Use these links to rapidly review the documentHERITAGE PROPERTY INVESTMENT TRUST, INC. ANNUAL REPORT ON FORM 10-K INDEX HERITAGE PROPERTY INVESTMENT TRUST, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|ý  |  | Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2002
|-- |  | --------------------------------------------------------------------------------------------------------------------------------
|OR
|o  |  | Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934                                        

Commission File Number: 001-31297

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HERITAGE PROPERTY INVESTMENT
TRUST, INC.(Exact name of registrant as specified in its charter)

|Maryland(State or other jurisdiction of
incorporation or organization)                                       |  | 04-3474810(I.R.S. Employer Identification No.)
|------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------
|535 Boylston Street
Boston, Massachusetts 02116(Address, including zip code, of principal executive offices)
|Registrant's telephone number, including area code: (617) 247-2200                                          

|Securities registered pursuant to Section 12(b) of the Act: |  | Common Stock, par value $.001 per share
New York Stock Exchange, Inc.
|----------------------------------------------------------- |  | ---------------------------------------------------------------------
|Securities registered pursuant to Section 12(g) of the Act: |  | None                                                                 

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.
            Yes    ý     No    o

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.            o

Indicate
by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes o    No ý

As
of June 28, 2002, the aggregate market value of the voting stock held by nonaffiliates of the Registrant was $478 million.

As
of March 26, 2003, the number of shares outstanding of the Registrant's common stock was 41,778,708.

Documents Incorporated by Reference

Portions
of the proxy statement for the 2003 Annual Meeting of Stockholders are incorporated by reference in Part III.

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HERITAGE PROPERTY INVESTMENT TRUST, INC.  ANNUAL REPORT ON FORM 10-K  INDEX



|Item No.
|--------
|PART I  
|Item 1: 
|Item 2: 
|Item 3: 
|Item 4: 
|PART II 
|Item 5: 
|Item 6: 
|Item 7: 
|Item 7a:
|Item 8: 
|Item 9: 
|PART III
|Item 10:
|Item 11:
|Item 12:
|Item 13:
|Item 14:
|PART IV 
|Item 15:

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PART I

Forward-Looking Statements

This Annual Report on Form 10-K, together with other statements and information publicly disseminated by Heritage Property Investment
Trust, Inc. ("Heritage" or the "Company"), contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. The forward-looking statements reflect the Company's current views about future events and are subject to risks, uncertainties,
assumptions and changes in circumstances that may cause the Company's actual results to differ significantly from those expressed in any forward-looking statement. Forward-looking statements involve
known and unknown risks, uncertainties and other factors, which are, in some cases, beyond the Company's control and which could materially affect actual results and therefore should not be relied
upon. The factors that could cause actual results to differ materially from current expectations include financial performance and operations of the Company's shopping centers and tenants, real estate
conditions, current and future bankruptcies of the Company's tenants, execution of shopping center redevelopment programs, the Company's ability to finance its operations, competition, successful
completion of renovations, completion of pending acquisitions, the availability of additional acquisitions, changes in economic, business, competitive market and regulatory conditions, acts of
terrorism or war and other risks detailed in this Annual Report on Form 10-K and from time to time in other filings with the Securities and Exchange Commission. The forward-looking
statements contained herein represent the Company's judgment as of the date of this report, and the Company cautions readers not to place undue reliance on such statements.

Item 1: Business

Overview

Heritage, a fully integrated, self-administered and self-managed real estate investment trust, or "REIT", is a Maryland corporation and
one of the nation's largest owners of neighborhood and community shopping centers. The Company acquires, owns, manages, leases and redevelops primarily grocer-anchored neighborhood and community
shopping centers in the Eastern and Midwestern United States. As of December 31, 2002, we had a shopping center portfolio consisting of 152 shopping centers, located in 26 states and totaling
approximately 30.7 million square feet of total gross leasable area ("GLA"), of which approximately 25.9 million square feet is company-owned GLA. Our shopping center portfolio was
approximately 93% leased as of December 31, 2002.

We
are headquartered in Boston, Massachusetts and have 13 regional offices located in the Eastern and Midwestern United States. As of December 31, 2002, we also owned four office
buildings and ten single-tenant properties. In keeping with our focus on our core portfolio of primarily grocer-anchored shopping centers, we completed the disposition of our ten single-tenant
properties subsequent to December 31, 2002.

We
elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing with our initial taxable year ended December 31, 1999. We believe that we
are organized in conformity with the requirements for qualification as a REIT under the Internal Revenue Code, and that our manner of operation enables us to meet the requirements for taxation as a
REIT for federal income tax purposes. To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT
taxable income to our stockholders. As a REIT, we generally will not be subject to federal income tax on REIT taxable income we distribute to our stockholders. If we fail to qualify as a REIT in any
taxable year, we

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will be subject to federal income tax at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to some federal, state and local taxes on our income and property.

2002 Highlights

A summary of financial highlights, significant events and transactions that we completed in 2002 include:



Subsequent Events



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Our Competitive Strengths

We believe that we distinguish ourselves from other owners and operators of community and neighborhood shopping centers in a number of ways, including by our:



Business and Growth Strategies

Our business strategy has been, and will continue to be, to generate stable and increasing cash flow and asset value by acquiring and managing a portfolio of real
estate properties located in attractive

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markets with strong economic and demographic characteristics. Our business strategy consists of the following elements:



Financing Strategy

Our financing strategy is to maintain a strong and flexible financial position by maintaining a prudent level of leverage and managing our variable interest rate
exposure. We intend to finance future growth with the most advantageous source of capital available to us at the time of an acquisition. These sources may include selling common stock, preferred stock
or debt securities through public offerings or private placements, incurring or assuming additional indebtedness through secured or unsecured borrowings and issuing units of limited partnership
interests of one of our operating partnerships in exchange for contributed property.

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In
2002, we completed several financing transactions. In April 2002, we completed our IPO and sold 14,080,556 shares (including the exercise of the underwriter's overallotment) of
our common stock at a price of $25.00 per share. We used the net proceeds from the IPO of $323 million to repay debt under our prior line of credit facility and to repay other indebtedness.

In
addition, in April 2002, we obtained a new $350 million unsecured line of credit with Fleet National Bank as agent. This new line of credit bears interest at either the
lender's base rate or a floating rate based on a spread over LIBOR ranging from 80 basis points to 135 basis points, depending upon our
debt rating. In addition, this line of credit has a facility fee based on the amount committed ranging from 15 to 25 basis points, depending on our debt rating. Both of our two operating partnerships
are borrowers under this new line of credit. We, and substantially all of our other subsidiaries, have guaranteed this new line of credit. We have used this new line of credit principally to fund
growth opportunities and for working capital purposes.

Acquisition and Market Selection Process

General

We seek to acquire primarily grocer-anchored neighborhood and community shopping centers in neighborhood trade areas with attractive demographics. When specific
markets are selected, we seek a convenient and easily accessible location with abundant parking facilities close to residential communities, with excellent visibility for our tenants and easy access
for neighborhood shoppers. In particular, we emphasize the following factors:



2002 Acquisition Activity

During 2002, we completed the acquisition of ten community shopping centers. These shopping centers total 3.1 million square feet of GLA, of which we
acquired 2.4 million square feet of GLA. In addition, we completed the acquisition of two parcels at our shopping centers aggregating 0.1 million square feet of GLA. Set forth below is
information regarding our 2002 property acquisitions.

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In
March 2002, we completed the acquisition of Cross Keys Commons, a 371,000 square foot grocer-anchored shopping center located in Turnersville, New Jersey. At
December 31, 2002, the center was 93% leased and anchored by Acme Markets, Wal-Mart and Staples.

In
May 2002, we completed the acquisition of Montgomery Towne Center, a 235,000 square foot grocer-anchored shopping center, of which we acquired 144,000 square feet, located in
Montgomery, Alabama. At December 31, 2002, the center was 99% leased and anchored by Barnes & Noble, and Bed, Bath & Beyond and included a separately owned Winn Dixie (49,000
square feet) and Carmike Cinemas (32,600 square feet).

In
May 2002, we completed the acquisition of an additional 32,000 square feet at Montgomery Towne Center, which was leased to Circuit City.

In
May 2002, we completed our acquisition of the Pioneer Properties, consisting of the following four shopping centers, three of which are grocer-anchored, as follows:



In
May 2002, we also completed the acquisition of Marketplace Shopping Center, a 242,000 square foot grocer-anchored shopping center located in Independence, Missouri. At
December 31, 2002, the center was 97% leased and anchored by Price Chopper and Old Navy.

In
August 2002, we completed the acquisition of an additional 38,000 square feet at Camelot Shopping Center, which was leased to Winn-Dixie.

In
December 2002, we completed the acquisition of Apple Glen Crossing, a 453,000 square foot grocer-anchored shopping center, of which we acquired 150,000 square feet, located in
Fort Wayne, Indiana. At December 31, 2002, the center was 96% leased and anchored by Best Buy, Dick's Sporting Goods and Petsmart and included a separately owned Wal-Mart
Supercenter (214,000 square feet) and Kohl's (89,000 square feet).

In
December 2002, we also completed the acquisition of Warminster Towne Center, a 320,000 square foot grocer-anchored shopping center, of which, we acquired 239,000 square feet,
located in Warminster, Bucks County, Pennsylvania. At December 31, 2002, the center was 97% leased and anchored by Shop Rite, Ross Dress for Less, Petsmart and Office Max and included a
separately owned Kohl's (81,000 square feet).

In
December 2002, we also completed the acquisition of Montgomery Commons, a 299,000 square foot grocer-anchored shopping center, of which we acquired 95,000 square feet located
in Montgomery, Alabama adjacent to the Company's existing 267,000 square foot Montgomery Towne Center. At December 31, 2002, the center was 99% leased and anchored by Marshalls, Michael's and
included a separately owned Wal-Mart Supercenter (204,000 square feet).

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In-House Leasing and Property Management Program

We believe that effective leasing is the key to successful asset management. We maintain close relationships with our tenants, properties and markets by
maintaining 13 regional offices in addition to our corporate headquarters in Boston. A majority of these offices are staffed with leasing representatives. Our primary goal is for each leasing
representative to become an expert in his or her marketplace by becoming familiar with current tenants as well as potential local, regional and national tenants who would complement our current tenant
mix. The renewal and replacement of tenants is critical to our leasing and management performance.

Our
full time property managers are located throughout our regional offices, which make them easily accessible to our properties. This enables our managers to remain in frequent contact
with our tenants to ensure the proper maintenance of our properties. We periodically renovate and improve our properties in response to market conditions to attract and retain our tenants.

Our
leasing and property management functions are supervised and administered by our executive officers at our Boston headquarters. Corporate management, leasing and property management
personnel regularly visit all of our properties to support our regional personnel and to ensure implementation of our policies and directives.

Competition

We believe that competition for the acquisition and operation of retail shopping centers is highly fragmented. We face competition from institutional pension
funds, other REITs and owner-operators engaged in the acquisition, ownership and leasing of shopping centers as well as from numerous local, regional and national real estate developers and owners in
each of our markets.

We
encounter competition for acquisitions of existing income-producing properties. We also face competition in leasing available space at our properties to prospective tenants. The
actual competition for tenants varies depending upon the characteristics of each local market in which we own and manage property. We believe that the principal competitive factors in attracting
tenants in our market areas are location, price, the presence of anchor tenants and maintenance of properties.

Employees

At December 31, 2002, we had 120 total employees. Our employees included 23 leasing and support personnel, 45 property management and support personnel, 8
legal and support personnel, and 44 corporate management and support personnel. We believe that our relations with our employees are good. None of our employees are unionized.

Available Information

We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under the Securities
Exchange Act of 1934 (the "Exchange Act"). The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The
public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that
contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that we
file with the SEC athttp://www.sec.gov.

We
also make available free of charge on or through our Internet website (http://www.heritagerealty.com) our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as
soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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Risk Factors

An investment in our common stock involves significant risks, which should be considered in addition to other information set forth elsewhere in this
Form 10-K.

Adverse market conditions affect our results of operations.

The economic performance and value of our real estate assets is subject to all of the risks associated with owning and operating real estate, including risks
related to adverse changes in national, regional and local economic and market conditions. Our properties currently are located in 26 states in the East and the Midwest. The economic condition of each
of our markets may be dependent on one or more industries. An economic downturn generally or in one of these industry sectors may result in an increase in tenant bankruptcies, which may harm our
performance in the affected market. Economic and market conditions also may impact the ability of our tenants to make lease payments. If our properties do not generate sufficient income to meet our
operating expenses, including future debt service, our income and results of operations would be significantly harmed.

Downturns in the retailing industry likely will have a direct impact on our performance.

Our properties consist of community and neighborhood shopping centers. Our performance therefore is linked to economic conditions in the market for retail space
generally. The market for retail space has been, and could in the future be, adversely affected by weakness in the national, regional and local economies, the adverse financial condition of some large
retailing companies, the ongoing consolidation in the retail sector, the increasing market strength of Wal-Mart, the excess amount of retail space in a number of markets, and increasing
consumer purchases through catalogues or the Internet. To the extent that any of these conditions occur or continue, they are likely to impact market rents for retail space.

A downturn in our tenants' businesses, tenant bankruptcies, leasing delays we encounter, particularly with respect to our anchor tenants, could affect
our ability to collect balances due from tenants and could seriously harm our operating results.

At any time, our tenants may experience a downturn in their businesses that may weaken their financial condition. As a result, our tenants may delay lease
commencement, fail to make rental payments when due, or declare bankruptcy. We are subject to the risk that these tenants may be unable to make their lease payments or may decline to extend a lease
upon its expiration. Any tenant bankruptcies, leasing delays, or failure to make rental payments when due could result in the termination of the tenant's lease and material losses to our company and
would harm our operating results.

If
any of our anchor tenants becomes insolvent, suffers a downturn in business, or decides not to renew its lease or vacates a space at a property and prevents us from
re-leasing that space by continuing to pay base rent for the balance of the term, it may seriously harm our business.

At
December 31, 2002, the Company had 12 tenants that contributed approximately 1.8% of our annualized base rent for all leases in which tenants were in occupancy at
December 31, 2002, operating under bankruptcy protection, the largest of which was Kmart Corporation ("Kmart").

On
January 22, 2002, Kmart filed for bankruptcy protection. We currently lease space to Kmart at seven of our shopping centers, all of which were physically occupied at
December 31, 2002, and represented approximately 1.3% of our total annualized base rent for all leases in which tenants were in occupancy at December 31, 2002. In addition, Kmart owns
store locations at four of our shopping centers and subleases space from a third party tenant at one of our other locations.

On
March 8, 2002, Kmart announced that it intended to close 284 store locations as part of its bankruptcy reorganization. None of the twelve store locations described above were
included in the list

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of announced store closings. However, we agreed with Kmart to a rent reduction at one of our shopping centers of approximately $290,000 on an annualized basis.

On
January 14, 2003, Kmart announced that it intends to close an additional 326 store locations as part of its continued bankruptcy reorganization. Three of the twelve store
locations described above were included in the list of announced store closings, including the location for which we had previously granted a rent reduction. These three planned store closings total
approximately 290,120 square feet and represented approximately 0.59% of our total annualized base rent for all leases in which tenants were in occupancy at December 31, 2002.

Although
Kmart has announced its current intended store closings, we are not able to fully predict the impact on our business of Kmart's bankruptcy filing at this time. For instance,
Kmart could decide to close additional stores, including some or all of our remaining locations, terminate a substantial number of leases with us, or request additional rent reductions or deferrals.
Any of these actions could adversely affect our rental revenues, and the impact may be material. In addition, Kmart's termination of leases or closure of stores could result in lease terminations or
reductions in rent by other tenants in the same shopping centers, which could materially harm our business.

Any
bankruptcy filings by or relating to one of our tenants or a lease guarantor would bar all efforts by us to collect pre-bankruptcy debts from that tenant, the lease
guarantor or their property, unless we receive an order permitting us to do so from the bankruptcy court. A tenant or lease guarantor bankruptcy could delay our efforts to collect past due balances
under the relevant leases, and could ultimately preclude full collection of these sums. If a tenant assumes the lease while in bankruptcy, all pre-bankruptcy balances due under the lease
must be paid to us in full. However, if a tenant rejects the lease while in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold may be paid only to the
extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. It is possible that we may recover substantially less than the full value of any
unsecured claims we hold, which may harm our financial condition.

Certain provisions of our leases with our tenants may harm our operating performance.

We have entered into leases with our tenants that allow the tenant to terminate their lease or to seek a rent reduction from us if an anchor tenant in the same
shopping center terminates its lease with us or fails to occupy the premises. In that event, we may be unable to re-lease the vacated space. Similarly, the leases of some anchor tenants
may permit the anchor tenant to transfer its lease to another retailer. The transfer to a new anchor tenant could cause customer traffic in the retail center to decrease, which would reduce the income
generated by that retail center. A transfer of a lease to a new anchor tenant could also allow other tenants to make reduced rental payments or to terminate their leases at the retail center.

In
addition, in many cases, our tenant leases contain provisions giving the tenant the exclusive right to sell particular types of merchandise or provide specific types of services
within the particular retail center, or limit the ability of other tenants within that center to sell that merchandise or provide those services. When re-leasing space after a vacancy by
one of these other tenants, these provisions may limit the number and types of prospective tenants for the vacant space. The failure to re-lease or to re-lease on satisfactory
terms could harm our operating results.

We face increasing competition in the leasing of space and for the acquisition of additional real estate properties and other assets.

We face competition from similar retail centers within the neighborhood trade areas of each of our centers to renew leases or release space as leases expire. In
addition, any new competitive properties that are developed within the neighborhood trade areas of our existing properties may result in increased competition for customer traffic and creditworthy
tenants. Increased competition for tenants

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may require us to make capital improvements to properties, which we would not have otherwise planned to make. Any unbudgeted capital expenditures we undertake may divert cash that would otherwise be
available for distributions to stockholders. Ultimately, to the extent we are unable to renew leases or re-lease space as leases expire, cash flow from tenants would be decreased resulting
in lower operating results.

In
addition, we face competition in making acquisitions of additional real estate properties and other assets. Integral to our business strategy is our ability to expand through
acquisitions, which requires us to identify suitable acquisition candidates or investment opportunities that meet our criteria and are comparable with our growth strategy. We compete with many other
entities engaged in real estate investment activities for acquisitions of retail shopping centers, including institutional pension funds, other REITs and other owner-operators of shopping centers.
These competitors may drive up the price we must pay for the real estate properties, other assets and other companies we seek to acquire, or may succeed in acquiring those companies or assets
themselves. In addition, our potential acquisition
targets may find our competitors to be more attractive suitors because they may have greater resources, may be willing to pay more, or may have more compatible operating philosophy. In particular,
larger REITs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, during 2002, the number of
entities and the amount of funds competing for suitable investment properties increased. This resulted in increased demand for these assets and therefore increased prices paid for them. If we pay
higher prices for properties, our profitability will be reduced.

We anticipate that our working capital reserves and cash flow from operations may not be adequate to cover all of our cash needs and we will have to
obtain financing from other sources.

We anticipate that our working capital reserves will not be adequate to cover all of our cash needs. In order to cover those needs, we may have to obtain
financing from other sources. Sufficient financing may not be available or, if available, may not be available on economically feasible terms or on terms acceptable to us. Additional borrowings for
working capital purposes will increase our interest expense, and therefore may harm our financial condition and results of operations.

We have over $1 billion of debt, a portion of which is variable rate debt, which may impede our business and operating performance.

We have over $1.0 billion of outstanding indebtedness, approximately $251 million of which bears interest at a variable rate, and we have the
ability to borrow $116 million of additional variable rate debt under our line of credit. Increases in interest rates on our existing indebtedness would increase our interest expense, which
could harm our cash flow and our ability to pay distributions. For example, if market rates of interest on our variable rate debt outstanding at December 31, 2002 increase by 10%, or 27 basis
points, the increase in interest expense on our existing variable rate debt would decrease future earnings and cash flows by $0.7 million annually.

As
we anticipate that our internally generated cash will be adequate to repay only a portion of our indebtedness prior to maturity, we expect that we will be required to repay debt
through refinancings and/or equity offerings. In particular, we have outstanding indebtedness that will require principal amortization and balloon payments of $16 million in 2003. It is likely
that we will not have sufficient funds on hand to repay these balloon amounts at maturity and that we will have to borrow additional funds to make these payments. The amount of our existing
indebtedness may adversely affect our ability to repay debt through refinancings. If we are unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or
more of our properties on disadvantageous terms, which might result in losses to us and which might adversely affect cash available for distributions. If prevailing interest rates or other factors at
the time of refinancing result in higher

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interest rates on refinancing, our interest expense would increase, which would adversely affect our operating results.

We
also intend to incur additional debt in connection with future acquisitions of real estate. We may, in some instances, borrow under our line of credit or borrow new funds to acquire
properties. In addition, we may incur or increase our mortgage debt by obtaining loans secured by a portfolio of some or all of the real estate properties we acquire. We may also borrow funds, if
necessary, to satisfy the requirement that we distribute to stockholders as distributions at least 90% of our annual REIT taxable income, or otherwise as is necessary or advisable to ensure that we
maintain our qualification as a REIT for federal income tax purposes.

Our
substantial debt may harm our business and operating results, including:



Our financial covenants may restrict our operating or acquisition activities.

The mortgages on our properties contain customary negative covenants such as those that limit our ability, without the prior consent of the lender, to further
mortgage the applicable property or to discontinue insurance coverage. In addition, our outstanding unsecured debt contains customary restrictions, requirements and other limitations on our ability to
incur indebtedness, including total debt to assets ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt, which we must
maintain. Our ability to borrow under our line of credit is subject to compliance with these financial and other covenants. We rely on borrowings under our line of credit to finance acquisitions and
redevelopment activities and for working capital, and if we were unable to borrow under our line of credit or to refinance existing indebtedness, our financial condition and results of operations
would likely be adversely impacted. The indenture under which our subsidiary, the Bradley Operating Limited Partnership ("Bradley OP"), previously issued unsecured public debt also contains
limitations on the Bradley OP's ability to incur future secured and unsecured debt. If we need to pledge properties owned by the Bradley OP in order to borrow additional funds, these covenants could
reduce our flexibility in conducting our operations by limiting our ability to borrow and may create a risk of default on our debt if we cannot continue to satisfy these
covenants. If we breach covenants in our debt agreements, the lender can declare a default and require us to repay the debt immediately and, if the debt is secured, can immediately take possession of
the property securing the loan.

Mortgage debt obligations expose us to increased risk of loss of property, which could harm our financial condition.

Incurring mortgage debt increases our risk of loss because defaults on indebtedness secured by properties may result in foreclosure actions initiated by lenders
and ultimately our loss of the property securing any loans for which we are in default. We have entered into mortgage loans, which are secured by multiple properties and contain cross
collateralization and cross default provisions. Specifically, we have three individual loans, which are secured by 29 properties, eight properties and two properties. Cross default provisions under
each of these loans would allow a lender to foreclose on multiple properties in the event that we default on the loan. For tax purposes, a foreclosure of any of our properties would be treated as a
sale of the property for a purchase price equal to the outstanding

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balance of the debt secured by the property. If the outstanding balance of the debt secured by the property exceeds our tax basis in the property, we would recognize taxable income on foreclosure,
but would not receive any cash proceeds.

We could become too highly leveraged because our organizational documents do not contain any limitation on the amount of debt we may incur.

Our organizational documents do not limit the amount of indebtedness that we, or our two operating partnerships, may incur. Although we intend to maintain a
balance between our total outstanding indebtedness and the value of our portfolio, we could alter this balance at any time. If we become highly leveraged, then the resulting increase in debt service
could adversely affect our ability to make payments on our outstanding indebtedness and harm our financial condition.

The costs of compliance with laws and changes in laws may harm our operating results.

Costs associated with complying with laws and changes in laws may adversely affect our financial condition and operating results. We have incurred increases in
expenses as a result of regulatory changes and the costs of compliance at the corporate level associated with becoming a public company. These expenses are generally not passed through to our tenants
under our leases. As a result, these increased expenses may adversely affect our cash flow and our ability to service our debt and make distributions to our stockholders.

In
addition, our properties are subject to various federal, state and local regulatory requirements, such as the requirements of the Americans with Disabilities Act of 1990 and state and
local fire and life safety requirements. Failure to comply with these requirements could result in the imposition of fines by regulatory agencies and governmental authorities or awards of damages to
private litigants. In addition, these requirements are subject to change and new requirements could be imposed that would require significant unanticipated expenditures by us. Any of these events
could adversely affect our cash flow and distribution to stockholders.

The costs of compliance with environmental laws may harm our operating results.

Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be liable for the costs of removal or remediation
of hazardous or toxic substances present at, on, under, in, or released from its property. We currently have approximately 20 properties in our portfolio that are undergoing or have been identified as
requiring some form of remediation to clean up contamination. In some cases, contamination has migrated into the groundwater beneath our properties from adjacent properties, such as service stations.
In other cases, contamination has resulted from on-site uses by current or former owners or tenants, such as gas stations or dry cleaners, which have released pollutants such as gasoline
or dry-cleaning solvents into soil and/or groundwater. Based on our experience with properties in our portfolio, we believe the cost of remediation for contamination resulting from
dry-cleaning pollutants will range from approximately $15,000 to $300,000 per property, and the cost of remediation for contamination from gasoline pollutants will range from approximately
$15,000 to $100,000 per property. Any failure to properly remediate the contamination at our properties may result in liability to federal, state or local governments for damages to natural resources
or liability to third parties for property damage or personal injury and may adversely affect our ability to operate, lease or sell that property.

In
addition to the costs of remediation described above, we may incur additional costs to comply with federal, state and local laws, ordinances and regulations relating to environmental
protection and human health and safety generally. These laws, ordinances and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and
above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the management of asbestos and the remediation of contamination. Some of these
laws, ordinances and

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regulations may impose joint and several liabilities on current or former tenants, owners or operators for the costs of investigation or remediation of contaminated properties, regardless of fault or
the legality of the actions that caused the contamination. Some of these laws and regulations require compliance with new or more stringent standards as of future dates. Compliance with new or more
stringent laws or regulations, stricter interpretation of existing laws or the future discovery of environmental contamination may require material expenditures on our part. Future laws, ordinances or
regulations may impose material environmental liability, or the current environmental condition of our properties may affect the operations of our tenants, the existing condition of the land,
operations in the vicinity of the properties, such as the presence of underground storage tanks, or the activities of unrelated third parties. These laws typically allow liens to be placed on the
affected property. In addition, there are various local, state and federal fire, health, life-safety and similar regulations which may be applicable to our operations, and which may
subject us to liability in the form of fines or damages for noncompliance.

If we suffer losses that are not covered by insurance or that are in excess of our insurance coverage limits, we could lose invested capital and
anticipated profits.

Catastrophic losses, such as losses due to wars, terrorist attacks, earthquakes, floods, hurricanes, pollution or environmental matters, generally are either
uninsurable or not economically insurable, or may be subject to insurance coverage limitations, such as large deductibles or co-payments. If one of these events occurred to, or caused the
destruction of, one or more of our properties, we could lose both our invested capital and anticipated profits from that property.

Liquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties.

Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties in our portfolio in response to changing economic,
financial and investment conditions is limited. The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors,
including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether any price or other terms
offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.

We
may be required to expend funds to correct defects or to make improvements before a property can be sold. We may not have funds available to correct those defects or to make those
improvements. In acquiring a property, we may agree to lockout provisions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation
on the amount of debt that can be placed or repaid on that property. These lockout provisions would restrict our ability to sell a property. These factors and any others that would impede our ability
to respond to adverse changes in the performance of our properties could significantly harm our financial condition and operating results.

Further issuances of equity securities may be dilutive to current security holders.

The interest of our existing security holders could be diluted if additional equity securities are issued to finance future acquisitions and other working capital
needs as an alternative to incurring additional indebtedness. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of
credit and other forms of secured and unsecured debt, and equity financing, including common and preferred equity.

13

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Our largest stockholder owns approximately 43% of our common stock, exercises significant control of our company and may delay, defer or prevent us from
taking actions that would be beneficial to our other stockholders.

Our largest stockholder, Net Realty Holding Trust, a wholly-owned subsidiary of The New England Teamsters and Trucking Industry Pension Fund, owns approximately
43% of the outstanding shares of our common stock and has the right to nominate four of our eleven directors. Accordingly, Net Realty Holding Trust is able to exercise significant control over the
outcome of substantially all matters required to be submitted to our stockholders for approval, including decisions relating to the election of our board of directors, and the determination of our
day-to-day corporate and management policies. In addition, Net Realty Holding Trust is able to exercise significant control over the outcome of any proposed merger or
consolidation of our company under Maryland law. Net Realty Holding Trust's ownership interest in our company may discourage third parties from seeking to acquire control of our company, which may
adversely affect the market price of our common stock.

Provisions of the company's charter and bylaws could inhibit changes in control of the company, and could prevent stockholders from obtaining a premium
price for our common stock.

Our organizational documents contain provisions which may have the effect of delaying, deferring or preventing a change in control of our company or the removal
of existing management and, as a result, could prevent our stockholders from being paid a premium for their shares of common stock over the then-prevailing market prices. These provisions
include staggered terms for our directors, advance notice requirements for stockholder proposals and the absence of cumulative voting rights. In addition, our organizational documents permit our board
of directors to issue up to 50,000,000 shares of preferred stock, having those preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, or
terms or conditions of redemption as determined by our board. Thus, our board could authorize the issuance of preferred stock with terms and conditions which could have the effect of discouraging a
takeover or other transaction in which holders of some or a majority of our shares might receive a premium for their shares over the then-prevailing market price of our shares.

Our board of directors has adopted the limitations available in Maryland law on changes in control that could prevent transactions in the best interests
of stockholders.

Certain provisions of Maryland law applicable to us prohibit "business combinations," including certain issuances of equity securities, with any person who
beneficially owns 10% or more of the voting power of outstanding shares, or with an affiliate of ours who, at any time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the outstanding voting shares (which is referred to as a so-called "interested stockholder"), or with an affiliate of an interested
stockholder. These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder. After the five-year period, a business
combination with an interested stockholder must be approved by two super-majority stockholder votes unless, among other conditions, our common stockholders receive a minimum price for their shares and
the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares of common stock.

Our share ownership limit may discourage a takeover of the company and depress our stock price.

In order for us to qualify as a REIT, no more than 50% of the value of outstanding shares of our capital stock may be owned, actually or constructively, by five
or fewer individuals at any time during the last half of each taxable year. To make sure that we will not fail to qualify as a REIT under this test, subject to some exceptions, our articles prohibit
any stockholder from owning actually or constructively more than 9.8% of the value or number of outstanding shares of our capital stock. Our board of directors may exempt a person from the 9.8%
ownership limit if the board determines, in its

14

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sole discretion that exceeding the 9.8% ownership limit as to any proposed transferee would not jeopardize our qualification as a REIT. This restriction may: discourage a tender offer or other
transactions or a change in management or control that might involve a premium price for our shares or otherwise be in the best interests of our stockholders; or compel a stockholder who had acquired
more than 9.8% of our stock to dispose of the additional shares and, as a result, to forfeit the benefits of owning the additional shares.

Our business would be harmed if key personnel with longstanding business relationships with our tenants terminate their employment with us.

Our future success depends, to a significant extent, upon the continued services of our corporate management team. In particular, the extent and nature of
relationships that our corporate executives have developed with existing and prospective tenants and institutional and other owners and operators of retail shopping centers is critically important to
the success of our business. There is no guarantee that these corporate executives will remain employed with our company, and we generally do not have employment agreements with most members of our
corporate and regional management teams that impose a specific term of employment. We do not maintain key person life insurance on any of our officers. The loss of services of one or more members of
our corporate or regional management teams, would harm our business and our prospects.

We are subject to business constraints related to our status as a pension-held REIT.

We are classified as a "pension-held REIT". As a result, some "qualified trusts" such as Net Realty Holding Trust may be required to treat a portion
of the distributions that we pay as "unrelated business taxable income" unless we comply with certain rules. We intend to comply with those rules so that we do not generate "unrelated business taxable
income" for our "qualified trust" shareholders, including
Net Realty Holding Trust. Our compliance with those rules may affect the manner in which we are able to conduct our business and may cause us to refrain from taking actions or from consummating
transactions on terms that would be advantageous to us and to our other shareholders.

If we fail to remain qualified as a REIT, our distributions will not be deductible by us, and our income will be subject to taxation, reducing our
earnings available for distribution.

We intend to remain qualified as a REIT under the Internal Revenue Code, which will afford us significant tax advantages. The requirements for this qualification,
however, are complex. If we fail to meet these requirements, our distributions will not be deductible by us and we will have to pay a corporate level tax on our income. This would substantially reduce
our cash available to pay distributions. In addition, such a tax liability might cause us to borrow funds, liquidate some of our investments or take other steps, which could negatively affect our
operating results. Moreover, if our REIT status is terminated because of our failure to meet a technical REIT requirement or if we voluntarily revoke our election, we would generally be disqualified
from electing treatment as a REIT for the four taxable years following the year in which REIT status is lost.

Even REITs are subject to federal and state income taxes.

Even if we qualify and maintain our status as a REIT, we may become subject to federal income taxes and related state taxes. For example, if we have net income
from a "prohibited transaction," that income will be subject to a 100% tax. A "prohibited transaction" is, in general, the sale or other disposition of inventory or property, other than foreclosure
property, held primarily for sale to customers in the ordinary course of business. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We may also decide to
retain income we earn from the sale or other disposition of our property and pay income tax directly on that income. In that event, our stockholders would be treated as if they earned that income and
paid the tax on it directly. However,

15

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stockholders that are tax-exempt, such as charities or qualified pension plans would have no benefit from their deemed payment of that tax liability.

We
may also be subject to state and local taxes on our income or property, either directly or at the level of our operating partnerships or at the level of the other companies through
which we indirectly own our assets. We may not be able to continue to satisfy the REIT requirements, or it may not be in our best interests to continue to do so.

Item 2: Properties

Shopping Centers

As of December 31, 2002, we had a shopping center portfolio consisting of 152 shopping centers, located in 26 states and totaling 30.7 million
square feet of total GLA, of which 25.9 million square feet is company-owned GLA. Our shopping center portfolio was 93% leased as of December 31, 2002. We believe that our shopping
center properties are adequately covered by insurance.

Subsequent Acquisition

On January 23, 2003, we completed the acquisition of Spradlin Farm, a 442,000 square foot community shopping center, of which we acquired 181,000 square
feet, located in Christiansburg, Virginia for $23.6 million. The center is approximately ten minutes from Blacksburg, Virginia and the Virginia Tech University campus. The property, which is
98% leased, is anchored by TJ Maxx, Barnes & Noble, Michael's and Goody's, and includes a separately owned Home Depot (124,000 square feet) and Target (137,000 square feet), and is adjacent to
a new Wal-Mart Supercenter.

Other Properties

As of December 31, 2002, the Company owned four office buildings, two in New York and two in Boston, totaling 281,000 square feet and ten single-tenant
properties, totaling 26,000 square feet. During 2002, we disposed of one office building, a single tenant property, and a development property for aggregate proceeds of $10.4 million, resulting
in an aggregate gain of $3.3 million. The sales of these properties are consistent with the Company's policy to sell non-core assets and redeploy the capital into the acquisition of
primarily grocer-anchored shopping centers. We believe that our remaining office buildings and single-tenant properties are adequately covered by insurance.

Subsequent Disposition

During the first quarter of 2003, the Company completed the disposition of its ten remaining single-tenant properties, which were classified as held for sale at
December 31, 2002. The Company received proceeds of $2.4 million, resulting in a net gain on sale of $0.8 million.

Offices

We own our headquarters building located at 535 Boylston Street, in the Back Bay of Boston, Massachusetts. In addition, we also manage our properties through 13
regional offices, strategically located throughout our portfolio states. We own 12 of our 13 regional offices, some of which are located in our shopping center properties. In addition, we anticipate
opening two new regional offices in Tennessee and Michigan during 2003. We believe that our current and anticipated facilities are adequate for our present and future operations.

16

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The following tables provide information about our properties, our tenants and lease expirations.

|Property Name
and Location |  | Year Built/
Renovated(1) |  | % Leased as of
12/31/2002 |   | Company-
Owned GLA(2) |  | Total
GLA(3) |  | Anchor
SF(4) |  | Anchors(5)                                                                                                                             |  | Annualized
Base Rent(6) |           | Annualized
Base
Rent/Sq. Ft.(7)
|-------------------------- |  | ------------------------ |  | ------------------------- | - | --------------------- |  | ------------ |  | ------------ |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- | -------------------------------
|Shopping Centers:          |  |                          |  |                           |   |                       |  |              |  |              |  |                                                                                                                                        |  |                         |           |                                
|Alabama                    |  |                          |  |                           |   |                       |  |              |  |              |  |                                                                                                                                        |  |                         |           |                                
|Montgomery Commons         |  | 1999                     |  | 99                        | % | 95,300                |  | 299,050      |  | 257,550      |  | Super Wal-Mart (Non-owned)
Marshalls
Michaels                                                                                          |  | $                       | 1,027,539 |                                
|Montgomery Towne Center    |  | 1996                     |  | 99                        | % | 176,361               |  | 266,895      |  | 225,415      |  | Winn Dixie Supermarket (Non-Owned)
Bed, Bath & Beyond
Circuit City
Carmike Cinemas (Non-Owned)
Just for Feet
Barnes & Noble
Office Max |  | $                       | 2,180,455 |                                
|Riverchase Village SC      |  | 1994                     |  | 90                        | % | 178,511               |  | 187,711      |  | 128,225      |  | Bruno's Supermarket
Best Buy
Barnes & Noble                                                                                            |  | $                       | 1,648,657 |                                
|Connecticut                |  |                          |  |                           |   |                       |  |              |  |              |  |                                                                                                                                        |  |                         |           |                                
|Torrington Plaza           |  | 1963/1994                |  | 90                        | % | 125,730               |  | 132,930      |  | 42,037       |  | TJ Maxx
Staples                                                                                                                        |  | $                       | 1,170,613 |                                
|Florida                    |  |                          |  |                           |   |                       |  |              |  |              |  |                                                                                                                                        |  |                         |           |                                
|Barton Commons             |  | 1989                     |  | 81                        | % | 215,049               |  | 218,049      |  | 138,518      |  | K-Mart
Bealls Dept. Store
Bealls Outlet                                                                                                |  | $                       | 1,123,018 |                                
|Naples Shopping Center     |  | 1962/1997                |  | 99                        | % | 198,904               |  | 202,404      |  | 162,486      |  | Publix Supermarket
Marshalls
Linens 'N' Things
Office Depot
Books A Million                                                            |  | $                       | 1,618,628 |                                
|Park Shore Shopping Center |  | 1973/1993                |  | 99                        | % | 231,830               |  | 240,330      |  | 188,180      |  | Fresh Market Supermarket
K-Mart
Rhodes Furniture
Homegoods
Sound Advice                                                                |  | $                       | 1,836,863 |                                

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|Shoppers Haven Shopping Center |  | 1959/1998 |  | 74 | % | 207,049 |  | 207,049 |  | 88,404  |  | Winn Dixie Supermarket
Walgreens
Bealls Outlet                              |  | $ | 1,531,062 |  | $ | 7.39 
|------------------------------ |  | --------- |  | -- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Venetian Isle Shopping Center  |  | 1959/1992 |  | 97 | % | 183,467 |  | 186,967 |  | 111,831 |  | Publix Supermarket
TJ Maxx
Linens 'N' Things
PetsMart                       |  | $ | 1,657,442 |  | $ | 9.03 
|Georgia                        |  |           |  |    |   |         |  |         |  |         |  |                                                                             |  |   |           |  |   |      
|Shenandoah Plaza               |  | 1987      |  | 96 | % | 141,072 |  | 144,072 |  | 113,922 |  | Ingles Market
Wal-Mart                                                      |  | $ | 636,683   |  | $ | 4.51 
|Illinois                       |  |           |  |    |   |         |  |         |  |         |  |                                                                             |  |   |           |  |   |      
|Bartonville Square             |  | 1972      |  | 99 | % | 61,678  |  | 61,678  |  | 41,824  |  | Kroger Supermarket                                                          |  | $ | 281,144   |  | $ | 4.56 
|Butterfield Square             |  | 1997      |  | 98 | % | 106,824 |  | 121,427 |  | 51,677  |  | Sunset Foods                                                                |  | $ | 1,455,234 |  | $ | 13.62
|The Commons of Chicago Ridge   |  | 1992/1999 |  | 91 | % | 324,080 |  | 324,080 |  | 233,405 |  | Home Depot
Office Depot
Marshalls
Pep Boys (Ground Lease)
Old Navy
Michaels |  | $ | 3,669,788 |  | $ | 11.32
|The Commons of Crystal Lake    |  | 1995/1998 |  | 99 | % | 273,060 |  | 365,335 |  | 210,569 |  | Jewel Foods/Osco Drugs
Marshalls
Toys R Us
Hobby Lobby (Non-Owned)          |  | $ | 3,128,390 |  | $ | 11.46
|Crossroads Centre              |  | 1975/1988 |  | 98 | % | 242,470 |  | 247,970 |  | 129,468 |  | Malan Realty Investors, Inc./Hobby Lobby
(Ground Lease)
TJ Maxx             |  | $ | 1,620,855 |  | $ | 6.68 

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|Fairhills Shopping Center |  | 1971/1989 |  | 78  | % | 107,614 |  | 117,714 |  | 49,330  |  | Jewel Foods/Osco Drugs                                                                                                                                                                        |  | $ | 531,360   |  | $ | 4.94 
|------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Heritage Square           |  | 1992      |  | 100 | % | 210,852 |  | 210,852 |  | 164,706 |  | Circuit City
Carson Furniture Gallery
DSW Shoe Warehouse
Rhodes Furniture                                                                                                                     |  | $ | 2,528,392 |  | $ | 11.99
|High Point Centre         |  | 1988      |  | 98  | % | 240,032 |  | 240,032 |  | 141,068 |  | Cub Foods
Office Depot
Babies R Us
Big Lots                                                                                                                                                   |  | $ | 2,288,057 |  | $ | 9.53 
|Parkway Pointe            |  | 1996      |  | 100 | % | 38,737  |  | 222,037 |  | 179,300 |  | Wal-Mart (Non-Owned)
Target (Non-Owned)
Party Tree (Non-Owned)                                                                                                                                |  | $ | 474,804   |  | $ | 12.26
|Rivercrest                |  | 1992/1999 |  | 99  | % | 488,680 |  | 847,635 |  | 711,859 |  | Dominick's Supermarket
Best Buy
PetsMart
TJ Maxx
Kimco Realty Corp./K-Mart
Sears
OfficeMax
Hollywood Park
Target (Non-Owned)
Kohl's (Non-Owned)
Menards (Non-Owned)
Sony Theaters (Non-Owned) |  | $ | 4,125,856 |  | $ | 8.44 
|Rollins Crossing          |  | 1995/1998 |  | 93  | % | 150,576 |  | 344,696 |  | 283,704 |  | Super K-Mart (Non-Owned)
Sears Paint & Hardware
Regal Cinema                                                                                                                                  |  | $ | 922,669   |  | $ | 6.13 

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|Sangamon Center North      |  | 1970/1996 |  | 98  | % | 139,907 |  | 151,107 |  | 79,257  |  | Schnuck's Supermarket
U.S. Post Office                                                |  | $ | 1,160,128 |  | $ | 8.29 
|-------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Sheridan Village           |  | 1954/1995 |  | 93  | % | 303,896 |  | 303,896 |  | 177,409 |  | Bergner's Dept Store
Cohen's Furniture Co.                                            |  | $ | 2,398,137 |  | $ | 7.89 
|Sterling Bazaar            |  | 1992      |  | 84  | % | 84,637  |  | 84,637  |  | 52,337  |  | Kroger Supermarket                                                                    |  | $ | 693,114   |  | $ | 8.19 
|Twin Oaks Centre           |  | 1991      |  | 96  | % | 98,197  |  | 98,197  |  | 59,682  |  | Hy-Vee Supermarket                                                                    |  | $ | 697,782   |  | $ | 7.11 
|Wardcliffe Shopping Center |  | 1976/1977 |  | 100 | % | 67,681  |  | 67,681  |  | 48,341  |  | CVS
Big Lots                                                                          |  | $ | 368,005   |  | $ | 5.44 
|Westview Center            |  | 1992      |  | 97  | % | 326,072 |  | 416,872 |  | 244,265 |  | Cub Foods
Marshalls
Mara Furniture
Value City Dept. Store (Non-Owned)                 |  | $ | 2,867,029 |  | $ | 8.79 
|Indiana                    |  |           |  |     |   |         |  |         |  |         |  |                                                                                       |  |   |           |  |   |      
|Apple Glen Crossing        |  | 2001/2002 |  | 96  | % | 150,322 |  | 452,550 |  | 396,113 |  | Super Wal-Mart (Non-owned)
Kohl's (Non-owned)
Dick's Sporting Goods
Best Buy
PetsMart |  | $ | 1,700,381 |  | $ | 11.31
|County Line Mall           |  | 1976/1991 |  | 52  | % | 260,785 |  | 263,585 |  | 84,545  |  | Kroger Supermarket
OfficeMax                                                          |  | $ | 1,100,987 |  | $ | 4.22 
|Double Tree Plaza          |  | 1996      |  | 95  | % | 98,342  |  | 110,342 |  | 45,000  |  | Amelia's Supermarket                                                                  |  | $ | 720,138   |  | $ | 7.32 
|Germantown Shopping Center |  | 1985      |  | 71  | % | 230,600 |  | 239,000 |  | 114,905 |  | Beuhlers Supermarket
Elder Beerman Dept Store
Peebles Dept Store                      |  | $ | 1,044,842 |  | $ | 4.53 
|King's Plaza               |  | 1965      |  | 87  | % | 102,788 |  | 104,888 |  | 60,200  |  | Cub Foods                                                                             |  | $ | 423,648   |  | $ | 4.12 

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|Lincoln Plaza               |  | 1968      |  | 100 | % | 95,814  |  | 95,814  |  | 39,104  |  | Kroger Supermarket                                                              |  | $ | 677,908   |  | $ | 7.08 
|--------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Martin's Bittersweet Plaza  |  | 1992      |  | 96  | % | 78,245  |  | 81,255  |  | 61,079  |  | Martin's Supermarket
Osco Drug                                                  |  | $ | 544,224   |  | $ | 6.96 
|Rivergate Shopping Center   |  | 1982      |  | 94  | % | 133,086 |  | 137,486 |  | 108,086 |  | Super Foods/Blue River Trading
Wal-Mart                                         |  | $ | 503,024   |  | $ | 3.78 
|Sagamore Park Centre        |  | 1982      |  | 87  | % | 102,487 |  | 102,487 |  | 41,154  |  | Payless Supermarket                                                             |  | $ | 886,809   |  | $ | 8.65 
|Speedway SuperCenter        |  | 1960/1998 |  | 91  | % | 567,014 |  | 567,014 |  | 237,399 |  | Kroger Supermarket
AJ Wright
Kohl's
Sears
Factory Card Outlet
Old Navy          |  | $ | 4,723,360 |  | $ | 8.33 
|The Village                 |  | 1950      |  | 80  | % | 312,187 |  | 314,987 |  | 98,025  |  | US Factory Outlet
AJ Wright
Ind. Dept of Employment                             |  | $ | 1,847,949 |  | $ | 5.92 
|Washington Lawndale Commons |  | 1957/1993 |  | 82  | % | 336,674 |  | 336,674 |  | 131,089 |  | Stein Mart
Dunham's Sporting Goods
Sears/Bedland
Jo-Ann Fabrics
Books A Million |  | $ | 1,723,987 |  | $ | 5.12 
|Iowa                        |  |           |  |     |   |         |  |         |  |         |  |                                                                                 |  |   |           |  |   |      
|Burlington Plaza West       |  | 1989      |  | 83  | % | 88,118  |  | 92,118  |  | 52,468  |  | Festival Foods                                                                  |  | $ | 494,948   |  | $ | 5.62 
|Davenport Retail Center     |  | 1996      |  | 100 | % | 62,588  |  | 229,588 |  | 214,433 |  | Staples
PetsMart
Super Target (Non-Owned)                                       |  | $ | 646,050   |  | $ | 10.32
|Kimberly West               |  | 1987/1997 |  | 96  | % | 113,713 |  | 116,513 |  | 76,896  |  | Hy-Vee Supermarket                                                              |  | $ | 641,933   |  | $ | 5.65 
|Parkwood Plaza              |  | 1992      |  | 92  | % | 126,369 |  | 126,369 |  | 63,108  |  | Albertson's Supermarket                                                         |  | $ | 752,917   |  | $ | 5.96 
|Southgate Shopping Center   |  | 1972/1996 |  | 86  | % | 155,399 |  | 155,399 |  | 102,065 |  | Hy-Vee Supermarket
Big Lots                                                     |  | $ | 476,627   |  | $ | 3.07 
|Spring Village              |  | 1980/1991 |  | 88  | % | 90,263  |  | 92,763  |  | 45,763  |  | Eagle Foods                                                                     |  | $ | 431,421   |  | $ | 4.78 
|Warren Plaza                |  | 1980/1993 |  | 96  | % | 90,102  |  | 187,135 |  | 148,525 |  | Hy-Vee Supermarket
Target (Non-Owned)                                           |  | $ | 681,101   |  | $ | 7.56 

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|Kansas                    |  |           |  |     |   |         |  |         |  |         |  |                                                            |  |   |           |  |   |      
|------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------- |  | - | --------- |  | - | -----
|Mid State Plaza           |  | 1971      |  | 89  | % | 286,601 |  | 292,906 |  | 180,288 |  | Food 4 Less
Sutherlands Lumber
Hobby Lobby
Carroll's Books |  | $ | 903,947   |  | $ | 3.15 
|Santa Fe Square           |  | 1987      |  | 100 | % | 133,698 |  | 133,698 |  | 55,820  |  | Hy-Vee Supermarket                                         |  | $ | 1,236,936 |  | $ | 9.25 
|Shawnee Parkway Plaza     |  | 1979/1995 |  | 85  | % | 92,213  |  | 92,213  |  | 59,128  |  | Price Chopper Supermarket                                  |  | $ | 585,579   |  | $ | 6.35 
|Village Plaza             |  | 1975      |  | 80  | % | 55,698  |  | 55,698  |  | 31,431  |  | Falley's Food 4 Less                                       |  | $ | 277,330   |  | $ | 4.98 
|Westchester Square        |  | 1968/1998 |  | 88  | % | 164,944 |  | 168,644 |  | 63,000  |  | Hy-Vee Supermarket                                         |  | $ | 1,271,522 |  | $ | 7.71 
|West Loop Shopping Center |  | 1986/1998 |  | 97  | % | 199,032 |  | 199,032 |  | 78,558  |  | Dillons Supermarket
Waters True Value                      |  | $ | 1,233,835 |  | $ | 6.20 
|Kentucky                  |  |           |  |     |   |         |  |         |  |         |  |                                                            |  |   |           |  |   |      
|Camelot Shopping Center   |  | 1969/1997 |  | 69  | % | 150,461 |  | 150,461 |  | 61,500  |  | Winn Dixie Supermarket
Gatti's Pizza                       |  | $ | 785,908   |  | $ | 5.22 
|Dixie Plaza               |  | 1987      |  | 100 | % | 48,021  |  | 82,804  |  | 59,383  |  | Winn Dixie Supermarket
Frank's Nursery (Non-Owned)         |  | $ | 382,893   |  | $ | 7.97 
|Midtown Mall              |  | 1970/1994 |  | 92  | % | 153,716 |  | 153,716 |  | 96,171  |  | Kroger Supermarket
Big Lots/Odd Lots
Gatti's Pizza         |  | $ | 887,320   |  | $ | 5.77 
|Plainview Village Center  |  | 1977      |  | 94  | % | 163,128 |  | 193,928 |  | 30,975  |  | Kroger Supermarket                                         |  | $ | 1,372,433 |  | $ | 8.41 
|Stony Brook               |  | 1988      |  | 100 | % | 137,013 |  | 238,213 |  | 169,775 |  | Kroger Supermarket
H.H. Gregg (Non-Owned)                  |  | $ | 1,562,564 |  | $ | 11.40

22

---

|Maine                     |  |           |  |     |   |         |  |         |  |         |  |                                                                                                 |  |   |           |  |   |      
|------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ----------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Pine Tree Shopping Center |  | 1958/1973 |  | 100 | % | 254,378 |  | 254,378 |  | 200,178 |  | Shaw's Supermarket (Ground Lease)
Ames Department Stores, Inc.
Mardens
Jo-Ann Fabrics
AJ Wright |  | $ | 1,414,210 |  | $ | 5.56 
|Massachusetts             |  |           |  |     |   |         |  |         |  |         |  |                                                                                                 |  |   |           |  |   |      
|Berkshire Crossing        |  | 1996      |  | 100 | % | 441,412 |  | 441,412 |  | 389,561 |  | Price Chopper
Wal-Mart (Ground Lease)
Home Depot (Ground Lease)
Staples
Michaels
Barnes & Noble |  | $ | 3,194,526 |  | $ | 7.24 
|Lynn Market Place         |  | 1966/1993 |  | 100 | % | 78,092  |  | 78,092  |  | 52,620  |  | Shaw's Supermarket                                                                              |  | $ | 608,336   |  | $ | 7.79 
|Watertower Plaza          |  | 1988/1998 |  | 89  | % | 296,320 |  | 296,320 |  | 194,078 |  | Shaw's Supermarket
TJ Maxx
OfficeMax
Barnes & Noble
Linens 'N' Things
Petco
Michaels            |  | $ | 3,612,288 |  | $ | 12.19
|Westgate Plaza            |  | 1969/1996 |  | 100 | % | 103,903 |  | 103,903 |  | 77,768  |  | Stop & Shop/Staples
TJ Maxx                                                                     |  | $ | 1,007,061 |  | $ | 9.69 
|Michigan                  |  |           |  |     |   |         |  |         |  |         |  |                                                                                                 |  |   |           |  |   |      
|Cherry Hill Marketplace   |  | 1992/1999 |  | 88  | % | 122,132 |  | 125,032 |  | 53,739  |  | Farmer Jacks                                                                                    |  | $ | 1,261,120 |  | $ | 10.33

23

---

|Grand Traverse Crossing |  | 1996      |  | 99  | % | 387,273 |  | 387,273 |  | 339,156 |  | Wal-Mart (Ground Lease)
Home Depot (Ground Lease)
Borders (Ground Lease)
Toys R Us
Staples
PetsMart        |  | $ | 2,874,681 |  | $ | 7.42
|----------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | ----
|The Courtyard           |  | 1989      |  | 100 | % | 125,965 |  | 262,875 |  | 219,421 |  | V.G. Food Center
OfficeMax
Dunhams Sporting Goods
Home Depot (Non-Owned)                                   |  | $ | 1,047,544 |  | $ | 8.32
|Redford Plaza           |  | 1956/1987 |  | 96  | % | 284,913 |  | 284,913 |  | 194,014 |  | Kroger Supermarket
Burlington Coat Factory
Bally Total Fitness
AJ Wright
Aco Hardware
The Resource Network |  | $ | 2,337,766 |  | $ | 8.21
|Minnesota               |  |           |  |     |   |         |  |         |  |         |  |                                                                                                            |  |   |           |  |   |     
|Austin Town Center      |  | 1999      |  | 98  | % | 110,680 |  | 200,680 |  | 170,789 |  | Rainbow Foods
Staples
Target (Non-Owned)                                                                   |  | $ | 957,300   |  | $ | 8.65
|Brookdale Square        |  | 1971/1994 |  | 95  | % | 185,883 |  | 185,883 |  | 159,402 |  | Circuit City
Office Depot
Brookdale Theater
Pep Boys
Heart Alive
Hennepin County                           |  | $ | 1,106,990 |  | $ | 5.96
|Burning Tree Plaza      |  | 1987/1998 |  | 100 | % | 173,929 |  | 173,929 |  | 117,716 |  | Best Buy
TJ Maxx
Hancock Fabrics
Dunham's Sporting Goods                                                   |  | $ | 1,574,358 |  | $ | 9.05

24

---

|Central Valu Center       |  | 1961/1984 |  | 86  | % | 123,350 |  | 123,350 |  | 90,946  |  | Rainbow Foods
Slumberland Clearance                                                           |  | $ | 778,034   |  | $ | 6.31 
|------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Division Place            |  | 1991      |  | 97  | % | 129,354 |  | 134,354 |  | 24,016  |  | TJ Maxx                                                                                       |  | $ | 1,387,644 |  | $ | 10.73
|Elk Park Center           |  | 1995/1999 |  | 100 | % | 204,992 |  | 302,635 |  | 192,843 |  | Cub Foods
Target (Non-Owned)
OfficeMax                                                        |  | $ | 1,962,610 |  | $ | 9.57 
|Har Mar Mall              |  | 1965/1992 |  | 92  | % | 434,355 |  | 434,355 |  | 226,838 |  | Cub Foods
Barnes & Noble
Marshalls
TJ Maxx
AMC Theatres
Michaels                              |  | $ | 4,314,793 |  | $ | 9.93 
|Hub West(9)
Richfield Hub |  | 1952/1992 |  | 99  | % | 214,855 |  | 217,655 |  | 129,400 |  | Rainbow Foods
Bally Total Fitness
Marshalls
Michaels                                          |  | $ | 2,325,702 |  | $ | 10.82
|Marketplace at 42         |  | 1999      |  | 97  | % | 120,377 |  | 150,577 |  | 72,371  |  | Rainbow Foods
Walgreens (Non-owned)                                                           |  | $ | 1,555,555 |  | $ | 12.92
|Roseville Center          |  | 1950/2000 |  | 80  | % | 76,810  |  | 155,610 |  | 65,000  |  | Rainbow Foods (Non-Owned)                                                                     |  | $ | 749,209   |  | $ | 9.75 
|Southport Centre          |  | 1992      |  | 100 | % | 124,937 |  | 426,985 |  | 346,566 |  | Cub Foods (Non-Owned)
Best Buy
Frank's Nursery
Super Target (Non-Owned)
OfficeMax (Non-Owned) |  | $ | 1,455,496 |  | $ | 11.65
|Sun Ray Shopping Center   |  | 1958/1992 |  | 97  | % | 256,154 |  | 256,154 |  | 132,519 |  | JC Penney
TJ Maxx
Bally Total Fitness
Michaels
Petters Warehouse Direct                       |  | $ | 2,104,153 |  | $ | 8.21 
|Ten Acres Center          |  | 1972/1986 |  | 99  | % | 162,364 |  | 162,364 |  | 133,894 |  | Cub Foods
Burlington Coat Factory                                                             |  | $ | 1,072,268 |  | $ | 6.60 

25

---

|Terrace Mall                |  | 1979/1993 |  | 89  | % | 135,031 |  | 250,031 |  | 212,430 |  | Rainbow Foods
Montgomery Ward (Non-owned)
North Memorial Medical |  | $ | 970,849   |  | $ | 7.19 
|--------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------------- |  | - | --------- |  | - | -----
|Westwind Plaza              |  | 1985      |  | 97  | % | 87,933  |  | 147,933 |  | 80,245  |  | Cub Foods (Non-Owned)
Northern Hydraulics                        |  | $ | 1,030,707 |  | $ | 11.72
|White Bear Hills            |  | 1990/1996 |  | 100 | % | 73,095  |  | 81,895  |  | 45,679  |  | Festival Foods                                                   |  | $ | 634,791   |  | $ | 8.68 
|Missouri                    |  |           |  |     |   |         |  |         |  |         |  |                                                                  |  |   |           |  |   |      
|Ellisville Square           |  | 1990      |  | 98  | % | 146,052 |  | 149,552 |  | 107,772 |  | K-Mart
Lukas Liquors                                             |  | $ | 1,359,978 |  | $ | 9.31 
|Grandview Plaza             |  | 1961/1991 |  | 89  | % | 296,008 |  | 296,008 |  | 200,075 |  | Schnuck's Supermarket
Old Time Pottery
OfficeMax
Walgreens       |  | $ | 1,641,804 |  | $ | 5.55 
|Hub Shopping Center         |  | 1972/1995 |  | 97  | % | 163,072 |  | 163,072 |  | 103,322 |  | Price Chopper Supermarket                                        |  | $ | 810,522   |  | $ | 4.97 
|Liberty Corners             |  | 1987/1996 |  | 94  | % | 125,432 |  | 214,932 |  | 136,500 |  | Price Chopper Supermarket
Sutherlands (Non-Owned)                |  | $ | 924,979   |  | $ | 7.37 
|Maplewood Square            |  | 1998      |  | 100 | % | 71,590  |  | 75,590  |  | 57,575  |  | Shop n' Save Supermarket                                         |  | $ | 529,391   |  | $ | 7.39 
|Marketplace at Independence |  | 1988      |  | 97  | % | 241,898 |  | 241,898 |  | 133,942 |  | Price Chopper Supermarket
Old Navy                               |  | $ | 2,188,664 |  | $ | 9.05 
|Prospect Plaza              |  | 1979/1999 |  | 100 | % | 189,996 |  | 189,996 |  | 136,566 |  | Hen House Grocery
Hobby Lobby
Factory Oak Outlet                 |  | $ | 1,580,692 |  | $ | 8.32 
|Watts Mill Plaza            |  | 1973/1997 |  | 100 | % | 161,717 |  | 169,717 |  | 91,989  |  | Price Chopper Supermarket
Westlake Hardware                      |  | $ | 1,455,818 |  | $ | 9.00 

26

---

|Nebraska                 |  |           |  |     |   |         |  |         |  |         |  |                                                                                                 |  |   |           |  |   |      
|------------------------ |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ----------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Bishop Heights           |  | 1971/1997 |  | 100 | % | 34,388  |  | 128,448 |  | 106,992 |  | Russ's IGA Supermarket
Shopko (Non-Owned)                                                       |  | $ | 109,012   |  | $ | 3.17 
|Cornhusker Plaza         |  | 1988      |  | 95  | % | 84,083  |  | 163,063 |  | 121,723 |  | Hy-Vee Supermarket
Wal-Mart (Non-Owned)                                                         |  | $ | 448,609   |  | $ | 5.34 
|Eastville Plaza          |  | 1986      |  | 100 | % | 68,546  |  | 133,636 |  | 99,046  |  | Hy-Vee Supermarket
Menard's (Non-Owned)                                                         |  | $ | 560,761   |  | $ | 8.18 
|Edgewood Shopping Center |  | 1980/1994 |  | 94  | % | 172,729 |  | 400,179 |  | 295,020 |  | SuperSaver Supermarket
Osco Drug
Target (Non-Owned)
K-Mart (Non-Owned)                          |  | $ | 1,404,790 |  | $ | 8.13 
|The Meadows              |  | 1998      |  | 100 | % | 67,840  |  | 70,840  |  | 50,000  |  | Russ' IGA Supermarket                                                                           |  | $ | 518,193   |  | $ | 7.64 
|Miracle Hills Park       |  | 1988      |  | 82  | % | 69,638  |  | 139,638 |  | 66,000  |  | Cub Foods (Non-Owned)                                                                           |  | $ | 728,405   |  | $ | 10.46
|Stockyards Plaza         |  | 1988      |  | 99  | % | 129,459 |  | 148,659 |  | 85,649  |  | Hy-Vee Supermarket
Movies 8                                                                     |  | $ | 959,114   |  | $ | 7.41 
|New Hampshire            |  |           |  |     |   |         |  |         |  |         |  |                                                                                                 |  |   |           |  |   |      
|Bedford Grove            |  | 1989      |  | 100 | % | 216,941 |  | 216,941 |  | 175,745 |  | Shop N' Save
Wal-Mart (Ground Lease)                                                            |  | $ | 1,718,735 |  | $ | 7.92 
|Bedford Mall             |  | 1963/1999 |  | 86  | % | 264,375 |  | 264,375 |  | 188,607 |  | Marshalls
Bob's Stores
Staples
Linens 'N' Things
Decathalon Sports (Ground Lease)
Hoyts Cinemas |  | $ | 2,424,219 |  | $ | 9.17 

27

---

|Capitol Shopping Center      |  | 1961/1999 |  | 95  | % | 182,971 |  | 189,971 |  | 129,551 |  | Demoulas Market Basket
Ames Department Stores, Inc.
Marshalls |  | $ | 996,420   |  | $ | 5.45 
|---------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ------------------------------------------------------------- |  | - | --------- |  | - | -----
|Tri City Plaza               |  | 1968/1992 |  | 100 | % | 146,947 |  | 146,947 |  | 84,920  |  | Demoulas Market Basket
TJ Maxx                                |  | $ | 910,245   |  | $ | 6.19 
|New Jersey                   |  |           |  |     |   |         |  |         |  |         |  |                                                               |  |   |           |  |   |      
|Cross Keys Common            |  | 1995      |  | 93  | % | 371,128 |  | 371,128 |  | 218,978 |  | Acme Markets
Sears
Wal-Mart
Staples                           |  | $ | 3,822,723 |  | $ | 10.30
|Morris Hills Shopping Center |  | 1957/1994 |  | 100 | % | 159,454 |  | 159,454 |  | 109,161 |  | Mega Marshalls
Clearview Cinema
Michaels                      |  | $ | 2,319,821 |  | $ | 14.55
|New Mexico                   |  |           |  |     |   |         |  |         |  |         |  |                                                               |  |   |           |  |   |      
|St. Francis Plaza            |  | 1992/1993 |  | 100 | % | 35,800  |  | 35,800  |  | 20,850  |  | Wild Oats Market                                              |  | $ | 389,897   |  | $ | 10.89
|New York                     |  |           |  |     |   |         |  |         |  |         |  |                                                               |  |   |           |  |   |      
|College Plaza                |  | 1975/1994 |  | 96  | % | 175,086 |  | 175,086 |  | 126,812 |  | Bob's Stores
Marshalls
Eckerd Drugs
Staples                   |  | $ | 1,373,521 |  | $ | 7.84 
|Dalewood I Shopping Center   |  | 1966/1995 |  | 100 | % | 58,969  |  | 58,969  |  | 36,989  |  | Pathmark                                                      |  | $ | 894,291   |  | $ | 15.17
|Dalewood II Shopping Center  |  | 1970/1995 |  | 100 | % | 81,326  |  | 81,326  |  | 59,326  |  | Turco's Supermarket
Bed, Bath & Beyond                        |  | $ | 1,846,115 |  | $ | 22.70
|Dalewood III Shopping Center |  | 1972/1995 |  | 100 | % | 48,390  |  | 48,390  |  | 28,361  |  | TJ Maxx                                                       |  | $ | 1,164,334 |  | $ | 24.06
|Falcaro's Plaza              |  | 1968/1993 |  | 100 | % | 61,295  |  | 63,295  |  | 29,887  |  | OfficeMax                                                     |  | $ | 952,554   |  | $ | 15.54

28

---

|Kings Park Shopping Center       |  | 1963/1985 |  | 100 | % | 71,940  |  | 73,940  |  | 48,870  |  | Key Foods
TJ Maxx                                                                                                                 |  | $ | 983,943   |  | $ | 13.68
|-------------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Nesconset Shopping Center        |  | 1961/1999 |  | 100 | % | 122,996 |  | 124,996 |  | 33,460  |  | Office Depot/HomeGoods                                                                                                            |  | $ | 1,682,031 |  | $ | 13.68
|Parkway Plaza                    |  | 1973/1992 |  | 97  | % | 89,704  |  | 89,704  |  | 31,600  |  | TJ Maxx                                                                                                                           |  | $ | 1,751,684 |  | $ | 19.53
|Roanoke Plaza                    |  | 1972/1994 |  | 100 | % | 87,161  |  | 89,661  |  | 43,590  |  | Produce Warehouse
TJ Maxx                                                                                                         |  | $ | 976,044   |  | $ | 11.20
|Rockville Centre Shopping Center |  | 1975      |  | 100 | % | 44,131  |  | 44,131  |  | 27,781  |  | HomeGoods                                                                                                                         |  | $ | 577,407   |  | $ | 13.08
|Salmon Run Plaza                 |  | 1993      |  | 100 | % | 68,761  |  | 181,195 |  | 164,614 |  | Hannaford's Supermarket
K-Mart (Non-Owned)                                                                                        |  | $ | 1,084,328 |  | $ | 15.77
|Suffolk Plaza                    |  | 1967/1998 |  | 98  | % | 84,480  |  | 89,680  |  | 56,759  |  | Waldbaum's Supermarket                                                                                                            |  | $ | 665,439   |  | $ | 7.88 
|Three Village Plaza              |  | 1964/1991 |  | 100 | % | 77,458  |  | 77,458  |  | 40,455  |  | Swezey and Newins                                                                                                                 |  | $ | 911,652   |  | $ | 11.77
|Turnpike Plaza                   |  | 1971/1994 |  | 100 | % | 52,950  |  | 52,950  |  | 30,700  |  | Waldbaum's Supermarket                                                                                                            |  | $ | 944,601   |  | $ | 17.84
|North Carolina                   |  |           |  |     |   |         |  |         |  |         |  |                                                                                                                                   |  |   |           |  |   |      
|The Commons at Chancellor Park   |  | 1994      |  | 100 | % | 341,860 |  | 351,460 |  | 312,497 |  | Home Depot (Ground Lease)
K-Mart
Circuit City
Marshalls
Gold's Gym                                                                |  | $ | 2,048,979 |  | $ | 5.99 
|Crown Point Shopping Center      |  | 1990      |  | 100 | % | 147,200 |  | 164,200 |  | 135,200 |  | Lowe's of Crown Point
Babies R US                                                                                                 |  | $ | 1,014,775 |  | $ | 6.89 
|Franklin Square                  |  | 1990      |  | 95  | % | 310,435 |  | 517,735 |  | 379,568 |  | Super Wal-Mart (Non-Owned)
Best Buy
Ross Dress for Less
Bed, Bath & Beyond
Dollar Tree
Pep Boys (Ground Lease)
OfficeMax
Michaels |  | $ | 2,854,164 |  | $ | 9.19 

29

---

|Innes Street Market                |  | 1998      |  | 100 | % | 349,356 |  | 349,356 |  | 296,740 |  | Food Lion Supermarket
Lowe's Home Centers
Tinseltown Cinema
Marshalls
Staples
Circuit City
Old Navy |  | $ | 3,362,023 |  | $ | 9.62 
|---------------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|McMullen Creek Shopping Center(10) |  | 1988      |  | 93  | % | 283,638 |  | 293,238 |  | 98,222  |  | Winn Dixie Supermarket
Burlington Coat Factory                                                      |  | $ | 2,897,659 |  | $ | 10.22
|New Centre Market                  |  | 1998      |  | 98  | % | 143,763 |  | 266,263 |  | 202,040 |  | Target (Non-Owned)
Marshalls
PetsMart
OfficeMax                                                     |  | $ | 1,644,223 |  | $ | 11.44
|River Ridge Marketplace            |  | 1984/1996 |  | 95  | % | 214,454 |  | 214,454 |  | 104,541 |  | Food Lion Supermarket
Hamricks
Kitchen & Company                                                    |  | $ | 1,445,625 |  | $ | 6.74 
|Tarrymore Square                   |  | 1989      |  | 78  | % | 260,405 |  | 260,405 |  | 85,447  |  | Marshalls
Dick's Sporting Goods                                                                     |  | $ | 2,119,454 |  | $ | 8.14 
|University Commons                 |  | 1989      |  | 73  | % | 231,943 |  | 231,943 |  | 79,272  |  | Lowes Foods
TJ Maxx
AC Moore                                                                        |  | $ | 1,710,546 |  | $ | 7.37 

30

---

|University Commons Greenville |  | 1996      |  | 100 | % | 232,821 |  | 338,021 |  | 270,249 |  | Kroger Supermarket
TJ Maxx
Circuit City
Barnes & Noble
Target (Non-Owned)
Linens 'N' Things                            |  | $ | 2,632,218 |  | $ | 11.31
|----------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Wendover Place                |  | 1997      |  | 98  | % | 415,886 |  | 548,786 |  | 441,954 |  | Harris-Teeter/Michaels
Kohl's
Dick's Sporting Goods
Babies R Us
PetsMart
Old Navy
Linens 'N' Things
Target (Non-Owned) |  | $ | 4,356,773 |  | $ | 10.48
|Ohio                          |  |           |  |     |   |         |  |         |  |         |  |                                                                                                                        |  |   |           |  |   |      
|30th Street Plaza             |  | 1951/1999 |  | 96  | % | 157,085 |  | 157,085 |  | 111,251 |  | Giant Eagle Supermarket
Marc's Pharmacy                                                                                |  | $ | 1,422,196 |  | $ | 9.05 
|Clock Tower Plaza             |  | 1989      |  | 99  | % | 237,975 |  | 244,475 |  | 172,300 |  | Ray's Supermarket
Wal-Mart                                                                                             |  | $ | 1,435,876 |  | $ | 6.03 
|Salem Consumer Square         |  | 1988      |  | 94  | % | 274,652 |  | 274,652 |  | 131,650 |  | Cub Foods
Office Depot
Michigan Sporting Goods
AJ Wright                                                               |  | $ | 2,312,637 |  | $ | 8.42 
|Pennsylvania                  |  |           |  |     |   |         |  |         |  |         |  |                                                                                                                        |  |   |           |  |   |      
|Boyertown Plaza               |  | 1961      |  | 84  | % | 83,229  |  | 88,629  |  | 50,229  |  | Ames                                                                                                                   |  | $ | 449,109   |  | $ | 5.40 

31

---

|Lehigh Shopping Center      |  | 1955/1999 |  | 71  | % | 343,432 |  | 347,432 |  | 191,920 |  | Giant Foods
Mega Marshalls
Staples
D&D Budget & Clearance
Frank's Nursery                                |  | $ | 1,409,967 |  | $ | 4.11 
|--------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | -------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Warminster Towne Center     |  | 1997      |  | 97  | % | 239,143 |  | 319,826 |  | 276,951 |  | Shop Rite/Supervalu
Kohl's (Non-owned)
Ross Dress for Less
PetsMart
OfficeMax
Pep Boys
Rag Shop
Old Navy |  | $ | 3,019,577 |  | $ | 12.63
|South Dakota                |  |           |  |     |   |         |  |         |  |         |  |                                                                                                          |  |   |           |  |   |      
|Baken Park                  |  | 1962/1997 |  | 98  | % | 195,526 |  | 195,526 |  | 95,039  |  | Nash Finch Supermarket
Ben Franklin
Boyd's Drug                                                          |  | $ | 1,467,951 |  | $ | 7.51 
|Tennessee                   |  |           |  |     |   |         |  |         |  |         |  |                                                                                                          |  |   |           |  |   |      
|Oakwood Commons             |  | 1989/1997 |  | 96  | % | 291,535 |  | 295,285 |  | 192,279 |  | Publix Supermarket
K-Mart
Peebles Dept. Store                                                            |  | $ | 2,011,751 |  | $ | 6.90 
|Watson Glen Shopping Center |  | 1989      |  | 100 | % | 264,360 |  | 264,360 |  | 206,427 |  | Bi-Lo Foods
K-Mart
Goody's Family Clothing
World Gym                                                     |  | $ | 1,933,249 |  | $ | 7.31 

32

---

|Williamson Square(12)     |  | 1988/1993 |  | 78  | % | 331,931 |  | 342,181 |  | 143,700 |  | Kroger Supermarket
Hobby Lobby
USA Baby                     |  | $ | 2,304,333 |  | $ | 6.94 
|------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ----------------------------------------------------------- |  | - | --------- |  | - | -----
|Vermont                   |  |           |  |     |   |         |  |         |  |         |  |                                                             |  |   |           |  |   |      
|Rutland Plaza             |  | 1966/1996 |  | 99  | % | 224,514 |  | 234,514 |  | 182,264 |  | Price Chopper Supermarket
Wal-Mart
TJ Maxx
Plaza Movie Plex |  | $ | 1,795,372 |  | $ | 8.00 
|Wisconsin                 |  |           |  |     |   |         |  |         |  |         |  |                                                             |  |   |           |  |   |      
|Fairacres Shopping Center |  | 1992      |  | 100 | % | 79,736  |  | 82,486  |  | 58,678  |  | Pick 'N' Save Supermarket                                   |  | $ | 681,270   |  | $ | 8.54 
|Fitchburg Ridge           |  | 1980      |  | 69  | % | 50,038  |  | 61,288  |  | 16,631  |  | Wisconsin Dialysis                                          |  | $ | 139,157   |  | $ | 2.78 
|Fox River Plaza           |  | 1987      |  | 100 | % | 169,883 |  | 173,383 |  | 137,113 |  | Pick 'N' Save Supermarket
K-Mart                            |  | $ | 822,325   |  | $ | 4.84 
|Garden Plaza              |  | 1990      |  | 95  | % | 80,099  |  | 80,099  |  | 49,564  |  | Pick 'N' Save Supermarket                                   |  | $ | 527,255   |  | $ | 6.58 
|Madison Plaza             |  | 1988/1994 |  | 91  | % | 127,584 |  | 127,584 |  | 68,309  |  | SuperSaver Foods                                            |  | $ | 910,387   |  | $ | 7.14 
|Mequon Pavilions          |  | 1967/1991 |  | 90  | % | 211,425 |  | 211,425 |  | 65,995  |  | Jewel Foods / Osco Drugs
Bed, Bath & Beyond                 |  | $ | 2,554,669 |  | $ | 12.08
|Moorland Square           |  | 1990      |  | 97  | % | 98,288  |  | 195,388 |  | 149,674 |  | Pick 'N' Save Supermarket
K-Mart (Non-Owned)                |  | $ | 777,378   |  | $ | 7.91 
|Oak Creek Centre          |  | 1988      |  | 99  | % | 91,510  |  | 99,510  |  | 50,000  |  | Sentry Supersaver                                           |  | $ | 602,923   |  | $ | 6.59 
|Park Plaza                |  | 1959/1993 |  | 96  | % | 114,678 |  | 114,678 |  | 74,063  |  | Sentry Foods
Big Lots                                       |  | $ | 688,154   |  | $ | 6.00 

33

---

|Spring Mall                                |  | 1967/1994 |  | 77  | % | 210,421    |  | 210,421    |  | 140,041    |  | Pick 'N' Save Supermarket
TJ Maxx
Walgreens |  | $ | 1,227,788   |  | $ | 5.83 
|------------------------------------------ |  | --------- |  | --- | - | ---------- |  | ---------- |  | ---------- |  | ------------------------------------------- |  | - | ----------- |  | - | -----
|Taylor Heights                             |  | 1989      |  | 100 | % | 85,072     |  | 223,862    |  | 158,630    |  | Piggly Wiggly Foods
Wal-Mart (Non-Owned)    |  | $ | 901,667     |  | $ | 10.60
|                                           |  |           |  |     |   |            |  |            |  |            |  |                                             |  |   |             | 
|TOTAL SHOPPING CENTERS                     |  |           |  | 93  | % | 25,924,762 |  | 30,717,746 |  | 19,849,569 |  |                                             |  | $ | 214,594,382 |  | $ | 8.28 
|                                           |  |           |  |     |   |            |  |            |  |            |  |                                             |  |   |             | 
|Single Tenant Properties:                  |  |           |  |     |   |            |  |            |  |            |  |                                             |  |   |             |  |   |      
|General Host (6 properties)
Florida        |  | Various   |  | 100 | % | 12,000     |  | 12,000     |  |            |  |                                             |  | $ | 69,372      |  | $ | 5.78 
|Sambo's Restaurants (3 properties)
Florida |  | Various   |  | 100 | % | 12,000     |  | 12,000     |  |            |  |                                             |  | $ | 147,435     |  | $ | 12.29
|Subway (1 property)
Florida                |  | 1975      |  | 100 | % | 1,800      |  | 1,800      |  |            |  |                                             |  | $ | 13,200      |  | $ | 7.33 
|                                           |  |           |  |     |   |            |  |            |  |            |  |                                             |  |   |             | 
|TOTAL SINGLE TENANT PROPERTIES             |  |           |  | 100 | % | 25,800     |  | 25,800     |  |            |  |                                             |  | $ | 230,007     |  | $ | 8.92 
|                                           |  |           |  |     |   |            |  |            |  |            |  |                                             |  |   |             | 

34

---

|Office Buildings:            |  |           |  |    |   |            |  |            |  |  |  |                                                       |  |   |             |  |   |      
|---------------------------- |  | --------- |  | -- | - | ---------- |  | ---------- |  |  |  | ----------------------------------------------------- |  | - | ----------- |  | - | -----
|William J. McCarthy Building |  | 1963/1995 |  | 97 | % | 93,335     |  | 93,335     |  |  |  | NETT
Heritage
Clarke & Company                        |  | $ | 3,758,342   |  | $ | 40.27
|545 Boylston Street          |  | 1972/1996 |  | 95 | % | 89,140     |  | 89,140     |  |  |  | Allied Advertising                                    |  | $ | 3,196,674   |  | $ | 35.86
|Executive Office Building    |  | 1970      |  | 91 | % | 40,230     |  | 40,230     |  |  |  | Lipner Gordon & Co.
Norca
Sol G Atlas Realty
Heritage |  | $ | 923,368     |  | $ | 22.95
|Fortune Office Building      |  | 1969      |  | 89 | % | 58,503     |  | 58,503     |  |  |  | N/A                                                   |  | $ | 1,075,485   |  | $ | 18.38
|                             |  |           |  |    |   |            |  |            |  |  |  |                                                       |  |   |             | 
|TOTAL OFFICE BUILDINGS       |  |           |  | 94 | % | 281,208    |  | 281,208    |  |  |  |                                                       |  | $ | 8,953,869   |  | $ | 31.84
|                             |  |           |  |    |   |            |  |            |  |  |  |                                                       |  |   |             | 
|TOTAL PORTFOLIO              |  |           |  | 93 | % | 26,231,770 |  | 31,024,754 |  |  |  |                                                       |  | $ | 223,778,258 |  | $ | 8.53 
|                             |  |           |  |    |   |            |  |            |  |  |  |                                                       |  |   |             | 

---

35

---



Top 20 Tenants by Annualized Base Rent

|Tenant                           |  | # of Stores |  | Total GLA |  | GLA as a % of Total |   | (1)
Tenant Annualized Base Rent |            | (2)
% of Total Annualized Base Rent |      | Type of Business
|-------------------------------- |  | ----------- |  | --------- |  | ------------------- | - | ------------------------------- | ---------- | ----------------------------------- | ---- | ----------------
|TJX Companies(3)                 |  | 42          |  | 1,260,949 |  | 4.81                | % | $                               | 11,242,241 |                                     | 5.02 | %               
|Kroger(4)                        |  | 13          |  | 695,687   |  | 2.65                | % |                                 | 4,974,272  |                                     | 2.22 | %               
|Fleming Companies(5)             |  | 13          |  | 692,996   |  | 2.64                | % |                                 | 4,892,684  |                                     | 2.19 | %               
|Supervalu(6)                     |  | 9           |  | 609,154   |  | 2.32                | % |                                 | 4,323,739  |                                     | 1.93 | %               
|Wal-Mart                         |  | 8           |  | 834,962   |  | 3.18                | % |                                 | 3,490,427  |                                     | 1.56 | %               
|Home Depot                       |  | 4           |  | 459,073   |  | 1.75                | % |                                 | 2,978,360  |                                     | 1.33 | %               
|K-Mart(7)                        |  | 7           |  | 641,130   |  | 2.44                | % |                                 | 2,889,583  |                                     | 1.29 | %               
|OfficeMax                        |  | 11          |  | 281,020   |  | 1.07                | % |                                 | 2,855,606  |                                     | 1.28 | %               
|Charming Shoppes(8)              |  | 37          |  | 312,605   |  | 1.19                | % |                                 | 2,785,279  |                                     | 1.24 | %               
|Staples                          |  | 10          |  | 254,018   |  | 0.97                | % |                                 | 2,607,231  |                                     | 1.17 | %               
|Hy-Vee                           |  | 9           |  | 513,999   |  | 1.96                | % |                                 | 2,598,962  |                                     | 1.16 | %               
|Barnes & Noble(9)                |  | 7           |  | 160,961   |  | 0.61                | % |                                 | 2,593,040  |                                     | 1.16 | %               
|Hallmark                         |  | 43          |  | 216,654   |  | 0.83                | % |                                 | 2,576,730  |                                     | 1.15 | %               
|Walgreens                        |  | 16          |  | 204,431   |  | 0.78                | % |                                 | 2,409,504  |                                     | 1.08 | %               
|Albertson's(10)                  |  | 7           |  | 319,122   |  | 1.22                | % |                                 | 2,320,485  |                                     | 1.04 | %               
|PetsMart                         |  | 8           |  | 195,836   |  | 0.75                | % |                                 | 2,169,971  |                                     | 0.97 | %               
|Blockbuster                      |  | 22          |  | 137,946   |  | 0.53                | % |                                 | 2,169,318  |                                     | 0.97 | %               
|Circuit City                     |  | 6           |  | 181,149   |  | 0.69                | % |                                 | 2,165,841  |                                     | 0.97 | %               
|Associated Wholesale Grocers(11) |  | 6           |  | 401,848   |  | 1.53                | % |                                 | 2,145,528  |                                     | 0.96 | %               
|Linens N Things                  |  | 6           |  | 179,705   |  | 0.69                | % |                                 | 2,135,832  |                                     | 0.95 | %               

---

36

---

Lease Expiration Summary

|Lease Expiration Year |        | Number of
Expiring
Leases |       | Expiring
Square
Feet |            | % of Total
Sq. Ft.
Expiring |       | Expiring
Base Rent(1) |            | % of Total
Base Rent |      | Expiring
Base Rent /
Sq. Ft.(2)
|--------------------- | ------ | ------------------------- | ----- | -------------------- | ---------- | --------------------------- | ----- | --------------------- | ---------- | -------------------- | ---- | -------------------------------
|2003                  |        | 538                       |       | 1,796,562            |            | 7.4                         | %     | $                     | 19,006,702 |                      | 8.2  | %                              
|2004                  |        | 511                       |       | 2,610,129            |            | 10.7                        | %     |                       | 25,467,747 |                      | 11.0 | %                              
|2005                  |        | 555                       |       | 2,413,168            |            | 9.9                         | %     |                       | 27,488,507 |                      | 11.9 | %                              
|2006                  |        | 397                       |       | 2,539,153            |            | 10.4                        | %     |                       | 24,165,053 |                      | 10.4 | %                              
|2007                  |        | 331                       |       | 2,315,684            |            | 9.5                         | %     |                       | 22,410,482 |                      | 9.7  | %                              
|2008                  |        | 185                       |       | 1,925,282            |            | 7.9                         | %     |                       | 16,989,452 |                      | 7.3  | %                              
|2009                  |        | 96                        |       | 1,401,952            |            | 5.7                         | %     |                       | 14,018,377 |                      | 6.0  | %                              
|2010                  |        | 90                        |       | 1,172,169            |            | 4.8                         | %     |                       | 11,934,196 |                      | 5.1  | %                              
|2011                  |        | 86                        |       | 1,342,628            |            | 5.5                         | %     |                       | 12,852,559 |                      | 5.5  | %                              
|2012                  |        | 77                        |       | 987,625              |            | 4.0                         | %     |                       | 10,587,665 |                      | 4.6  | %                              
|2013 and Thereafter   |        | 175                       |       | 5,935,381            |            | 24.3                        | %     |                       | 47,016,276 |                      | 20.3 | %                              
|                      |        |                           |       |                      |            |                             |       |                       |            |                      |      |                                
|                      | Totals |                           | 3,041 |                      | 24,439,733 |                             | 100.0 | %                     | $          | 231,937,016          |      | 100.0                          
|                      |        |                           |       |                      |            |                             |       |                       |            |                      |      |                                

---

Item 3: Legal Proceedings

On October 31, 2001, a complaint was filed against us in the Superior Court of Suffolk County of the Commonwealth of Massachusetts by Weston Associates and
its president, Paul Donahue, alleging that we owe Mr. Donahue and his firm a fee in connection with services he claims he performed on our behalf in connection with our acquisition of Bradley
Real Estate, Inc. On September 18, 2000, Heritage acquired Bradley Real Estate, Inc. ("Bradley"), a publicly traded REIT based in Illinois with nearly 100 shopping center
properties located primarily in the Midwest, at an aggregate cost of approximately $1.2 billion. Through his personal relationships with the parties involved, Mr. Donahue introduced us
to Bradley and its senior management team. Mr. Donahue alleges, however, that he played an instrumental role in the negotiation and completion of our acquisition of Bradley beyond merely
introducing the parties. For these alleged efforts, Mr. Donahue demands that he receive a fee equal to 2% of the aggregate consideration we paid to acquire Bradley, or a fee of approximately
$24 million. In addition, Mr. Donahue also seeks treble damages based on alleged unfair or deceptive business practices under Massachusetts's law.

On
December 30, 2001, we filed a motion to dismiss all of Mr. Donahue's claims. Mr. Donahue filed an opposition to our motion and on March 22, 2002, a hearing
was held by the court. On November 29, 2002, the court granted our motion to dismiss Mr. Donahue's claims. Mr. Donahue has since filed an appeal of the court's decisions. It is
not possible at this time to predict the outcome of this litigation and we intend to vigorously defend against these claims.

Except
as set forth above, we are not involved in any material litigation nor, to our knowledge, is any material litigation threatened against us, other than routine litigation arising
in the ordinary course of business, which is generally expected to be covered by insurance. In the opinion of our management, based upon currently available information, this litigation is not
expected to have a material adverse effect on our business, financial condition or results of operations.

Item 4: Submission of Matters to a Vote of Security Holders

None

37

---



PART II

Item 5: Market for Registrant's Common Equity and Related Stockholder Matters

Our common stock began trading on the New York Stock Exchange on April 24, 2002, under the symbol "HTG". As of March 7, 2003, we had approximately 6,500
common stockholders of record.

The
following table sets forth, for the periods indicated and on a per-share basis, the high and low closing prices as reported by the New York Stock Exchange and
per-share distributions declared since our initial public offering:

High

Low

DistributionsSecond Quarter 2002 (April 24, 2002 to June 30, 2002)

$
26.71

$
24.60

$
0.363Third Quarter 2002

$
25.50

$
23.65

$
0.525Fourth Quarter 2002

$
25.00

$
23.06

$
0.525


We
intend to continue to declare quarterly distributions. No assurance, however, can be provided as to the amounts or timing of future distributions, as the maintenance of those
distributions is subject to various factors, including the discretion of our Board of Directors, limitations contained in our debt instruments, the ability to pay dividends under Maryland law, the
availability of cash to make the necessary dividend payments and the effect of REIT distribution requirements. In order to qualify for the beneficial tax treatment accorded to REITs under the Internal
Revenue Code, we are required to make distributions to holders of our shares in an amount equal to 90% of our "real estate investment trust taxable income," as defined in Section 857 of the
Internal Revenue Code.

Item 6: Selected Financial Data

The following selected historical consolidated financial and operating data should be read together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements on page F-1 of this Form 10-K. Our historical financial information has been presented on an accrual basis
in accordance with generally accepted accounting principles, ("GAAP"), applicable to real estate investment trusts for all periods presented since our commencement of operations on July 9,
1999. Prior to our formation, our business was operated by The New England Teamsters and Trucking Pension Fund's ("NETT") real estate company. Accordingly, the historical financial information
presented for all periods prior to our formation was prepared by NETT on a fair value basis in accordance with GAAP applicable to pension funds such as NETT.

The
major differences between the two types of GAAP are:



38

---



|                                                                                               |                                                                    | Year Ended December 31,        |           | July 9, 1999 to Dec. 31, |        
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------ | --------- | ------------------------ | -------
|
|
|STATEMENT OF OPERATIONS DATA:                                                                  |                                                                    |                                |           |                          |        
|Revenue:                                                                                       |                                                                    |                                |           |                          |        
|                                                                                               | Rentals and recoveries                                             |                                | $         | 277,931                  |        
|                                                                                               | Interest and other                                                 |                                |           | 88                       |        
|                                                                                               |                                                                    |                                |           |                          |        
|                                                                                               |                                                                    | Total revenue                  |           |                          | 278,019
|                                                                                               |                                                                    |                                |           |                          |        
|Expenses:                                                                                      |                                                                    |                                |           |                          |        
|                                                                                               | Operating                                                          |                                |           | 80,078                   |        
|                                                                                               | General and administrative                                         |                                |           | 23,351                   |        
|                                                                                               | Depreciation and amortization                                      |                                |           | 70,023                   |        
|                                                                                               | Interest                                                           |                                |           | 72,312                   |        
|                                                                                               |                                                                    |                                |           |                          |        
|                                                                                               |                                                                    | Total expenses                 |           |                          | 245,764
|                                                                                               |                                                                    |                                |           |                          |        
|Income before net gains                                                                        |                                                                    |                                | 32,255    |                          |        
|                                                                                               | Net gains on sales of real estate investments and equipment        |                                |           | 2,924                    |        
|                                                                                               | Net derivative (losses) gains                                      |                                |           | (7,766                   | )      
|                                                                                               |                                                                    |                                |           |                          |        
|Income before allocation to minority interests, discontinued operations and extraordinary item |                                                                    |                                | 27,413    |                          |        
|                                                                                               | Income allocated to minority interests                             |                                |           | (6,891                   | )      
|                                                                                               | Income from discontinued operations                                |                                |           | 651                      |        
|                                                                                               | Extraordinary loss on prepayment of debt, net of minority interest |                                |           | (6,730                   | )      
|                                                                                               |                                                                    |                                |           |                          |        
|Net income                                                                                     |                                                                    |                                | 14,443    |                          |        
|                                                                                               |                                                                    | Preferred stock distributions  |           |                          | (14,302
|                                                                                               |                                                                    | Accretion of redeemable equity |           |                          | (328   
|                                                                                               |                                                                    |                                |           |                          |        
|Net loss attributable to common shareholders                                                   |                                                                    | $                              | (187      | )                        | $      
|                                                                                               |                                                                    |                                |           |                          |        
|Per Share Data:                                                                                |                                                                    |                                |           |                          |        
|                                                                                               | Basic loss attributable to common shareholders                     |                                | $         | (0.01                    | )      
|                                                                                               | Diluted loss attributable to common shareholders                   |                                | $         | (0.01                    | )      
|Weighted average common shares outstandingBasic                                               |                                                                    |                                | 30,257    |                          |        
|Weighted average common and common equivalent shares outstandingDiluted                       |                                                                    |                                | 30,286    |                          |        
|BALANCE SHEET DATA:
(at end of period)                                                         |                                                                    |                                |           |                          |        
|Real estate investments, before accumulated depreciation                                       |                                                                    | $                              | 2,178,533 |                          | $      
|Total assets                                                                                   |                                                                    |                                | 2,059,557 |                          |        
|Total liabilities                                                                              |                                                                    |                                | 1,095,396 |                          |        
|Minority interests                                                                             |                                                                    |                                | 85,553    |                          |        
|Redeemable equity                                                                              |                                                                    |                                |          |                          |        
|Shareholders' equity                                                                           |                                                                    |                                | 878,608   |                          |        
|OTHER DATA:                                                                                    |                                                                    |                                |           |                          |        
|# of shopping centers (at end of period)                                                       |                                                                    |                                | 152       |                          |        
|Gross leasable area of shopping centers (sq. ft. at end of period, in thousands)(2)            |                                                                    |                                | 25,925    |                          |        
|% leased (at end of period)                                                                    |                                                                    |                                | 93        | %                        |        
|Total portfolio net operating income                                                           |                                                                    | $                              | 197,853   |                          | $      
|Funds from Operations(3)                                                                       |                                                                    |                                | 72,733    |                          |        
|Cash flow from operating activities                                                            |                                                                    |                                | 121,172   |                          |        
|Cash flow from investing activities                                                            |                                                                    |                                | (129,257  | )                        |        
|Cash flow from financing activities                                                            |                                                                    |                                | 3,430     |                          |        

---

39

---

HERITAGE
PREDECESSOR(1)Oct. 1, 1998
to July 8, 1999

Year Ended
Sept. 30, 1998(in thousands)INCOME STATEMENT DATA:Revenue:Rentals and recoveries

$
55,941

$
67,074Interest and other


393


628Total revenue


56,334


67,702Expenses:Operating


17,247


23,117General and administrative


3,757


3,060Interest


2,155


1,292Total expenses


23,159


27,469Net additions from operations


33,175


40,233Unrealized gain (loss) in fair value of assets


35,170


11,511Net gains (losses) on sales of real estate investments and equipment


(8,807
)

3,239Net additions after gains (losses)


59,538


54,983Distributions to NETT


(25,858
)

(20,771
)Net increase (decrease) in net assets

$
33,680

$
34,212BALANCE SHEET DATA:(at end of period)Real estate investments, before accumulated depreciation

$
578,200

$
544,937Total assets


585,592


557,514Total liabilities


35,592


41,194OTHER DATA:# of shopping centers (at end of period)


41


40Gross leasable area of shopping centers (sq. ft. at end of period, in thousands)


7,155


6,700% leased (at end of period)


92
%

92
%Total portfolio net operating income

$
38,694

$
43,957


---

40

---



Item 7:    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the selected financial data and the historical consolidated financial
statements and related notes thereto.

Overview

We are a fully integrated, self-administered and self-managed REIT that acquires, owns, manages, leases and redevelops primarily
grocer-anchored neighborhood and community shopping centers in the Eastern and Midwestern United States. As of December 31, 2002, we had a portfolio of 152 shopping centers totaling
25.9 million square feet of company-owned gross leasable area, located in 26 states. Our shopping center portfolio was 93% leased as of December 31, 2002. We also own four office
buildings and ten single-tenant properties.

On
January 23, 2003, we completed the acquisition of Spradlin Farm, a 442,000 square foot community shopping center, of which we acquired 181,000 square feet, located in
Christiansburg, Virginia for $22.5 million. The center is approximately ten minutes from Blacksburg, Virginia and the Virginia Tech University campus. The property, which is 98% leased, is
anchored by TJ Maxx, Barnes & Noble, Michael's and Goody's, and includes a separately owned Home Depot (124,000 square feet) and Target (137,000 square feet), and is adjacent to a new
Wal-Mart Supercenter (210,000 square feet).

In
keeping with our focus on our core portfolio of primarily grocer-anchored shopping centers, we completed the disposition of our ten remaining single-tenant properties for
$2.4 million, resulting in a net gain on sale of $0.8 million during the first quarter of 2003. These properties were classified as held for sale at December 31, 2002, and their
results of operations were classified as discontinued operations in the accompanying financial statements. As our net operating income from these properties constituted less than 1% of our total net
operating income during 2002, we do not expect the sale of these properties to have an impact on our future operations or cash flows.

We
derive substantially all of our revenues from rentals and recoveries received from tenants under existing leases on each of our properties. Our operating results therefore depend
materially on the ability of our tenants to make required rental payments. We believe that the nature of the properties
that we primarily own and invest ingrocer-anchored neighborhood and community shopping centersprovides a more stable revenue flow in uncertain economic times, as they are
more resistant to economic down cycles. This is because consumers still need to purchase food and other goods found at grocers, even in difficult economic times.

In
the future, we intend to focus on increasing our internal growth, and we expect to continue to pursue targeted acquisitions of primarily grocer-anchored neighborhood and community
shopping centers in attractive markets with strong economic and demographic characteristics. We currently expect to incur additional debt in connection with any future acquisitions of real estate.

As
of December 31, 2002, we had $1.0 billion of indebtedness. This indebtedness will require balloon payments starting in June 2003. We anticipate that we will not
have sufficient funds on hand to repay these balloon amounts at maturity. Therefore, we expect to refinance our debt either through unsecured private or public debt offerings, additional debt
financings secured by individual properties or groups of properties or by additional equity offerings. We may also finance those payments through borrowings under our line of credit facility.

Initial Public Offering and Related Transactions

On April 23, 2002, the Securities and Exchange Commission simultaneously declared effective our registration statement on Form S-11
filed under the Securities Act of 1933 and our registration statement on Form 8-A, filed under the Securities Exchange Act of 1934 for an initial public offering

41

---

("IPO") of our Common Stock, and on April 29, 2002, we completed our IPO. We sold 14,080,556 shares of our Common Stock (including 80,556 shares issued pursuant to the exercise of the
underwriters' overallotment options) in the IPO at a price of $25.00 per share resulting in net proceeds to the Company of $323 million.

The
net proceeds from our IPO were used for the following:



In
connection with our IPO, all shares of our Series A Cumulative Convertible Preferred Stock and redeemable equity, then outstanding, converted automatically into shares of the
Company's common stock on a one for one basis.

Upon
completion of the IPO, the vesting of all stock options previously granted to our employees (other than 430,000 stock options granted in April 2002 in connection with the
IPO) accelerated and all contractual restrictions on transfer and forfeiture provisions that existed on restricted shares previously granted to members of our senior management and other key employees
terminated. As a result, we incurred compensation expense, including the reimbursement of a portion of the taxes paid by two individuals, of $6.8 million on the restricted shares in the second
quarter of 2002, which was comprised of $4.3 million of stock compensation expense and $2.5 million for the reimbursement of a portion of such taxes payable.

In
July 2002, the Board of Directors approved the issuance over five years of an aggregate of up to 775,000 shares of restricted stock with no exercise price to members of senior
management of the Company. The Company issued the first installment of 155,000 shares in July 2002 based on a fair market value per share of $23.65 on the grant date. These shares were subject
to risk of forfeiture and transfer restrictions, which terminated on March 1, 2003. During the year ended December 31, 2002, the Company recognized $2,618,000 of compensation expense
related to these shares. The unamortized compensation expense of $1,047,000 is included as unearned compensation on the accompanying balance sheet and will be amortized over the remaining vesting
period.

In
addition, on March 3, 2003, the Company issued 155,000 shares based on a value of $24.36 per share. These shares are subject to risk of forfeiture and transfer restrictions,
which terminate on March 3, 2004. The remaining installments of these special share grants are expected to be issued ratably over a three-year period beginning in March 2004,
subject to the satisfaction of certain performance milestones and other conditions during the three-year period. Upon issuance, the remaining installments will also be subject to risk of
forfeiture and transfer restrictions, which will terminate upon the first anniversary of the date of each installment, subject to continued employment.

Critical Accounting Policies

In response to recent guidance of the Securities and Exchange Commission we have identified the following critical accounting policies that affect our more
significant judgments and estimates used in the preparation of our consolidated financial statements. The preparation of our consolidated financial statements in conformity with GAAP requires us to
make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.

On
an ongoing basis, we evaluate our estimates, including those related to revenue recognition and the allowance for doubtful accounts receivable, real estate investments and asset
impairment, and

42

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derivatives used to hedge interest-rate risks. We state these accounting policies in the notes to our consolidated financial statements and at relevant sections in this discussion and
analysis. Our estimates are based on information that is currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ
from those estimates and those estimates could be different under varying assumptions or conditions.

Revenue Recognition

Rental income with scheduled rent increases is recognized using the straight-line method over the term of the leases. The aggregate excess of rental
revenue recognized on a straight-line basis over cash received under applicable lease provisions is included in accounts receivable. Leases for both retail and office space generally
contain provisions under which the tenants reimburse us for a portion of property operating expenses and real estate taxes incurred by us. In addition, certain of our operating leases for retail space
contain contingent rent provisions under which tenants are required to pay a percentage of their sales in excess of a specified amount as additional rent. We defer recognition of contingent rental
income until those specified targets are met.

We
must make estimates of the uncollectibility of our accounts receivable related to minimum rent, deferred rent, expense reimbursements and other revenue or income. We specifically
analyze accounts receivable and historical bad debts, tenant concentrations, tenant credit worthiness, current economic trends and changes in our tenant payment terms when evaluating the adequacy of
the allowance for doubtful accounts receivable. These estimates have a direct impact on our net income, because a higher bad debt allowance would result in lower net income.

Real Estate Investments

At our formation in July 1999, contributed real estate investments were recorded at the carry-over basis of our predecessor, which was fair
market value of the assets in conformity with GAAP applicable to pension funds. Subsequent acquisitions of real estate investments, including those acquired in connection with our acquisition of
Bradley in September 2000 and other acquisitions since our formation, are recorded at cost. Expenditures that substantially extend the useful life of a real estate investment are capitalized.
Expenditures for maintenance, repairs and betterments that do not materially extend the useful life of a real estate investment are charged to operations as incurred.

The
provision for depreciation and amortization has been calculated using the straight-line method over the following estimated useful lives:

Land improvements

15 yearsBuildings and improvements

20-39 yearsTenant improvements

Shorter of useful life or term of related lease


We
are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to reflect on an annual
basis with respect to our properties. These assessments have a direct impact on our net income because if we were to shorten the expected useful life of our properties or improvements, we would
depreciate them over fewer years, resulting in more depreciation expense and lower net income on an annual basis during these periods.

We
apply Statement of Financial Accounting Standards (SFAS) No. 144,Accounting for the Impairment or Disposal of Long-Lived
Assets, to recognize and measure impairment of long-lived assets. We review each real estate investment for impairment whenever events or circumstances indicate
that the carrying value of a real estate investment may not be recoverable. The review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges,
expected to result from the real estate investment's use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the
effects of leasing

43

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demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a real estate investment, an impairment loss is recorded to the extent that the
carrying value exceeds estimated fair market value. No such impairment losses have been recognized to date.

Real
estate investments held for sale are carried at the lower of carrying amount or fair value, less cost to sell. Depreciation and amortization are suspended during the period held for
sale.

We
are required to make subjective assessments as to whether there are impairments in the value of our real estate properties. These assessments have a direct impact on our net income,
because taking an impairment loss results in an immediate negative adjustment to net income.

Hedging Activities

From time to time, we use derivative financial instruments to limit our exposure to changes in interest rates. We were not a party to any hedging agreements with
respect to our floating rate debt as of December 31, 2002. We have in the past used derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings, from
lines of credit to medium and long-term financings. We require that hedging derivative instruments are effective in reducing the interest rate risk exposure that they are designed to
hedge. We do not use derivatives for trading or speculative purposes and only enter contracts with major financial institutions based on their credit rating and other factors.

If
interest rate assumptions and other factors used to estimate a derivatives fair value or methodologies used to determine hedge effectiveness were different, amounts reported in
earnings and other comprehensive income and losses expected to be reclassified into earnings in the future could be affected. Furthermore, future changes in market interest rates and other relevant
factors could increase the fair value of a liability for a derivative, increase future interest expense, and result in lower net income.

Results of Operations

The following discussion is based on our consolidated financial statements for the years ended December 31, 2002, 2001, and 2000.

From
January 1, 2000 through December 31, 2002, we increased our total portfolio of properties from 63 properties to 166 properties and from 8.4 million
company-owned GLA to 26.2 million company-owned GLA. The majority of this increase resulted from the Bradley acquisition of approximately 100 properties, which we completed in
September 2000. As a result of this rapid growth of our total portfolio, the financial data presented below shows significant changes in revenues and expenses from
period-to-period and we do not believe our period-to-period financial data are comparable. Therefore, the comparison of operating results for the years
ended December 31, 2002, 2001, and 2000 show changes resulting from net operating income for properties that we owned for each period compared (we refer to this comparison as our "Same Property
Portfolio" for the applicable period) and the changes for income before net gains attributable to our Total Portfolio. Unless otherwise indicated, increases in revenue and expenses attributable to the
Total Portfolio are due to the acquisition of properties, including those resulting from the Bradley acquisition, during the years being compared. In addition, amounts classified as discontinued
operations in the accompanying consolidated financial statements are excluded from the Total Portfolio information.

Comparison of the year ended December 31, 2002 to the year ended December 31, 2001

The table below shows selected operating information for our total portfolio and the 153 properties acquired prior to January 1, 2001 that remained in the
total portfolio through December 31,

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2002, which constitute the Same Property Portfolio for the years ended December 31, 2002 and 2001, (in thousands):

|          |                               | Same Property Portfolio |   | Total Portfolio |        
|--------- | ----------------------------- | ----------------------- | - | --------------- | -------
|
|Revenue:  |                               |                         |   |                 |        
|          | Rentals                       |                         | $ | 192,029         |        
|          | Percentage rent               |                         |   | 5,048           |        
|          | Recoveries                    |                         |   | 58,634          |        
|          | Other property                |                         |   | 2,031           |        
|          |                               |                         |   |                 |        
|          |                               | Total revenue           |   |                 | 257,742
|Expenses: |                               |                         |   |                 |        
|          | Property operating expenses   |                         |   | 34,739          |        
|          | Real estate taxes             |                         |   | 38,407          |        
|          |                               |                         |   |                 |        
|          |                               | Net operating income    |   | $               | 184,596
|          |                               |                         |   |                 |        
|Add:      |                               |                         |   |                 |        
|          | Interest and other income     |                         |   | 88              |        
|Deduct:   |                               |                         |   |                 |        
|          | Depreciation and amortization |                         |   | 70,023          |        
|          | Interest                      |                         |   | 72,312          |        
|          | Interest-related party        |                         |   |                |        
|          | General and administrative    |                         |   | 23,351          |        
|          |                               |                         |   |                 |        
|          |                               | Income before net gains |   | $               | 32,255 
|          |                               |                         |   |                 |        

The increase in rental revenue, including termination fees, for our Same Property Portfolio is primarily the result of an increase in minimum rent
of $2.6 million related to new leases and rollovers of existing tenants at higher rental rates. Although our actual occupancy on a same property basis remained relatively flat at 92.7% as of
December 31, 2002, the new leasing activity offset any loss of income related to new vacancies and bankruptcies. Additionally, rental revenue increased $0.7 million due to an additional
charge made to bad debts in 2001 primarily associated with bankruptcies, principally Kmart, and other delinquent tenants. These increases are partially offset by a reduction in termination fees over
the prior year of $0.6 million in 2002.

Percentage
rent revenue increased for our Same Property Portfolio primarily due to the timing of notification that sales thresholds have been met and due to the increased sales
performance over the prior sales year for tenants who pay percentage rent.

Recoveries
revenue increased for our Same Property Portfolio primarily due to an overall increase in the recovery rate of property operating and real estate tax expenses from 80.2% in
2001 to 84.3% in 2002. The increase in the rate is due to recoveries recorded in 2002 for bankrupt tenants, primarily Kmart, as these leases were not rejected and continued to remain open and
operating. In addition, recoveries revenue increased due to higher reimbursable expenses in 2002.

The
decrease in interest and other income in the Total Portfolio is primarily due to lower rates and lower average cash balances during 2002.

Property
operating expenses increased primarily as a result of an increase of $0.9 million in repairs and maintenance expense, an increase of $0.5 in insurance expense, and an
increase of $0.2 million in landscaping expense, partially offset by a decrease in snow removal expense of $0.7 million due to a mild early 2002 snow season.

Real
estate tax expense increased primarily as a result of an increase in the real estate tax rate for our properties in New York and Illinois.

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Interest
expense, including related party interest expense, decreased due to the payoff of certain indebtedness with the proceeds from the IPO, offset by an increase in mortgage loans
payable as result of the assumption of debt from various property acquisitions.

General
and administrative expenses increased primarily as a result of the effect of accelerated stock compensation expense in connection with the IPO. Upon completion of the IPO, all
contractual restrictions on transfer and forfeiture provisions that existed on restricted shares previously granted to members of our senior management and other key employees terminated. As a result,
the Company incurred compensation expense, including the reimbursement of taxes paid by two employees, of $6.8 million, which is comprised of $4.3 million of stock compensation expense
and $2.5 million for the reimbursement of a portion of such taxes. In addition, general and administrative expense increased $2.6 million as a result of compensation expense related to
the issuance of 155,000 shares of restricted stock in July 2002. These shares are subject to contractual restrictions on transfer and forfeiture provisions, which terminated on March 1,
2003. The increase is also due in part to a $0.7 million increase in supplemental executive retirement plan costs and increased corporate expenses associated with being a public company.

Comparison of the year ended December 31, 2001 to year ended December 31, 2000

The table below shows selected operating information for our Total Portfolio and the 50 properties acquired prior to January 1, 2000 that remained in our
Total Portfolio through December 31, 2001 (which constitute the Same Property Portfolio for the years ended December 31, 2001 and 2000) (in thousands):

|                        |                               | Same Property Portfolio |        | Total Portfolio |       
|----------------------- | ----------------------------- | ----------------------- | ------ | --------------- | ------
|
|Revenue:                |                               |                         |        |                 |       
|                        | Rentals                       |                         | $      | 74,010          |       
|                        | Percentage rent               |                         |        | 1,533           |       
|                        | Recoveries                    |                         |        | 16,529          |       
|                        | Other property                |                         |        | 75              |       
|                        |                               |                         |        |                 |       
|                        |                               | Total revenue           |        |                 | 92,147
|Expenses:               |                               |                         |        |                 |       
|                        | Property operating expenses   |                         |        | 12,465          |       
|                        | Real estate taxes             |                         |        | 11,724          |       
|                        |                               |                         |        |                 |       
|                        |                               | Net operating income    |        | $               | 67,958
|                        |                               |                         |        |                 |       
|Add:                    |                               |                         |        |                 |       
|                        | Interest and other income     |                         |        | 298             |       
|Deduct:                 |                               |                         |        |                 |       
|                        | Depreciation and amortization |                         |        | 64,051          |       
|                        | Interest                      |                         |        | 88,315          |       
|                        | Interest-related party        |                         |        | 2,027           |       
|                        | General and administrative    |                         |        | 12,640          |       
|                        |                               |                         |        |                 |       
|Income before net gains |                               | $                       | 13,438 |                 | $     
|                        |                               |                         |        |                 |       

The increase in rental revenue for our Same Property Portfolio is primarily the result of an increase in minimum rent related to new leases and
rollovers of existing tenants at higher rental rates. Specifically, a number of new leases were signed with anchor tenants in late 2000 and early 2001 to occupy previously vacant space. The actual
occupancy for the Same Property Portfolio increased from 91.3% to 92.6% in 2001.

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Percentage
rent revenue increased for our Same Property Portfolio primarily due to additional revenue from new leases that commenced in 2000. Additionally, a full year of percentage rent
revenue was recorded in 2001 related to 2000 sales performance for eight properties acquired in December 1999. Percentage rent income is recognized at the end of the lease year or other period
in which tenant sales thresholds have been reached and the percentage rents are due. The increase in percentage rent revenue for our Total Portfolio is primarily the result of percentage rent related
to properties acquired or placed in service after January 1, 2000 and 1999.

Recoveries
revenue increased for our Same Property Portfolio primarily due to the related increase in property operating and real estate tax expenses. The Same Store Portfolio's rate of
recovery for operating and real estate taxes remained at 70% in 2001 and 2000. Occupancy increases were offset by an additional charge to bad debt recorded in 2001 primarily associated with
bankruptcies and other delinquent tenants.

The
decrease in other property revenue for our Same Property Portfolio is primarily the result of a decrease in late fees and other incidental charges paid by our tenants in 2001.

The
decrease in interest and other income in the Total Portfolio is primarily the result of a decrease in the average monthly cash balance maintained during the year ended
December 31, 2001 due to the use of cash in connection with our acquisition of Bradley in September of 2000.

Property
operating expenses increased for the Same Property Portfolio primarily due to an increase in snow removal costs of $0.6 million as well as an increase in utility and
cleaning expenses of $0.3 million and $0.2 million, respectively, for the year ended December 31, 2001.

Real
estate tax expense increased for the Same Property Portfolio primarily due to increases in real estate tax assessments for the year ended December 31, 2001.

The
interest expense for our Total Portfolio increased due to the additional debt incurred and assumed in connection with the Bradley acquisition and the acquisition of River Ridge
Marketplace, Village Plaza, Division Place and Franklin Square.

Related
party interest for our Total Portfolio increased due to the interest paid to Prudential in connection with the subordinated debt that was originated in September 2000 and
repaid in April 2001.

General
and administrative expenses increased for the year ended December 31, 2001 for our Total Portfolio due primarily to a one-time compensation cost associated
with the Bradley acquisition and an increase in the overall size of our real estate portfolio, mainly attributable to increased headcount resulting from the Bradley acquisition.

Liquidity and Capital Resources

At December 31, 2002, we had $1.5 million in available cash and cash equivalents. As a REIT, we are required to distribute at least 90% of our
taxable income to our stockholders on an annual basis. Therefore, as a general matter, it is unlikely that we will have any substantial cash balances that could be used to meet our liquidity needs.
Instead, these needs must be met from cash generated from operations and external sources of capital.

At
December 31, 2002, we had $1.0 billion of indebtedness. This indebtedness has a weighted average interest rate of 6.43% with an average maturity of 5.5 years. As
of December 31, 2002, our market capitalization was $2.12 billion, resulting in a debt-to-total market capitalization ratio of approximately 47%.

Short-Term Liquidity Requirements

Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated
with our properties, including:



47

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Historically,
we have satisfied our short-term liquidity requirements through our existing working capital and cash provided by our operations as well as with borrowings
under the Company's line of credit facility. We believe that our existing working capital and cash provided by operations should be sufficient to meet our short-term liquidity
requirements. Cash flows provided by operating activities increased to $121.2 million for the year ended December 31, 2002 from $78.7 million for the year ended
December 31, 2001. The increase in cash flows from operations is primarily attributable to the combined effect of an $18.0 million decrease in interest expense and a $17.5 million
increase in net operating income for the year ended December 31, 2002, partially offset by an increase in cash paid for general and administrative expenses of $3.3 million.

There
are a number of factors that could adversely affect our cash flow. The continuation of an economic downturn in one or more of our markets may impede the ability of our tenants to
make lease payments and may impact our ability to renew leases or re-lease space as leases expire. In addition, such an economic downturn or recession could also lead to an increase in
tenant bankruptcies, increases in our overall vacancy rates or declines in rents we can charge to re-lease properties upon expiration of current leases. In all of these cases, our cash
flow would be adversely affected.

As
of December 31, 2002, the Company had 12 tenants that contributed approximately 1.8% of our annualized base rent for all leases in which tenants were in occupancy at
December 31, 2002, operating under bankruptcy protection, the largest of which is Kmart.

On
January 22, 2002, Kmart filed for bankruptcy protection. At December 31, 2002, we leased space to Kmart at seven of our shopping centers. These locations, all of which
were physically occupied at December 31, 2002, and represented approximately 1.3% of our total annualized base rent for all leases in which tenants were in occupancy at December 31,
2002. In addition, Kmart owns store locations at
four of our shopping centers and subleases space from a third party tenant at one of our other locations.

On
March 8, 2002, Kmart announced that it intended to close 284 store locations as part of its bankruptcy reorganization. None of the twelve store locations described above were
included in the list of announced store closings. However, we agreed with Kmart to a rent reduction at one of our shopping centers of approximately $290,000 on an annualized basis.

On
January 14, 2003, Kmart announced that it intends to close an additional 326 store locations as part of its continued bankruptcy reorganization. Three of the twelve store
locations described above were included in the list of announced store closings, including the location for which we had previously granted a rent reduction. These three planned store closings total
approximately 290,120 square feet and represented approximately 0.59% of our total annualized base rent for all leases in which tenants were in occupancy at December 31, 2002.

Although
Kmart has announced its current intended store closings, we are not able to fully predict the impact on our business of Kmart's bankruptcy filing at this time. For instance,
Kmart could decide to close additional stores, including some or all of our remaining locations, terminate a substantial number of leases with us, or request additional rent reductions or deferrals.
Any of these actions could adversely affect our rental revenues, and the impact may be material. In addition, Kmart's termination of leases or closure of stores could result in lease terminations or
reductions in rent by other tenants in the same shopping centers, which could materially harm our business.

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In
the 3rd quarter of 2002, Ames Department Stores, Inc. (Ames), announced plans to liquidate in the 4th quarter of 2002. As of December 31, 2002, we leased space to Ames
at three of our shopping centers totaling approximately 205,000 square feet. Annualized base rent from Ames represented approximately 0.17% of our annualized base rent for all leases in which tenants
were in occupancy at December 31, 2002. In addition, in 2002 Ames closed two of its locations at our shopping centers totaling 129,000 square feet. Ames is in the process of selling its
remaining assets, including the leasehold interests in all of its locations. Leases at two of the three remaining locations are supported by guarantees from a national tenant and we expect rents to
remain current at these two locations.

In
addition, Phar-Mor, a tenant at two of our shopping centers totaling approximately 110,000 square feet, which had been operating under bankruptcy protection, completed the
liquidation of all assets in the 3rd quarter of 2002. Both of our Phar-Mor locations closed and stopped paying rent at the end of August 2002. Phar-Mor represented
approximately 0.3% of our annualized base rent for all leases in which tenants were in occupancy at December 31, 2002, prior to their termination.

Any
future bankruptcies of tenants in our portfolio particularly major or anchor tenants, may negatively impact our operating results.

We
incur maintenance capital expenditures at our properties, which include such expenses as parking lot improvements, roof repairs and replacements and other non-revenue
enhancing capital expenditures. Maintenance capital expenditures were approximately $8.1 million for the year ended December 31, 2002. We expect total maintenance capital expenditures to
be approximately $8.3 million, or $0.32 per square foot, in 2003. We also expect to incur revenue enhancing capital expenditures such as tenant improvements and leasing commissions in
connection with the leasing or re-leasing of retail space. We believe that our existing working capital and cash provided by operations will be sufficient to fund our maintenance capital
expenditures for the next twelve months.

We
believe that we qualify and we intend to continue to qualify as a REIT under the Internal Revenue Code. As a REIT, we are allowed to reduce taxable income by all or a portion of our
distributions paid to shareholders. We believe that our existing working capital and cash provided by operations will be sufficient to allow us to pay distributions necessary to enable us to continue
to qualify as a REIT.

However,
under some circumstances, we may be required to pay distributions in excess of cash available for those distributions in order to meet these distribution requirements, and we
may need to borrow funds to pay distributions in the future.

Long-Term Liquidity Requirements

Our long-term liquidity requirements consist primarily of funds necessary to pay for scheduled debt maturities, renovations, expansions and other
non-recurring capital expenditures that need to be made periodically to our properties, and the costs associated with acquisitions of properties that we pursue. Historically, we have
satisfied our long-term liquidity requirements through various sources of capital, including our existing working capital, cash provided by operations, long-term property
mortgage indebtedness, our senior unsecured credit facility and through the issuance of additional equity securities. We believe that these sources of capital will continue to be available to us in
the future to fund our long-term liquidity requirements. However, there are certain factors that may have a material adverse effect on our access to these capital sources.

Our
ability to incur additional debt is dependent upon a number of factors, including our degree of leverage, the value of our unencumbered assets, our credit rating and borrowing
restrictions imposed by existing lenders. Currently, we have a credit rating from two major rating agenciesStandard & Poor's, which on August 1, 2002, raised our rating to
BBB-, and Moody's Investor Service, which on August 7, 2002, raised our rating to Baa3, resulting in a decrease of 30 basis points in the spread over

49

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LIBOR and a 5 basis points reduction in the facility fee payable by us under our line of credit. A downgrade in outlook or rating by a rating agency can occur at any time if the agency perceives
adverse change in our financial condition, results of operations or ability to service our debt.

Based
on our internal evaluation of our properties, the estimated value of our properties exceeds the outstanding amount of mortgage debt encumbering those properties as of
December 31, 2002. Therefore, at this time, we believe that additional funds could be obtained, either in the form of mortgage debt or additional unsecured borrowings. In addition, we believe
that we could obtain additional financing without violating the financial covenants contained in our unsecured public notes.

Our
ability to raise funds through the issuance of equity securities is dependent upon, among other things, general market conditions for REITs and market perceptions about us. We will
continue to analyze which source of capital is most advantageous to us at any particular point in time, but the equity markets may not be consistently available on terms that are attractive or at all.

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Commitments

We currently do not have any capital lease obligations or material operating lease commitments. The following table summarizes our repayment obligations under our
indebtedness outstanding as of December 31, 2002 (in thousands):

|                                                     |  | Interest
Rate |   | Maturity       |  | 2003 |        | 2004 |         | 2005 |         | 2006 |        | 2007 |        | Thereafter |         | Total
|---------------------------------------------------- |  | ------------- | - | -------------- |  | ---- | ------ | ---- | ------- | ---- | ------- | ---- | ------ | ---- | ------ | ---------- | ------- | -----
|Mortgage loans payable:                              |  |               |   |                |  |      |        |      |         |      |         |      |        |      |        |            |         |      
|Kimberly West(1)                                     |  | 7.88          | % | January 2003   |  | $    | 3,519  |      |        |      |        |      |       |      |       |            |        |      
|Martin's Bittersweet Plaza                           |  | 8.88          | % | June 2003      |  |      | 2,975  |      |        |      |        |      |       |      |       |            |        |      
|Miracle Hills Park                                   |  | 8.28          | % | August 2004    |  |      | 78     |      | 3,594   |      |        |      |       |      |       |            |        |      
|The Commons of Chancellor Park                       |  | 8.48          | % | November 2004  |  |      | 371    |      | 12,374  |      |        |      |       |      |       |            |        |      
|Franklin Square                                      |  | 9.00          | % | June 2005      |  |      | 399    |      | 436     |      | 13,583  |      |       |      |       |            |        |      
|Williamson Square                                    |  | 8.00          | % | August 2005    |  |      | 311    |      | 337     |      | 10,831  |      |       |      |       |            |        |      
|Riverchase Village Shopping Center                   |  | 7.62          | % | September 2005 |  |      | 287    |      | 310     |      | 9,764   |      |       |      |       |            |        |      
|Spring Mall                                          |  | 9.39          | % | October 2006   |  |      | 100    |      | 109     |      | 120     |      | 8,021  |      |       |            |        |      
|Southport Centre                                     |  | 6.94          | % | July 2007      |  |      |       |      |        |      | 76      |      | 160    |      | 9,764  |            |        |      
|Innes Street Market                                  |  | 7.63          | % | October 2007   |  |      | 302    |      | 326     |      | 352     |      | 380    |      | 12,098 |            |        |      
|Southgate Shopping Center                            |  | 8.38          | % | October 2007   |  |      | 93     |      | 101     |      | 110     |      | 119    |      | 2,166  |            |        |      
|Salem Consumer Square                                |  | 10.13         | % | September 2008 |  |      | 385    |      | 425     |      | 471     |      | 520    |      | 576    |            | 8,724   |      
|St. Francis Plaza                                    |  | 8.13          | % | December 2008  |  |      | 162    |      | 176     |      | 191     |      | 207    |      | 225    |            | 243     |      
|8 shopping centers, cross collaterialized            |  | 7.83          | % | December 2009  |  |      | 1,459  |      | 1,577   |      | 1,705   |      | 1,843  |      | 1,993  |            | 74,287  |      
|Montgomery Commons(2)                                |  | 8.48          | % | January 2010   |  |      | 67     |      | 71      |      | 79      |      | 86     |      | 94     |            | 7,536   |      
|Warminster Towne Center(3)                           |  | 8.24          | % | February 2010  |  |      | 219    |      | 233     |      | 258     |      | 281    |      | 305    |            | 19,010  |      
|545 Boylston Street and William J. McCarthy Building |  | 8.26          | % | October 2010   |  |      | 556    |      | 603     |      | 655     |      | 711    |      | 772    |            | 32,645  |      
|29 shopping centers, cross collateralized            |  | 7.88          | % | October 2010   |  |      | 2,166  |      | 2,276   |      | 2,520   |      | 2,728  |      | 2,955  |            | 227,261 |      
|Bedford Grove                                        |  | 7.86          | % | March 2012     |  |      | 322    |      | 349     |      | 377     |      | 408    |      | 441    |            | 2,929   |      
|Berkshire Crossing                                   |  | 3.38          | % | November 2012  |  |      | 557    |      | 575     |      | 596     |      | 617    |      | 638    |            | 12,678  |      
|Grand Traverse Crossing                              |  | 7.42          | % | January 2013   |  |      | 200    |      | 215     |      | 232     |      | 249    |      | 269    |            | 12,773  |      
|Salmon Run Plaza(4)                                  |  | 8.95          | % | September 2013 |  |      | 267    |      | 292     |      | 319     |      | 349    |      | 381    |            | 3,609   |      
|Elk Park Center                                      |  | 7.64          | % | August 2016    |  |      | 255    |      | 275     |      | 298     |      | 322    |      | 346    |            | 7,279   |      
|Grand Traverse CrossingWal-Mart                     |  | 7.75          | % | October 2016   |  |      | 142    |      | 154     |      | 166     |      | 180    |      | 193    |            | 4,620   |      
|Montgomery Towne Center                              |  | 8.50          | % | March 2019     |  |      | 322    |      | 351     |      | 382     |      | 416    |      | 452    |            | 5,793   |      
|Bedford GroveWal-Mart                               |  | 7.63          | % | November 2019  |  |      | 131    |      | 141     |      | 152     |      | 164    |      | 178    |            | 3,573   |      
|Berkshire CrossingHome Depot/Wal-Mart               |  | 7.63          | % | March 2020     |  |      | 205    |      | 221     |      | 239     |      | 258    |      | 278    |            | 5,842   |      
|                                                     |  |               |   |                |  |      |        |      |         |      |         |      |        |      |        |            |         |      
|Total mortgage loans due                             |  |               |   |                |  | $    | 15,850 |      | 25,521  |      | 43,476  |      | 18,019 |      | 34,124 |            | 428,802 |      
|Unsecured notes payable                              |  | (5            | ) | (5)            |  |      |       |      | 100,000 |      |        |      | 1,490  |      |       |            | 100,000 |      
|Line of credit facility                              |  | 2.62          | % | April 2005     |  |      |       |      |        |      | 234,000 |      |       |      |       |            |        |      
|                                                     |  |               |   |                |  |      |        |      |         |      |         |      |        |      |        |            |         |      
|Total indebtedness                                   |  |               |   |                |  | $    | 15,850 |      | 125,521 |      | 277,476 |      | 19,509 |      | 34,124 |            | 528,802 |      
|                                                     |  |               |   |                |  |      |        |      |         |      |         |      |        |      |        |            |         |      

---

51

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The indebtedness described in the table above will require balloon payments, including $3.0 million starting in June 2003. It is
likely that we will not have sufficient funds on hand to repay these balloon amounts at maturity. We currently expect to refinance this debt through unsecured private or public debt offerings,
additional debt financings secured by individual properties or groups of properties or additional equity offerings. We may also refinance balloon payments through borrowings under our senior unsecured
credit facility.

Line of Credit

On April 29, 2002, the Company entered into a new three-year $350 million unsecured line of credit with a group of lenders and Fleet
National Bank, as agent. This line of credit replaced the Company's prior senior unsecured credit facility, which was repaid with proceeds of the IPO. Our two operating partnerships are the borrowers
under the line of credit and we, and certain of our other subsidiaries, have guaranteed this line of credit. This line of credit is being used principally to fund growth opportunities and for working
capital purposes. At December 31, 2002, $234 million was outstanding under the line of credit.

Our
ability to borrow under this line of credit is subject to our ongoing compliance with a number of financial and other covenants. This line of credit, except under some circumstances,
limits our ability to make distributions in excess of 90% of our annual funds from operations. In addition, this line of credit bears interest at either the lender's base rate or a floating rate based
on a spread over LIBOR ranging from 80 basis points to 135 basis points, depending upon our debt rating. In addition, this line of credit has a facility fee based on the amount committed ranging from
15 to 25 basis points, depending upon our debt rating, and requires quarterly payments. The variable rate in effect at December 31, 2002, including the lender's margin of 105 basis points and
borrowings outstanding at the base rate was 2.62%.

As
of December 31, 2002, we were in compliance with all of the financial covenants under our senior unsecured credit facility. However, if our properties do not perform as
expected, or if unexpected events occur that require us to borrow additional funds, compliance with these covenants may become difficult and may restrict our ability to pursue some business
initiatives. In addition, these financial covenants may restrict our ability to pursue particular acquisition transactions, including for example, acquiring a portfolio of properties that is highly
leveraged. These constraints on acquisitions could significantly impede our growth.

Funds From Operations

We calculate Funds from Operations in accordance with the best practices described in the April 2001 National Policy Bulletin of the National Association
of Real Estate Investment Trusts, referred to as NAREIT, and NAREIT's 1995 White Paper on Funds from Operations, as supplemented in November 1999. The White Paper defines Funds From Operations
as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of property,

52

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plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Funds from Operations should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of our
liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. We believe that Funds from Operations is helpful to investors as a measure of
our performance as an equity REIT because, along with cash flows from operating activities, financing activities and investing activities, it provides investors with an understanding of our ability to
incur and service debt and make capital expenditures. Our computation of Funds from Operations may, however, differ from the methodology for calculating funds from Operations utilized by other equity
REITs and, therefore, may not be comparable to such other REITs.

The
following table reflects the calculation of Funds from Operations (in thousands):

2002

Year Ended
December 31,
2001

2000Net income

$
14,443

$
12,236

$
24,102Add (deduct):Depreciation and amortization (real-estate related)


69,498


63,723


34,594Net gains on sales of real estate investments and equipment (including gains of $384 included in discontinued operations in 2002)


(3,308
)

(4,159
)

(1,890
)Extraordinary loss on debt prepayment


6,730





Preferred stock distributions


(14,302
)

(43,345
)

(38,410
)Accretion of redeemable equity


(328
)

(995
)

(329
)Funds from Operations

$
72,733

$
27,460

$
18,067


Related Party Transactions

We have in the past engaged in and currently engage in a number of transactions with related parties. The following is a summary of ongoing transactions with
related parties that may impact our future operating results.

The TJX Companies

In July 1999, Bernard Cammarata became a member of our board of directors. Mr. Cammarata is Chairman of the Board of TJX Companies, Inc., our
largest tenant, and was President and Chief Executive Officer of TJX until June 1999. We received annualized base rent from the TJX Companies of $11.2 million in 2002, which represented
approximately 5.0% of our total annualized base rent for all leases in which tenants were in occupancy at December 31, 2002. TJX pays us rent in accordance with written leases with respect to
several of our properties.

Advisory Fee

The Prudential Insurance Company of America, our second largest stockholder, received advisory and other fees totaling $3.4 million in connection with our
IPO.

131 Dartmouth Street Joint Venture

In November 1999, we entered into a joint venture with NETT for the acquisition and development of a 365,000 square foot commercial office building at 131
Dartmouth Street, Boston,

53

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Massachusetts. This joint venture is owned 94% by NETT and 6% by us. We were issued this interest as part of a construction management arrangement we originally entered into with the new entity. We
have entered into a property management agreement with this new entity pursuant to which we will manage the building in exchange for a management fee. We have no ongoing capital contribution
requirements with respect to this project, which was completed in January 2003. We expect that the first
tenants will begin occupying a portion of this office building in October 2003. We account for our interest in this joint venture using the cost method and we have not expended any amounts on
the project through December 31, 2002.

Boston Office Lease

One of the properties contributed to us by Net Realty Holding Trust was our headquarters building at 535 Boylston Street, Boston, Massachusetts. In 1974, NETT and
Net Realty Holding Trust entered into an agreement providing for the lease of 14,400 square feet of space in this office building to NETT for its Boston offices. Net Realty Holding Trust assigned this
area to us as part of our formation. The current term of this lease expires on March 31, 2005 and under this lease, NETT pays us $648,000 per year in rent.

Contingencies

Legal and Other Claims

We are subject to legal and other claims incurred in the normal course of business. Based on our review and consultation with counsel of those matters known to
exist, including those matters described on page 37, we do not believe that the ultimate outcome of these claims would materially affect our financial position or results of operations.

Non-Recourse Loan Guarantees

In connection with the Bradley acquisition, we entered into a special securitized facility with Prudential Mortgage Capital Corporation ("PMCC") pursuant to which
$244 million of collateralized mortgage-backed securities were issued by a trust created by PMCC. The trust consists of a single mortgage loan due from a subsidiary we created, Heritage SPE
LLC, to which we contributed 29 of our properties. This loan is secured by all 29 properties we contributed to the borrower.

In
connection with the securitized financing with PMCC, we entered into several indemnification and guaranty agreements with PMCC under the terms of which we agreed to indemnify PMCC for
various bad acts of Heritage SPE LLC and with respect to specified environmental liabilities with respect to the properties contributed by us to Heritage SPE LLC.

We
also have agreed to indemnify other mortgage lenders for bad acts and environmental liabilities in connection with other mortgage loans that we have obtained.

Inflation

Inflation has had a minimal impact on the operating performance of our properties. However, many of our leases contain provisions designed to mitigate the adverse
impact of inflation. These provisions include clauses enabling us to receive payment of additional rent calculated as a percentage of tenants' gross sales above pre-determined thresholds,
which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. These escalation clauses often are at fixed rent increases or
indexed escalations (based on the consumer price index or other measures). Many of our leases are also for terms of less than ten years, which permits us to seek to increase rents to market rates upon
renewal. In addition, most of our leases require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate

54

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taxes and insurance. This reduces our exposure to increases in costs and operating expenses resulting from inflation.

New Accounting Standards and Accounting Changes

SFAS No. 144

In October 2001, the FASB issued SFAS No. 144,Accounting for the Impairment of Disposal of Long-Lived
Assets, ("SFAS No. 144"). This statement addresses financial accounting and reporting for the impairment of long-lived assets and for the disposition of
long-lived assets. SFAS No. 144 requires, among other things, that the primary assets and liabilities and the results of operations of real properties, which have been sold during
2002, or otherwise qualify as held for sale (defined by SFAS No. 144), be classified as discontinued operations in accompanying financial statements. SFAS No. 144 requires that the
provisions of this statement be adopted prospectively. Accordingly, real estate designated as held for sale prior to January 1, 2002 is accounted for under the provisions of SFAS No. 121
and the results of operations from the only property so designated are included in income from continuing operations. Real estate designated as held for sale subsequent to January 1, 2002 is
accounted for in accordance with the provisions of SFAS No. 144 and the results of operations of certain properties so designated are included in income from discontinued operations. We have
restated prior periods for comparability, as required.

SFAS No. 145

In April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections("SFAS No. 145"). SFAS No. 145 eliminates the requirement that all gains and losses from the extinguishment of
debt be aggregated and, if material, classified as an extraordinary item. However, a company could continue to classify transactions as extraordinary items if it meets the criteria described in APB
No. 30,Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions("APB 30"). APB 30 requires that the event or transaction be both unusual in nature and infrequent in occurrence.

SFAS
No. 145 is effective for fiscal years beginning after May 15, 2002. However, any gain or loss on extinguishment of debt that was classified as an extraordinary item in
prior periods presented that does not meet the criteria of APB 30 shall be reclassified. The Company has elected to adopt SFAS No. 145 for its fiscal year beginning January 1, 2003, and
therefore has classified its losses associated with its prepayment of its prior senior unsecured credit facility and subordinated debt during the second quarter of 2002 as an extraordinary item. This
loss will be reclassified to continuing operations in 2003.

SFAS No. 146

In June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal
Activities("SFAS No. 146"). SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and requires that a
liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than at the date of an entity's commitment to an exit plan. SFAS No. 146
also establishes that fair value is the objective for initial measurement of the liability and is effective for exit or disposal activities initiated after December 31, 2002. The Company does
not expect this pronouncement to have a material impact on our liquidity, financial position, or results of operations.

55

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SFAS No. 148

In December 2002, the FASB issued SFAS No. 148,Accounting for Stock-Based CompensationTransition and
Disclosure("SFAS No. 148"). SFAS No. 148 amends SFAS No. 123,Accounting for Stock-Based Compensation("SFAS No. 123") to provide alternative methods of transition for a voluntary change to fair value based method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based
employee
compensation and the effect of the method used on reported results. The Company has adopted the disclosure requirements of SFAS No. 148 as of December 31, 2002.

FIN 45

In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45,Guarantor's Accounting and Disclosure Requirements for
Guarantees, including Indirect Indirect Guarantees of Indebtedness of Others. This interpretation expands the disclosures to be made by a guarantor in its financial statements
about its obligations under certain guarantees and requires the guarantor to recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 clarifies the requirements of
SFAS No. 5,Accounting for Contingencies, relating to guarantees. In general FIN 45 applies to contracts or indemnification agreements that
contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability, or equity security of the guaranteed party. The
disclosure requirements of FIN 45 are effective as of December 31, 2002 and require disclosure of the nature of the guarantee, the maximum potential amount of future payments that the guarantor
could be required to make under the guarantee, and the current amount of the liability, if any, for the guarantor's obligations under the guarantee. The Company adopted the disclosure requirements of
FIN 45 and concluded no additional disclosure was necessary. The Company will adopt the recognition requirements of FIN 45 in 2003 and does not expect these recognition requirements will have a
material impact on results of operations, financial position, or liquidity.

FIN 46

In January 2003, the FASB issued FIN 46,Consolidation of Variable Interest Entities.The objective
of this interpretation is to provide guidance on how to identify a variable interest entity ("VIE") and determine when the assets, liabilities, noncontrolling interests, and results of operations of a
VIE need to be included in a company's consolidated financial statements. A company that holds variable interest in an entity will need to consolidate the entity if the company's interest in the VIE
is such that the company will absorb a majority of the VIE's expected losses and/or receive a majority of the entity's expected residual returns, if they occur. FIN 46 also requires additional
disclosures by primary beneficiaries and other significant variable interest holders. The provisions of this interpretation became effective upon issuance. The Company does not believe the adoption of
the interpretation will have a material impact on results of operations, financial position, or liquidity.

56

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Item 7a:    Quantitative and Qualitative Disclosures About Market Risk

Market risk is the exposure to loss resulting from adverse changes in market prices, interest rates, foreign currency exchange rates, commodity prices and equity
prices. The primary market risk to which we are exposed is interest rate risk, which is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic
and political considerations and other factors that are beyond our control. Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest
rates.

The
following table presents our fixed rate debt obligations, at their carrying values, sorted by maturity date and our variable rate debt obligations sorted by maturity date (in
thousands):

|                |               | 2003 |   | 2004   |  | 2005 |         | 2006 |   | 2007    |  | 2008+ |        | Total |   | Fair Value |  | Weighted
Average
Interest
Rate |        
|--------------- | ------------- | ---- | - | ------ |  | ---- | ------- | ---- | - | ------- |  | ----- | ------ | ----- | - | ---------- |  | ------------------------------ | -------
|Secured Debt:   |               |      |   |        |  |      |         |      |   |         |  |       |        |       |   |            |  |                                |        
|                | Fixed rate    |      | $ | 15,293 |  | $    | 24,946  |      | $ | 42,880  |  | $     | 17,402 |       | $ | 33,486     |  | $                              | 419,995
|                | Variable rate |      |   | 557    |  |      | 575     |      |   | 596     |  |       | 617    |       |   | 638        |  |                                | 12,678 
|Unsecured Debt: |               |      |   |        |  |      |         |      |   |         |  |       |        |       |   |            |  |                                |        
|                | Fixed rate    |      |   |       |  |      | 100,000 |      |   |        |  |       | 1,490  |       |   |           |  |                                | 100,000
|                | Variable rate |      |   |       |  |      |        |      |   | 234,000 |  |       |       |       |   |           |  |                                |       
|                |               |      |   |        |  |      |         |      |   |         |  |       |        |       |   |            |  |                                |        
|                | Total         |      | $ | 15,850 |  | $    | 125,521 |      | $ | 277,476 |  | $     | 19,509 |       | $ | 34,124     |  | $                              | 532,673
|                |               |      |   |        |  |      |         |      |   |         |  |       |        |       |   |            |  |                                |        

We
were not a party to any hedging agreements with respect to our floating rate debt as of December 31, 2002. We have in the past used derivative financial instruments to manage,
or hedge, interest rate risks related to our borrowings, from lines of credit to medium- and long-term financings. We require that hedging derivative instruments be effective in reducing
the interest rate risk exposure that they are designed to hedge. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on
their credit rating and other factors. We do not believe that the interest rate risk represented by our floating rate debt is material as of December 31, 2002 in relation to total assets and
our total market capitalization.

Item 8:    Financial Statements

See "Index to Consolidated Financial Statements and Financial Statement Schedule" on page F-1 of this Form 10-K

Item 9:    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

57

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PART III

Item 10:    Directors and Executive Officers of the Registrant

The information contained in the sections captioned "Proposal One: Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" of
the Proxy Statement is incorporated herein by reference.

Item 11:    Executive Compensation

The information contained in the section captioned "Executive Compensation" of the Proxy Statement is incorporated herein by reference.

Item 12:    Security Ownership of Certain Beneficial Owners and Management

The information contained in the section captioned "Security Ownership of Certain Beneficial Owners and Management" of the Proxy Statement is incorporated herein
by reference.

Item 13:    Certain Relationships and Related Transactions

The information contained in the section captioned "Certain Relationships and Related Transactions" of the Proxy Statement is incorporated herein by reference.

Item 14:    Controls and Procedures

The principal executive officer and principal financial officer of the Company have evaluated the disclosure controls and procedures as of a date within
90 days before the filing date of this annual report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that the disclosure controls and
procedures effectively ensure that information required to be disclosed in the Company's filings and submissions with the Securities and Exchange Commission under the Exchange Act, is recorded,
processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. In addition, the Company has reviewed its internal controls and there have been no
significant changes in its internal controls or in other factors that could significantly affect those controls subsequent to the date of its last evaluation.

58

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PART IV

Item 15:    Exhibits, Financial Statements, Financial Statement Schedule and Reports on Form 8-K

Financial Statements.

See page F-1 for the index of the financial statements included in the Form 10-K.

Financial Statement Schedule.

See page 41 for the index of the financial statement schedule included in the Form 10-K.

Exhibits.

| |  |      |  |                                                                                                                                                                                                                            |  | 
| |  | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
| |  | 3.1  |  | Articles of Amendment and Restatement (Third) of Heritage Property Investment Trust, Inc.(1)                                                                                                                              
| |  | 3.2  |  | Amended and Restated Bylaws of Heritage Property Investment Trust, Inc.(1)                                                                                                                                                
| |  | 4.1  |  | Form of Common Stock Certificate of Heritage Property Investment Trust, Inc.(1)                                                                                                                                           
| |  | 4.2  |  | Indenture, dated as of November 24, 1997, by and between Bradley Operating Limited Partnership and LaSalle National Bank relating to the Senior Debt Securities of Bradley Operating Limited Partnership(1)               
| |  | 4.3  |  | Definitive Supplemental Indenture No. 1, dated as of November 24, 1997, between Bradley Operating Limited Partnership and LaSalle National Bank(1)                                                                        
| |  | 4.4  |  | Definitive Supplemental Indenture No. 2, dated as of January 28, 1998, between Bradley Operating Limited Partnership and LaSalle National Bank(1)                                                                         
| |  | 4.5  |  | Definitive Supplemental Indenture No. 3, dated as of March 10, 2000, between Bradley Operating Limited Partnership and LaSalle National Bank(1)                                                                           
| |  | 4.6  |  | Warrant Agreement for 75,000 shares of Registrant's common stock issued to The Prudential Insurance Company of America(1)                                                                                                 
| |  | 4.7  |  | Warrant Agreement for 300,000 shares of Registrant's common stock issued to The Prudential Insurance Company of America(1)                                                                                                
| |  | 10.1 |  | Amended and Restated Limited Partnership Agreement of Heritage Property Investment Limited Partnership, dated as of April 29, 2002(1)                                                                                     
| |  | 10.2 |  | Second Amended and Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership dated as of September 2, 1997(1)                                                                                    
| |  | 10.3 |  | Amendment, dated August 6, 1998, to Second Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership, designating the 8.4% Series A Convertible Preferred Units(1)                               
| |  | 10.4 |  | Amendment, dated February 23, 1999, to Second Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership, designating the 8.875% Series B Cumulative Redeemable Perpetual Preferred Units(1)      
| |  | 10.5 |  | Amendment, dated as of September 7, 1999, to Second Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership, designating the 8.875% Series C Cumulative Redeemable Perpetual Preferred Units(1)
| |  | 10.6 |  | Amendment, dated as of September 18, 2000, to Second Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership(1)                                                                                
| |  |      |  |                                                                                                                                                                                                                            |  | 

59

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| |  | 10.7  |  | Amendment, dated as of April 29, 2002, to Second Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership(1)                                                                                       
| |  | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |       |  | 10.7.1                                                                                                                                                                                                                       
| |  | 10.8  |  | Amended and Restated 2000 Equity Incentive Plan(1)                                                                                                                                                                           
| |  | 10.9  |  | Form of restricted stock and stock option agreements(1)                                                                                                                                                                      
| |  | 10.10 |  | Supplemental Executive Retirement Plan(1)                                                                                                                                                                                    
| |  | 10.11 |  | Revolving Credit and Guaranty Agreement, dated as of April 29, 2002, among Heritage Property Investment Limited Partnership, Bradley Operating Limited Partnership, the Company and the lending institutions named therein(2)
| |  | 10.12 |  | Loan Agreement, dated as of September 18, 2000, between Heritage SPE LLC and Prudential Mortgage Capital Company, LLC(1)                                                                                                     
| |  | 10.13 |  | Promissory Note, dated as of December 14, 1999, by and among Heritage Property Investment Limited Partnership, NH Heritage Limited Partnership and Metropolitan Life Insurance Company, as amended(1)                        
| |  | 10.14 |  | Promissory Note, dated as of September 13, 2000, by Heritage Property Investment Limited Partnership in favor of The Variable Annuity Life Insurance Company(1)                                                              
| |  | 10.15 |  | Employment Agreement with Thomas C. Prendergast, as amended by the First Amendment, dated as of April 3, 2000(1)                                                                                                             
| |  |       |  | 10.15.1                                                                                                                                                                                                                      
| |  | 10.16 |  | Form of Change in Control/Severance Agreement(1)                                                                                                                                                                             
| |  | 10.17 |  | PIMS Indemnification Letter, dated as of July 9, 1999, by and between the Registrant and Prudential Investment Management Services, LLC(1)                                                                                   
| |  | 21.1  |  | List of Subsidiaries of the Registrant                                                                                                                                                                                       
| |  | 23.1  |  | Consent of KPMG LLP                                                                                                                                                                                                          
| |  | 99.1  |  | Chief Executive Officer's Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.                                                                            
| |  | 99.2  |  | Chief Financial Officer's Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.                                                                            

---

Reports on Form 8-K.

On November 4, 2002, the Company filed a Current Report on Form 8-K with respect to its financial results for the fiscal quarter ended
September 30, 2002.

60

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SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|Date: March 27, 2003 Heritage Property Investment Trust, Inc.
|-------------------------------------------------------------
|/s/THOMAS C. PRENDERGASTThomas C. Prendergast                

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on
March 27, 2003.

|                                                  |  |                                                                                
|------------------------------------------------- |  | -------------------------------------------------------------------------------
|/s/THOMAS C. PRENDERGASTThomas C. Prendergast     |  | Chairman, President, Chief Executive Officer (principal executive officer)     
|/s/DAVID G. GAWDavid G. Gaw                       |  | Senior Vice President and Chief Financial Officer (principal financial officer)
|/s/PATRICK O'SULLIVANPatrick O'Sullivan           |  | Vice President, Finance and Accounting (principal accounting officer)          
|/s/JOSEPH L. BARRYJoseph L. Barry                 |  | Director                                                                       
|/s/BERNARD CAMMARATABernard Cammarata             |  | Director                                                                       
|/s/ROBERT M. FALZONRobert M. Falzon               |  | Director                                                                       
|/s/RICHARD C. GARRISONRichard C. Garrison         |  | Director                                                                       
|/s/DAVID W. LAUGHTONDavid W. Laughton             |  | Director                                                                       
|/s/KENNETH K. QUIGLEY, JR.Kenneth K. Quigley, Jr. |  | Director                                                                       
|                                                  |  |                                                                                

61

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|/s/KEVIN C. PHELANKevin C. Phelan               |  | Director
|----------------------------------------------- |  | --------
|/s/WILLIAM M. VAUGHN, IIIWilliam M. Vaughn, III |  | Director
|/s/PAUL V. WALSHPaul V. Walsh                   |  | Director
|/s/ROBERT J. WATSONRobert J. Watson             |  | Director

62

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CERTIFICATIONS

I,
Thomas C. Prendergast, certify that:





|Date: March 27, 2003 |  | /s/THOMAS C. PRENDERGASTThomas C. Prendergast
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------

---

I,
David G. Gaw, certify that:





|Date: March 27, 2003 |  | /s/DAVID G. GAWDavid G. Gaw
Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
|-------------------- |  | ----------------------------------------------------------------------------------------------------------------------

---



HERITAGE PROPERTY INVESTMENT TRUST, INC.        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND  FINANCIAL STATEMENT SCHEDULE



|                                                                                                                
|----------------------------------------------------------------------------------------------------------------
|Independent Auditors' Report                                                                                    
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                                    
|Consolidated Statements of Operations for the years ended December 31, 2002, 2001, and 2000                     
|Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2002, 2001, and 2000
|Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000                     
|Notes to Consolidated Financial Statements                                                                      
|Financial Statement ScheduleSchedule III                                                                       

All
other schedules for which a provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.

F-1

---



Independent Auditors' Report

The
Board of Directors and Shareholders
    Heritage Property Investment Trust, Inc.:

We
have audited the accompanying consolidated balance sheets of Heritage Property Investment Trust, Inc. and subsidiaries (the Company) as of December 31, 2002 and 2001 and
the consolidated statements of operations, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2002. In connection with
our audits of the consolidated financial statements, we also have audited the financial statement schedule III listed in the accompanying index to consolidated financial statements and
financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements and financial statement schedule based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 Company as of December 31, 2002 and
2001, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information set forth therein.

| |  | /s/ KPMG LLP
| |  | ------------

Boston, Massachusetts
January 31, 2003, except for notes 11 and 16, as to which the date is March 3, 2003

F-2

---



HERITAGE PROPERTY INVESTMENT TRUST, INC.        Consolidated Balance Sheets        December 31, 2002 and 2001        (In thousands, except for share amounts)

|                                                                                                 |                                                                                                                                                                                                                                                    | 2002 |                                                               | 2001      |  
|------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------------------------------------------------------- | --------- | -
|Assets                                                                                           |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|Real estate investments, net                                                                     |                                                                                                                                                                                                                                                    | $    | 2,008,504                                                     |           | $
|Cash and cash equivalents                                                                        |                                                                                                                                                                                                                                                    |      | 1,491                                                         |           |  
|Accounts receivable, net of allowance for doubtful accounts of $6,389 in 2002 and $7,473 in 2001 |                                                                                                                                                                                                                                                    |      | 22,836                                                        |           |  
|Prepaids and other assets                                                                        |                                                                                                                                                                                                                                                    |      | 11,162                                                        |           |  
|Deferred financing costs and other assets                                                        |                                                                                                                                                                                                                                                    |      | 15,564                                                        |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      | Total assets                                                  |           | $
|                                                                                                 |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|Liabilities, Redeemable Equity and Shareholders' Equity                                          |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|Liabilities:                                                                                     |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|                                                                                                 | Mortgage loans payable                                                                                                                                                                                                                             |      | $                                                             | 569,663   |  
|                                                                                                 | Unsecured notes payable                                                                                                                                                                                                                            |      |                                                               | 201,490   |  
|                                                                                                 | Line of credit facility                                                                                                                                                                                                                            |      |                                                               | 234,000   |  
|                                                                                                 | Subordinated debt                                                                                                                                                                                                                                  |      |                                                               |          |  
|                                                                                                 | Accrued expenses and other liabilities                                                                                                                                                                                                             |      |                                                               | 68,275    |  
|                                                                                                 | Accrued distributions                                                                                                                                                                                                                              |      |                                                               | 21,968    |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      | Total liabilities                                             |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|Series B Preferred Units                                                                         |                                                                                                                                                                                                                                                    |      | 50,000                                                        |           |  
|Series C Preferred Units                                                                         |                                                                                                                                                                                                                                                    |      | 25,000                                                        |           |  
|Exchangeable limited partnership units                                                           |                                                                                                                                                                                                                                                    |      | 8,128                                                         |           |  
|Other minority interests                                                                         |                                                                                                                                                                                                                                                    |      | 2,425                                                         |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      | Total minority interests                                      |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|Redeemable equity:                                                                               |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|                                                                                                 | Series A 8.5% Cumulative Convertible Participating Preferred Stock, $.001 par value, 3,743,315 shares issued and outstanding at December 31, 2001; and common stock, $.001 par value, 1,256,685 shares issued and outstanding
at December 31, 2001 |      |                                                               |          |  
|Shareholders' equity:                                                                            |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|                                                                                                 | Series A 8.5% Cumulative Convertible Participating Preferred Stock, $.001 par value; 25,000,000 shares authorized; 16,528,653 shares issued and outstanding at December 31, 2001,                                                                  |      |                                                               |          |  
|                                                                                                 | Common stock, $.001 par value; 70,000,000 shares authorized; 41,504,208 and 5,561,635 shares issued and outstanding at December 31, 2002 and 2001, respectively                                                                                    |      |                                                               | 41        |  
|                                                                                                 | Additional paid-in capital                                                                                                                                                                                                                         |      |                                                               | 1,006,417 |  
|                                                                                                 | Cumulative distributions in excess of net income                                                                                                                                                                                                   |      |                                                               | (126,803  | )
|                                                                                                 | Unearned compensation                                                                                                                                                                                                                              |      |                                                               | (1,047    | )
|                                                                                                 | Accumulated other comprehensive loss                                                                                                                                                                                                               |      |                                                               |          |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      | Total shareholders' equity                                    |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      |                                                               |           |  
|                                                                                                 |                                                                                                                                                                                                                                                    |      | Total liabilities, redeemable equity and shareholders' equity |           | $
|                                                                                                 |                                                                                                                                                                                                                                                    |      |                                                               |           |  

See
accompanying notes to consolidated financial statements.

F-3

---

HERITAGE PROPERTY INVESTMENT TRUST, INC.        Consolidated Statements of Operations        Years ended December 31, 2002, 2001 and 2000        (In thousands, except per-share
data)

|                                                                   |                                                                                                         | 2002                                                         |         | 2001    |         | 2000    |        
|------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ------- | ------- | ------- | ------- | -------
|Revenue:                                                           |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   | Rentals and recoveries                                                                                  |                                                              | $       | 277,931 |         | $       | 255,208
|                                                                   | Interest and other                                                                                      |                                                              |         | 88      |         |         | 298    
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Total revenue                                                |         |         | 278,019 |         |        
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|Expenses:                                                          |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   | Property operating expenses                                                                             |                                                              |         | 39,204  |         |         | 37,182 
|                                                                   | Real estate taxes                                                                                       |                                                              |         | 40,874  |         |         | 37,853 
|                                                                   | Depreciation and amortization                                                                           |                                                              |         | 70,023  |         |         | 64,051 
|                                                                   | Interest                                                                                                |                                                              |         | 72,312  |         |         | 88,315 
|                                                                   | Interest-related party                                                                                  |                                                              |         |        |         |         | 2,027  
|                                                                   | General and administrative                                                                              |                                                              |         | 23,351  |         |         | 12,640 
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Total expenses                                               |         |         | 245,764 |         |        
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Income before net gains                                      |         |         | 32,255  |         |        
|Net gains on sales of real estate investments and equipment        |                                                                                                         |                                                              | 2,924   |         |         | 4,159   |        
|Net derivative (losses) gains                                      |                                                                                                         |                                                              | (7,766  | )       |         | 986     |        
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Income before allocation to minority interests               |         |         | 27,413  |         |        
|Income allocated to exchangeable limited partnership units         |                                                                                                         |                                                              | (235    | )       |         |        |        
|Income allocated to Series B and C Preferred Units                 |                                                                                                         |                                                              | (6,656  | )       |         | (6,656  | )      
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Income before discontinued operations and extraordinary item |         |         | 20,522  |         |        
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|Discontinued operations:                                           |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Operating income from discontinued operations                |         |         | 267     |         |        
|                                                                   |                                                                                                         | Gain on sale of discontinued operations                      |         |         | 384     |         |        
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Income from discontinued operations                          |         |         | 651     |         |        
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Income before extraordinary item                             |         |         | 21,173  |         |        
|Extraordinary loss on prepayment of debt, net of minority interest |                                                                                                         |                                                              | (6,730  | )       |         |        |        
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Net income                                                   |         |         | 14,443  |         |        
|Preferred stock distributions                                      |                                                                                                         |                                                              | (14,302 | )       |         | (43,345 | )      
|Accretion of redeemable equity                                     |                                                                                                         |                                                              | (328    | )       |         | (995    | )      
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   |                                                                                                         | Net loss attributable to common shareholders                 |         | $       | (187    | )       | $      
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|Basic per-share data:                                              |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   | Income (loss) attributable to common shareholders before discontinued operations and extraordinary item |                                                              | $       | 0.19    |         | $       | (4.75  
|                                                                   | Income from discontinued operations                                                                     |                                                              |         | 0.02    |         |         | 0.04   
|                                                                   | Extraordinary loss on prepayment of debt, net of minority interest                                      |                                                              |         | (0.22   | )       |         |       
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   | Loss attributable to common shareholders                                                                |                                                              | $       | (0.01   | )       | $       | (4.71  
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   | Weighted average common shares outstanding                                                              |                                                              |         | 30,257  |         |         | 6,818  
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|Diluted per-share data:                                            |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   | Income (loss) attributable to common shareholders before discontinued operations and extraordinary item |                                                              | $       | 0.19    |         | $       | (4.75  
|                                                                   | Income from discontinued operations                                                                     |                                                              |         | 0.02    |         |         | 0.04   
|                                                                   | Extraordinary loss on prepayment of debt, net of minority interest                                      |                                                              |         | (0.22   | )       |         |       
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   | Loss attributable to common shareholders                                                                |                                                              | $       | (0.01   | )       | $       | (4.71  
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        
|                                                                   | Weighted average common and common equivalent shares outstanding                                        |                                                              |         | 30,286  |         |         | 6,818  
|                                                                   |                                                                                                         |                                                              |         |         |         |         |        

See accompanying notes to consolidated financial statements.

F-4

---



HERITAGE PROPERTY INVESTMENT TRUST, INC.        Consolidated Statements of Changes in Shareholders' Equity        Years ended December 31, 2002, 2001 and 2000        (In
thousands, except per-share data)

|                             |                                                             | Series A
Cumulative
Convertible
Participating
Preferred
Stock                  |                                                                                                  | Common
Stock |   | Additional
Paid-in
Capital |    | Cumulative
Distributions
in Excess of
Net Income |           | Unearned
Compensation |   | Accumulated
Other
Comprehensive
Income (Loss) |         | Total |       
|---------------------------- | ----------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------ | ------------ | - | -------------------------- | -- | ------------------------------------------------ | --------- | --------------------- | - | --------------------------------------------- | ------- | ----- | ------
|Balance at December 31, 1999 |                                                             | $                                                                              | 16                                                                                               |              | $ | 6                          |    | $                                                | 550,172   |                       | $ | (3,963                                        | )       | $     |      
|                             | Issuance of preferred stock                                 |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | 39                    |   |                                               |        |       |       
|                             | Issuance of common stock                                    |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | 18                    |   |                                               |        |       |       
|                             | Issuance of warrants                                        |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | 879                   |   |                                               |        |       |       
|                             | Net income                                                  |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               | 24,102  |       |       
|                             | Preferred stock distributions ($2.13 per share)             |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               | (38,410 | )     |       
|                             | Common stock distributions ($0.16 per share)                |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               | (1,113  | )     |       
|                             | Accretion of redeemable equity                              |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | (329                  | ) |                                               |        |       |       
|                             | Issuance of restricted stock                                |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | 1,875                 |   |                                               |        |       |       
|                             | Compensation expense associated with restricted stock plans |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               |        |       |       
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|Balance at December 31, 2000 |                                                             |                                                                                | 16                                                                                               |              |   | 6                          |    |                                                  | 552,654   |                       |   | (19,384                                       | )       |       | (1,500
|                             | Net income                                                  |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               | 12,236  |       |       
|                             | Other comprehensive loss:                                   |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             | Unrealized derivative losses                                |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             |                                                             | Cumulative transition adjustment of interest rate collar as of Jan. 1, 2001    |                                                                                                  |              |  |                            |    |                                                 |           |                       |  |                                               |         |      |       
|                             |                                                             | Effective portion of interest rate collar for the year ended December 31, 2001 |                                                                                                  |              |  |                            |    |                                                 |           |                       |  |                                               |         |      |       
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             | Total other comprehensive loss                              |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               |        |       |       
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             |                                                             | Comprehensive income                                                           |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             | Preferred stock distributions ($2.13 per share)             |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               | (43,345 | )     |       
|                             | Common stock distributions ($0.73 per share)                |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               | (4,942  | )     |       
|                             | Accretion of redeemable equity                              |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | (995                  | ) |                                               |        |       |       
|                             | Issuance of restricted stock                                |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | 2,067                 |   |                                               |        |       |       
|                             | Compensation expense associated with restricted stock plans |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               |        |       |       
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|Balance at December 31, 2001 |                                                             |                                                                                | 16                                                                                               |              |   | 6                          |    |                                                  | 553,726   |                       |   | (55,435                                       | )       |       | (2,103
|                             | Net income                                                  |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               | 14,443  |       |       
|                             | Other comprehensive income:                                 |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             |                                                             | Unrealized derivative gains:                                                   |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             |                                                             |                                                                                | Effective portion of interest rate collar for the period from Jan. 1, 2002Apr. 29, 2002         |              |   |                           |    |                                                  |          |                       |   |                                              |         |       |      
|                             |                                                             |                                                                                | Reclassification adjustment to earnings for realized loss on termination of interest rate collar |              |   |                           |    |                                                  |          |                       |   |                                              |         |       |      
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             | Total other comprehensive income                            |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               |        |       |       
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             | Comprehensive income                                        |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             | Issuance of common stock                                    |                                                                                |                                                                                                  |             |   |                            | 14 |                                                  |           | 352,000               |   |                                               |        |       |       
|                             | Equity issuance costs                                       |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | (29,527               | ) |                                               |        |       |       
|                             | Conversion of preferred stock to common stock               |                                                                                |                                                                                                  | (16          | ) |                            | 16 |                                                  |           |                      |   |                                               |        |       |       
|                             | Accretion of redeemable equity                              |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | (328                  | ) |                                               |        |       |       
|                             | Conversion of redeemable equity to common stock             |                                                                                |                                                                                                  |             |   |                            | 5  |                                                  |           | 123,417               |   |                                               |        |       |       
|                             | Preferred stock distributions ($0.70 per share)             |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               | (14,302 | )     |       
|                             | Common stock distributions ($1.89 per share)                |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           |                      |   |                                               | (71,509 | )     |       
|                             | Issuance of restricted stock                                |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | 6,379                 |   |                                               |        |       |       
|                             | Compensation expense associated with restricted stock plans |                                                                                |                                                                                                  |             |   |                            |   |                                                  |           | 750                   |   |                                               |        |       |       
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|Balance at December 31, 2002 |                                                             | $                                                                              |                                                                                                 |              | $ | 41                         |    | $                                                | 1,006,417 |                       | $ | (126,803                                      | )       | $     | (1,047
|                             |                                                             |                                                                                |                                                                                                  |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       

See accompanying notes to consolidated financial statements.

F-5

---



HERITAGE PROPERTY INVESTMENT TRUST, INC.        Consolidated Statements of Cash Flows        Years ended December 31, 2002, 2001 and 2000        (In thousands)

|                                                     |                                                                                   | 2002                                                                                      |                                                  | 2001     |        | 2000     |        
|---------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------ | -------- | ------ | -------- | -------
|Cash flows from operating activities:                |                                                                                   |                                                                                           |                                                  |          |        |          |        
|                                                     | Net income                                                                        |                                                                                           | $                                                | 14,443   |        | $        | 12,236 
|                                                     | Adjustments to reconcile net income to net cash provided by operating activities: |                                                                                           |                                                  |          |        |          |        
|                                                     |                                                                                   | Depreciation and amortization                                                             |                                                  |          | 70,023 |          |        
|                                                     |                                                                                   | Amortization of deferred debt financing costs                                             |                                                  |          | 2,898  |          |        
|                                                     |                                                                                   | Amortization of stock-based compensation                                                  |                                                  |          | 8,185  |          |        
|                                                     |                                                                                   | Net gains on sales of real estate investments and equipment                               |                                                  |          | (3,308 | )        |        
|                                                     |                                                                                   | Net derivative losses (gains)                                                             |                                                  |          | 7,766  |          |        
|                                                     |                                                                                   | Extraordinary loss on debt refinancing                                                    |                                                  |          | 6,730  |          |        
|                                                     |                                                                                   | Income allocated to Series B and C preferred units                                        |                                                  |          | 6,656  |          |        
|                                                     |                                                                                   | Income allocated to minority interests                                                    |                                                  |          | 235    |          |        
|                                                     |                                                                                   | Changes in operating assets and liabilities, net of effect of Bradley acquisition in 2000 |                                                  |          | 7,544  |          |        
|                                                     |                                                                                   |                                                                                           |                                                  |          |        |          |        
|                                                     |                                                                                   |                                                                                           | Net cash provided by operating activities        |          |        | 121,172  |        
|                                                     |                                                                                   |                                                                                           |                                                  |          |        |          |        
|Cash flows from investing activities:                |                                                                                   |                                                                                           |                                                  |          |        |          |        
|                                                     | Net cash used for acquisition of Bradley                                          |                                                                                           |                                                  | (220     | )      |          | (3,710 
|                                                     | Acquisitions and additions to real estate investments                             |                                                                                           |                                                  | (134,449 | )      |          | (54,626
|                                                     | Net proceeds from sales of real estate investments                                |                                                                                           |                                                  | 10,400   |        |          | 23,250 
|                                                     | Expenditures for capitalized leasing commissions                                  |                                                                                           |                                                  | (4,292   | )      |          | (3,455 
|                                                     | Net proceeds from sales of furniture, fixtures and equipment                      |                                                                                           |                                                  |         |        |          | 7      
|                                                     | Expenditures for furniture, fixtures and equipment                                |                                                                                           |                                                  | (696     | )      |          | (682   
|                                                     |                                                                                   |                                                                                           |                                                  |          |        |          |        
|                                                     |                                                                                   |                                                                                           | Net cash used by investing activities            |          |        | (129,257 | )      
|                                                     |                                                                                   |                                                                                           |                                                  |          |        |          |        
|Cash flows from financing activities:                |                                                                                   |                                                                                           |                                                  |          |        |          |        
|                                                     | Proceeds from mortgage loans payable                                              |                                                                                           |                                                  | 4,599    |        |          | 7,000  
|                                                     | Repayments of mortgage loans payable                                              |                                                                                           |                                                  | (22,339  | )      |          | (8,740 
|                                                     | Repayments of unsecured notes payable                                             |                                                                                           |                                                  |         |        |          | (475   
|                                                     | Proceeds from draws under line of credit facility                                 |                                                                                           |                                                  | 373,000  |        |          | 71,000 
|                                                     | Repayments of draws under line of credit facility                                 |                                                                                           |                                                  | (482,000 | )      |          | (51,000
|                                                     | Interest rate collar termination payment                                          |                                                                                           |                                                  | (6,788   | )      |          |       
|                                                     | Proceeds from subordinated debt                                                   |                                                                                           |                                                  |         |        |          | 50,000 
|                                                     | Proceeds from subordinated debt issued through related parties                    |                                                                                           |                                                  |         |        |          |       
|                                                     | Repayment of subordinated debt to related party                                   |                                                                                           |                                                  | (100,000 | )      |          | (50,000
|                                                     | Distributions paid to exchangeable limited partnership unit holders               |                                                                                           |                                                  | (290     | )      |          | (29    
|                                                     | Distributions paid to Series B and C preferred unit holders                       |                                                                                           |                                                  | (6,656   | )      |          | (5,021 
|                                                     | Preferred stock distributions paid                                                |                                                                                           |                                                  | (25,109  | )      |          | (43,282
|                                                     | Common stock distributions paid                                                   |                                                                                           |                                                  | (50,953  | )      |          | (3,704 
|                                                     | Expenditures for debt financing costs                                             |                                                                                           |                                                  | (3,902   | )      |          | (1,943 
|                                                     | Expenditures for issuance of common stock                                         |                                                                                           |                                                  | (28,146  | )      |          | (1,256 
|                                                     | Proceeds from issuance of common stock                                            |                                                                                           |                                                  | 352,014  |        |          |       
|                                                     | Proceeds from issuance of preferred stock                                         |                                                                                           |                                                  |         |        |          |       
|                                                     | Proceeds from issuance of redeemable equity, net                                  |                                                                                           |                                                  |         |        |          |       
|                                                     |                                                                                   |                                                                                           |                                                  |          |        |          |        
|                                                     |                                                                                   |                                                                                           | Net cash provided (used) by financing activities |          |        | 3,430    |        
|                                                     |                                                                                   |                                                                                           |                                                  |          |        |          |        
|Net (decrease) increase in cash and cash equivalents |                                                                                   |                                                                                           | (4,655                                           | )        |        | 2,060    |        
|Cash and cash equivalents:                           |                                                                                   |                                                                                           |                                                  |          |        |          |        
|                                                     | Beginning of year                                                                 |                                                                                           |                                                  | 6,146    |        |          | 4,086  
|                                                     |                                                                                   |                                                                                           |                                                  |          |        |          |        
|                                                     | End of year                                                                       |                                                                                           | $                                                | 1,491    |        | $        | 6,146  
|                                                     |                                                                                   |                                                                                           |                                                  |          |        |          |        

See accompanying notes to consolidated financial statements.

F-6

---



HERITAGE PROPERTY INVESTMENT TRUST, INC.        Notes to Consolidated Financial Statements        Years ended December 31, 2002, 2001 and 2000

1.    Organization

Background

Heritage Property Investment Trust, Inc. ("Heritage" or the "Company") is a Maryland corporation organized as a real estate investment trust ("REIT").
Heritage was formed on July 1, 1999 and commenced operations on July 9, 1999 through the contribution of $550 million of real estate investments and related assets, net of
liabilities, by Net Realty Holding Trust, a wholly-owned subsidiary of the New England Teamsters & Trucking Industry Pension Fund ("NETT") and $25 million of cash from the Prudential
Insurance Company of America ("Prudential"). Heritage qualifies as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code").

Heritage
is a fully-integrated, self-administered and self-managed REIT and is focused on the acquisition, ownership, management, leasing and redevelopment of
primarily grocer-anchored neighborhood and community shopping centers in the Eastern and Midwestern United States. At December 31, 2002, the Company owned 152 shopping centers, four office
buildings and ten single-tenant properties.

Heritage
Property Investment Limited Partnership ("Heritage OP") and Bradley Operating Limited Partnership ("Bradley OP") are subsidiaries through which the Company conducts
substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. As of December 31, 2002, the Company owned directly or indirectly all of
the ownership interests in the Heritage OP and approximately 99% of the voting interests in the Bradley OP, and is the sole general partner of Heritage OP and Bradley OP. This structure is commonly
referred to as an umbrella partnership REIT or UPREIT.

Initial Public Offering

On April 23, 2002, the Securities and Exchange Commission simultaneously declared effective the Registration Statement and the Company's registration
statement on Form 8-A, filed under the Securities Exchange Act of 1934, for an initial public offering ("IPO") of its common stock. As a result, the Company completed its IPO and,
when combined with the exercise of the Underwriter's overallotment, sold a total of 14,080,556 shares of its common stock in the IPO at a price of $25.00 per share.

The
net proceeds from the IPO, after deducting the underwriters' discount and offering expenses, were $322.5 million and were used by the Company to repay $215.7 million of
the outstanding indebtedness under its prior line of credit facility, to repay in full the $100.0 million of subordinated debt then outstanding, and to pay the $6.8 million fee
associated with terminating the collar previously in place with respect to the $150.0 million term loan under the prior line of credit facility.

In
connection with the IPO, all shares of Series A Cumulative Convertible Preferred Stock and redeemable equity outstanding converted automatically into shares of the Company's
common stock on a one for one basis.

F-7

---

2.    Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements are prepared on the accrual basis in accordance with accounting principles generally accepted in the United States of
America ("GAAP"). Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reporting of revenue and expenses during the periods presented to
prepare these consolidated financial statements in conformity with GAAP. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the
circumstances. Actual results could differ from those estimates under different assumptions or conditions.

Management
considers those estimates and assumptions that are most important to the portrayal of the Company's financial condition and results of operations, in that they require
management's most subjective judgments, to form the basis for the accounting policies deemed to be most critical to the Company. These critical accounting policies include the useful lives used to
calculate depreciation expense on real estate investments, judgments regarding the recoverability or impairment of each real estate investment, judgments regarding the ultimate collectibility of
accounts receivable, and assumptions used in accounting for and disclosures of the Company's interest rate hedging activities.

If
the useful lives of real estate investments were different, future operating results would be affected. Future adverse changes in market conditions or poor operating results could
result in an inability to recover real estate investment carrying values that may not be reflected in current carrying values and could require an impairment charge in the future. Future adverse
changes in market conditions could also impact the Company's tenants and may affect the adequacy of the allowance for doubtful accounts receivable. If the methodologies and assumptions used to
estimate the fair value of the Company's interest rate hedging instruments or to determine hedge effectiveness were different, amounts reported in earnings and other comprehensive income and amounts
expected to be recognized in earnings in the future could be affected. Further, future changes in market interest rates and other relevant factors could affect the fair value of such instruments and
future interest expense.

The
consolidated financial statements of the Company include the accounts and operations of the Company and its subsidiaries. All significant inter-company accounts and transactions have
been eliminated in consolidation.

Real Estate Investments

Real estate investments contributed in July 1999 were recorded at the carry-over basis of the Company's predecessor, which was fair market
value of the assets in conformity with GAAP applicable to pension funds. Subsequent acquisitions of real estate investments, including those acquired in the Bradley acquisition in 2000 and other
additions, are recorded at cost. The cost of buildings and improvements includes the purchase price of property, legal fees, and acquisition costs.

Real
estate investments held for sale are carried at the lower of carrying amount or fair value less costs to sell. Depreciation and amortization are suspended during the period held for
sale. There can be no assurance that properties designated as held for sale will actually be sold. The net carrying value of properties held for sale at December 31, 2002 and 2001 was
$1.6 million and $3.0 million, respectively.

F-8

---

Statement
of Financial Accounting Standards ("SFAS") No. 144,Accounting for the Impairment or Disposal of Long-Lived
Assets, ("SFAS No. 144") SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, requires the Company to periodically perform reviews of its properties to determine if their carrying amounts will be recovered from future operating
cash flows. If the Company determines that impairment has occurred, those assets shall be reduced to fair value. No such impairment losses have been recognized to date.

In
addition, SFAS No. 144 retains the basic provisions of Opinion No. 30,Reporting the Results of OperationsReporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for presenting discontinued operations in the statement of
operations but broadens that presentation to include a component of an entity (rather than a segment of a business). The Company adopted SFAS No. 144 on January 1, 2002 and accordingly,
the operating results of real estate sold or classified as held for sale during the year ended December 31, 2002, have been reclassified and reported as discontinued operations for the years
ended December 31, 2002, 2001 and 2000. SFAS No. 144 did not affect the operating results of properties sold or classified as held for sale prior to January 1, 2002 (see
Note 3).

For
property acquisitions completed subsequent to June 30, 2001, the Company applies the provisions of SFAS No. 141,Business
Combinations("SFAS No. 141"), and records the fair value of intangible assets or liabilities resulting from in-place leases, to the extent material. Such
intangible assets may result from, for example, the fair value of leasing costs avoided by the Company because the lease is already in place, or from contractual rents that are favorable relative to
market rents at the acquisition date. Conversely, liabilities may result from unfavorable or below-market in-place leases. Such assets or liabilities are generally amortized over the
remaining lease terms. The Company concluded that SFAS No. 141 did not have a material effect on the 2002 and 2001 consolidated financial statements.

Expenditures
for maintenance, repairs and betterments that do not materially extend the useful life of a real estate investment are charged to operations as incurred and amounted to
$6.0 million, $5.6 million and $3.6 million for the years ended December 31, 2002, 2001 and 2000, respectively. Expenditures that substantially extend the useful life of a
real estate investment are capitalized. Upon sale or other disposition of the real estate investment, the cost and related accumulated depreciation and amortization are removed and the resulting gain
or loss, if any, is reflected in net income. Interest on significant construction projects is capitalized as part of the cost of real estate investments. Interest capitalized for the years ended
December 31, 2002, 2001 and 2000 was $151,000, $65,000, and $24,000, respectively.

The
provision for depreciation and amortization has been calculated using the straight-line method over the following estimated useful lives:

Land improvements

15 yearsBuildings and improvements

20 - 39 yearsTenant improvements

Shorter of useful life or term of related lease


The
Company recognizes gains from sales of real estate at the time of sale using the full accrual method, provided that various criteria related to the terms of the transactions are met
and no

F-9

---

subsequent involvement is required. If the criteria are not met, or if subsequent involvement is required, the Company defers the gains and recognizes them when the criteria are met or subsequent
involvement is completed.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash in banks and short-term investments with maturities at the date of purchase of three months or less. The
majority of the Company's cash and cash equivalents are held at major commercial banks. The Company has not experienced any losses to date on its invested cash.

Deferred Financing Costs and Other Assets

Deferred financing costs and other assets include costs incurred in connection with securing financing for, or leasing space in, the Company's real estate
investments. Such charges are capitalized and amortized over the terms of the related financing or lease. Unamortized deferred charges are charged to expense upon prepayment of the financing or early
termination of the related lease.

The
Company capitalizes internal leasing costs in accordance with SFAS No. 91,Nonrefundable Fees & Costs Associated with Originating or Acquiring
Loans and Initial Direct Costs of Leases. These costs amounted to $2.3 million and $2.4 million during the years ended December 31, 2002 and 2001,
respectively.

Revenue Recognition

Management has determined that all of the Company's leases with its various tenants are operating leases. Rental income from such leases with scheduled rent
increases is recognized using the straight-line method over the terms of the leases. The aggregate excess of rental revenue recognized on a straight-line basis over cash
received under applicable lease provisions amounted to $11.4 million and $7.5 million at December 31, 2002 and 2001, respectively, and is included in accounts receivable, net of
an allowance for doubtful accounts. Rental revenue recognized over cash received is included in revenue from rental and recoveries for the years ended December 31, 2002, 2001 and 2000 and
amounted to $4.2 million, $3.8 million and $3.0 million, respectively.

Leases
for both retail and office space generally contain provisions under which the tenants reimburse the Company for a portion of property operating expenses and real estate taxes
incurred by the Company. In addition, certain of the Company's operating leases for retail space contain contingent rent provisions under which tenants are required to pay a percentage of their sales
in excess of a specified amount as additional rent. The Company defers recognition of contingent rental income until such specified targets are met. Reimbursements for both operating expenses and real
estate taxes as well as contingent rental income during the years ended December 31, 2002, 2001 and 2000 were $67.8 million, $59.9 million and $28.8 million, respectively.
These items are included in revenue from rentals and recoveries in the consolidated statements of income.

Allowances
for uncollectible receivables are charged against revenue from rentals and recoveries and amounted to $3.8 million, $4.5 million and $1.2 million for the
years ended December 31, 2002, 2001 and 2000, respectively.

F-10

---

Credit Risk

The Company operates in one industry, which is the acquisition, ownership, management, leasing and redevelopment of real estate, and no single tenant accounts for
more than 10% of total revenue. Financial instruments potentially subjecting the Company to concentrations of credit risk consist principally of (1) temporary cash and equivalent instruments,
which are held at financial institutions of high credit quality; and (2) tenant receivables, whose credit risk is distributed among tenants in different industries and across several
geographical areas.

Fair Value of Financial Instruments

SFAS No. 107,Disclosures about Fair Value of Financial Instruments, requires the Company to disclose fair
value information about all financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate fair value. The Company's financial instruments, other than
debt, are generally short-term in nature and consist of cash and cash equivalents, rents and other receivables, and accounts payable. The carrying values of these assets and liabilities,
which are recorded at net realizable value in the consolidated balance sheets, are assumed to be at fair value.

The
fair values of the Company's fixed rate mortgage loans and unsecured notes payable, which is based on estimates made by management for rates currently prevailing for comparable loans
and notes of comparable maturities, exceeds the aggregate carrying value by approximately $51 million at December 31, 2002 and approximate the aggregate carrying value at
December 31, 2001. The Company's line of credit facility and former subordinated debt are at variable rates, resulting in carrying values that approximate fair value at December 31, 2002
and 2001.

Stock-Based Compensation

The Company adopted the disclosure provisions of SFAS No. 148,Accounting for Stock-Based CompensationTransition and
Disclosure, during the year ended December 31, 2002. At December 31, 2002, the Company has one stock-based employee compensation plan, which is described more
fully in Note 11. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25,Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation cost related to stock option grants is reflected in the Company's reported results, as all options
granted under the plan have an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per
share as if the Company had applied the fair value recognition provisions of

F-11

---

SFAS No. 123,Accounting for Stock-Based Compensation, to stock-based employee compensation (in thousands, except per-share data):

Year ended December 31,2002

2001

2000Net loss attributed to common shareholders, as reported

$
(187
)
$
(32,104
)
$
(14,637
)Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards*


403





Pro forma net loss attributable to common shareholders

$
(590
)
$
(32,104
)
$
(14,637
)Loss per share:Basicas reported

$
(0.01
)
$
(4.71
)
$
(2.40
)Basicpro forma

$
(0.02
)
$
(4.71
)
$
(2.40
)Dilutedas reported

$
(0.01
)
$
(4.71
)
$
(2.40
)Dilutedpro forma

$
(0.02
)
$
(4.71
)
$
(2.40
)


---

Earnings Per Share

In accordance with SFAS No. 128,Earnings Per Share, ("SFAS No. 128") basic earnings per common
share is computed by dividing net income attributable to common shareholders (defined as net income less paid and accrued preferred stock distributions and accretion of redeemable equity) by the
weighted average number of common shares outstanding during the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock and then shared
in the earnings of the Company.

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code. In order to qualify as a REIT for income tax purposes, the Company must, among
other things, distribute to shareholders at least 90% of its taxable income. It is the Company's policy to distribute 100% of its taxable income to shareholders; accordingly, no provision has been
made for federal income taxes.

Reclassifications

Certain prior year balances have been reclassified to conform to the current year presentation.

F-12

---



3.    Real Estate Investments

Summary

A summary of real estate investments follows as of December 31 (in thousands):

2002

2001Land

$
319,129

$
290,758Land improvements


168,246


149,072Buildings and improvements


1,639,494


1,474,058Tenant improvements


34,694


24,420Improvements in process


16,970


10,6602,178,533


1,948,968Accumulated depreciation and amortization


(170,029
)

(103,800
)Net carrying value

$
2,008,504

$
1,845,168


Acquisitions

During the year ended December 31, 2002, the Company completed the acquisition of ten shopping centers, nine of which are grocer-anchored, aggregating
3,147,000 square feet of gross leasable area ("GLA"), of which the Company acquired 2,355,000 square feet of GLA. The aggregate acquisition price of the shopping centers was $208.5 million,
which was funded with borrowings under the Company's line of credit facility, assumptions of mortgage loans payable at their estimated fair market value, and the issuance of exchangeable units of
limited partnership interest in one of the Company's operating partnerships. In addition, the Company completed the acquisition of two parcels at company-owned shopping centers aggregating 70,000
square feet GLA, for a total acquisition price of $6.5 million, which was funded with borrowings under the Company's line of credit facility and cash provided by operations.

During
the year ended December 31, 2001, the Company completed the acquisition of three shopping centers, two of which are grocer-anchored, aggregating 708,000 square feet of GLA,
of which the Company acquired 495,000 square feet of GLA. The aggregate acquisition price of the shopping centers was $40.0 million, which was funded with borrowings under the Company's line of
credit facility and the assumption of a mortgage loan payable. Also during 2001, the Company completed the acquisitions of a development land parcel and a 17,000 square foot parcel at a company-owned
shopping center for acquisition prices of $1.3 million and $1.0 million, respectively. The acquisitions were funded with borrowings under the Company's line of credit facility and cash
provided by operations.

On
September 18, 2000, Heritage acquired Bradley Real Estate, Inc. ("Bradley"), a publicly traded REIT based in Illinois with nearly 100 shopping center properties located
primarily in the Midwest, at an aggregate cost of approximately $1.2 billion. The Company acquired Bradley through a merger in which all of the holders of Bradley capital stock received cash in
exchange for their shares. The transaction was accounted for using the purchase method and, accordingly, the acquisition cost was allocated to the estimated fair values of the assets received and
liabilities assumed. Results of Bradley's

F-13

---

operations have been included in the accompanying consolidated financial statements from the acquisition date.

Dispositions

On March 21, 2002, the Company completed the sale of the Flower Hill building located in Roslyn, New York, one of its office buildings, for
$4.2 million, resulting in a net gain on sale of $1.4 million. The Flower Hill building was classified as held for sale at December 31, 2001.

On
September 20, 2002, the Company completed the sale of its only ground-up development property located in Mishawaka, Indiana for $5.7 million, resulting in a
net gain on sale of $1.6 million. There were no clearly distinguishable operations and cash flows from this development entity prior to the sale. Therefore, the gain on sale of this property is
included as a component of income before discontinued operations.

On
September 24, 2002, the Company completed the sale of one of its single-tenant properties for $0.5 million, resulting in a net gain on sale of $0.4 million. The
operations of this property, combined with the operations of the remaining single tenant properties, were reported as income from discontinued operations in 2002, and their respective 2001 and 2000
results of operations were reclassified to income from discontinued operations.

During
the year ended December 31, 2001, the Company sold a shopping center acquired from Bradley and two office buildings at an aggregate sales price of $18.3 million,
resulting in an aggregate net gain on sale of $1.8 million. In addition, the Company sold two single-tenant properties for an aggregate sales price of $5.0 million, resulting in an
aggregate net gain on sale of $2.3 million.

During
the year ended December 31, 2000, the Company sold two single-tenant properties for an aggregate sales price of $3.7 million, resulting in an aggregate net gain on
sale of $1.8 million.

4.    Supplemental Cash Flow Information

During 2002, 2001 and 2000, interest paid was $70.7 million, $85.0 million, and $27.8 million, respectively, and net state income and
franchise tax payments were $0.1 million, $0.7 million, and $0.5 million, respectively.

During
2002, the Company assumed $95.1 million of existing debt in connection with the acquisition of seven shopping centers. In addition, the Company issued exchangeable limited
partnership units with a fair value of $7.9 million in connection with the acquisition of four shopping centers. Included in accrued expenses and other liabilities at December 31, 2002
are accrued expenditures for real estate investments of $3.7 million and accrued expenses of $0.1 million for the issuance of common stock.

During
2001, the Company assumed $14.9 million of existing debt in connection with the acquisition of a shopping center. Included in accrued expenses and other liabilities at
December 31, 2001 are accrued expenditures for real estate investments of $2.7 million and accrued expenses of $0.8 million for the issuance of common stock.

F-14

---

In
2000, in connection with the acquisition of Bradley, the Company assumed net operating liabilities of $20 million and $364 million of outstanding debt. Included in
accrued expenses and other liabilities at December 31, 2000 are accrued expenditures for real estate investments of $0.3 million.

Only
the cash portion of the above transactions is reflected in the accompanying consolidated statements of cash flows.

5.    Operating Leases

Scheduled future minimum rental payments to be received under the Company's non-cancelable operating leases are as follows at December 31, 2002
(in thousands):

Year Ending December 31

Amount2003

$
214,6742004


196,8582005


172,2852006


147,9522007


127,585Thereafter


634,615Total minimum future rentals

$
1,493,969


6.    Minority Interests

Series B and C Preferred Units

The Bradley OP has outstanding 2,000,000 units of 8.875% Series B Cumulative Redeemable Perpetual Preferred Units and 1,000,000 units of 8.875%
Series C Cumulative Redeemable Perpetual Preferred Units (together, the "Series B and C Preferred Units"). The Series B and C Preferred Units were issued during 1999 to investors
at a price of $25.00 per unit. The Series B and C Preferred Units are callable by the Bradley OP after five years from the date of issuance at a redemption price equal to the redeemed holder's
capital account plus an amount equal to all accumulated, accrued and unpaid distributions or dividends thereon to the date of redemption. In lieu of cash, the Bradley OP may elect to deliver shares of
8.875% Series B or C Cumulative Redeemable Perpetual Preferred Stock, as appropriate, of the Company, on a one-for-one basis, plus an amount equal to all accumulated,
accrued and unpaid distributions or dividends thereon to the date of redemption. Holders of the Series B and C Preferred Units have the right to exchange their Series B and C Preferred
Units for shares of Series B and C Preferred Shares on a one-for-one basis after ten years from the original date of issuance, subject to certain limitations. Income is
allocated to the Series B and C Preferred Units, which have been reported as minority interests in the accompanying financial statements, in amounts equal to the distributions or dividends
thereon.

Exchangeable Limited Partnership Units

Exchangeable limited partnership units consist of 340,270 Bradley OP Units ("OP Units") not owned by the Company. The holders of these Units may present
such OP Units to Bradley OP for

F-15

---

redemption at any time (subject to certain restrictions with particular holders). Upon presentation of an OP Unit, the Bradley OP must redeem such OP Unit for cash equal to the then value of a share
of common stock of the Company ("Common Stock"), except that the Company may, at its election, in lieu of a cash redemption, acquire such OP Unit for one share of Common Stock. One share of common
stock is generally the economic equivalent of the OP Unit, and the quarterly distribution that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a
share of Common Stock.

Other Minority Interests

The Company also assumed other minority interests in its acquisition of Bradley that participate in earnings based on terms specified in their partnership
agreements. These minority interests amounted to $2.4 million at December 31, 2002 and 2001.

7.    Debt

Mortgage Loans Payable

Mortgage loans consist of various non-recourse issues collateralized by 63 real estate investments with an aggregate net carrying value of
$869.7 million at December 31, 2002. The loans require monthly payments of principal and interest through 2020 at interest rates ranging from 3.38% to 10.13% and have a weighted average
effective interest rate of 7.76% at December 31, 2002. The loans are generally subject to prepayment penalties.

F-16

---

Mortgage
loans payable consisted of the following at December 31 (in thousands):

|Property                                             |                              | Effective
Interest
Rate |   | Maturity       |  | 2002 |         | 2001   
|---------------------------------------------------- | ---------------------------- | ----------------------- | - | -------------- |  | ---- | ------- | -------
|Fox River Plaza                                      |                              | 7.76                    | % | April 2002     |  | $    |        |        
|Edgewood Shopping Center                             |                              | 9.08                    | % | June 2002      |  |      |        |        
|Moorland Square                                      |                              | 8.99                    | % | November 2002  |  |      |        |        
|Kimberly West(1)                                     |                              | 7.88                    | % | January 2003   |  |      | 3,519   |        
|Martin's Bittersweet Plaza                           |                              | 8.88                    | % | June 2003      |  |      | 2,975   |        
|Miracle Hills Park                                   |                              | 8.28                    | % | August 2004    |  |      | 3,672   |        
|The Commons of Chancellor Park                       |                              | 8.48                    | % | November 2004  |  |      | 12,745  |        
|Franklin Square                                      |                              | 9.00                    | % | June 2005      |  |      | 14,418  |        
|Williamson Square                                    |                              | 8.00                    | % | August 2005    |  |      | 11,479  |        
|Riverchase Village Shopping Center                   |                              | 7.62                    | % | September 2005 |  |      | 10,361  |        
|Spring Mall                                          |                              | 9.39                    | % | October 2006   |  |      | 8,350   |        
|Southport Center                                     |                              | 6.94                    | % | July 2007      |  |      | 10,000  |        
|Innes Street Market                                  |                              | 7.63                    | % | October 2007   |  |      | 13,458  |        
|Southgate Shopping Center                            |                              | 8.38                    | % | October 2007   |  |      | 2,589   |        
|Salem Consumer Square                                |                              | 10.13                   | % | September 2008 |  |      | 11,101  |        
|St. Francis Plaza                                    |                              | 8.13                    | % | December 2008  |  |      | 1,204   |        
|8 shopping centers, cross collateralized             |                              | 7.83                    | % | December 2009  |  |      | 82,864  |        
|Montgomery Commons(2)                                |                              | 6.38                    | % | January 2010   |  |      | 8,872   |        
|Warminster Towne Center(3)                           |                              | 6.01                    | % | February 2010  |  |      | 22,922  |        
|545 Boylston Street and William J. McCarthy Building |                              | 8.26                    | % | October 2010   |  |      | 35,942  |        
|29 shopping centers, cross collateralized            |                              | 7.88                    | % | October 2010   |  |      | 239,906 |        
|Bedford Grove                                        |                              | 7.86                    | % | March 2012     |  |      | 4,826   |        
|Berkshire Crossing                                   |                              | 3.38                    | % | November 2012  |  |      | 15,661  |        
|Grand Traverse Crossing                              |                              | 7.42                    | % | January 2013   |  |      | 13,938  |        
|Salmon Run(4)                                        |                              | 8.10                    | % | September 2013 |  |      | 5,533   |        
|Elk Park Center                                      |                              | 7.64                    | % | August 2016    |  |      | 8,775   |        
|Grand Traverse CrossingWal-Mart                     |                              | 7.75                    | % | October 2016   |  |      | 5,455   |        
|Montgomery Towne Center                              |                              | 8.50                    | % | March 2019     |  |      | 7,716   |        
|Bedford GroveWal-Mart                               |                              | 7.63                    | % | November 2019  |  |      | 4,339   |        
|Berkshire CrossingHome Depot/Wal-Mart               |                              | 7.63                    | % | March 2020     |  |      | 7,043   |        
|                                                     |                              |                         |   |                |  |      |         |        
|                                                     | Total mortgage loans payable |                         |   |                |  |      | $       | 569,663
|                                                     |                              |                         |   |                |  |      |         |        

---

F-17

---

Unsecured Notes Payable

In its acquisition of Bradley in September 2000, Heritage assumed unsecured notes payable consisting of a $100 million 7% fixed-rate
issue maturing on November 15, 2004; $100 million, 7.2% fixed-rate issue maturing on January 15, 2008; and $2.0 million of other debt. The amount of unsecured
notes payable outstanding at December 31, 2002 and 2001 was $201.5 million.

Line of Credit Facility

On April 29, 2002, the Company entered into a new $350 million unsecured line of credit with a group of lenders and Fleet National Bank, as agent.
This line of credit replaced the Company's prior $425 million senior unsecured credit facility, which was repaid with proceeds from the IPO. The prior line of credit consisted of a
$275 million revolving line of credit and a $150 million term loan and bore interest at a variable rate based on LIBOR and had a maturity date of September 18, 2003. The Company's
two operating partnerships are the borrowers under this new line of credit, and Heritage and certain of Heritage's other subsidiaries have guaranteed this line of credit. This line of credit is being
used principally to fund growth opportunities and for working capital purposes. At December 31, 2002, $234 million was outstanding under the line of credit.

This
line of credit bears interest at either the lender's base rate or a floating rate based on a spread over LIBOR ranging from 80 basis points to 135 basis points, depending upon the
Company's debt rating, and requires monthly payments of interest. The variable rate in effect at December 31, 2002, including the lender's margin of 105 basis points, and borrowings outstanding
at the base rate, was 2.62%. In addition, this line of credit has a facility fee based on the amount committed ranging from 15 basis points to 25 basis points, depending upon the Company's debt
rating, and requires quarterly payments.

This
line of credit requires the Company to maintain specific financial ratios and restricts the incurrence of indebtedness and the making of investments. This line of credit also,
except under some
circumstances, including as necessary to maintain the Company's status as a REIT, limits the Company's ability to make distributions in excess of 90% of annual funds from operations, as defined.

Upon
entering into this new line of credit and repayment of the prior senior unsecured credit facility, the Company wrote off unamortized deferred financing costs and recognized an
extraordinary loss of $4.2 million on this transaction.

Subordinated Debt

In September 2000, Heritage entered into a $100 million term credit agreement (the "Subdebt"), which was subordinated in right of payment to the
line of credit. The Subdebt was scheduled to mature

F-18

---

on March 18, 2004 and bore interest at a variable rate based on LIBOR. The Subdebt contained covenants that, among other things, required the Company to maintain certain financial ratios. In
addition, the Subdebt contained provisions that required repayment of the Subdebt upon full repayment of the line of credit or upon receipt of aggregate equity proceeds in excess of $250,000.

On
April 30, 2001, the Company modified the interest rate terms under the Subdebt. This modification resulted in the leader's margin being reduced from its originally scheduled 6%
and 8% increasing-rate levels to 5% for the remaining term of the Subdebt. The Company determined that this modification did not result in an early extinguishment of debt. The fees
incurred to modify the terms of the Subdebt were $1.8 million and were being amortized over the remaining term of the debt.

The
Company used $100 million of the net proceeds from the IPO to repay in full the Subdebt outstanding. In connection with the full repayment, the Company wrote off unamortized
deferred financing costs and recognized an extraordinary loss of $2.5 million.

Scheduled Principal Repayments

Scheduled principal repayments on aggregate outstanding debt at December 31, 2002 are as follows (in thousands):

Year Ending December 31

Amount2003

$
15,8502004


125,5212005


277,4762006


19,5092007


34,124Thereafter


528,802Total due(1)

$
1,001,282


---

8.    Related Party Transactions

Transactions with NETT

Preferred and common distributions paid to NETT in 2002, 2001 and 2000 were $47.7 million, $38.0 million and $36.0 million, respectively. At
December 31, 2002 and 2001, distributions payable to NETT were $9.5 million and $9.8 million, respectively.

Included
in accounts payable, accrued expenses and other liabilities at December 31, 2002 and 2001 is $0.7 million and $1.1 million, respectively, that is due to
NETT. These amounts represent standard post closing adjustments related to the contribution of the real estate investments and related assets and liabilities to the Company.

The
Company signed a transitional servicing agreement whereby the Company provided management and collection services for the benefit of NETT and was compensated for such services.

F-19

---

This agreement was terminated in September 2000. The Company earned $0.2 million in connection with the transitional servicing agreement during the year ended December 31, 2000
prior to termination.

In
connection with the formation of Heritage, environmental studies were not completed for all of the contributed properties. NETT has agreed to indemnify the Company for environmental
costs up to $50 million. The environmental costs include completing environmental studies and any required remediation.

The
Company and NETT have 6% and 94% interests, respectively, in an office building development project located in Boston, Massachusetts. The Company has accounted for its interest using
the cost method and has expended nothing on the project to date.

Transactions with Prudential

Preferred and common distributions paid to Prudential in 2002, 2001 and 2000 were $11.6 million, $8.6 million and $1.9 million, respectively.
At December 31, 2002 and 2001, distributions payable to Prudential were $2.6 million and $2.2 million, respectively.

Prudential
received advisory and other fees totaling $3.4 million in connection with the IPO, which have been included as equity issuance costs. These fees were incurred in the
second quarter of 2002. Upon completion of the IPO and payment of these fees, the Company's advisory arrangements with Prudential were terminated.

On
April 30, 2001, in conjunction with the modification of its now repaid $100 million subordinated debt, the Company used the proceeds of a $50 million loan from a
lender to repay the $50 million of subordinated debt previously held by Prudential. Interest expense paid to Prudential for this issue during the years ended December 31, 2001 and 2000
was $2.0 million and $1.5 million, respectively.

Prudential
provided financing services to Heritage in connection with the Bradley acquisition and received fees totaling $6.9 million. These costs have been capitalized as
deferred financing costs and will be amortized over the lives of the related debt issues. In addition, Heritage paid Prudential $2.1 million of equity issuance costs in connection with
Prudential's $100 million purchase of common and Series A Preferred stock shares in 2000. This amount has been charged against additional paid-in capital. Prudential also
provided advisory services to Heritage in connection with the Bradley acquisition and
received fees totaling $3.7 million, which were capitalized as an acquisition cost of the Bradley real estate investments. All of these costs were paid by Heritage in 2000.

In
connection with its purchases of common stock and Series A Preferred Stock, Prudential received warrants to acquire shares of the Company's common stock at an exercise price of
$25.00 per share, which was assumed to be equal to the fair value of the stock at the date the warrants were issued. On July 9, 1999, 75,000 of the warrants were issued with an expiration date
of July 13, 2003, and on September 18, 2000, 300,000 warrants were issued with an expiration date of September 18, 2004. The warrants had an estimated fair value at issuance of
$0.2 million and $0.9 million, respectively, and such amounts were recorded as additional paid-in capital.

F-20

---

A
portion of redeemable equity, representing costs associated with prior equity transactions with Prudential, is reclassified as a charge to earnings for each quarter over the redemption
period. This charge, which is recorded as accretion of redeemable equity in the accompanying consolidated statements of income, amounted to $0.3 million, $1.0 million and
$0.3 million for the years ended December 31, 2002, 2001 and 2000, respectively. As a result of the IPO, all redeemable equity outstanding converted automatically into shares of the
Company's common stock on a one for one basis.

9.    Segment Reporting

The Company predominantly operates in one industry segmentreal estate ownership and management of retail properties. As of December 31, 2002
and 2001, the Company owned 152 and 142 community and neighborhood shopping centers, respectively. Management reviews operating and financial data for each property separately and independently from
all other properties when making resource allocation decisions and measuring performance. The Company defines operating segments as individual properties with no segment representing more than 10% or
more of rental revenue.

10.    Earnings Per Share

Earnings per common share ("EPS") has been computed pursuant to the provisions of SFAS No. 128. The following table provides a reconciliation of both net
income and the number of common shares used in the computation of basic EPS, which utilizes the weighted average number of common shares outstanding without regard to the dilutive potential common
shares, and diluted EPS, which included all shares, as applicable (in thousands, except per-share data):

For the year ended December 31, 2002Income
(Numerator)

Shares
(Denominator)

Per Share
AmountBasic Earnings Per Share:Net loss attributable to common shareholders

$
(187
)
30,257

$
(0.01
)Effect of dilutive securities:Anticipated stock compensation(1)




29


Diluted loss per share:Net loss attributable to common shareholders

$
(187
)
30,286

$
(0.01
)


---

For the years ended December 31, 2002, 2001, and 2000, preferred stock distributions of $14.3 million, $43.3 million, and
$38.4 million, respectively, and the effect of the assumed conversion of convertible preferred stock and exchangeable minority interests outstanding into shares of common stock at the beginning
of each year were not included in the computation of diluted loss per common share because the impact on basic loss per common share was anti-dilutive. At December 31, 2002, 2001,
and 2000, options and warrants to purchase 2,415,527, 1,376,500 and 1,082,000 shares,

F-21

---

respectively, of common stock at $25.00 per share were outstanding but were not included in the computation of diluted loss per common share because their exercise price was not below the fair value
of the common shares and would therefore not dilute basic loss per common share.

11.    Stock-Based Compensation

Overview

SFAS No. 123,Accounting for Stock-Based Compensation, ("SFAS No. 123") establishes financial
accounting and reporting standards for stock-based employee compensation plans, including all arrangements by which employees receive shares of stock or other equity instruments of the employer or the
employer incurs liabilities to employees in amounts based on the price of the employer's stock. SFAS No. 123 defines a fair value-based method of accounting for an employee stock option or
similar equity instrument and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, it also allows an entity to continue to measure
compensation cost using the intrinsic value-based method of accounting prescribed by Accounting Principles Opinion No. 25,Accounting for Stock Issued to
Employees("Opinion No. 25"), and to make pro-forma disclosures of net income and earnings per share as if the fair value method of accounting defined in
SFAS No. 123 were applied. The Company uses Opinion No. 25 and related Interpretations to measure compensation costs for its stock-based plans.

The
Company's 2000 Equity Incentive Plan (the "Plan"), as amended, authorizes options and other stock-based compensation awards to be granted to employees for up to 3,600,000 shares of
common and/or preferred stock. A committee of the Board of Directors administers the Plan and is responsible for selecting persons eligible for awards and for determining the term and duration of any
award.

Stock Options

Pursuant to the Plan, the Company periodically grants options to purchase shares of common stock at an exercise price equal to the estimated per-share
fair value of the Company's common stock. The options vest over periods ranging from three to five years and have an expiration of ten years from the grant date.

Upon
completion of the Company's initial public offering, the vesting of all stock options previously granted to employees (other than 430,000 options granted in April 2002)
accelerated.

F-22

---



11.    Stock-Based Compensation (Continued)

A summary of option transactions during the periods covered by these consolidated financial statements is as follows:

Shares

Weighted Average
Exercise price
per shareOutstanding at January 1, 2000



$
Granted

708,000


25.00Cancelled

(1,000
)

25.00Exercised




Outstanding at December 31, 2000

707,000


25.00Granted

420,750


25.00Cancelled

(126,250
)

25.00Exercised




Outstanding at December 31, 2001

1,001,500


25.00Granted

1,096,362


24.99Cancelled

(46,125
)

25.00Exercised




Outstanding at December 31, 2002

2,051,727

$
24.99


The
following table summarizes information about stock options outstanding at December 31, 2002:

|  |                | Options Outstanding |           | Options Exercisable
|- | -------------- | ------------------- | --------- | -------------------
|
|$ | 23.95 - $25.00 |                     | 2,051,727 |                    

The
Company has estimated the fair value of options granted prior to September 7, 2001 (the initial filing of the Company's Registration Statement) using the minimum value method,
which SFAS No. 123 indicates may be used by nonpublic companies and which excludes the expected volatility of the Company's stock. The Company applied this method incorporating the following
weighted-average assumptions: dividend yield of 8.25%; risk-free interest rate of 5%; expected life of 4 years; and no expected volatility. Had compensation cost for these options
been determined in accordance with SFAS
No. 123, the Company's net income and basic and diluted loss per common share would have been unchanged from reported amounts for the years ended December 31, 2001 and 2000. There were
no stock options granted between September 7, 2001 and December 31, 2001.

In
addition to the 1,096,352 options granted during the year ended December 31, 2002, the Company is contractually obligated as of December 31, 2002 to issue an
additional 140,000 options to a certain employee based on the Company's 2002 performance. For purposes of the pro forma amounts below, the Company recognizes compensation expense over the performance
and vesting periods. The per-share weighted-average fair value of the 1,096,352 options issued and 140,000 options accrued during the year ended December 31, 2002 was $1.39.
The per-share fair value of each option granted is

F-23

---

estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Dividend yield

8.4%Expected life of option

6 yearsRisk-free interest rate

3%Expected stock price volatility

20%


The
compensation cost under SFAS 123 for the stock performance-based plan would have been $0.4 million for the year ended December 31, 2002. Had compensation cost
for the Company's grants under stock-based compensation plans been determined consistent with SFAS 123, the Company's net loss, and net loss per common share for 2002, 2001 and 2000 would
approximate the pro forma amounts below (in thousands, except per-share data):

Year Ended December 31,2002

2001

2000Net loss attributable to common shareholders

$
(590
)
$
(32,104
)
$
(14,637
)Net loss per common sharebasic

$
(0.02
)
$
(4.71
)
$
(2.40
)Net loss per common sharediluted

$
(0.02
)
$
(4.71
)
$
(2.40
)


The
effects of applying SFAS 123 in the pro-forma disclosure are not indicative of future amounts and anticipated awards.

On
March 3, 2003, pursuant to the Plan, the Company granted 653,700 stock options at an exercise price of $24.36 per share. The options vest at a rate of one-third per
year on the anniversary of the grant date and have a duration of ten years.

Restricted Shares

In July 2002, the Board of Directors approved the issuance over five years of an aggregate of up to 775,000 shares of restricted stock with no exercise
price to members of senior management of the Company. The Company issued 155,000 shares in July 2002 based on a fair market value per share of $23.65 on the grant date. These shares are subject
to risk of forfeiture and transfer restrictions, which terminate on March 1, 2003, based on the continued employment of these individuals with the Company through that date. During the year
ended December 31, 2002, the Company recognized $2.6 million of compensation expense related to these shares. The unamortized compensation expense of $1.0 million is included as
unearned compensation on the accompanying balance sheet and will be amortized over the remaining vesting period.

In
addition, on March 3, 2003, the Company issued 155,000 shares based on a value of $24.36 per share. These shares are subject to risk of forfeiture and transfer restrictions,
which terminate on March 3, 2004.

During
the years ended December 31, 2001 and 2000, the Company granted shares of restricted stock with no performance-based conditions and no exercise price to certain employees.
Grantees

F-24

---

immediately receive distributions and voting rights on shares granted, and the shares vest over periods ranging up to five years. Compensation expense is recognized over the vesting periods. During
the years ended December 31, 2001 and 2000, compensation expense recognized was $1.5 million and $0.4 million, respectively, based on a fair value per share of $25.00 at each of
the grant dates.

Upon
completion of the IPO in the second quarter, all contractual restrictions on transfer and forfeiture provisions that existed on restricted shares previously granted to members of
senior management and other key employees terminated. As a result, the Company incurred compensation expense, including the reimbursement of a portion of the taxes paid by two employees, of
$6.8 million on the restricted shares, which is comprised of $4.3 million of stock compensation expense and $2.5 million for the reimbursement of a portion of such taxes.

Following
is a table summarizing restricted stock activity during the years ended December 31:

2002

2001

2000Unvested shares outstanding at beginning of year

84,111

60,000

Shares issued

263,565

84,497

75,000Shares forfeited



(1,830
)
Shares vested

(192,676
)
(58,556
)
(15,000
)Unvested shares outstanding at end of year

155,000

84,111

60,000


During
the year ended December 31, 2002, the Company accrued $1.1 million of compensation expense, including the reimbursement of a portion of the taxes to be paid by one
employee, related to approximately 120,000 shares of restricted stock that were issued by the Company on March 3, 2003 for 2002 performance. The Company recognizes compensation expense with
respect to performance-based stock grants ratably over the performance and vesting periods.

12.    Commitments and Contingencies

Retirement Savings Plan

Effective in January 2000, the Company began to offer its employees a retirement savings plan qualified under Section 401(k) of the Internal Revenue
Code. Under the Plan, the Company provides matching contributions. These matching contributions are currently equal to 100% of the employee's contribution up to 3% of the employee's compensation, and
50% of the employee's contribution in excess of 3% and up to 5% of the employee's compensation. These employer contributions aggregated $0.3 million, $0.2 million, and
$0.1 million in 2002, 2001 and 2000, respectively, and vested immediately.

Effective
in January 2000, the Company adopted a non-qualified executive retirement plan ("SERP"). Benefits payable under the SERP are based upon a percentage of each participant's
average annual compensation, including base salary and bonus for the three calendar years of the last ten years of employment which produce the highest average amount. Benefits earned under the SERP
vest over varying periods ranging from eight to ten years. Participants may begin to receive payments under the SERP following either their 60th or 65th birthday depending on the terms of their
individual agreement. Benefits under the SERP will terminate upon the participant's death. The Company has

F-25

---

accrued a liability pursuant to the SERP of $2.9 million and $1.6 million, at December 31, 2002 and 2001, respectively.

Legal and Other Matters

The Company is subject to legal and other claims incurred in the normal course of business. Based on its review and consultation with counsel of such matters
known to exist, management does not believe that the ultimate outcome of these claims would materially affect the Company's financial position or results of operations.

13.    Derivative and Hedging Activities

On January 1, 2001, the Company adopted SFAS No. 133,Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 138,Accounting for Certain Derivative Instruments and Certain Hedging Activities.
SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments. Specifically, SFAS No. 133 requires an entity to recognize all derivatives as either
assets or liabilities in the balance sheet and to measure such instruments at fair value. Fair value adjustments affect either other comprehensive income (a component of shareholders' equity) or net
income, depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity.

The
Company uses certain derivative financial instruments to manage, or hedge, interest rate risks related to its borrowings, from lines of credit to medium-and long-term
financings. The Company requires that hedging derivative instruments are effective in reducing the interest rate risk exposure that they are designed to hedge. Instruments that meet the hedging
criteria are formally designated as hedges at the inception of the derivative contract. The Company does not use derivatives for trading or speculative purposes and only enters into contracts with
major financial institutions based on their credit rating and other factors. To determine the fair values of its derivative instruments, the Company uses methods and assumptions based on market
conditions and risks existing at each balance sheet date. Such methods incorporate standard market conventions and techniques such as discounted cash flow analysis and option pricing models to
determine fair value. All methods of estimating fair value result in general approximation of value, and such value may or may not actually be realized.

The
Company had no derivatives at December 31, 2002. The Company's only derivative at December 31, 2001 was an interest rate "collar" entered into pursuant to and as a
condition of the Company's prior line of credit facility. This collar limited the variable interest rate range on the entire $150 million term loan under the prior line of credit to a floor of
6% and a cap of 8.5% through September 18, 2003, the date of maturity of the prior line of credit. The derivative was classified as a cash flow hedge and the fair value of the derivative was
included in accrued expenses and other liabilities in the accompanying consolidated balance sheet as of December 31, 2001. For purposes of determining hedge effectiveness, the Company excludes
the time value element of the collar. As of January 1, 2001, the adoption of SFAS No. 133 resulted in the recognition of a loss of $2.5 million, which is reported as a cumulative
transition adjustment to accumulated other comprehensive loss (a component of changes in shareholders' equity). The net increase in the fair value of the liability for the collar during the year ended
December 31, 2001 was $5.3 million, which resulted from a net gain recognized in income during the year ended December 31, 2001 of $1.0 million (representing the time

F-26

---

value component of the collar excluded from the assessment of hedge effectiveness), a net loss of $6.3 million charged to accumulated other comprehensive loss.

Interest
expense attributable to the collar and recognized in earnings in 2002 and 2001 was $2.1 million and $3.0 million, respectively.

On
April 29, 2002, the Company entered into a $350 million unsecured line of credit with a group of lenders and Fleet National Bank, as agent. This new line of credit
replaced the Company's prior $425 million senior unsecured credit facility. Upon entering into this new line of credit, the Company paid $6.8 million to terminate the interest rate
collar that was then in place with respect to the $150 million term loan under the prior senior unsecured credit facility. As a result of this termination, the Company reclassified
$7.6 million of accumulated other comprehensive loss, a component of shareholders' equity, to earnings during the year ended December 31, 2002.

14.    Supplementary Quarterly Data (unaudited)

The tables below reflect the Company's selected quarterly information for the years ended December 31, 2002 and 2001. Certain 2002 and 2001 amounts have
been reclassified to conform to the current presentation of discontinued operations (in thousands, except per-share data):

|                                                       |  | Quarter ended
|------------------------------------------------------ |  | -------------
|
|2002                                                   |  |              
|Revenue from rentals and recoveries                    |  | $            
|Net income (loss)                                      |  |              
|Net (loss) income attributable to common shareholders  |  |              
|Basic and diluted net (loss) income per common share * |  |              

|                                             |  | Quarter ended |       
|-------------------------------------------- |  | ------------- | ------
|
|2001                                         |  |               |       
|Revenue from rentals and recoveries          |  | $             | 65,179
|Net income                                   |  |               | 5,230 
|Net loss attributable to common shareholders |  |               | (5,827
|Basic and diluted net loss per common share  |  |               | (0.85 

---

15.    Pro-Forma Financial Information (unaudited)

The following pro-forma financial information for the year ended December 31, 2000 is presented as if the September 18, 2000 acquisition
of Bradley Real Estate, Inc. had occurred at January 1, 2000. The pro-forma information is based upon historical information and does not purport to present what

F-27

---

actual results would have been had such transaction occurred at January 1, 2000 or to project results for any future period (in thousands, except per-share data).

Total revenues

$
252,666Net income before extraordinary item


14,459Net loss attributable to common shareholders


(29,454
)Basic loss per share

$
(4.32
)Diluted loss per share

$
(4.32
)


16.    Subsequent EventsAcquisitions and Dispositions

On January 23, 2003, the Company acquired a 442,000 square foot community shopping center, of which we acquired 181,000 square feet, located in
Christiansburg, VA known as Spradlin Farm. The acquisition price for Spradlin Farm was $23.6 million and was funded with borrowings under the Company's line of credit.

During
the first quarter of 2003 the Company completed the disposition of its ten remaining single-tenant properties classified as held for sale at December 31, 2002. The Company
received proceeds of $2.4 million, resulting in a net gain on sale of $0.8 million.

17.    Newly Issued Accounting Standards

SFAS No. 145

In April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections("SFAS No. 145"). SFAS No. 145 eliminates the requirement that all gains and losses from the extinguishment of
debt be aggregated and, if material, classified as an extraordinary item. However, a company could continue to classify transactions as extraordinary items if they meet the criteria described in APB
No. 30,Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions("APB 30"). APB 30 requires that the event or transaction be both unusual in nature and infrequent in occurrence.

SFAS
No. 145 is effective for fiscal years beginning after May 15, 2002. However, any gain or loss on extinguishment of debt that was classified as an extraordinary item in
prior periods presented that does not meet the criteria of APB 30 shall be reclassified. The Company has elected to adopt SFAS No. 145 for its fiscal year beginning January 1, 2003, and
therefore has classified its losses associated with its prepayment of its prior senior unsecured credit facility and subordinated debt during the second quarter of 2002 as an extraordinary item. This
loss will be reclassified to continuing operations in 2003.

SFAS No. 146

In June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal
Activities("SFAS No. 146"). SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and requires that a
liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than at the date of an entity's

F-28

---

commitment to an exit plan. SFAS No. 146 also establishes that fair value is the objective for initial measurement of the liability and is effective for exit or disposal activities initiated
after December 31, 2002. The Company does not expect this pronouncement to have a material impact on its liquidity, financial position, or results of operations.

FIN 45

In November 2002, the FASB issued FASB Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for
Guarantees, including Indirect Indirect Guarantees of Indebtedness of Others("FIN 45"). This interpretation expands the disclosures to be made by a guarantor in its
financial statements about its obligations under certain guarantees and requires the guarantor to recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 clarifies
the requirements of SFAS No. 5,Accounting for Contingencies, relating to guarantees. In general FIN 45 applies to contracts or indemnification
agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability, or equity security of the
guaranteed party. The disclosure requirements of FIN 45 are effective as of December 31, 2002 and require disclosure of the nature of the guarantee, the maximum potential amount of future
payments that the guarantor could be required to make under the guarantee, and the current amount of the liability, if any, for the guarantor's obligations under the guarantee. The Company adopted the
disclosure requirements of FIN 45 and concluded no additional disclosure was necessary. The Company will adopt the recognition requirements of FIN 45 in 2003 and does not expect these
recognition requirements will have a material impact on the results of its operations, financial position, or liquidity.

FIN 46

In January 2003, the FASB issued FASB Interpretation No. 46,Consolidation of Variable Interest
Entities("FIN 46"). The objective of this interpretation is to provide guidance on how to identify a variable interest entity ("VIE") and determine when the assets,
liabilities, noncontrolling interests, and results of operations of a VIE need to be included in a company's consolidated financial statements. A company that holds variable interest in an entity will
need to consolidate the entity if the company's interest in the VIE is such that the company will absorb a majority of the VIE's expected losses and/or receive a majority of the entity's expected
residual returns, if they occur. FIN 46 also requires additional disclosures by primary beneficiaries and other significant variable interest holders. The provisions of this interpretation became
effective upon issuance. The Company does not believe the adoption of the interpretation will have a material impact on the results of its operations, financial position, or liquidity.

F-29

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2002

(In thousands)

The
following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2002.

|                                                   |  |   |         | Initial Cost to the Company |   |       |  | Gross Amount Carried at December 31, 2002 |        |  |   |      
|-------------------------------------------------- |  | - | ------- | --------------------------- | - | ----- |  | ----------------------------------------- | ------ |  | - | -----
|
|RETAIL SHOPPING CENTERS                            |  |   |         |                             |   |       |  |                                           |        |  |   |      
|ALABAMA                                            |  |   |         |                             |   |       |  |                                           |        |  |   |      
|Montgomery Commons
Montgomery, AL                  |  | $ | 8,872   |                             | $ | 2,527 |  | $                                         | 8,459  |  | $ |     
|Mongtomery Towne Center
Montgomery, AL             |  |   | 7,716   |                             |   | 4,307 |  |                                           | 14,421 |  |   | 1    
|Riverchase Village Shopping Center
Hoover, AL      |  |   | 10,361  |                             |   | 4,094 |  |                                           | 13,718 |  |   | 411  
|CONNECTICUT                                        |  |   |         |                             |   |       |  |                                           |        |  |   |      
|Torrington Plaza
Torrington, CT                    |  |   | 239,906 | (1)                         |   | 2,548 |  |                                           | 8,538  |  |   | 230  
|FLORIDA                                            |  |   |         |                             |   |       |  |                                           |        |  |   |      
|Barton Commons
Rockledge, FL                       |  |   |         | (1)                         |   | 1,652 |  |                                           | 5,546  |  |   | 324  
|Naples Shopping Center
Naples, FL                  |  |   | 82,864  | (2)                         |   | 4,783 |  |                                           | 16,029 |  |   | 238  
|Park Shore Shopping Center
Naples, FL              |  |   |         | (1)                         |   | 3,099 |  |                                           | 10,391 |  |   | 954  
|Shoppers Haven Shopping Center
Pompano Beach, FL   |  |   |        |                             |   | 3,286 |  |                                           | 10,933 |  |   | 1,915
|Venetian Isle Shopping Center
Lighthouse Point, FL |  |   |         | (1)                         |   | 3,605 |  |                                           | 12,084 |  |   | 238  
|GEORGIA                                            |  |   |         |                             |   |       |  |                                           |        |  |   |      
|Shenandoah Plaza
Newnan, GA                        |  |   |        |                             |   | 1,352 |  |                                           | 4,530  |  |   |     
|ILLINOIS                                           |  |   |         |                             |   |       |  |                                           |        |  |   |      
|Bartonville Square
Bartonville, IL                 |  |   |        |                             |   | 572   |  |                                           | 1,914  |  |   | 225  
|Butterfield Square
Libertyville, IL                |  |   |        |                             |   | 3,328 |  |                                           | 11,139 |  |   | 150  
|The Commons of Chicago Ridge
Chicago Ridge, IL     |  |   |        |                             |   | 9,254 |  |                                           | 30,982 |  |   | 1,894

S-III-1

---

|The Commons of Crystal Lake
Crystal Lake, IL |  |  |  | 7,193  |  | 24,079 |  | 393   |  | 7,193  |  | 24,472 |  | 31,665 |  | 2,329 |  | 2000 |  | 4 - 39 
|-------------------------------------------- |  | - |  | ------ |  | ------ |  | ----- |  | ------ |  | ------ |  | ------ |  | ----- |  | ---- |  | -------
|Crossroads Centre
Fairview Heights, IL       |  |  |  | 3,614  |  | 12,099 |  | 191   |  | 3,680  |  | 12,224 |  | 15,904 |  | 1,163 |  | 2000 |  | 10 - 39
|Fairhills Shopping Center
Springfield, IL    |  |  |  | 1,369  |  | 4,583  |  | 15    |  | 1,369  |  | 4,598  |  | 5,967  |  | 439   |  | 2000 |  | 3 - 39 
|Heritage Square
Naperville, IL               |  |  |  | 5,554  |  | 18,593 |  | 611   |  | 5,554  |  | 19,204 |  | 24,758 |  | 1,830 |  | 2000 |  | 5 - 39 
|High Point Centre
Lombard, IL                |  |  |  | 5,621  |  | 18,817 |  | 247   |  | 5,659  |  | 19,026 |  | 24,685 |  | 1,797 |  | 2000 |  | 10 - 39
|Parkway Pointe
Springfield, IL               |  |  |  | 1,059  |  | 3,546  |  |      |  | 1,059  |  | 3,546  |  | 4,605  |  | 338   |  | 2000 |  | 10 - 39
|Rivercrest
Crestwood, IL                     |  |  |  | 10,043 |  | 33,620 |  | 125   |  | 10,043 |  | 33,745 |  | 43,788 |  | 3,220 |  | 2000 |  | 6 - 39 
|Rollins Crossing
Round Lake Beach, IL        |  |  |  | 3,839  |  | 12,852 |  | 3     |  | 3,839  |  | 12,855 |  | 16,694 |  | 1,228 |  | 2000 |  | 4 - 39 
|Sangamon Center North
Springfield, IL        |  |  |  | 2,450  |  | 8,204  |  | 132   |  | 2,450  |  | 8,336  |  | 10,786 |  | 790   |  | 2000 |  | 10 - 39
|Sheridan Village
Peoria, IL                  |  |  |  | 5,293  |  | 17,716 |  | 1,206 |  | 5,425  |  | 18,790 |  | 24,215 |  | 1,713 |  | 2000 |  | 3 - 39 
|Sterling Bazaar
Peoria, IL                   |  |  |  | 1,619  |  | 5,419  |  | 99    |  | 1,718  |  | 5,419  |  | 7,137  |  | 522   |  | 2000 |  | 10 - 39
|Twin Oaks Centre
Silvis, IL                  |  |  |  | 1,832  |  | 6,131  |  | 287   |  | 1,841  |  | 6,409  |  | 8,250  |  | 587   |  | 2000 |  | 10 - 39
|Wardcliffe Shopping Center
Peoria, IL        |  |  |  | 503    |  | 1,682  |  | 244   |  | 566    |  | 1,863  |  | 2,429  |  | 183   |  | 2000 |  | 5 - 39 
|Westview Center
Hanover Park, IL             |  |  |  | 6,527  |  | 21,852 |  | 580   |  | 6,815  |  | 22,144 |  | 28,959 |  | 2,134 |  | 2000 |  | 5 - 39 
|INDIANA                                      |  |   |  |        |  |        |  |       |  |        |  |        |  |        |  |       |  |      |  |        
|Apple Glen Crossing
Fort Wayne, IN           |  |  |  | 4,337  |  | 14,518 |  |      |  | 4,337  |  | 14,518 |  | 18,855 |  | 45    |  | 2002 |  | 15 - 39
|County Line Mall
Indianapolis, IN            |  |  |  | 4,616  |  | 15,451 |  | 68    |  | 4,616  |  | 15,519 |  | 20,135 |  | 1,483 |  | 2000 |  | 3 - 39 
|Double Tree Plaza
Winfield, IN               |  |  |  | 1,404  |  | 4,703  |  | 80    |  | 1,420  |  | 4,767  |  | 6,187  |  | 455   |  | 2000 |  | 5 - 39 

S-III-2

---

|Germantown Shopping Center
Jasper, IN      |  |      |  | 1,829  |  | 6,124  |  | 1,642 |  | 1,848  |  | 7,747  |  | 9,595  |  | 768   |  | 2000 |  | 3 - 39 
|------------------------------------------ |  | ----- |  | ------ |  | ------ |  | ----- |  | ------ |  | ------ |  | ------ |  | ----- |  | ---- |  | -------
|King's Plaza
Richmond, IN                  |  |      |  | 983    |  | 3,290  |  | 498   |  | 1,111  |  | 3,660  |  | 4,771  |  | 373   |  | 2000 |  | 5 - 39 
|Lincoln Plaza
New Haven, IN                |  |      |  | 1,241  |  | 4,155  |  | 134   |  | 1,241  |  | 4,289  |  | 5,530  |  | 429   |  | 2000 |  | 2 - 39 
|Martin's Bittersweet Plaza
Mishawaka, IN   |  | 2,975 |  | 1,110  |  | 3,717  |  | 29    |  | 1,110  |  | 3,746  |  | 4,856  |  | 359   |  | 2000 |  | 5 - 39 
|Rivergate Shopping Center
Shelbyville, IN  |  |      |  | 1,299  |  | 4,350  |  | 206   |  | 1,299  |  | 4,556  |  | 5,855  |  | 426   |  | 2000 |  | 10 - 39
|Sagamore Park Centre
West Lafayette, IN    |  |      |  | 1,768  |  | 5,919  |  | 439   |  | 1,768  |  | 6,358  |  | 8,126  |  | 583   |  | 2000 |  | 4 - 39 
|Speedway SuperCenter
Indianapolis, IN      |  |      |  | 11,446 |  | 38,322 |  | 1,971 |  | 11,502 |  | 40,237 |  | 51,739 |  | 3,809 |  | 2000 |  | 2 - 39 
|The Village
Gary, IN                       |  |      |  | 2,649  |  | 8,871  |  | 2,024 |  | 2,649  |  | 10,895 |  | 13,544 |  | 895   |  | 2000 |  | 3 - 39 
|Washington Lawndale Commons
Evansville, IN |  |      |  | 4,757  |  | 15,924 |  | 592   |  | 4,831  |  | 16,442 |  | 21,273 |  | 1,603 |  | 2000 |  | 3 - 39 
|IOWA                                       |  |       |  |        |  |        |  |       |  |        |  |        |  |        |  |       |  |      |  |        
|Burlington Plaza West
Burlington, IA       |  |      |  | 1,409  |  | 4,719  |  | 111   |  | 1,475  |  | 4,764  |  | 6,239  |  | 453   |  | 2000 |  | 4 - 39 
|Davenport Retail Center
Davenport, IA      |  |      |  | 1,355  |  | 4,539  |  |      |  | 1,355  |  | 4,539  |  | 5,894  |  | 433   |  | 2000 |  | 10 - 39
|Kimberly West
Davenport, IA                |  | 3,519 |  | 1,380  |  | 4,623  |  | 62    |  | 1,391  |  | 4,674  |  | 6,065  |  | 449   |  | 2000 |  | 3 - 39 
|Parkwood Plaza
Urbandale, IA               |  |      |  | 1,950  |  | 6,527  |  | 118   |  | 1,950  |  | 6,645  |  | 8,595  |  | 624   |  | 2000 |  | 10 - 39
|Southgate Shopping Center
Des Moines, IA   |  | 2,589 |  | 994    |  | 3,327  |  | 249   |  | 1,054  |  | 3,516  |  | 4,570  |  | 325   |  | 2000 |  | 7 - 39 
|Spring Village
Davenport, IA               |  |      |  | 673    |  | 2,255  |  | 435   |  | 753    |  | 2,610  |  | 3,363  |  | 244   |  | 2000 |  | 3 - 39 
|Warren Plaza
Dubuque, IA                   |  |      |  | 1,439  |  | 4,818  |  | 83    |  | 1,523  |  | 4,817  |  | 6,340  |  | 460   |  | 2000 |  | 10 - 39
|KANSAS                                     |  |       |  |        |  |        |  |       |  |        |  |        |  |        |  |       |  |      |  |        
|Mid State Plaza
Salina, KS                 |  |      |  | 1,718  |  | 5,752  |  | 845   |  | 2,243  |  | 6,072  |  | 8,315  |  | 600   |  | 2000 |  | 1 - 39 

S-III-3

---

|Santa Fe Square
Olathe, KS              |  |       |     | 2,465 |  | 8,252  |  | 451   |  | 2,649 |  | 8,519  |  | 11,168 |  | 809   |  | 2000 |  | 5 - 39 
|--------------------------------------- |  | ------ | --- | ----- |  | ------ |  | ----- |  | ----- |  | ------ |  | ------ |  | ----- |  | ---- |  | -------
|Shawnee Parkway Plaza
Shawnee, KS       |  |       |     | 1,176 |  | 3,936  |  | 207   |  | 1,298 |  | 4,021  |  | 5,319  |  | 415   |  | 2000 |  | 2 - 39 
|Village Plaza
Manhattan, KS             |  |       |     | 497   |  | 1,664  |  | 13    |  | 499   |  | 1,675  |  | 2,174  |  | 137   |  | 2001 |  | 10 - 39
|Westchester Square
Lenexa, KS           |  |       |     | 3,128 |  | 10,473 |  | 381   |  | 3,256 |  | 10,726 |  | 13,982 |  | 1,055 |  | 2000 |  | 4 - 39 
|West Loop Shopping Center
Manhattan, KS |  |       |     | 3,285 |  | 10,997 |  | 272   |  | 3,388 |  | 11,166 |  | 14,554 |  | 1,066 |  | 2000 |  | 3 - 39 
|KENTUCKY                                |  |        |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Camelot Shopping Center
Louisville, KY  |  |       |     | 1,659 |  | 6,198  |  | 37    |  | 1,659 |  | 6,235  |  | 7,894  |  | 543   |  | 2000 |  | 2 - 39 
|Dixie Plaza
Louisville, KY              |  |       |     | 719   |  | 2,406  |  | 15    |  | 719   |  | 2,421  |  | 3,140  |  | 233   |  | 2000 |  | 5 - 39 
|Midtown Mall
Ashland, KY                |  |       |     | 1,924 |  | 6,444  |  | 301   |  | 1,924 |  | 6,745  |  | 8,669  |  | 663   |  | 2000 |  | 3 - 39 
|Plainview Village Center
Louisville, KY |  |       |     | 2,701 |  | 9,044  |  | 700   |  | 2,727 |  | 9,718  |  | 12,445 |  | 901   |  | 2000 |  | 5 - 39 
|Stony Brook
Louisville, KY              |  |       |     | 3,319 |  | 11,110 |  | 158   |  | 3,364 |  | 11,223 |  | 14,587 |  | 1,082 |  | 2000 |  | 3 - 39 
|MAINE                                   |  |        |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Pine Tree Shopping Center
Portland, ME  |  |        | (1) | 2,390 |  | 8,018  |  | 1,558 |  | 2,425 |  | 9,541  |  | 11,966 |  | 1,313 |  | 1999 |  | 5 - 39 
|MASSACHUSETTS                           |  |        |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Berkshire Crossing
Pittsfield, MA       |  | 22,704 |     | 6,964 |  | 23,313 |  | 93    |  | 6,964 |  | 23,406 |  | 30,370 |  | 509   |  | 2002 |  | 15 - 39
|Lynn Market Place
Lynn, MA              |  |        | (1) | 1,340 |  | 4,490  |  | 463   |  | 1,340 |  | 4,953  |  | 6,293  |  | 654   |  | 1999 |  | 5 - 39 
|Watertower Plaza
Leominster, MA         |  |        | (1) | 6,669 |  | 22,350 |  | 4,227 |  | 6,673 |  | 26,573 |  | 33,246 |  | 4,039 |  | 1999 |  | 4 - 39 
|Westgate Plaza
Westfield, MA            |  |        | (1) | 2,062 |  | 6,911  |  | 25    |  | 2,079 |  | 6,919  |  | 8,998  |  | 964   |  | 1999 |  | 5 - 39 
|MICHIGAN                                |  |        |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Cherry Hill Marketplace
Westland, MI    |  |       |     | 2,639 |  | 4,113  |  | 6,268 |  | 2,639 |  | 10,381 |  | 13,020 |  | 895   |  | 2000 |  | 4 - 39 

S-III-4

---

|Grand Traverse Crossing
Traverse City, MI |  | 19,393 |  | 5,375  |  | 17,993 |  | 62    |  | 5,375  |  | 18,055 |  | 23,430 |  | 393   |  | 2002 |  | 15 - 39
|----------------------------------------- |  | ------ |  | ------ |  | ------ |  | ----- |  | ------ |  | ------ |  | ------ |  | ----- |  | ---- |  | -------
|The Courtyard
Burton, MI                  |  |       |  | 2,039  |  | 6,831  |  | 34    |  | 2,040  |  | 6,864  |  | 8,904  |  | 666   |  | 2000 |  | 5 - 39 
|Redford Plaza
Redford, MI                 |  |       |  | 5,520  |  | 18,482 |  | 275   |  | 5,520  |  | 18,757 |  | 24,277 |  | 1,809 |  | 2000 |  | 4 - 39 
|MINNESOTA                                 |  |        |  |        |  |        |  |       |  |        |  |        |  |        |  |       |  |      |  |        
|Austin Town Center
Austin, MN             |  |       |  | 2,096  |  | 7,015  |  | 116   |  | 2,096  |  | 7,131  |  | 9,227  |  | 699   |  | 2000 |  | 3 - 39 
|Brookdale Square
Brooklyn Center, MN      |  |       |  | 2,191  |  | 7,335  |  | 539   |  | 2,191  |  | 7,874  |  | 10,065 |  | 710   |  | 2000 |  | 3 - 39 
|Burning Tree Plaza
Duluth, MN             |  |       |  | 3,355  |  | 11,230 |  | 152   |  | 3,355  |  | 11,382 |  | 14,737 |  | 1,101 |  | 2000 |  | 3 - 39 
|Central Valu Center
Columbia Heights, MN  |  |       |  | 2,144  |  | 7,176  |  | 8     |  | 2,144  |  | 7,184  |  | 9,328  |  | 688   |  | 2000 |  | 3 - 39 
|Division Place
St. Cloud, MN              |  |       |  | 2,614  |  | 8,751  |  | 159   |  | 2,638  |  | 8,886  |  | 11,524 |  | 509   |  | 2001 |  | 10 - 39
|Elk Park Center
Elk River, MN             |  | 8,775  |  | 4,440  |  | 14,866 |  | 308   |  | 4,446  |  | 15,168 |  | 19,614 |  | 1,478 |  | 2000 |  | 3 - 39 
|Har Mar Mall
Roseville, MN                |  |       |  | 10,281 |  | 34,418 |  | 2,201 |  | 10,322 |  | 36,578 |  | 46,900 |  | 3,451 |  | 2000 |  | 3 - 39 
|Hub West / Richfield Hub
Richfield, MN    |  |       |  | 3,269  |  | 10,948 |  | 450   |  | 3,270  |  | 11,397 |  | 14,667 |  | 1,060 |  | 2000 |  | 9 - 39 
|Marketplace at 42
Savage, MN              |  |       |  | 5,070  |  | 16,973 |  | 246   |  | 5,093  |  | 17,196 |  | 22,289 |  | 1,657 |  | 2000 |  | 4 - 39 
|Roseville Center
Roseville, MN            |  |       |  | 1,571  |  | 5,257  |  | 468   |  | 1,571  |  | 5,725  |  | 7,296  |  | 526   |  | 2000 |  | 2 - 39 
|Southport Centre
Apple Valley, MN         |  | 10,000 |  | 3,915  |  | 13,106 |  | 57    |  | 3,915  |  | 13,163 |  | 17,078 |  | 1,250 |  | 2000 |  | 10 - 39
|Sun Ray Shopping Center
St. Paul, MN      |  |       |  | 4,669  |  | 15,628 |  | 733   |  | 4,690  |  | 16,340 |  | 21,030 |  | 1,517 |  | 2000 |  | 2 - 39 
|Ten Acres Center
West St. Paul, MN        |  |       |  | 2,368  |  | 7,930  |  | 574   |  | 2,344  |  | 8,528  |  | 10,872 |  | 810   |  | 2000 |  | 4 - 39 
|Terrace Mall
Robbinsdale, MN              |  |       |  | 2,030  |  | 6,799  |  | 54    |  | 2,030  |  | 6,853  |  | 8,883  |  | 665   |  | 2000 |  | 4 - 39 
|Westwind Plaza
Minnetonka, MN             |  |       |  | 2,511  |  | 8,409  |  | 1,040 |  | 2,676  |  | 9,284  |  | 11,960 |  | 845   |  | 2000 |  | 9 - 39 
|White Bear Hills
White Bear Lake, MN      |  |       |  | 1,412  |  | 4,732  |  | 52    |  | 1,413  |  | 4,783  |  | 6,196  |  | 452   |  | 2000 |  | 5 - 39 

S-III-5

---

|MISSOURI                                     |  |       |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|-------------------------------------------- |  | ----- | --- | ----- |  | ------ |  | ----- |  | ----- |  | ------ |  | ------ |  | ----- |  | ---- |  | -------
|Ellisville Square
Ellisville, MO             |  |      |     | 2,577 |  | 8,627  |  | 795   |  | 2,772 |  | 9,227  |  | 11,999 |  | 853   |  | 2000 |  | 9 - 39 
|Grandview Plaza
Florissant, MO               |  |      |     | 3,555 |  | 11,902 |  | 502   |  | 3,700 |  | 12,259 |  | 15,959 |  | 1,142 |  | 2000 |  | 10 - 39
|Hub Shopping Center
Independence, MO         |  |      |     | 1,578 |  | 5,281  |  | 403   |  | 1,708 |  | 5,554  |  | 7,262  |  | 517   |  | 2000 |  | 2 - 39 
|Liberty Corners
Liberty, MO                  |  |      |     | 1,904 |  | 6,375  |  | 133   |  | 1,970 |  | 6,442  |  | 8,412  |  | 629   |  | 2000 |  | 3 - 39 
|Maplewood Square
Maplewood, MO               |  |      |     | 1,080 |  | 3,616  |  | 67    |  | 1,080 |  | 3,683  |  | 4,763  |  | 365   |  | 2000 |  | 5 - 39 
|Marketplace at Independence
Independence, MO |  |      |     | 4,612 |  | 15,441 |  | 76    |  | 4,612 |  | 15,517 |  | 20,129 |  | 337   |  | 2002 |  | 15 - 39
|Prospect Plaza
Gladstone, MO                 |  |      |     | 3,479 |  | 11,647 |  | 586   |  | 3,479 |  | 12,233 |  | 15,712 |  | 1,245 |  | 2000 |  | 4 - 39 
|Watts Mill Plaza
Kansas City, MO             |  |      |     | 3,180 |  | 10,645 |  | 230   |  | 3,348 |  | 10,707 |  | 14,055 |  | 1,037 |  | 2000 |  | 5 - 39 
|NEBRASKA                                     |  |       |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Bishop Heights
Lincoln, NE                   |  |      |     | 318   |  | 1,062  |  | 36    |  | 345   |  | 1,071  |  | 1,416  |  | 103   |  | 2000 |  | 10 - 39
|Cornhusker Plaza
South Sioux City, NE        |  |      |     | 1,122 |  | 3,754  |  | 30    |  | 1,122 |  | 3,784  |  | 4,906  |  | 359   |  | 2000 |  | 5 - 39 
|Eastville Plaza
Fremont, NE                  |  |      |     | 1,137 |  | 3,805  |  | 30    |  | 1,137 |  | 3,835  |  | 4,972  |  | 363   |  | 2000 |  | 10 - 39
|Edgewood Shopping Center
Lincoln, NE         |  |      |     | 2,890 |  | 9,674  |  | 183   |  | 2,904 |  | 9,843  |  | 12,747 |  | 944   |  | 2000 |  | 3 - 39 
|The Meadows
Lincoln, NE                      |  |      |     | 1,037 |  | 3,471  |  | 24    |  | 1,037 |  | 3,495  |  | 4,532  |  | 333   |  | 2000 |  | 4 - 39 
|Miracle Hills Park
Omaha, NE                 |  | 3,672 |     | 1,739 |  | 5,824  |  | 107   |  | 1,761 |  | 5,909  |  | 7,670  |  | 577   |  | 2000 |  | 3 - 39 
|Stockyards Plaza
Omaha, NE                   |  |      |     | 2,122 |  | 7,102  |  | 33    |  | 2,155 |  | 7,102  |  | 9,257  |  | 705   |  | 2000 |  | 10 - 39
|NEW HAMPSHIRE                                |  |       |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Bedford Mall
Bedford, NH                     |  |      |     | 4,686 |  | 15,708 |  | 296   |  | 4,735 |  | 15,955 |  | 20,690 |  | 2,301 |  | 1999 |  | 3 - 39 
|Bedford Grove
Bedford, NH                    |  | 9,165 |     | 3,595 |  | 12,037 |  |      |  | 3,595 |  | 12,037 |  | 15,632 |  | 263   |  | 2002 |  | 15 - 39
|Capitol Shopping Center
Concord, NH          |  |       | (2) | 2,300 |  | 7,713  |  | 1,341 |  | 2,300 |  | 9,054  |  | 11,354 |  | 1,242 |  | 1999 |  | 10 - 39

S-III-6

---

|Tri City Plaza
Somersworth, NH                        |  |       | (2) | 1,875 |  | 6,287  |  | 280   |  | 2,135 |  | 6,307  |  | 8,442  |  | 963   |  | 1999 |  | 5 - 39 
|----------------------------------------------------- |  | ----- | --- | ----- |  | ------ |  | ----- |  | ----- |  | ------ |  | ------ |  | ----- |  | ---- |  | -------
|NEW JERSEY                                            |  |       |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Cross Keys Commons
Washington Township, NJ            |  |      |     | 7,823 |  | 26,189 |  | 437   |  | 7,829 |  | 26,620 |  | 34,449 |  | 818   |  | 2002 |  | 15 - 39
|Morris Hills Shopping Center
Parsippany, NJ           |  |       | (1) | 4,646 |  | 15,565 |  | 705   |  | 4,646 |  | 16,270 |  | 20,916 |  | 2,433 |  | 1999 |  | 10 - 39
|NEW MEXICO                                            |  |       |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|St. Francis Plaza
Santa Fe, NM                        |  | 1,204 |     | 891   |  | 2,989  |  | 2     |  | 893   |  | 2,989  |  | 3,882  |  | 297   |  | 2000 |  | 10 - 39
|NEW YORK                                              |  |       |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|College Plaza
Selden, NY                              |  |       | (1) | 3,093 |  | 10,367 |  | 45    |  | 3,093 |  | 10,412 |  | 13,505 |  | 1,488 |  | 1999 |  | 10 - 39
|Dalewood I Shopping Center
Hartsdale, NY              |  |       | (1) | 1,767 |  | 5,918  |  | 73    |  | 1,767 |  | 5,991  |  | 7,758  |  | 857   |  | 1999 |  | 10 - 39
|Dalewood II Shopping Center
Hartsdale, NY             |  |       | (1) | 3,780 |  | 12,661 |  | 2     |  | 3,780 |  | 12,663 |  | 16,443 |  | 1,812 |  | 1999 |  | 10 - 39
|Dalewood III Shopping Center
Hartsdale, NY            |  |       | (1) | 2,646 |  | 8,861  |  | 73    |  | 2,646 |  | 8,934  |  | 11,580 |  | 1,275 |  | 1999 |  | 5 - 39 
|Falcaro's Plaza
Lawrence, NY                          |  |       | (1) | 1,881 |  | 6,301  |  | 100   |  | 1,881 |  | 6,401  |  | 8,282  |  | 922   |  | 1999 |  | 10 - 39
|Kings Park Shopping Center
Kings Park, NY             |  |       | (1) | 1,839 |  | 6,160  |  | 84    |  | 1,839 |  | 6,244  |  | 8,083  |  | 892   |  | 1999 |  | 5 - 39 
|Nesconset Shopping Center
Port Jefferson Station, NY  |  |       | (1) | 2,622 |  | 8,787  |  | 1,006 |  | 2,859 |  | 9,556  |  | 12,415 |  | 1,482 |  | 1999 |  | 3 - 39 
|Parkway Plaza
Carle Place, NY                         |  |       | (1) | 3,786 |  | 12,678 |  | 186   |  | 3,786 |  | 12,864 |  | 16,650 |  | 1,795 |  | 1999 |  | 5 - 39 
|Roanoke Plaza
Riverhead, NY                           |  |       | (2) | 1,653 |  | 5,541  |  | 267   |  | 1,653 |  | 5,808  |  | 7,461  |  | 847   |  | 1999 |  | 3 - 39 
|Rockville Centre Shopping Center
Rockville Centre, NY |  |       | (1) | 897   |  | 3,006  |  | 1,252 |  | 897   |  | 4,258  |  | 5,155  |  | 766   |  | 1999 |  | 9 - 39 
|Salmon Run Plaza
Watertown, NY                        |  | 5,533 |     | 2,096 |  | 7,015  |  |      |  | 2,096 |  | 7,015  |  | 9,111  |  | 148   |  | 2002 |  | 15 - 39
|Suffolk Plaza
East Setauket, NY                       |  |       | (1) | 1,182 |  | 4,042  |  | 180   |  | 1,182 |  | 4,222  |  | 5,404  |  | 612   |  | 1999 |  | 10 - 39
|Three Village Plaza
East Setauket, NY                 |  |       | (1) | 1,763 |  | 5,909  |  | 139   |  | 1,763 |  | 6,048  |  | 7,811  |  | 868   |  | 1999 |  | 9 - 39 
|Turnpike Plaza
Huntington Station, NY                 |  |       | (2) | 908   |  | 3,044  |  | 107   |  | 908   |  | 3,151  |  | 4,059  |  | 445   |  | 1999 |  | 10 - 39

S-III-7

---

|NORTH CAROLINA                               |  |        |     |       |  |        |  |       |  |        |  |        |  |        |  |       |  |      |  |        
|-------------------------------------------- |  | ------ | --- | ----- |  | ------ |  | ----- |  | ------ |  | ------ |  | ------ |  | ----- |  | ---- |  | -------
|The Commons at Chancellor Park
Charlotte, NC |  | 12,745 |     | 4,922 |  | 16,502 |  | 87    |  | 4,922  |  | 16,589 |  | 21,511 |  | 2,366 |  | 1999 |  | 5 - 39 
|Crown Point Shopping Center
Charlotte, NC    |  |        | (1) | 2,096 |  | 7,026  |  | 67    |  | 2,162  |  | 7,027  |  | 9,189  |  | 1,026 |  | 1999 |  | 10 - 39
|Franklin Square
Gastonia, NC                 |  | 14,418 |     | 6,084 |  | 20,369 |  | 36    |  | 6,084  |  | 20,405 |  | 26,489 |  | 957   |  | 2001 |  | 5 - 39 
|Innes Street Market
Salisbury, NC            |  | 13,458 |     | 6,158 |  | 20,615 |  | 4,774 |  | 6,019  |  | 25,528 |  | 31,547 |  | 4,167 |  | 1999 |  | 4 - 39 
|McMullen Creek Shopping Center
Charlotte, NC |  |        | (1) | 6,580 |  | 22,047 |  | 438   |  | 6,580  |  | 22,485 |  | 29,065 |  | 3,247 |  | 1999 |  | 1 - 39 
|New Centre Market
Wilmington, NC             |  |        | (2) | 3,904 |  | 13,070 |  | 17    |  | 3,904  |  | 13,087 |  | 16,991 |  | 1,511 |  | 1999 |  | 5 - 39 
|River Ridge Marketplace
Asheville, NC        |  |       |     | 2,805 |  | 9,388  |  | 249   |  | 2,805  |  | 9,637  |  | 12,442 |  | 803   |  | 2000 |  | 3 - 39 
|Tarrymore Square
Raleigh, NC                 |  |        | (1) | 4,891 |  | 16,392 |  | 186   |  | 4,891  |  | 16,578 |  | 21,469 |  | 2,405 |  | 1999 |  | 3 - 39 
|University Commons
Wilmington, NC            |  |        | (1) | 4,370 |  | 14,646 |  | 585   |  | 4,370  |  | 15,231 |  | 19,601 |  | 2,242 |  | 1999 |  | 5 - 39 
|University Commons Greenville
Greenville, NC |  |        | (2) | 5,976 |  | 20,009 |  | 13    |  | 5,977  |  | 20,021 |  | 25,998 |  | 2,314 |  | 1999 |  | 5 - 39 
|Wendover Place
Greensboro, NC                |  |        | (2) | 8,309 |  | 27,819 |  | 8,401 |  | 10,085 |  | 34,444 |  | 44,529 |  | 3,518 |  | 1999 |  | 3 - 39 
|OHIO                                         |  |        |     |       |  |        |  |       |  |        |  |        |  |        |  |       |  |      |  |        
|30th Street Plaza
Canton, OH                 |  |       |     | 3,071 |  | 10,279 |  | 15    |  | 3,071  |  | 10,294 |  | 13,365 |  | 983   |  | 2000 |  | 8 - 39 
|Clock Tower Plaza
Lima, OH                   |  |       |     | 3,409 |  | 11,409 |  | 230   |  | 3,533  |  | 11,515 |  | 15,048 |  | 1,124 |  | 2000 |  | 4 - 39 
|Salem Consumer Square
Trotwood, OH           |  | 11,101 |     | 5,964 |  | 19,965 |  | 331   |  | 6,053  |  | 20,207 |  | 26,260 |  | 1,926 |  | 2000 |  | 3 - 39 
|PENNSYLVANIA                                 |  |        |     |       |  |        |  |       |  |        |  |        |  |        |  |       |  |      |  |        
|Boyertown Plaza
Boyertown, PA                |  |        | (1) | 675   |  | 2,265  |  | 931   |  | 675    |  | 3,196  |  | 3,871  |  | 394   |  | 1999 |  | 5 - 39 
|Lehigh Shopping Center
Bethlehem, PA         |  |        | (1) | 4,125 |  | 13,831 |  | 2,553 |  | 4,125  |  | 16,384 |  | 20,509 |  | 2,588 |  | 1999 |  | 5 - 39 
|Warminster Towne Center
Warminster, PA       |  | 22,922 |     | 7,677 |  | 25,703 |  |      |  | 7,677  |  | 25,703 |  | 33,380 |  |      |  | 2002 |  | 15 - 39

S-III-8

---

|SOUTH DAKOTA                             |  |        |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|---------------------------------------- |  | ------ | --- | ----- |  | ------ |  | ----- |  | ----- |  | ------ |  | ------ |  | ----- |  | ---- |  | -------
|Baken Park
Rapid City, SD                |  |       |     | 3,119 |  | 10,440 |  | 705   |  | 3,119 |  | 11,145 |  | 14,264 |  | 1,128 |  | 2000 |  | 3 - 39 
|TENNESSEE                                |  |        |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Oakwood Commons
Hermitage, TN            |  |        | (1) | 3,740 |  | 12,542 |  | 152   |  | 3,740 |  | 12,694 |  | 16,434 |  | 1,812 |  | 1999 |  | 2 - 39 
|Watson Glen Shopping Center
Franklin, TN |  |        | (1) | 3,381 |  | 11,336 |  | 428   |  | 3,381 |  | 11,764 |  | 15,145 |  | 1,640 |  | 1999 |  | 3 - 39 
|Williamson Square
Franklin, TN           |  | 11,479 |     | 4,779 |  | 15,994 |  | 1,290 |  | 4,777 |  | 17,286 |  | 22,063 |  | 1,649 |  | 2000 |  | 3 - 39 
|VERMONT                                  |  |        |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Rutland Plaza
Rutland, VT                |  |        | (1) | 4,037 |  | 13,530 |  | 62    |  | 4,037 |  | 13,592 |  | 17,629 |  | 1,962 |  | 1999 |  | 5 - 39 
|WISCONSIN                                |  |        |     |       |  |        |  |       |  |       |  |        |  |        |  |       |  |      |  |        
|Fairacres Shopping Center
Oshkosh, WI    |  |       |     | 1,563 |  | 5,230  |  | 6     |  | 1,563 |  | 5,236  |  | 6,799  |  | 501   |  | 2000 |  | 4 - 39 
|Fitchburg Ridge
Madison, WI              |  |       |     | 481   |  | 1,611  |  | 187   |  | 481   |  | 1,798  |  | 2,279  |  | 160   |  | 2000 |  | 5 - 39 
|Fox River Plaza
Burlington, WI           |  |       |     | 1,654 |  | 5,536  |  | 151   |  | 1,654 |  | 5,687  |  | 7,341  |  | 552   |  | 2000 |  | 7 - 39 
|Garden Plaza
Franklin, WI                |  |       |     | 1,088 |  | 3,642  |  | 53    |  | 1,088 |  | 3,695  |  | 4,783  |  | 356   |  | 2000 |  | 5 - 39 
|Madison Plaza
Madison, WI                |  |       |     | 1,817 |  | 6,082  |  | 296   |  | 1,817 |  | 6,378  |  | 8,195  |  | 586   |  | 2000 |  | 3 - 39 
|Mequon Pavilions
Mequon, WI              |  |       |     | 6,296 |  | 21,075 |  | 1,411 |  | 6,353 |  | 22,429 |  | 28,782 |  | 2,054 |  | 2000 |  | 2 - 39 
|Moorland Square
New Berlin, WI           |  |       |     | 1,881 |  | 6,299  |  | 2     |  | 1,882 |  | 6,300  |  | 8,182  |  | 601   |  | 2000 |  | 10 - 39
|Oak Creek Centre
Oak Creek, WI           |  |       |     | 1,357 |  | 4,546  |  | 44    |  | 1,358 |  | 4,589  |  | 5,947  |  | 443   |  | 2000 |  | 5 - 39 
|Park Plaza
Manitowoc, WI                 |  |       |     | 1,586 |  | 5,305  |  | 213   |  | 1,693 |  | 5,411  |  | 7,104  |  | 532   |  | 2000 |  | 4 - 39 
|Spring Mall
Greenfield, WI               |  | 8,350  |     | 3,136 |  | 10,499 |  | 3,226 |  | 3,136 |  | 13,725 |  | 16,861 |  | 1,043 |  | 2000 |  | 10 - 39
|Taylor Heights
Sheboygan, WI             |  |       |     | 1,976 |  | 6,618  |  | 1     |  | 1,977 |  | 6,618  |  | 8,595  |  | 631   |  | 2000 |  | 7 - 39 

S-III-9

---

|OFFICE BUILDINGS                         |  |   |         |     |   |         |  |   |           |  |   |        |  |   |         |  |   |           |  |   |           |  |   |         |  |      |  |       
|---------------------------------------- |  | - | ------- | --- | - | ------- |  | - | --------- |  | - | ------ |  | - | ------- |  | - | --------- |  | - | --------- |  | - | ------- |  | ---- |  | ------
|MASSACHUSETTS                            |  |   |         |     |   |         |  |   |           |  |   |        |  |   |         |  |   |           |  |   |           |  |   |         |  |      |  |       
|William J. McCarthy
Boston, MA           |  |   | 35,942  | (3) |   | 4,700   |  |   | 18,807    |  |   | 1,324  |  |   | 4,700   |  |   | 20,131    |  |   | 24,831    |  |   | 2,081   |  | 1999 |  | 3 - 39
|545 Boylston Street
Boston, MA           |  |   |         | (3) |   | 4,300   |  |   | 17,206    |  |   | 1,325  |  |   | 4,300   |  |   | 18,531    |  |   | 22,831    |  |   | 1,976   |  | 1999 |  | 3 - 39
|NEW YORK                                 |  |   |         |     |   |         |  |   |           |  |   |        |  |   |         |  |   |           |  |   |           |  |   |         |  |      |  |       
|Executive Office Building
Great Neck, NY |  |   |        |     |   | 834     |  |   | 3,338     |  |   | 223    |  |   | 834     |  |   | 3,561     |  |   | 4,395     |  |   | 411     |  | 1999 |  | 4 - 39
|Fortune Office Building
Hartsdale, NY    |  |   |        |     |   | 856     |  |   | 3,430     |  |   | 437    |  |   | 856     |  |   | 3,867     |  |   | 4,723     |  |   | 440     |  | 1999 |  | 1 - 39
|                                         |  |   |         |     |   |         |  |   |           |  |   |        |  |   |         |  |   |           |  |  
|SUBTOTAL                                 |  | $ | 569,663 |     | $ | 480,743 |  | $ | 1,612,784 |  | $ | 83,255 |  | $ | 486,972 |  | $ | 1,689,810 |  | $ | 2,176,782 |  | $ | 169,854 |  |      |  |       
|Real Estate Held For Sale                |  |   |        |     |   | 403     |  |   | 1,348     |  |   |       |  |   | 403     |  |   | 1,348     |  |   | 1,751     |  |   | 175     |  |      |  |       
|                                         |  |   |         |     |   |         |  |   |           |  |   |        |  |   |         |  |   |           |  |  
|GRAND TOTAL                              |  | $ | 569,663 |     | $ | 481,146 |  | $ | 1,614,132 |  | $ | 83,255 |  | $ | 487,375 |  | $ | 1,691,158 |  | $ | 2,178,533 |  | $ | 170,029 |  |      |  |       
|                                         |  |   |         |     |   |         |  |   |           |  |   |        |  |   |         |  |   |           |  |  

---

Years ended December 31,2002

2001Cost:Balance, beginning of year

$
1,948,968

1,899,025Acquisitions and other additions


238,413

77,445Sale of properties and other deductions


(8,848
)
(27,502
)Balance, end of year

$
2,178,533

1,948,968Accumulated Depreciation:Balance, beginning of year

$
103,800

43,563Depreciation provided


67,830

62,532Sale of properties and other deductions


(1,601
)
(2,295
)Balance, end of year

$
170,029

103,800


S-III-10

---