   |  | 8,457                                  |  | 3,874                    |                                                 |       | 3,319                                  |  | 12,331             |  | 15,650          |  | 6,070                                                        |  | 1967            |  | 12/23/94   |  | 35 years    
|QUINCE ORCHARD PLAZA (Maryland)          |  | MD |      |            |                          | 3,197                   |  | 7,949                                  |  | 9,844                    |                                                 |       | 2,928                                  |  | 18,062             |  | 20,990          |  | 10,392                                                       |  | 1975            |  | 04/22/93   |  | 35 years    
|ROCKVILLE TOWN SQUARE (Maryland)         |  | MD |      |            |                          |                        |  | 8,092                                  |  | 29,186                   |                                                 |       |                                       |  | 37,278             |  | 37,278          |  | 1,854                                                        |  | 2005 - 2007     |  | 2006 -2007 |  | 50 years    
|ROLLINGWOOD APTS. (Maryland)             |  | MD |      |            |                          | 552                     |  | 2,246                                  |  | 4,430                    |                                                 |       | 572                                    |  | 6,656              |  | 7,228           |  | 6,251                                                        |  | 1960            |  | 01/15/71   |  | 25 years    
|SAM'S PARK & SHOP (District of Columbia) |  | DC |      |            |                          | 4,840                   |  | 6,319                                  |  | 1,155                    |                                                 |       | 4,840                                  |  | 7,474              |  | 12,314          |  | 3,043                                                        |  | 1930            |  | 12/01/95   |  | 35 years    
|SANTANA ROW (California)                 |  | CA |      |            |                          | 41,969                  |  | 1,161                                  |  | 464,551                  |                                                 |       | 49,725                                 |  | 457,956            |  | 507,681         |  | 58,756                                                       |  | 1999 - 2008     |  | 03/05/97   |  | 40 -50 years
|SAUGUS (Massachusetts)                   |  | MA |      |            |                          | 4,383                   |  | 8,291                                  |  | 1,019                    |                                                 |       | 4,383                                  |  | 9,310              |  | 13,693          |  | 3,573                                                        |  | 1976            |  | 10/01/96   |  | 35 years    
|SHIRLINGTON (Virginia)                   |  | VA |      | 6,259       |                          | 9,761                   |  | 14,808                                 |  | 25,749                   |                                                 |       | 5,798                                  |  | 44,520             |  | 50,318          |  | 10,566                                                       |  | 1940, 2006-2008 |  | 12/21/95   |  | 35 years    



F-40



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATIONCONTINUED

December 31, 2008

(Dollars in thousands)



|                                            |  |    |      |             |                          |                         |   |                                        |  |                          |                                                 |       |                                        |           |                    |  |                 |         |                                                              |   |           |  |          |           |          |   |         |  |            |  |           |  |             
|------------------------------------------- |  | -- | ---- | ----------- | ------------------------ | ----------------------- | - | -------------------------------------- |  | ------------------------ | ----------------------------------------------- | ----- | -------------------------------------- | --------- | ------------------ |  | --------------- | ------- | ------------------------------------------------------------ | - | --------- |  | -------- | --------- | -------- | - | ------- |  | ---------- |  | --------- |  | ------------
|COLUMN A                                    |  |    |      | COLUMN B    |                          | COLUMN C                |   |                                        |  | COLUMN D                 |                                                 |       | COLUMN E                               |           |                    |  |                 |         | COLUMN F                                                     |   | COLUMN G  |  | COLUMN H |           | COLUMN I
|Descriptions                                |  |    |      | Encumbrance |                          | Initial cost to company |   | CostCapitalizedSubsequenttoAcquisition |  |                          | Gross amount at which carried at close ofperiod |       | AccumulatedDepreciationandAmortization |           | DateofConstruction |  | Date(s)Acquired |         | Life onwhichdepreciationin
latestincomestatementsis computed
|                                            |  |    | Land |             | Building andImprovements |                         |   | Land                                   |  | Building andImprovements |                                                 | Total |                                        |           |                    | 
|SHOPPERS WORLD (Virginia)                   |  | VA |      |             | 5,816                    |                         |   | 10,211                                 |  |                          | 18,863                                          |       |                                        | 448       |                    |  |                 | 10,225  |                                                              |   | 19,297    |  |          | 29,522    |          |   | 1,045   |  | 1975 -2001 |  | 05/30/07  |  | 35 years    
|THE SHOPPES AT NOTTINGHAM SQUARE (Maryland) |  | MD |      |             |                         |                         |   | 27,029                                 |  |                          | 12,849                                          |       |                                        | (12,308   | )                  |  |                 | 14,692  |                                                              |   | 12,878    |  |          | 27,570    |          |   | 822     |  | 2005 -2006 |  | 03/08/07  |  | 35 years    
|THIRD STREET PROMENADE (California) (9)     |  | CA |      |             |                         |                         |   | 22,645                                 |  |                          | 12,709                                          |       |                                        | 41,453    |                    |  |                 | 24,668  |                                                              |   | 52,139    |  |          | 76,807    |          |   | 18,931  |  | 1888-2000  |  | 1996-2000 |  | 35 years    
|TOWER (Virginia)                            |  | VA |      |             |                         |                         |   | 7,170                                  |  |                          | 10,518                                          |       |                                        | 2,079     |                    |  |                 | 7,129   |                                                              |   | 12,638    |  |          | 19,767    |          |   | 4,277   |  | 1953-1960  |  | 08/24/98  |  | 35 years    
|TROY (New Jersey)                           |  | NJ |      |             |                         |                         |   | 3,126                                  |  |                          | 5,193                                           |       |                                        | 15,420    |                    |  |                 | 4,028   |                                                              |   | 19,711    |  |          | 23,739    |          |   | 14,664  |  | 1966       |  | 07/23/80  |  | 22 years    
|TYSONS STATION (Virginia)                  |  | VA |      |             | 6,070                    |                         |   | 388                                    |  |                          | 453                                             |       |                                        | 2,826     |                    |  |                 | 475     |                                                              |   | 3,192     |  |          | 3,667     |          |   | 2,881   |  | 1954       |  | 01/17/78  |  | 17 years    
|WESTGATE (California)                       |  | CA |      |             |                         |                         |   | 6,319                                  |  |                          | 107,284                                         |       |                                        | 2,561     |                    |  |                 | 6,319   |                                                              |   | 109,845   |  |          | 116,164   |          |   | 13,104  |  | 1960-1966  |  | 03/31/04  |  | 35 years    
|WHITE MARSH PLAZA (Maryland)                |  | MD |      |             | 10,359                   |                         |   | 3,478                                  |  |                          | 21,413                                          |       |                                        | 36        |                    |  |                 | 3,478   |                                                              |   | 21,449    |  |          | 24,927    |          |   | 1,448   |  | 1987       |  | 03/08/07  |  | 35 years    
|WHITE MARSH OTHER (Maryland)                |  | MD |      |             |                         |                         |   | 37,812                                 |  |                          | 1,843                                           |       |                                        | (7,729    | )                  |  |                 | 30,076  |                                                              |   | 1,850     |  |          | 31,926    |          |   | 132     |  | 1985       |  | 03/08/07  |  | 35 years    
|WILDWOOD (Maryland)                         |  | MD |      |             | 25,773                   |                         |   | 9,111                                  |  |                          | 1,061                                           |       |                                        | 7,514     |                    |  |                 | 9,111   |                                                              |   | 8,575     |  |          | 17,686    |          |   | 7,313   |  | 1958       |  | 05/05/69  |  | 33 1/3 years
|WILLOW GROVE (Pennsylvania)                 |  | PA |      |             |                         |                         |   | 1,499                                  |  |                          | 6,643                                           |       |                                        | 19,010    |                    |  |                 | 1,499   |                                                              |   | 25,653    |  |          | 27,152    |          |   | 17,685  |  | 1953       |  | 11/20/84  |  | 35 years    
|WILLOW LAWN (Virginia)                      |  | VA |      |             |                         |                         |   | 3,192                                  |  |                          | 7,723                                           |       |                                        | 65,052    |                    |  |                 | 7,790   |                                                              |   | 68,177    |  |          | 75,967    |          |   | 37,060  |  | 1957       |  | 12/05/83  |  | 35 years    
|WYNNEWOOD (Pennsylvania)                    |  | PA |      |             | 29,882                   |                         |   | 8,055                                  |  |                          | 13,759                                          |       |                                        | 14,399    |                    |  |                 | 8,055   |                                                              |   | 28,158    |  |          | 36,213    |          |   | 12,410  |  | 1948       |  | 10/29/96  |  | 35 years    
|                                            |  |    |      |             |                          |                         |   |                                        |  |                          |                                                 |       |                                        |           |                    |  |                 |         |                                                              |   |           |  |          |           |          |   |         |  |            |  |           |  |             
|TOTALS                                      |  |    |      | $           | 452,810                  |                         | $ | 759,247                                |  | $                        | 1,200,166                                       |       | $                                      | 1,714,272 |                    |  | $               | 762,611 |                                                              | $ | 2,911,074 |  | $        | 3,673,685 |          | $ | 846,258 |  |            |  |           |  |             
|                                            |  |    |      |             |                          |                         |   |                                        |  |                          |                                                 |       |                                        |           |                    |  |                 |         |                                                              |   |           |  |          |           |          |   |         |  |            |  |           |  |             



F-41



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATIONCONTINUED

Three
Years Ended December 31, 2008

Reconciliation of Total Cost

(In thousands)



|                                                                |  |   |           |  
|--------------------------------------------------------------- |  | - | --------- | -
|Balance, December 31, 2005                                      |  | $ | 2,829,321 |  
|Additions during period                                         |  |   |           |  
|Acquisitions                                                    |  |   | 317,287   |  
|Improvements                                                    |  |   | 112,930   |  
|Deduction during perioddisposition and retirements of property |  |   | (55,280   | )
|                                                                |  |   |           |  
|Balance, December 31, 2006                                      |  |   | 3,204,258 |  
|Additions during period                                         |  |   |           |  
|Acquisitions                                                    |  |   | 313,934   |  
|Improvements                                                    |  |   | 140,613   |  
|Deduction during perioddisposition and retirements of property |  |   | (205,958  | )
|                                                                |  |   |           |  
|Balance, December 31, 2007                                      |  |   | 3,452,847 |  
|Additions during period                                         |  |   |           |  
|Acquisitions                                                    |  |   | 122,662   |  
|Improvements                                                    |  |   | 144,192   |  
|Deduction during perioddisposition and retirements of property |  |   | (46,016   | )
|                                                                |  |   |           |  
|Balance, December 31, 2008                                      |  | $ | 3,673,685 |  
|                                                                |  |   |           |  



|(A) | For Federal tax purposes, the aggregate cost basis is approximately $3.1 billion as of December 31, 2008.
|--- | ---------------------------------------------------------------------------------------------------------



F-42



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATIONCONTINUED

Three
Years Ended December 31, 2008

Reconciliation of Accumulated

Depreciation and Amortization

(In thousands)



|                                                                 |  |   |         |  
|---------------------------------------------------------------- |  | - | ------- | -
|Balance, December 31, 2005                                       |  | $ | 663,750 |  
|Additions during perioddepreciation and amortization expense    |  |   | 89,564  |  
|Deductions during perioddisposition and retirements of property |  |   | (12,807 | )
|                                                                 |  |   |         |  
|Balance, December 31, 2006                                       |  |   | 740,507 |  
|Additions during perioddepreciation and amortization expense    |  |   | 96,454  |  
|Deductions during perioddisposition and retirements of property |  |   | (80,258 | )
|                                                                 |  |   |         |  
|Balance, December 31, 2007                                       |  |   | 756,703 |  
|Additions during perioddepreciation and amortization expense    |  |   | 101,321 |  
|Deductions during perioddisposition and retirements of property |  |   | (11,766 | )
|                                                                 |  |   |         |  
|Balance, December 31, 2008                                       |  | $ | 846,258 |  
|                                                                 |  |   |         |  



F-43



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE IV

MORTGAGE LOANS ON REAL
ESTATE

Year Ended December 31, 2008

(Dollars in thousands)



|                                                       |  |                                                      |  |               |  |                                                            |  |            |  |                         |        |                               |   |        |    
|------------------------------------------------------ |  | ---------------------------------------------------- |  | ------------- |  | ---------------------------------------------------------- |  | ---------- |  | ----------------------- | ------ | ----------------------------- | - | ------ | ---
|Column A                                               |  | Column B                                             |  | Column C      |  | Column D                                                   |  | Column E   |  | Column F                |        | Column G                      |  
|Description of Lien                                    |  | Interest Rate                                        |  | Maturity Date |  | Periodic PaymentTerms                                      |  | PriorLiens |  | Face Amountof Mortgages |        | CarryingAmount ofMortgages(1) |  
|Mortgage on land and mixed-use building in Norwalk, CT |  | Greater of 10%or LIBOR plus725 basis points          |  | November2009  |  | Interest only, balloon payment due at maturity             |  |           |  | $                       | 5,515  |                               | $ | 5,397  | (2)
|                                                       |  |                                                      |  |               |  |                                                           
|Mortgage on Hotel in San Jose, CA                      |  | 9%                                                   |  | August 2016   |  | Principal and interest; balloon payment due at maturity(3) |  |           |  |                         | 16,221 |                               |   | 12,063 |    
|                                                       |  |                                                      |  |               |  |                                                           
|Mortgage on retail buildings in Philadelphia, PA       |  | 8% or 10%based on timingof draws, plus participation |  | May 2021      |  | Interest only monthly; balloon payment due at maturity     |  |           |  |                         | 19,070 |                               |   | 19,070 | (4)
|                                                       |  |                                                      |  |               |  |                                                           
|Mortgage on retail buildings in Philadelphia, PA       |  | 10% plusparticipation                                |  | May 2021      |  | Interest only; balloon payment due at maturity             |  |           |  |                         | 9,250  |                               |   | 9,250  |    
|                                                       |  |                                                      |  |               |  |                                                            |  |            |  |                         |        |                               |   |        |    
|                                                       |  |                                                      |  |               |  |                                                            |  |            |  | $                       | 50,056 |                               | $ | 45,780 |    
|                                                       |  |                                                      |  |               |  |                                                            |  |            |  |                         |        |                               |   |        |    



|(1) | For Federal tax purposes, the aggregate tax basis is approximately $49.9 million as of December 31, 2008.
|--- | ---------------------------------------------------------------------------------------------------------

|(2) | The borrower has two one-year extension options with interest at the greater of 12% or LIBOR plus 925 basis points. The mortgage is available for up to $7.3 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | This note was amended on August 4, 2006. The amended note decreased the interest from 14% to 9% per annum, and requires monthly payments of principal and interest based on
15-year amortization schedule.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | This mortgage is available for up to $25.0 million.
|--- | ---------------------------------------------------



F-44



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE IV

MORTGAGE LOANS ON REAL ESTATECONTINUED

Three Years Ended December 31, 2008

Reconciliation of Carrying Amount

(In thousands)



|                                     |  |   |        |  
|------------------------------------ |  | - | ------ | -
|Balance, December 31, 2005           |  | $ | 40,531 |  
|Additions during period:             |  |   |        |  
|Issuance of loans                    |  |   | 4,321  |  
|Deductions during period:            |  |   |        |  
|Collection and satisfaction of loans |  |   | (4,055 | )
|Allowance for collectibility         |  |   | (280   | )
|Amortization of discount             |  |   | 239    |  
|                                     |  |   |        |  
|Balance, December 31, 2006           |  |   | 40,756 |  
|Additions during period:             |  |   |        |  
|Issuance of loans                    |  |   | 8      |  
|Deductions during period:            |  |   |        |  
|Collection and satisfaction of loans |  |   | (556   | )
|Amortization of discount             |  |   | 430    |  
|                                     |  |   |        |  
|Balance, December 31, 2007           |  |   | 40,638 |  
|Additions during period:             |  |   |        |  
|Issuance of loans                    |  |   | 5,612  |  
|Loan fee                             |  |   | (219   | )
|Deductions during period:            |  |   |        |  
|Collection and satisfaction of loans |  |   | (719   | )
|Amortization of discount /loan fee   |  |   | 468    |  
|                                     |  |   |        |  
|Balance, December 31, 2008           |  | $ | 45,780 |  
|                                     |  |   |        |  



F-45



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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|3.1         |  | Declaration of Trust of Federal Realty Investment Trust dated May 5, 1999 as amended by the Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated May 6,
2004, as corrected by the Certificate of Correction of Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated June 17, 2004 (previously filed as Exhibit 3.1 to the Trusts Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005 (File No. 1-07533) (the 2005 2Q Form 10-Q) and incorporated herein by reference)
|            | 
|3.2         |  | Amended and Restated Bylaws of Federal Realty Investment Trust dated February 12, 2003, as amended October 29, 2003, May 5, 2004 and February 17, 2006 (previously filed as Exhibit 3.2 to the
Trusts Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-07533) (the 2005 Form 10-K) and incorporated herein by reference)                                                                                                                                                                                                    
|            | 
|4.1         |  | Specimen Common Share certificate (previously filed as Exhibit 4(i) to the Trusts Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-07533)
(the 1999 Form 10-K) and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                        
|            | 
|4.2         |  | Articles Supplementary relating to the 5.417% Series 1 Cumulative Convertible Preferred Shares of Beneficial Interest (previously filed as Exhibit 4.1 to the Trusts Current
Report on Form 8-K filed on March 13, 2007, (File No. 1-07533) and incorporated herein by reference)                                                                                                                                                                                                                                                                        
|            | 
|4.3         |  | Amended and Restated Rights Agreement, dated March 11, 1999, between the Trust and American Stock Transfer & Trust Company (previously filed as Exhibit 1 to the Trusts Registration
Statement on Form 8-A/A filed on March 11, 1999 (File No. 1-07533) and incorporated herein by reference)                                                                                                                                                                                                                                                            
|            | 
|4.4         |  | First Amendment to Amended and Restated Rights Agreement, dated as of November 2003, between the Trust and American Stock Transfer & Trust Company (previously filed as Exhibit 4.5 to the
Trusts Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-07533) and incorporated herein by reference)                                                                                                                                                                                                                               
|            | 
|4.5         |  | Indenture dated December 13, 1993 related to the Trusts 7.48% Debentures due August 15, 2026; and 6.82% Medium Term Notes due August 1, 2027; (previously filed as Exhibit
4(a) to the Trusts Registration Statement on Form S-3 (File No. 33-51029), and amended on Form S-3 (File No. 33-63687), filed on December 13, 1993 and incorporated herein by reference)                                                                                                                                                                                     
|            | 
|4.6         |  | Indenture dated September 1, 1998 related to the Trusts 8.75% Notes due December 1, 2009; 61/8% Notes due November 15, 2007; 4.50% Notes due 2011; 5.65% Notes due 2016; 6.00% Notes due 2012; 6.20% Notes due 2017; and 5.40% Notes due 2013 (previously filed as Exhibit 4(a) to the
Trusts Registration Statement on Form S-3 (File No. 333-63619) filed on September 17, 1998 and incorporated herein by reference)                                                                                                                                 
|            | 
|4.7         |  | Pursuant to Regulation S-K Item 601(b)(4)(iii), the Trust by this filing agrees, upon request, to furnish to the Securities and Exchange Commission a copy of other instruments defining the
rights of holders of long-term debt of the Trust                                                                                                                                                                                                                                                                                                             
|            | 
|10.1        |  | Amended and Restated 1993 Long-Term Incentive Plan, as amended on October 6, 1997 and further amended on May 6, 1998 (previously filed as Exhibit 10.26 to the Trusts
Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-07533) and incorporated herein by reference)                                                                                                                                                                                                                                                           
|            | 
|10.2        |  | Fiscal Agency Agreement dated as of October 28, 1993 between the Trust and Citibank, N.A. (previously filed as an exhibit to the Trusts Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 (File No. 1-07533) and incorporated herein by reference)                                                                                                                                                                                                                                                                                  



1



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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                        
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                            
|10.3        |  | Form of Severance Agreement between the Trust and Certain of its Officers dated December 31, 1994 (previously filed as a portion of Exhibit 10 to the Trusts Annual Report on
Form 10-K for the year ended December 31, 1994 (File No. 1-07533) and incorporated herein by reference)                                 
|            | 
|10.4        |  | * Severance Agreement between the Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of Exhibit 10 to the Trusts Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999 (File No. 1-07533) (the 1999 1Q Form 10-Q) and incorporated herein by reference)                   
|            | 
|10.5        |  | * Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of Exhibit 10 to the 1999 1Q Form 10-Q and
incorporated herein by reference)                                                                                                   
|            | 
|10.6        |  | * Amendment to Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 16, 2005 (previously filed as Exhibit 10.12 to the Trusts Annual
Report on Form 10-K for the year ended December 31, 2004 (File No. 1-07533) (the 2004 Form 10-K) and incorporated herein by reference)
|            | 
|10.7        |  | * Split Dollar Life Insurance Agreement dated August 12, 1998 between the Trust and Donald C. Wood (previously filed as a portion of Exhibit 10 to the Trusts Annual
Report on Form 10-K for the year ended December 31, 2000 (File No. 1-07533) and incorporated herein by reference)                                
|            | 
|10.8        |  | * Severance Agreement between the Trust and Jeffrey S. Berkes dated March 1, 2000 (previously filed as a portion of Exhibit 10 to the Trusts Annual Report on Form 10-K
for the year ended December 31, 2001 (File No. 1-07533) and incorporated herein by reference)                                                 
|            | 
|10.9        |  | * Amendment to Severance Agreement between Federal Realty Investment Trust and Jeffrey S. Berkes dated February 16, 2005 (previously filed as Exhibit 10.17 to the 2004 Form 10-K and
incorporated herein by reference)                                                                                                
|            | 
|10.10       |  | * Severance Agreement dated March 1, 2002 between the Trust and Larry E. Finger (previously filed as a portion of Exhibit 10 to the Trusts Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 (File No. 1-07533) and incorporated herein by reference)                                                 
|            | 
|10.11       |  | * Amendment to Severance Agreement between Federal Realty Investment Trust and Larry E. Finger dated February 16, 2005 (previously filed as Exhibit 10.19 to the 2004 Form 10-K and
incorporated herein by reference)                                                                                                  
|            | 
|10.12       |  | * Amendment to Stock Option Agreement dated August 15, 2002 between the Trust and Dawn M. Becker (previously filed as a portion of Exhibit 10 to the Trusts Quarterly
Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 1-075330 and incorporated herein by reference)                           
|            | 
|10.13       |  | 2001 Long-Term Incentive Plan (previously filed as Exhibit 99.1 to the Trusts S-8 Registration Number 333-60364 filed on May 7, 2001 and incorporated herein by
reference)                                                                                                                                            
|            | 
|10.14       |  | * Health Coverage Continuation Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 16, 2005 (previously filed as Exhibit 10.26 to the 2004 Form 10-K and
incorporated herein by reference)                                                                                             
|            | 
|10.15       |  | * Severance Agreement between the Trust and Dawn M. Becker dated April 19, 2000 (previously filed as Exhibit 10.26 to the Trusts 2005 2Q Form 10-Q and incorporated herein by reference)                                                                                                                              



2



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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|10.16       |  | * Amendment to Severance Agreement between the Trust and Dawn M. Becker dated February 16, 2005 (previously filed as Exhibit 10.27 to the 2004 Form 10-K and incorporated herein by
reference)                                                                                                                                                                                            
|            | 
|10.17       |  | Form of Restricted Share Award Agreement for awards made under the Trusts 2003 Long-Term Incentive Award Program for shares issued out of 2001 Long-Term Incentive Plan (previously filed
as Exhibit 10.28 to the 2004 Form 10-K and incorporated herein by reference)                                                                                                                   
|            | 
|10.18       |  | Form of Restricted Share Award Agreement for awards made under the Trusts Annual Incentive Bonus Program for shares issued out of 2001 Long-Term Incentive Plan (previously filed as
Exhibit 10.29 to the 2004 Form 10-K and incorporated herein by reference)                                                                                                                           
|            | 
|10.19       |  | Form of Option Award Agreement for options awarded under 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.30 to the 2004 Form 10-K and incorporated herein by
reference)                                                                                                                                                                                                     
|            | 
|10.20       |  | Form of Option Award Agreement for awards made under the Trusts 2003 Long-Term Incentive Award Program for shares issued out of the 2001 Long-Term Incentive Plan (previously filed as
Exhibit 10.32 to the 2005 Form 10-K and incorporated herein by reference)                                                                                                                         
|            | 
|10.21       |  | Credit Agreement dated as of July 28, 2006, by and among the Trust, Wachovia Capital Markets LLC, Wachovia Bank, National Association and various other financial institutions (previously
filed as Exhibit 10.1 to the Trusts Current Report on Form 8-K (File No. 1-07533), filed on July 31, 2006 and incorporated herein by reference)                                               
|            | 
|10.22       |  | Amended and Restated 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.34 to the Trusts Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 1-07533)
and incorporated herein by reference)                                                                                                                                                           
|            | 
|10.23       |  | Credit Agreement dated as of November 9, 2007, by and among the Trust, Wachovia Capital Markets LLC, Wachovia Bank, National Association and various other financial institutions (previously
filed as Exhibit 10.25 to the Trusts Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (File No. 1-07533) (the 2007 Form 10-K) and incorporated herein by reference)
|            | 
|10.24       |  | Consulting Agreement between the Trust and Larry E. Finger dated January 1, 2008 (previously filed as Exhibit 10.26 to the 2007 Form 10-K and incorporated herein by
reference)                                                                                                                                                                                                           
|            | 
|10.25       |  | Change in Control Agreement between the Trust and Andrew P. Blocher dated February 12, 2007 (previously filed as Exhibit 10.27 to the Trusts Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008 (File No. 1-07533) and incorporated herein by reference)                                                                                                             
|            | 
|10.26       |  | Amendment to Severance Agreement between the Trust and Donald C. Wood dated January 1, 2009 (filed herewith)                                                                                                                                                                                                                                                                              
|            | 
|10.27       |  | Second Amendment to Executive Agreement between the Trust and Donald C. Wood dated January 1, 2009 (filed herewith)                                                                                                                                                                                                                                                                       
|            | 
|10.28       |  | Amendment to Health Coverage Continuation Agreement between the Trust and Donald C. Wood dated January 1, 2009 (filed herewith)                                                                                                                                                                                                                                                           
|            | 
|10.29       |  | Second Amendment to Severance Agreement between the Trust and Jeffrey S. Berkes dated January 1, 2009 (filed herewith)                                                                                                                                                                                                                                                                    
|            | 
|10.30       |  | Second Amendment to Severance Agreement between the Trust and Dawn M. Becker dated January 1, 2009 (filed herewith)                                                                                                                                                                                                                                                                       



3



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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                 
|            | 
|10.31       |  | Amendment to Change in Control Agreement between the Trust and Andrew P. Blocher dated January 1, 2009 (filed herewith)                     
|            | 
|10.32       |  | Amendment to Stock Option Agreements between the Trust and Andrew P. Blocher dated February 17, 2009 (filed herewith)                       
|            | 
|10.33       |  | Restricted Share Award Agreement between the Trust and Andrew P. Blocher dated February 17, 2009 (filed herewith)                           
|            | 
|10.34       |  | Combined Incentive and Non-Qualified Stock Option Agreement between the Trust and Andrew P. Blocher dated February 17, 2009 (filed herewith)
|            | 
|10.35       |  | Severance Agreement between the Trust and Andrew P. Blocher dated February 17, 2009 (filed herewith)                                        
|            | 
|21.1        |  | Subsidiaries of Federal Realty Investment Trust (filed herewith)                                                                            
|            | 
|23.1        |  | Consent of Grant Thornton LLP (filed herewith)                                                                                              
|            | 
|24.1        |  | Power of Attorney (included on signature page)                                                                                              
|            | 
|31.1        |  | Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith)                                                                    
|            | 
|31.2        |  | Rule 13a-14(a) Certification of Chief Financial Officer (filed herewith)                                                                    
|            | 
|32.1        |  | Section 1350 Certification of Chief Executive Officer (filed herewith)                                                                      
|            | 
|32.2        |  | Section 1350 Certification of Chief Financial Officer (filed herewith)                                                                      



|* | Management contract or compensatory plan to be filed under Item 15(b) of Form 10-K.
|- | -----------------------------------------------------------------------------------



4