**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-K**

| x      | ** ** | **Annual Report Pursuant to Section 13 or  15(d) of the Securities  Exchange Act of 1934** |
|--------|------------|----------------------------------------------------------------------------------------------------------------|
|   | ** ** | **For the  fiscal year ended December 31, 2005**                                                          |
|   | ** ** | **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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**HERITAGEPROPERTY INVESTMENT TRUST, INC.******(Exact name ofregistrant as specified in its charter)

| **Maryland**(State or other  jurisdiction of  incorporation or organization) |   | **04-3474810**  (I.R.S. Employer  Identification No.) |
|------------------------------------------------------------------------------|--------|-------------------------------------------------------|

 

**131 Dartmouth StreetBoston, Massachusetts 02116**(Address,including zip code, of principal executive offices)

**Registrant’stelephone 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 |
|------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
| Securities registered pursuant to  Section 12(g) of the Act: |   | None                                                              |

 

Indicate by check markwhether the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.   Yes x   No o

Indicate by check markwhether the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Exchange Act.   Yes o No x

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days.   Yes x   No o

Indicate by check markwhether disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.   x

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer or a non-accelerated filed. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Act.

| Large accelerated filer   x |   | Accelerated filer   o |   | Non-accelerated filer   o |
|---------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).   Yes o   No x

As of June 30, 2005,the aggregate market value of the voting stock held by nonaffiliates of the registrantwas $939.7 million.

As of March 10, 2006,the number of shares outstanding of the registrant’s common stock was 47,796,980.

**Documents Incorporated byReference**

Portionsof the proxy statement for the 2006 Annual Meeting of Stockholders areincorporated by reference in Part III: Items 10, 11, 12, 13 and 14 of thisreport.

 

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.**

**ANNUALREPORT ON FORM 10-K**

**INDEX**

| Item No. | ** ** | ** **                                                                                                          | ** ** | ** ** | ** ** | **Page  No.** | ** ** |
|---------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|------------|------------|---------------|------------|
|          |       | **PART I**                                                                                                     |       |       |       |
| Item 1:       |       | Business                                                                                                            |       | 1          |       |
| Item  1A:     |       | Risk  Factors                                                                                                       |       | 9          |       |
| Item 1B:      |       | Unresolved Staff Comments                                                                                           |       | 16         |       |
| Item  2:      |       | Properties                                                                                                          |       | 16         |       |
| Item  3:      |       | Legal  Proceedings                                                                                                  |       | 34         |       |
| Item 4:       |       | Submission of  Matters to a Vote of Security Holders                                                                |       | 35         |       |
| ** **    |       | **PART II**                                                                                                    |       |       |       |
| Item 5:       |       | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities |       | 35         |       |
| Item 6:       |       | Selected Financial  Data                                                                                            |       | 36         |       |
| Item 7:       |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                         |       | 38         |       |
| Item 7A:      |       | Quantitative  and Qualitative Disclosures About Market Risk                                                         |       | 65         |       |
| Item 8:       |       | Financial Statements and  Supplementary Data                                                                        |       | 66         |       |
| Item 9:       |       | Changes in and  Disagreements with Accountants on Accounting and Financial Disclosure                               |       | 66         |       |
| Item 9A:      |       | Controls and  Procedures                                                                                            |       | 67         |       |
| Item  9B:     |       | Other  Information                                                                                                  |       | 68         |       |
|          |       | **PART III**                                                                                                   |       |       |       |
| Item 10:      |       | Directors and  Executive Officers of the Registrant                                                                 |       | 68         |       |
| Item 11:      |       | Executive  Compensation                                                                                             |       | 68         |       |
| Item 12:      |       | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                    |       | 68         |       |
| Item 13:      |       | Certain  Relationships and Related Transactions                                                                     |       | 68         |       |
| Item 14:      |       | Principal  Accounting Fees and Services                                                                             |       | 68         |       |
| ** **    |       | **PART IV**                                                                                                    |       |       |       |
| Item 15:      |       | Exhibits and  Financial Statement Schedules                                                                         |       | 69         |       |

 

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**PART I**

**Forward-Looking Statements**

This Annual Report on Form 10-K,together with other statements and information publicly disseminated byHeritage Property Investment Trust, Inc. (“Heritage” or the “Company”),contains certain “forward-looking statements” as that expression is defined in Section 27Aof the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended. Forward-looking statements arestatements that relate to expectations, beliefs, projections, future plans andstrategies, anticipated events or trends and similar expressions concerningmatters that are not historical facts. The forward-looking statements made inthis Annual Report reflect the Company’s current views about future events, andare subject to risks, uncertainties, assumptions and changes in circumstancesthat may cause the Company’s actual results to differ significantly from theCompany’s current views expressed in any forward-looking statement. Forward-lookingstatements involve known and unknown risks, uncertainties and other factorsthat are, in some cases, beyond the Company’s control and that could materiallyaffect actual results. Forward-looking statements, therefore, should not berelied upon. The factors that could cause actual results to differ materiallyfrom current expectations are discussed under “**Item 1A—RiskFactors**.”  The forward-lookingstatements contained in this Annual Report represent the Company’s judgment asof the date of this report, and the Company cautions readers not to place unduereliance on those statements.

**Item 1:**                       Business

**Overview**

We are a fully integrated, self-administered andself-managed real estate investment trust, or “REIT.”  We are a Maryland corporation and one of thenation’s largest owners of neighborhood and community shopping centers. Weacquire, own, manage, lease and redevelop primarily grocer- and multi-anchoredneighborhood and community shopping centers located in the Eastern, Midwesternand Southwestern United States. As of December 31, 2005, we had a shoppingcenter portfolio consisting of 171 shopping centers, located in 30 states andtotaling approximately 35.0 million square feet of total gross leasablearea (“GLA”), of which approximately 28.7 million square feet wasCompany-owned GLA. Our shopping center portfolio was 92.4% leased as of December 31,2005. We also own three office buildings in addition to our shopping centerportfolio. We are headquartered in Boston, Massachusetts and have sixteenregional offices located in the Eastern, Midwestern, and Southwestern UnitedStates.

Heritage Property Investment Limited Partnership (“HeritageOP”) and Bradley Operating Limited Partnership (“Bradley OP”) are thesubsidiaries through which we conduct substantially all of our business and own(either directly or indirectly through subsidiaries) substantially all of ourassets. As of December 31, 2005, we owned directly or indirectly all ofthe ownership interests in Heritage OP and approximately 98.2% of the ownershipinterests in Bradley OP. We are the sole general partner of Heritage OP and oneof our wholly owned subsidiaries is the sole general partner of Bradley OP. Thisstructure is commonly referred to as an umbrella partnership REIT, or UPREIT.

We elected to be taxed asa REIT under Sections 856 through 860 of the Internal Revenue Code of 1987, asamended (the “Code”), commencing with our initial taxable year ended December 31,1999. We believe that we are organized in conformity with the requirements forqualification as a REIT under the Code, and that our manner of operationenables us to meet the requirements for taxation as a REIT for federal incometax purposes. To maintain our REIT status, we must meet a number oforganizational and operational requirements, including a requirement that wedistribute at least 90% of our REIT taxable income to our stockholders. As aREIT, we generally will not be subject to federal income tax on REIT taxableincome we distribute to our stockholders. If we fail to qualify as a REIT inany taxable year, we will 

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besubject to federal income tax at regular corporate rates. Even if we qualifyfor taxation as a REIT, we may be subject to some federal, state and localtaxes on our income and property.

**Business and Growth Strategies**

Ourbusiness strategy has been, and will continue to be, to generate stable andincreasing cash flow and asset value by managing a portfolio of real estateproperties located in attractive markets with strong economic and demographiccharacteristics. Our business strategy consists of the following elements: 

·       **Maximizing cash flow from our properties by continuing to enhance theoperating performance of each property**. We manage our propertiesthrough a coordinated property management and leasing program, which enables usto achieve operating, marketing and leasing efficiencies. We aggressively leasecurrently available space and space that becomes available, both to existingand new tenants. 

·       **Building and leveraging our long-term tenant relationships.**Animportant priority in managing our business is establishing and developingstrong, lasting relationships with our tenants. We believe that we have beensuccessful in consistently meeting or exceeding the expectations and demands ofour tenants. Over the years, this strategy has allowed us to forge mutuallybeneficial business relationships, enabling our tenants, through our broadgeographic focus and contacts, to enter new markets and leverage opportunitiesto increase their presence in and across markets.

·       **Increasing the number of anchor and national tenants to enhance thequality and stability of our neighborhood and community shopping centers.**We believe that securing multiple anchors and other national tenants at a givencenter enhances the attractiveness of that center by increasing consumertraffic, which enhances the performance of our other tenants within thecenter’s remaining available space. The presence of strong, credit-qualityanchor and national tenants also increases the stability and long-termprospects of the center.

·       **Targeting redevelopment and expansion projects that we believe willgenerate substantial returns.**We seek to leverage our operating andredevelopment capabilities to capitalize on prospects within our existingportfolio. In particular, we are currently exploring opportunities to expandour existing centers, to reposition our tenant mix and, where appropriate, tolease parcels on our properties with minimal incremental cost.

·       **Exploring opportunities to improve the overall quality of our portfoliothrough capital recycling.**We continually analyze each asset in ourcore property portfolio with the goal of improving our portfolio’s long-termquality by disposing of properties that have demonstrated limited growthpotential or are no longer a strategic fit within our overall portfolio. Wewill redeploy the proceeds of these dispositions into newer, more promisingproperties or to finance redevelopment or development joint ventureopportunities.

·       **Pursuing opportunities to acquire multi-anchored, primarily by grocers,neighborhood and community shopping centers.**We utilize ourknowledge of key markets to pursue opportunistic acquisitions of primarilygrocer- and multi-anchored shopping centers. We seek to establish a firm marketpresence by owning multiple properties in an area and employ a strategy thatfocuses our acquisition activities in densely populated areas with stronggrowth prospects. Our senior management team has developed long-standingrelationships with institutional and non-institutional shopping center propertyowners and operators, and has built a national broker network. These effortshave enhanced our ability to identify and capitalize on acquisitionopportunities.

·       **Increasingour sources of capital and acquisition activities by pursuing joint ventureswith local developers and institutional investors.** As theacquisition environment has grown more competitive, 

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we have developedalternative sources of acquisition candidates and capital sources. Jointventures with developers allow us to leverage our operating expertise to createvalue, enhance our profitable growth and participate in areas of newdevelopments. We also actively pursue with institutional investors jointventures the goals of which are to provide us with an alternative source ofcapital. These joint ventures allow us to use our management experience andinfrastructure to expand our portfolio, generating solid returns for both ourpartners and ourselves.

**Our Competitive Strengths**

We seek to implement our strategy in a number of ways,including by our: 

·       **Grocer-anchored neighborhood and community shopping center focus.**Asof December 31, 2005, approximately 68% of our centers weregrocer-anchored and these centers accounted for approximately 70% of our totalnet operating income for the year. Grocers within our centers are dominant intheir marketplace, which in our experience, allows them to be more resistant toeconomic downturns by the nature of their business, generating continuousconsumer traffic to our centers. 

·       **Multi-anchored focus.**Our shopping centers have an average of2.8 anchor tenants. We consider an anchor tenant to be a tenant that occupiesat least 15,000 square feet at one of our centers. In our experience, multipleanchors attract greater consumer flow through the entire shopping center andadd to the economic stability of our shopping centers as a whole.

·       **Diverse and stable tenant base.**We believe our tenant roster iswell-diversified and of good credit quality. As of December 31, 2005, ourtop twenty tenants contributed less than 28% of our annualized base rentalrevenue, with no single tenant representing more than 5.4% of our annualizedbase rental revenue. As of December 31, 2005, we had approximately 3,300separate leases with various tenants, including national and regionalsupermarket chains, drug stores, discount retail stores, other nationally orregionally known stores and a great variety of other regional and localretailers. We believe that this diversity of tenants will enable us to generatemore stable cash flows over time.

·       **Geographic diversification.**Our properties are located in 30states, in the Eastern, Midwestern and Southwestern United States. As ofDecember 31, 2005, the five largest concentrations of properties in ourtotal portfolio, based on total annualized base rent, were located in Illinois,North Carolina, Minnesota, Indiana and New York, representing 11.5%, 9.5%,9.3%, 6.8%, and 6.7% of our total portfolio, respectively. We believe thatgeographic diversity helps mitigate the risks associated with localizedeconomic downturns.

·       **Attractive locations with strong market demographics.**Theaverage population within a three-mile radius of our properties isapproximately 63,000 and the average annual household income in such areas is$64,000, based upon 2000 census data provided by Applied Geographic Solutions.We believe these strong market demographics provide our properties with aconsistent supply of shoppers who exhibit strong demand for goods and services.

·       **Seasoned management team.**Our senior management team iscomprised of executives with an average of over 20 years of experience inthe acquisition, management, leasing, redevelopment and construction of realestate or retail properties. In particular, we believe the in-depth marketknowledge and long-term tenant relationships developed by our senior managementprovide us with a key competitive advantage.

·       **Prudent balance sheet management.** Through our financing strategy, we maintain astrong and flexible financial position with what we believe to be a prudentlevel of leverage and a large and growing pool of unencumbered properties, andwe manage our exposure to interest rate risk from 

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our floating rate debt.Currently, we have a credit rating from three major rating agencies—Standard &Poor’s, which has given us a rating of BBB-, Moody’s Investor Service, whichhas given us a rating of Baa3, and Fitch Ratings, which has given us a rating ofBBB-.

 

**Financing Strategy**

Our financing strategy is to maintain a strongfinancial position by maintaining a prudent level of leverage and managing ourvariable interest rate exposure. We have accomplished this by being flexible inselecting the best means available of financing our operations and growth,including accessing the public equity markets.

At December 31, 2005, we had approximately$1.5 billion of indebtedness consisting of a combination of our unsecuredline of credit, unsecured term loan, an aggregate $450 million of unsecurednotes issued by the Company or by one of our operating partnerships and $631million of mortgage indebtedness. As of December 31, 2005, this aggregateindebtedness had a weighted average interest rate of 6.18% with an averagematurity of 4.2 years. As of December 31, 2005, our marketcapitalization, including outstanding debt, was $3.1 billion, resulting ina debt-to-total market capitalization ratio of approximately 47.6%.

On March 29, 2005, we refinanced our thenexisting line of credit, entering into a new three-year $400 millionunsecured line of credit with a group of lenders and Wachovia Bank, NationalAssociation, as agent, expiring March 28, 2008, subject to a one-yearextension. At our request, subject to the agent’s consent, this line of creditmay be increased to $500 million. This line of credit bears interest ateither the lender’s base rate or a floating rate based on a spread over LIBORranging from 62.5 basis points to 115 basis points, depending upon our debtrating. This credit facility also includes a competitive bid option that allowsthe Company to hold auctions among the participating lenders in the facilityfor up to fifty percent of the facility amount. The variable rate in effect at December 31,2005 was 4.98%. This line of credit also has a facility fee based on the amountcommitted ranging from 15 to 25 basis points, depending upon our debt rating,and requires quarterly payments. As of December 31, 2005,$328 million was outstanding under this line of credit.

On November 28, 2005, we entered into a $100million term loan or “bridge loan” with Wachovia Capital Markets, LLC, asarranger, Wachovia Investment Holdings, LLC, as agent, and certain otherfinancial institutions, expiring August 28, 2006, subject to a two-yearextension. Amounts borrowed under this bridge loan bear interest at either thelender’s base rate or a floating rate based on a spread over LIBOR ranging from55 basis points to 115 basis points, depending upon our debt rating. Thevariable rate in effect at December 31, 2005 was 5.09%. This bridge loanalso has a facility fee based on the amount committed ranging from 12.5 to 25basis points, depending upon our debt rating, and requires quarterly payments. Asof December 31, 2005, $50 million was drawn under the bridge loan.

During the fourth quarter 2005, we entered into $150million of forward-starting interest rate swaps with a fixed rate of 5.019%. Weentered into the interest rate swap contracts designated and qualifying as cashflow hedges. The purpose of these forward swaps is to mitigate the risk ofchanges in forecasted interest payments on $150 million of ten-year fixed-ratefinancing anticipated to be obtained in the second or third quarter of 2006.

During October 2003, we filed a shelfregistration statement on Form S-3 for up to $500 million ofdebt securities, preferred stock, common stock and common stock warrants. Thisshelf registration statement permits us to utilize the public debt and equitymarkets as a principal source of capital for our expansion and other needs. Asof December 31, 2005, we had approximately $389 million available forissuance under this shelf registration statement.

We intend to finance future growth with the mostadvantageous source of capital available. These sources may include sellingcommon stock, preferred stock or debt securities through public offerings or 

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private offerings,incurring or assuming additional indebtedness through secured or unsecuredborrowings, and issuing units of limited partnership interests of one of ouroperating partnerships in exchange for contributed property. We may alsofinance future growth by disposing of existing properties and redeploying theproceeds into acquisitions or to finance redevelopment or development jointventure opportunities.

In addition, we expect tocontinue to enter into joint ventures with institutions and developers todevelop and acquire properties or portfolios, reducing the amount of capitalrequired by us to make those investments. These joint ventures also provide uswith a capital source for new development, as well as the opportunity to earnfees for asset and property management services. As asset manager, we will beengaged by our partners to apply similar operating, investment, and capitalstrategies to the portfolios owned by the joint ventures.

**Investment Strategy**

*Acquisitions*

We target multi-anchored, open-air neighborhood andcommunity shopping centers generally containing greater than 125,000 squarefeet of GLA. In particular, we seek to acquire those shopping centers anchoredby market-leading grocers or those regional operators who have dominantpositions in their trade areas. We also seek to acquire shopping centers withmultiple retail anchors, including electronics, home improvement, off-priceretailers, office superstores, and fabric and clothing retailers, all of whomwe believe to be generally beneficial to the value of the center. In additionto those anchors, we also seek properties with a diverse tenant mix thatincludes service retailers, such as banks, florists, restaurants, and appareland specialty shops. We seek convenient and easily accessible locations thatoffer abundant parking close to residential communities, excellent visibilityfor our tenants and easy access for neighborhood shoppers.

With respect to our geographical focus, historically,our acquisition activities were focused primarily in the Eastern and MidwesternUnited States. We seek to establish a significant market presence by owningmultiple properties in an area. We focus our acquisition activities primarilyin densely populated areas with strong growth prospects, either in geographicareas proximate to our existing neighborhood and community shopping centers,which allows us to maximize our current resources and manage expenses, or innew markets where the opportunity presented is a sizable portfolio that willallow us to reach an economy of scale.

We will continue to evaluate all potentialacquisitions on a property-by-property and market-by-market basis. We evaluateeach market based on similar criteria, including: stable or growing populationbase; positive job growth; diverse economy; and other competitive factors.

During 2005, we expanded our shopping center portfolioby acquiring seven properties aggregating 1.3 million square feet of GLA,of which 0.7 million square feet was Company-owned GLA. The aggregateinvestment for the seven properties was $143 million, which was fundedthrough borrowings under our line of credit, the assumption of mortgage debt,and the issuance of common units of limited partnership interest in Bradley OP.

With the emergence of Wal-Mart and increased consolidationwithin the traditional grocer industry, our recent and anticipated futureactivity has and may include acquisitions of shopping centers that do notcontain a traditional grocer-anchor. These centers may, in some instances,contain a specialty grocer. However, we will continue to focus on acquiring ourcore property type—dominant, well-established grocer- and multi-anchored shoppingcenters located in densely populated communities with strong growth prospectswithin our core markets.

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In recent years, themarket for acquisitions has been particularly competitive with a greater numberof potential buyers pursuing properties. The low cap rate environment andreduced costs of funds have further served to dramatically increase prices paidfor shopping center properties. As a result, our effort to expand our portfoliothrough acquisition has been adversely affected. We expect these conditions topersist for the foreseeable future. As a result, we expect that a substantialamount of our future acquisition activity will be completed through jointventures, as discussed below.

*Development andCapital Raising Joint Ventures*

To increase our access to potential acquisitions andalternative sources of capital to fund future acquisitions, particularly inlight of the current competition within the acquisitions market, we have beenpursuing, and will continue to pursue, joint venture arrangements with thirdparty developers and institutional investors. We expect such joint ventures totake one of two forms.

The first type of joint venture arrangement we arepursuing is with third party developers. In these joint ventures, we willpartner with a local developer to develop and construct shopping centers inattractive markets. Fundamentally, this development joint venture strategy issimply an extension of our acquisition philosophy because these joint ventureswill enable us to take advantage of attractive opportunities to “pre-purchase”quality assets. These development properties will be similar to thoseproperties within our core portfolio. In addition, these joint ventures willprovide us with the potential for generating fee income.

To date, we have completed two joint venturearrangements with third party developers. We have entered into additional jointventure arrangements with third party developers for the development of sitesunder contract in which the underlying projects are still in the approval andentitlement process.

The second type of joint venture arrangement we arepursuing is with institutional investors, the primary goal of which is toprovide us with alternative sources of capital. These joint ventures allow usto use our management experience and infrastructure to expand our portfolio,generating solid returns for both our partners and ourselves and enabling us toearn steady fee income. We expect the types of properties we might acquirethrough these joint ventures to be stabilized properties similar to those weseek to acquire for our core portfolio.

In April 2005, in a joint venture withIntercontinental Real Estate Investment Fund III, LLC, a fund sponsored andmanaged by Intercontinental Real Estate Corporation, we acquired SkillmanAbrams, a 133,000 square foot shopping center located in Dallas, Texas, for atotal purchase price of approximately $19 million, including assumed mortgagedebt. We have a 25% interest in the joint venture and are the property managerof Skillman Abrams pursuant to a property management agreement.

We expect to continue toincrease our joint venture activity in both these areas in 2006.

*Dispositions*

We generally hold ourproperties for investment and the production of rental income and not for saleto buyers in the ordinary course of our business. However, we continuallyanalyze each asset in our portfolio and will consider those properties thatmight be sold for optimal sale prices, given prevailing market conditions andthe particular characteristics of each property.  Through our capital recycling program, we also identify and pursue the sale ofthose properties that no longer meet our long-term strategy due to their size,geographic location or demonstrated lack of sufficient growth opportunities. Inlate January 2006, we finalized an agreement to sell eight such shoppingcenters, which are being sold as a portfolio to a single buyer and constituteall of our centers in Nebraska and South Dakota. We expect to dispose of othernon-strategic assets in the future.

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**In-HouseLeasing and Property Management Program**

We believe that effective leasing is the key tosuccessful asset management. We maintain close relationships with our tenants,properties and markets by maintaining sixteen regional offices in addition toour corporate headquarters in Boston. A majority of these offices are staffedwith leasing representatives. Our primary goal is for each leasingrepresentative to become an expert in his or her marketplace by becomingfamiliar with current tenants as well as potential local, regional and nationaltenants who would complement our current tenant mix. The renewal andreplacement of tenants is critical to our leasing and management performance.

Our full time property managers are located throughoutour regional offices, which make them easily accessible to our properties. Thisenables our managers to remain in frequent contact with our tenants and toensure the proper maintenance of our properties. We periodically renovate andimprove our properties in order to keep them in top condition to enable us toattract and retain our tenants.

Our leasing and propertymanagement functions are supervised and administered by our senior officers atour Boston headquarters. Corporate management, leasing and property managementpersonnel regularly visit all of our properties to support our regionalpersonnel and to ensure implementation of our policies and directives.

**Competition**

We encounter competition for acquisitions of existingincome-producing properties. We also face competition in leasing availablespace at our properties to prospective tenants. The actual competition fortenants varies depending upon the characteristics of each local market in whichwe own and manage property. We believe that the principal competitive factorsin attracting tenants in our market areas are location, price, and the presenceof anchor tenants and maintenance of properties.

We believe thatcompetition for the acquisition and operation of retail shopping centers ishighly fragmented. We face competition from institutional pension funds, otherdomestic and foreign institutional investors, other REITs and owner-operatorsengaged in the acquisition, ownership, development and leasing of shoppingcenters as well as from numerous local, regional and national real estatedevelopers and owners in each of our markets. In recent years, competition forthe acquisition and development of properties has increased, primarily due to agreater number of potential buyers and the reduced cost of funds.

**Environmental Matters**

Under various federal, state and local laws,ordinances and regulations, an owner or operator of real estate may be liablefor the costs of removal or remediation of hazardous or toxic substancespresent at, on, under, in, or released from its property. We currently have fifteenproperties in our portfolio that are undergoing or have been identified asrequiring or potentially requiring some form of remediation (includingmonitoring for compliance) to clean up contamination. In these cases,contamination has resulted from on-site uses by current or former owners ortenants, such as gas stations or dry cleaners, which have released pollutantssuch as gasoline or dry-cleaning solvents into soil and/or groundwater. We alsocurrently have eleven properties in our portfolio that we are monitoring forcompliance as a result of contamination on adjacent properties.

Of the approximately fifteen properties cited above, nineof those properties were contributed to us by Net Realty Holding Trust, ourlargest stockholder. All of these contributed properties (together with elevenother contributed properties for which no remediation is currently takingplace) are the subject of an indemnity arrangement under which Net RealtyHolding Trust has agreed to indemnify us against environmental liabilities upto $50 million in the aggregate. Since our formation in 1999, we have beenreimbursed by Net Realty Holding Trust for approximately $2.0 million ofenvironmental costs pursuant to 

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this indemnity. As of December 31,2005, we were due $0.6 million under this indemnity. Although we do not believethat the aggregate indemnity amount will be needed, we believe that Net RealtyHolding Trust has the ability to perform under its indemnity up to theaggregate amount. In addition, each of the properties for which we are activelypursuing remediation to clean up contamination is covered by this indemnity.

With respect to the remaining properties cited abovenot covered by the Net Realty Holding Trust indemnity, no clean-up activitiesare currently taking place and our requisite on-going responsibilities are tomonitor those properties for compliance and to determine if any remediation orother action may be required in the future. We believe that the costs ofmonitoring these properties are not material, individually or in the aggregate,to our financial condition and we have established reserves for such costs. Anyfailure to remediate the contamination at our properties properly may result inliability to federal, state or local governments for damages to naturalresources or liability to third parties for property damage or personal injuryand may adversely affect our ability to operate, lease or sell that property.Further, no assurance can be given that any environmental studies performedhave identified or will identify all material environmental conditions, thatany prior owner of the properties did not create a material environmentalcondition not known to us or that a material environmental condition does nototherwise exist with respect to any of our properties.

In addition to the costsof remediation described above, we may incur additional costs to comply withfederal, state and local laws, ordinances and regulations relating toenvironmental protection and general human health and safety. These laws,ordinances and regulations generally govern wastewater discharges, air emissions,the operation and removal of underground and above-ground storage tanks, theuse, storage, treatment, transportation and disposal of solid and hazardousmaterials, the management of asbestos and the remediation of contamination.Some of these laws, ordinances and regulations may impose joint and severalliability on current or former tenants, owners or operators for the costs ofinvestigation or remediation of contaminated properties, regardless of fault orthe legality of the actions that caused the contamination. Some of these lawsand regulations require compliance with new or more stringent standards as offuture dates. Compliance with new or more stringent laws or regulations,stricter interpretation of existing laws or the future discovery of environmentalcontamination may require material expenditures on our part. Future laws,ordinances or regulations may impose material environmental liability, or thecurrent environmental condition of our properties may affect the operations ofour tenants, the existing condition of the land, operations in the vicinity ofthe properties, such as the presence of underground storage tanks, or theactivities of unrelated third parties. These laws typically allow liens to beplaced on the affected property. In addition, there are various local, stateand federal fire, health, life-safety and similar regulations that may beapplicable to our operations, and that may subject us to liability in the formof fines or damages for noncompliance.

**Employees**

At December 31, 2005,we had 166 total employees. Our employees included 24 leasing and supportpersonnel, 55 property management and support personnel, 10 legal and supportpersonnel and 77 corporate management and support personnel. We believe thatour relations with our employees are good. None of our employees are unionized.

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**Available Information**

A copy of this Annual Report on Form 10-K,our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-Kand any amendments to those reports are available free of charge on ourInternet website, www.heritagerealty.com, as soon as reasonably practicableafter we electronically file those reports or amendments with, or furnish thosereports to, the Securities and Exchange Commission. The information containedon our website does not constitute incorporation by reference of theinformation contained on the website and should not be considered part of thisdocument. We will also furnish copies of those reports free of charge uponwritten request to our Investor Relations department at the following address:

Heritage Property Investment Trust, Inc.Investor Relations131 Dartmouth StreetBoston, MA 02116(617) 247-2200

Also posted on our web site, and available in printupon request of any stockholder to our Investor Relations department, are thecharters for our Audit Committee, Compensation Committee and Nominating andCorporate Governance Committee, our Corporate Governance Guidelines, our Codeof Ethics for Financial Professionals, our Code of Business Conduct and Ethicsgoverning our directors, officers and employees and our Whistleblower Policy.Within the time period required by the SEC and the New York Stock Exchange, wewill disclose on our web site any amendment to, or waiver from, a provision ofour Code of Ethics for Financial Professionals and our Code of Business Conductand Ethics. In addition, our web site includes information concerning purchasesand sales of our equity securities by our executive officers and directors, aswell as disclosure relating to certain non-GAAP financial measures (as definedin the SEC’s Regulation G) that we may make public orally, telephonically,by webcast, by broadcast or by similar means from time to time.

The SEC also maintains anInternet website that contains reports, proxy and information statements, andother information regarding issuers, including the Company, that fileelectronically with the SEC. The public can obtain any documents that we filewith the SEC at *http://www.sec.gov*.

**Item 1A:**               RiskFactors

An investment in our commonstock involves significant risks, which should be considered in addition toother information set forth elsewhere in this Form 10-K.

***Adverse market conditions affect our results ofoperations.***

The economic performanceand value of our real estate assets is subject to all of the risks associatedwith owning and operating real estate, including risks related to adversechanges in national, regional and local economic and market conditions, changes in retail expendituresby consumers, the perceptions of prospective tenants of the attractiveness ofour  properties and the success of ouranchor tenants. Our properties currently are located in 30 states,primarily in the East and the Midwest. The economic condition of each of ourmarkets may be dependent on one or more industries. An economic downturngenerally or in one of these industry sectors may result in an increase intenant bankruptcies, which may harm our performance in the affected market.Economic and market conditions also may impact the ability of our tenants tomake lease payments. If our properties do not generate sufficient income tomeet our operating expenses, including future debt service, our income andresults of operations would be significantly harmed.

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***Downturns or changes in the retailing industry willhave a direct impact on our performance.***

Our properties consist primarilyof neighborhood and community shopping centers. Our performance, therefore, isgenerally linked to economic conditions in the market for retail space. Themarket for retail space has been, and could in the future be, adverselyaffected by weakness in the national, regional and local economies, the adversefinancial condition of some large retailing companies, the ongoingconsolidation in the retail sector, the increasing market strength of Wal-Mart,including its continued growth as a grocer, the excess amount of retail spacein a number of markets, and increasing consumer purchases through catalogues orthe Internet. In particular, consolidation within the retail industry hasreduced the number of prospective tenants to lease our available space.Furthermore, many national tenants have increased their overall buying power asa result of consolidation, thereby increasing their leverage in negotiatinglease terms with us. To the extent that any of these conditions occur orcontinue, they are likely to impact market rents for retail space.

***A downturn in our tenants’ businesses, tenantbankruptcies, leasing delays we encounter, particularly with respect to ouranchor tenants, will affect our ability to collect balances due from tenantsand would seriously harm our operating results.***

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

Any bankruptcy filings byor relating to one of our tenants or a lease guarantor would bar all efforts byus to collect pre-bankruptcy debts from that tenant, the lease guarantor ortheir property, unless we receive an order permitting us to do so from thebankruptcy court. A tenant or lease guarantor bankruptcy could delay ourefforts to collect past due balances under the relevant leases, and couldultimately preclude full collection of these sums. If a tenant assumes thelease while in bankruptcy, all pre-bankruptcy balances due under the lease mustbe paid to us in full. However, if a tenant rejects the lease while inbankruptcy, we would have only a general unsecured claim for pre-petitiondamages. Any unsecured claim we hold may be paid only to the extent that fundsare available and only in the same percentage as is paid to all other holdersof unsecured claims. It is possible that we may recover substantially less thanthe full value of any unsecured claims we hold, which may harm our financialcondition.

***Certain provisions of our leases with our tenants mayharm our operating performance.***

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

In addition, in manycases, our tenant leases contain provisions giving the tenant the exclusiveright to sell particular types of merchandise or provide specific types ofservices within the particular retail center, or limit the ability of othertenants within that center to sell that merchandise or provide those services.When re-leasing space after a vacancy by one of these other tenants, theseprovisions may limit the number and types of prospective tenants for the vacantspace. The failure to re-let or to re-let on satisfactory terms could harm ouroperating results.

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***We face considerable competition in the leasing marketand may not be able to renew leases or re-let space as leases expire.***

We face competition from similar retail centers withinthe trade areas of each of our centers when renewing leases or releasing spaceas leases expire. In addition, any new competitive properties that aredeveloped within the trade areas of our existing properties may result inincreased competition. Even if our tenants do renew or we are successful inre-letting space, it is possible that the terms of renewal or re-letting may beless favorable than existing lease terms.

For example, increasedcompetition for tenants may require us to make capital improvements toproperties that we would not have otherwise planned to make. Any unbudgetedcapital expenditures we undertake may divert cash that would otherwise beavailable for distributions to stockholders. Ultimately, to the extent we areunable to renew leases or re-let space as leases expire, cash flow from tenantswould be decreased resulting in lower operating results.

***We face increasing competition in the acquisition ofadditional real estate properties and other assets.***

We face competition in making acquisitions ofadditional real estate properties and other assets. Integral to our businessstrategy is our ability to expand through acquisitions, which requires us toidentify suitable acquisition candidates or investment opportunities that meetour criteria and are comparable with our growth strategy. We compete with manyother entities engaged in real estate investment activities for acquisitions ofretail shopping centers, including institutional pension funds, other domesticand foreign institutional investors, other REITs and other owner-operators ofshopping centers. These competitors may drive up the price we must pay for thereal estate properties, other assets and other companies we seek to acquire, ormay succeed in acquiring those companies or assets themselves. In addition, ourpotential acquisition targets may find our competitors to be more attractivesuitors because they may have greater resources, may be willing to pay more, ormay have a more compatible operating philosophy. In particular, larger REITsmay enjoy significant competitive advantages that result from, among otherthings, a lower cost of capital and enhanced operating efficiencies.

In addition, during 2005,the number of entities and the amount of funds competing for suitableinvestment properties continued to increase. This resulted in increased demandfor these assets and therefore increased prices paid for them. If we pay higherprices for properties, our profitability will be reduced.

***Current and future development of real estateproperties may not yield expected returns and may strain management resources.***

We are actively involvedin establishing joint ventures with third party developers and expect to investin additional development joint ventures in the future. Our participation inthese joint ventures exposes us to the risks inherent in developing realestate, which include construction delays, cost overruns, financing risks,failure to meet expected occupancy and rent levels, delays in and the inabilityto obtain zoning, occupancy and other governmental permits, and changes inzoning and land use laws. Overall project costs may significantly exceed thecosts that were estimated when the project was originally undertaken, which mayresult in reduced returns, or even losses, from those investments.

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

We anticipate that ourworking capital reserves may not be adequate to cover all of our cash needs. Inorder to cover those needs, we would have to obtain financing from othersources. Sufficient financing may not be available or, if available, may not beavailable on economically feasible terms or on terms acceptable to us.Additional borrowings for working capital purposes will increase our interestexpense, and therefore may harm our financial condition and results ofoperations.

***As of December 31, 2005, we have approximately$1.5 billion of debt, a portion of which is variable rate debt, which mayimpede our business and operating performance.***

As of December 31, 2005, we have approximately$1.5 billion of outstanding indebtedness, approximately $392 million ofwhich bears interest at a variable rate, and we have the ability to borrow $72million of additional variable rate debt under our  line of credit. Increases in interest rateson our existing indebtedness would increase our interest expense, which couldharm our cash flow and our ability to pay distributions.

We also intend to incur additional debt in connectionwith future acquisitions of real estate. We may, in some instances, borrowunder our line of credit or borrow new funds to acquire properties. Inaddition, we may incur or increase our mortgage debt by obtaining loans securedby a portfolio of some or all of the real estate properties we acquire. We mayalso borrow funds, if necessary, to satisfy the requirement that we distributeto stockholders as distributions at least 90% of our annual REIT taxableincome, or otherwise as is necessary or advisable to ensure that we maintainour qualification as a REIT for federal income tax purposes.

Oursubstantial debt may harm our business and operating results, including: 

·       Requiringour company to use a substantial portion of our funds from operations to payinterest, which reduces the amount available for distributions;

·       Placingus at a competitive disadvantage compared to our competitors that have lessdebt;

·       Makingour company more vulnerable to economic and industry downturns and reducing ourflexibility in responding to changing business and economic conditions; and

·       Limiting our ability toborrow more money for operations, capital or to finance acquisitions in thefuture.

***Our financial covenants may restrict our operating oracquisition activities.***

The mortgages on our properties contain customarynegative covenants such as those that limit our ability, without the priorconsent of the lender, to further mortgage the applicable property or todiscontinue insurance coverage. In addition, our outstanding unsecured debtcontains customary restrictions, requirements and other limitations on ourability to incur indebtedness, including total debt to assets ratios, secureddebt to total asset ratios, debt service coverage ratios and minimum ratios ofunencumbered assets to unsecured debt, which we must maintain. Our ability toborrow under our line of credit and bridge loan is subject to compliance withthese financial and other covenants.

We rely on borrowings under our line of credit tofinance acquisitions and redevelopment activities and for working capital, andif we were unable to borrow under our line of credit or to refinance existingindebtedness, our financial condition and results of operations would likely beadversely impacted. Our line of credit, bridge loan, and the indentures underwhich we have previously issued unsecured public debt also contain limitationson our ability to incur future secured and unsecured debt. If we need to pledgeproperties in order to borrow additional funds, these covenants could reduceour flexibility in conducting 

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our operations by limitingour ability to borrow and may create a risk of default on our debt if we cannotcontinue to satisfy these covenants. If we breach covenants in our debtagreements, the lender can declare a default and require us to repay the debtimmediately and, if the debt is secured, can immediately take possession of theproperty securing the loan.

***We could become toohighly leveraged because our organizational documents do not contain anylimitation on the amount of debt we may incur.***

Our organizational documents do not limit the amountof indebtedness that we, or our operating partnerships, Heritage OP and BradleyOP, may incur. Although we intend to maintain a balance between our totaloutstanding indebtedness and the value of our portfolio, we could alter thisbalance at any time. If we become highly leveraged, the resulting increase indebt service could adversely affect our ability to make payments on ouroutstanding indebtedness and harm our financial condition.

***A downgrade in our credit rating could negativelyimpact us.***

The floating rates ofinterest applicable to our line of credit and bridge loan are determined basedon the credit ratings of our debt provided by independent rating agencies.Thus, if these credit ratings are downgraded, our interest expense will be, andour ability to raise additional debt may be, negatively impacted.

***We do not have exclusive control over our jointventure investments, so we are unable to ensure that our objectives will bepursued.***

We have invested in somecases as a co-venturer in the development of new properties, instead ofdeveloping projects directly. These investments involve risks not present in awholly owned development project. In these investments, we do not haveexclusive control over the development, financing, leasing, management andother aspects of the project. As a result, the co-venturer might have interestsor goals that are inconsistent with our interests or goals, take actioncontrary to our interests or otherwise impede our objectives. The co-ventureralso might become insolvent or bankrupt.

***Compliance with changing regulation of corporategovernance and public disclosure may result in additional expenses.***

Our efforts to comply withevolving laws, regulations and standards, including the Sarbanes-Oxley Actof 2002, new SEC regulations and New York Stock Exchange rules haveresulted in, and are likely to continue to result in, increased general andadministrative expenses and a diversion of management time and attention fromrevenue-generating activities to compliance activities. In particular, ourongoing efforts to comply with Section 404 of the Sarbanes-Oxley Act of2002 and the related regulations regarding our required assessment of ourinternal control over financial reporting and our external auditors’ audit ofthat assessment has required the commitment of significant financial andmanagerial resources. We expect these efforts to require the continuedcommitment of significant resources. Further, our board members, chiefexecutive officer and chief financial officer could face an increased risk ofpersonal liability in connection with the performance of their duties. As aresult, we may have difficulty attracting and retaining qualified board membersand executive officers, which could harm our business.

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

Costs associated with complying with laws and changesin laws may adversely affect our financial condition and operating results. Wehave incurred increases in expenses as a result of regulatory changes and thecosts of compliance at the corporate level associated with maintaining ourstatus as a public company. These expenses are generally not passed through toour tenants under our leases. As a result, these increased expenses mayadversely affect our cash flow and our ability to service our debt and makedistributions to our stockholders.

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In addition, ourproperties are subject to various federal, state and local regulatoryrequirements, such as the requirements of the Americans with Disabilities Actof 1990 and state and local fire and life safety requirements. Failure tocomply with these requirements could result in the imposition of fines byregulatory agencies and governmental authorities or awards of damages toprivate litigants. In addition, these requirements are subject to change andnew requirements could be imposed that would require significant unanticipatedexpenditures by us. Any of these events could adversely affect our cash flowand distribution to stockholders.

***If we suffer losses that are not covered by insuranceor that are in excess of our insurance coverage limits, we could lose investedcapital and anticipated profits.***

Catastrophic losses, suchas losses due to wars, terrorist attacks, earthquakes, floods, hurricanes,pollution or environmental matters, generally are either uninsurable or noteconomically 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 bothour invested capital and anticipated profits from that property.

***Lack of liquidity of real estate investments couldsignificantly impede our ability to respond to adverse changes in theperformance of our properties.***

Because real estateinvestments are relatively illiquid, our ability to promptly sell one or moreproperties in our portfolio in response to changing economic, financial andinvestment conditions is limited. The real estate market is affected by manyfactors, such as general economic conditions, availability of financing,interest rates and other factors, including supply and demand, that are beyondour control. We cannot predict whether we will be able to sell any property forthe price or on the terms set by us, or whether any price or other termsoffered by a prospective purchaser would be acceptable to us. We also cannotpredict how long we would need to find a willing purchaser and complete thesale of a property. In addition, in recent years, some national anchor tenantshave purchased their own parcels within our centers, which could reduce thevalue of our centers.

***Further issuances of equity securities may be dilutiveto current security holders.***

The interest of ourexisting security holders could be diluted if additional equity securities areissued to finance future acquisition and other working capital needs as analternative to incurring additional indebtedness. Our ability to execute ourbusiness strategy depends on our access to an appropriate blend of debtfinancing, including unsecured lines of credit and other forms of secured andunsecured debt, and equity financing, including common and preferred equity.

***Our largeststockholder owns approximately 41% of our common stock, exercises significantcontrol of our company and may delay, defer or prevent us from taking actionsthat would be beneficial to our other stockholders.***

Our largest stockholder, Net Realty Holding Trust, awholly-owned subsidiary of the New England Teamsters and Trucking IndustryPension Fund (“NETT”), owns approximately 41% of the outstanding shares of ourcommon stock and has the right to nominate four of our directors. Accordingly,Net Realty Holding Trust is able to exercise significant control over theoutcome of substantially all matters required to be submitted to ourstockholders for approval, including decisions relating to the election of ourboard of directors, and the determination of our day-to-day corporate andmanagement policies. In addition, Net Realty Holding Trust is able to exercisesignificant control over the outcome of any proposed merger or consolidation ofour company under Maryland law. Net Realty Holding Trust’s ownership interestin our company may discourage third parties from seeking to acquire control ofour company, which may adversely affect the market price of our common stock.

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***Provisions of the company’s charter and bylaws couldinhibit changes in control of the company, and could prevent stockholders fromobtaining a premium price for our common stock.***

Our organizationaldocuments contain provisions which may have the effect of delaying, deferringor preventing a change in control of our company or the removal of existingmanagement and, as a result, could prevent our stockholders from being paid apremium for their shares of common stock over the then-prevailing marketprices. These provisions include staggered terms for our directors, advancenotice requirements for stockholder proposals and the absence of cumulativevoting rights. In addition, our organizational documents permit our board ofdirectors to issue up to 50,000,000 shares of preferred stock, having thosepreferences, conversion or other rights, voting powers, restrictions,limitations as to distributions, qualifications, or terms or conditions ofredemption as determined by our board. Thus, our board could authorize theissuance of preferred stock with terms and conditions that could have theeffect of discouraging a takeover or other transaction in which holders of someor a majority of our shares might receive a premium for their shares over thethen-prevailing market price of our shares.

***Our board of directors has adopted the limitationsavailable in Maryland law on changes in control that could prevent transactionsin the best interests of stockholders.***

Certain provisions ofMaryland law applicable to us prohibit “business combinations,” includingcertain issuances of equity securities, with any person who beneficially owns10% or more of the voting power of outstanding shares, or with an affiliate ofours 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 outstandingvoting shares (a so-called “interested stockholder”), or with an affiliate ofan interested stockholder. These prohibitions last for five years after themost recent date on which the interested stockholder became an interestedstockholder. After the five-year period, a business combination with aninterested stockholder must be approved by two super-majority stockholder votesunless, among other conditions, our common stockholders receive a minimum pricefor their shares and the consideration is received in cash or in the same formas previously paid by the interested stockholder for its shares of commonstock.

***Our share ownership limit may discourage a takeover ofthe company and depress our stock price.***

In order for us to qualifyas a REIT, no more than 50% of the value of outstanding shares of our capitalstock may be owned, actually or constructively, by five or fewer individuals atany time during the last half of each taxable year. To make sure that we willnot fail to qualify as a REIT under this test, subject to some exceptions, ourarticles prohibit any stockholder from owning actually or constructively morethan 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 theboard determines, in its sole discretion, that exceeding the 9.8% ownershiplimit as to any proposed transferee would not jeopardize our qualification as aREIT. This restriction may: discourage a tender offer or other transactions ora change in management or control that might involve a premium price for ourshares or otherwise be in the best interests of our stockholders; or compel astockholder who had acquired more than 9.8% of our stock to dispose of the additionalshares and, as a result, to forfeit the benefits of owning the additionalshares.

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

We intend to remainqualified as a REIT under the Code, which will afford us significant taxadvantages. The requirements for this qualification, however, are complex. Ifwe fail to meet these requirements, our distributions will not be deductible byus and we will have to pay a corporate level tax on our income. This wouldsubstantially reduce our cash available to pay distributions. In addition, sucha tax liability might cause us to borrow funds, liquidate some of ourinvestments or take other steps, which could negatively affect our operatingresults. Moreover, if our REIT status is terminated because of our failure 

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to meeta technical REIT requirement or if we voluntarily revoke our election, we wouldgenerally be disqualified from electing treatment as a REIT for the fourtaxable years following the year in which REIT status is lost.

***Even REITs are subject to federal and state incometaxes.***

Even if we maintain our status as a REIT, we maybecome subject to federal income taxes and related state taxes. For example, ifwe have net income from a “prohibited transaction,” that income will be subjectto a 100% tax. A “prohibited transaction” is, in general, the sale or otherdisposition of inventory or property, other than foreclosure property, heldprimarily for sale to customers in the ordinary course of business. We may notbe able to make sufficient distributions to avoid excise taxes applicable toREITs. We may also decide to retain income we earn from the sale or otherdisposition of our property and pay income tax directly on that income. In thatevent, our stockholders would be treated as if they earned that income and paidthe tax on it directly. However, stockholders that are tax-exempt, such ascharities or qualified pension plans, would have no benefit from their deemedpayment of that tax liability.

We are increasinglysubject to state and local taxes on our income or property, either directly orat the level of our operating partnerships or at the level of the othercompanies through which we indirectly own our assets. We may not be able tocontinue to satisfy the REIT requirements, or it may not be in our bestinterests to continue to do so.

**Item 1B:     UnresolvedStaff Comments**

None

**Item 2:        Properties**

**Shopping Centers**

As of December 31,2005, we had a shopping center portfolio consisting of 171 shopping centers,located in 30 states and totaling approximately 35.0 million square feetof total GLA, of which approximately 28.7 million square feet is Company-ownedGLA. Our shopping center portfolio was approximately 92.4% leased as of December 31,2005. We believe that our shopping center properties are adequately covered byinsurance.

**Other Properties**

As of December 31,2005, the Company owned three office buildings, one in New York and two inBoston, totaling 222,000 square feet. We believe that our office buildings areadequately covered by insurance.

**Offices**

Our corporate headquarters are located at 131Dartmouth Street, Boston, Massachusetts, an office building located in the BackBay constructed and owned by a joint venture that we entered into with ourlargest stockholder. We lease our corporate headquarters space from the joint venture.Under this lease, which contains a term of eleven years, we lease approximately31,000 square feet. We began to pay rent under this lease in February 2005.The Company pays $1.1 million per year in minimum rent through 2009 and$1.2 million per year from 2009 through 2015.

In addition, we also manage our properties through 16regional offices, strategically located throughout our portfolio states. We own14 of our 16 regional offices, some of which are located in our shopping centerproperties. We believe that our current and anticipated facilities are adequatefor our present and future operations.

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Thefollowing tables provide information about our properties, our tenants andlease expirations as of December 31, 2005.

| Property Name and Location  | ** **   | ** **   | ** **   | **Year Built / Renovated (1)** | ** **   | **% Leased as of 12/31/2005** | ** **   | **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         |         | 100%                           |         | 95,300                        |         | 299,050                       |         | 257,550             |         | Super Wal-Mart (Non-Owned)          |         | $1,002,340      |         | $10.52                         |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | Marshalls                           |         |            |         |                           |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | Michaels                            |         |            |         |                           |
| Montgomery Towne Center     |         | 1996         |         | 83%                            |         | 176,361                       |         | 266,895                       |         | 198,165             |         | Winn Dixie Supermarket (Non-Owned)  |         | $1,851,270      |         | $10.50                         |
|                        |         |         |         |                           |         |                          |         |                          |         |                |         | Bed, Bath & Beyond         |         |            |         |                           |
|                        |         |         |         |                           |         |                          |         |                          |         |                |         | Circuit City                        |         |            |         |                           |
|                        |         |         |         |                           |         |                          |         |                          |         |                |         | Carmike Cinemas (Non-Owned)         |         |            |         |                           |
|                        |         |         |         |                           |         |                          |         |                          |         |                |         | Barnes & Noble             |         |            |         |                           |
|                        |         |         |         |                           |         |                          |         |                          |         |                |         | OfficeMax                           |         |            |         |                           |
| Riverchase  Village SC      |         | 1994         |         | 89%                            |         | 178,511                       |         | 190,611                       |         | 128,225             |         | Bruno’s Supermarket            |         | $1,534,359      |         | $8.60                          |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | Best Buy                            |         |            |         |                           |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | PetsMart                            |         |            |         |                           |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         |                                |         |            |         |                           |
| ***Connecticut***           |         |         |         |                           |         |                          |         |                          |         |                |         |                                |         |            |         |                           |
| Crossroads  I & II |         | 1994         |         | 100%                           |         | 105,662                       |         | 217,662                       |         | 202,795             |         | Home Depot (Non-Owned)              |         | $2,134,188      |         | $20.20                         |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | The Sports Authority                |         |            |         |                           |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | Borders                             |         |            |         |                           |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | OfficeMax                           |         |            |         |                           |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         |                                |         |            |         |                           |
| Crossroads III              |         | 1994         |         | 79%                            |         | 68,750                        |         | 68,750                        |         | 46,278              |         | Levitz Home Furnishings             |         | $1,001,750      |         | $14.57                         |
|                        |         |         |         |                           |         |                          |         |                          |         |                |         | Petco                               |         |            |         |                           |
| Hale  Road                  |         | 2002         |         | 100%                           |         | 103,931                       |         | 103,931                       |         | 82,221              |         | Babies R US                         |         | $402,523        |         | $3.87                          |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | Bed, Bath & Beyond         |         |            |         |                           |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | AC Moore Arts & Crafts     |         |            |         |                           |
| Northern Hills              |         | 2001         |         | 100%                           |         | 12,000                        |         | 304,450                       |         | 292,450             |         | Lowe’s Home Center (Non-Owned) |         | $925,231        |         | $77.10                         |
|                        |         |         |         |                           |         |                          |         |                          |         |                |         | Target (Non-Owned)                  |         |            |         |                           |
| Slater  Street              |         | 1998         |         | 100%                           |         | 51,370                        |         | 96,185                        |         | 64,815              |         | Best Buy (Non-Owned)                |         | $1,449,419      |         | $28.22                         |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | Office Depot / Bassett Furniture    |         |            |         |                           |
| Torrington Plaza            |         | 1963/1994    |         | 94%                            |         | 125,710                       |         | 132,910                       |         | 42,037              |         | TJ Maxx                             |         | $1,379,715      |         | $10.98                         |
|                        |         |         |         |                           |         |                          |         |                          |         |                |         | Staples                             |         |            |         |                           |
|                        |         |         |         |                           |         |                          |         |                          |         |                |         |                                |         |            |         |                           |
| ***Florida***               |         |         |         |                           |         |                          |         |                          |         |                |         |                                |         |            |         |                           |
| Barton  Commons             |         | 1989         |         | 42%                            |         | 215,049                       |         | 218,049                       |         | 52,039              |         | Bealls Dept. Store                  |         | $468,109        |         | $2.18                          |
|                             |         |         |         |                           |         |                          |         |                          |         |                |         | Bealls Outlet                       |         |            |         |                           |

17

 

----

 

| Naples  Shopping Center           |   | 1962/1997 |   | 100%   |   | 198,843 |   | 202,343 |   | 162,486 |   | Publix Supermarket              |   | $2,055,993 |   | $10.34 |
|-----------------------------------|--------|-----------|--------|--------|--------|---------|--------|---------|--------|---------|--------|---------------------------------|--------|------------|--------|--------|
|                                   |   |      |   |   |   |    |   |    |   |    |   | Marshalls                       |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Linens N Things                 |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Office Depot                    |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Books A Million                 |   |       |   |   |
| Park Shore Shopping Center        |   | 1973/1993 |   | 100%   |   | 231,830 |   | 240,330 |   | 188,180 |   | Fresh Market                    |   | $1,950,985 |   | $8.42  |
|                              |   |      |   |   |   |    |   |    |   |    |   | K-Mart                          |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Hudson Furniture                |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Homegoods                       |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Sound Advice                    |   |       |   |   |
| Shoppers  Haven Shopping Center   |   | 1959/1998 |   | 99%    |   | 206,942 |   | 206,942 |   | 130,687 |   | Winn Dixie Supermarket          |   | $1,954,573 |   | $9.45  |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Bed, Bath & Beyond     |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | AC Moore Arts & Crafts |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Walgreens                       |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Bealls Outlet                   |   |       |   |   |
| Venetian Isle Shopping Center (8) |   | 1959/1992 |   | 99%    |   | 183,867 |   | 187,367 |   | 111,831 |   | Publix Supermarket              |   | $1,674,618 |   | $9.11  |
|                              |   |      |   |   |   |    |   |    |   |    |   | TJ Maxx                         |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Linens N Things                 |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Rec Warehouse Pools and Spas    |   |       |   |   |
| ***Georgia***                     |   |      |   |   |   |    |   |    |   |    |   |                            |   |       |   |   |
| Shenandoah Plaza                  |   | 1987      |   | 97%    |   | 141,072 |   | 144,072 |   | 113,922 |   | Ingles Market/Goodwill Emporium |   | $671,147   |   | $4.76  |
| ***Illinois***                    |   |      |   |   |   |    |   |    |   |    |   |                            |   |       |   |   |
| Bartonville Square                |   | 1972      |   | 100%   |   | 61,678  |   | 61,678  |   | 41,824  |   | Kroger Supermarket              |   | $297,455   |   | $4.82  |
| Butterfield  Square               |   | 1997      |   | 96%    |   | 106,767 |   | 121,370 |   | 51,677  |   | Sunset Foods                    |   | $1,408,038 |   | $13.19 |
| The Commons of Chicago Ridge      |   | 1992/1999 |   | 95%    |   | 324,080 |   | 324,080 |   | 246,039 |   | Home Depot  Office Depot        |   | $3,686,003 |   | $11.37 |
|                              |   |      |   |   |   |    |   |    |   |    |   | Marshalls                       |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Pep Boys (Ground Lease)         |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Old Navy                        |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | X Sport Fitness                 |   |       |   |   |
| The  Commons of Crystal Lake      |   | 1995/1998 |   | 96%    |   | 273,060 |   | 365,335 |   | 210,569 |   | Jewel Foods/Osco Drugs          |   | $3,175,873 |   | $11.63 |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Marshalls                       |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Toys R Us                       |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Hobby Lobby (Non-Owned)         |   |       |   |   |

 

 

18

 

----

| Property Name and Location | ** ** | ** ** | ** ** | **Year Built / Renovated (1)** | ** ** | **% Leased as of 12/31/2005** | ** ** | **Company   Owned   GLA (2)** | ** ** | **Total   GLA (3)** | ** ** | **Anchor   SF (4)**                                          | ** ** | **Anchors (5)** | ** ** | **Annualized   Base Rent (6)** | ** ** | **Annualized   Base   Rent/Sq. Ft. (7)** |
|----------------------------|------------|------------|------------|--------------------------------|------------|-------------------------------|------------|-------------------------------|------------|---------------------|------------|--------------------------------------------------------------|------------|-----------------|------------|--------------------------------|------------|------------------------------------------|
| Crossroads Centre          |       | 1975/1988  |       | 97%                            |       | 242,470                       |       | 247,970                       |       | 129,468             |       | KM Fairview  Heights LLC/Hobby Lobby/Big Lots (Ground Lease) |       | $1,593,904      |       | $6.57                          |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | TJ Maxx                                                      |       |            |       |                           |
| Fairhills Shopping Center  |       | 1971/1989  |       | 89%                            |       | 107,584                       |       | 117,684                       |       | 49,330              |       | Jewel Foods/Osco  Drugs                                      |       | $607,220        |       | $5.64                          |
| Heritage Square            |       | 1992       |       | 77%                            |       | 210,752                       |       | 210,752                       |       | 117,054             |       | Circuit City                                                 |       | $2,133,078      |       | $10.12                         |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Carson Furniture Gallery                                     |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | DSW Shoe Warehouse                                           |       |            |       |                           |
| High Point Centre          |       | 1988       |       | 95%                            |       | 240,002                       |       | 240,002                       |       | 141,068             |       | Cub Foods                                                    |       | $2,344,138      |       | $9.77                          |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Office Depot                                                 |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Babies R Us                                                  |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Big Lots                                                     |       |            |       |                           |
| Long Meadow Commons        |       | 1996       |       | 92%                            |       | 118,471                       |       | 118,471                       |       | 65,816              |       | Dominick's  Supermarket                                      |       | $1,658,408      |       | $14.00                         |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       |                                                         |       |            |       |                           |
| Parkway Pointe             |       | 1996       |       | 100%                           |       | 38,737                        |       | 222,037                       |       | 179,300             |       | Wal-Mart (Non-Owned)                                         |       | $549,113        |       | $14.18                         |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Target (Non-Owned)                                           |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Party Tree (Non-Owned)                                       |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       |                                                         |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       |                                                         |       |            |       |                           |
| Rivercrest                 |       | 1992/1999  |       | 100%                           |       | 488,680                       |       | 847,635                       |       | 711,859             |       | Dominick's  Supermarket                                      |       | $4,400,750      |       | $9.01                          |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | 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)                                    |       |            |       |                           |
| Rollins Crossing           |       | 1995/1998  |       | 100%                           |       | 148,117                       |       | 342,237                       |       | 283,704             |       | Super K-Mart  (Non-Owned)                                    |       | $1,156,930      |       | $7.81                          |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Sears Paint &  Hardware                                  |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Regal Cinema (Ground  Lease)                                 |       |            |       |                           |
| Sangamon Center North      |       | 1970/1996  |       | 98%                            |       | 139,907                       |       | 151,107                       |       | 79,257              |       | Schnuck’s  Supermarket                                  |       | $1,209,236      |       | $8.64                          |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | U.S. Post Office                                             |       |            |       |                           |
| Sheridan Village           |       | 1954/1995  |       | 97%                            |       | 303,915                       |       | 303,915                       |       | 177,409             |       | Bergner’s Dept  Store                                   |       | $2,401,304      |       | $7.90                          |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Cohen’s Furniture Co.                                   |       |            |       |                           |
| Sterling Bazaar            |       | 1992       |       | 94%                            |       | 84,535                        |       | 84,535                        |       | 52,337              |       | Kroger Supermarket                                           |       | $743,821        |       | $8.80                          |

19

 

----

 

| Twin Oaks Centre                 |   | 1991      |   | 97%    |   | 98,197  |   | 98,197  |   | 59,682  |   | Hy-Vee Supermarket                  |   | $716,870   |   | $7.30  |
|----------------------------------|--------|-----------|--------|--------|--------|---------|--------|---------|--------|---------|--------|-------------------------------------|--------|------------|--------|--------|
| Wardcliffe Shopping Center       |   | 1976/1977 |   | 96%    |   | 67,681  |   | 67,681  |   | 48,341  |   | CVS                                 |   | $375,980   |   | $5.56  |
|                                  |   |      |   |   |   |    |   |    |   |    |   | Big Lots                            |   |       |   |   |
| Westview Center                  |   | 1992      |   | 88%    |   | 325,507 |   | 416,307 |   | 209,963 |   | Cub Foods                           |   | $2,496,999 |   | $7.67  |
|                             |   |      |   |   |   |    |   |    |   |    |   | LA Fitness                          |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Value City Dept. Store  (Non-Owned) |   |       |   |   |
| ***Indiana***                    |   |      |   |   |   |    |   |    |   |    |   |                                |   |       |   |   |
| Apple Glen Crossing              |   | 2001/2002 |   | 98%    |   | 150,446 |   | 440,987 |   | 384,426 |   | Super Wal-Mart  (Non-Owned)         |   | $1,805,191 |   | $12.00 |
|                             |   |      |   |   |   |    |   |    |   |    |   | Kohl’s (Non-Owned)             |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Dick’s Sporting Goods          |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Best Buy (Ground Lease)             |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | PetsMart                            |   |       |   |   |
| County Line Mall                 |   | 1976/1991 |   | 91%    |   | 268,589 |   | 271,389 |   | 213,950 |   | Kroger Supermarket                  |   | $1,554,582 |   | $5.79  |
|                                  |   |      |   |   |   |    |   |    |   |    |   | OfficeMax                           |   |       |   |   |
|                                  |   |      |   |   |   |    |   |    |   |    |   | Old Time Pottery                    |   |       |   |   |
|                                  |   |      |   |   |   |    |   |    |   |    |   | Sofa Express                        |   |       |   |   |
| Double Tree Plaza                |   | 1996      |   | 96%    |   | 98,342  |   | 110,342 |   | 49,773  |   | Amelia’s  Supermarket          |   | $740,490   |   | $7.53  |
| Germantown Shopping Center       |   | 1985      |   | 79%    |   | 216,430 |   | 223,630 |   | 115,143 |   | Sav-A-Lot  Supermarket              |   | $987,573   |   | $4.56  |
|                                  |   |      |   |   |   |    |   |    |   |    |   | Elder Beerman Department  Store     |   |       |   |   |
|                                  |   |      |   |   |   |    |   |    |   |    |   | Englert’s Home Comfort  Center |   |       |   |   |
| King’s Plaza                |   | 1965      |   | 87%    |   | 102,788 |   | 104,888 |   | 60,200  |   | Cub Foods                           |   | $467,961   |   | $4.55  |
| Lincoln Plaza                    |   | 1968      |   | 94%    |   | 103,938 |   | 103,938 |   | 47,228  |   | Kroger Supermarket                  |   | $707,080   |   | $6.80  |
| Martin’s Bittersweet  Plaza |   | 1992      |   | 100%   |   | 91,798  |   | 94,808  |   | 71,157  |   | Martin’s  Supermarket          |   | $776,928   |   | $8.46  |
|                             |   |      |   |   |   |    |   |    |   |    |   | Osco Drug                           |   |       |   |   |
| Meridian Village                 |   | 1990      |   | 100%   |   | 130,774 |   | 130,774 |   | 65,030  |   | O’Malia’s  Supermarket    |   | $1,370,320 |   | $10.48 |
|                                  |   |      |   |   |   |    |   |    |   |    |   | Godby Home Furnishings              |   |       |   |   |
| Rivergate Shopping Center        |   | 1982      |   | 82%    |   | 133,086 |   | 137,486 |   | 90,666  |   | Wal-Mart                            |   | $366,777   |   | $2.76  |
| Sagamore Park Centre             |   | 1982      |   | 92%    |   | 118,436 |   | 118,436 |   | 66,063  |   | Payless Supermarket                 |   | $938,760   |   | $7.93  |

 

 

20

 

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| Property Name and Location  | ** ** | ** ** | ** ** | **Year  Built / Renovated (1)** | ** ** | **%  Leased as of 12/31/2005** | ** ** | **Company  Owned  GLA (2)** | ** ** | **Total  GLA (3)** | ** ** | **Anchor  SF (4)**                              | ** ** | **Anchors  (5)** | ** ** | **Annualized  Base Rent (6)** | ** ** | **Annualized  Base  Rent/Sq. Ft. (7)** |
|-----------------------------|------------|------------|------------|---------------------------------|------------|--------------------------------|------------|-----------------------------|------------|--------------------|------------|-------------------------------------------------|------------|------------------|------------|-------------------------------|------------|----------------------------------------|
| Speedway SuperCenter        |       | 1960/1998  |       | 87%                             |       | 564,279                        |       | 569,879                     |       | 252,624            |       | Kroger Supermarket                              |       | $4,653,165       |       | $8.25                         |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | AJ Wright                                       |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Kohl’s                                     |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Sears                                           |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Factory Card Outlet                             |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Old Navy                                        |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Petco                                           |       |             |       |                          |
| The Village                 |       | 1950       |       | 94%                             |       | 304,725                        |       | 307,525                     |       | 115,325            |       | US Factory Outlet                               |       | $2,284,383       |       | $7.50                         |
|                        |       |       |       |                            |       |                           |       |                        |       |               |       | AJ Wright                                       |       |             |       |                          |
|                        |       |       |       |                            |       |                           |       |                        |       |               |       | Dollar Tree                                     |       |             |       |                          |
|                        |       |       |       |                            |       |                           |       |                        |       |               |       | Indiana Department of  Employment               |       |             |       |                          |
| Washington Lawndale Commons |       | 1957/1993  |       | 80%                             |       | 331,912                        |       | 331,912                     |       | 168,409            |       | Stein Mart                                      |       | $1,649,615       |       | $4.97                         |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Dunham’s Sporting Goods                    |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Gensic’s Furniture House                   |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Jo-Ann Fabrics                                  |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Books A Million                                 |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Big Lots                                        |       |             |       |                          |
| ***Iowa***                  |       |       |       |                            |       |                           |       |                        |       |               |       |                                            |       |             |       |                          |
| Burlington Plaza West       |       | 1989       |       | 81%                             |       | 88,118                         |       | 92,118                      |       | 52,468             |       | Hobby Lobby                                     |       | $416,509         |       | $4.73                         |
| Davenport Retail Center     |       | 1996       |       | 100%                            |       | 62,588                         |       | 229,588                     |       | 214,433            |       | Staples                                         |       | $645,531         |       | $10.31                        |
|                        |       |       |       |                            |       |                           |       |                        |       |               |       | PetsMart                                        |       |             |       |                          |
|                        |       |       |       |                            |       |                           |       |                        |       |               |       | Super Target (Non-Owned)                        |       |             |       |                          |
| Kimberly West               |       | 1987/1997  |       | 90%                             |       | 113,713                        |       | 116,513                     |       | 76,896             |       | Hy-Vee Supermarket                              |       | $598,750         |       | $5.27                         |
| Parkwood Plaza              |       | 1992       |       | 28%                             |       | 126,369                        |       | 126,369                     |       | N/A                |       | N/A                                             |       | $251,444         |       | $1.99                         |
| Southgate Shopping Center   |       | 1972/1996  |       | 90%                             |       | 154,174                        |       | 154,174                     |       | 102,065            |       | Hy-Vee Supermarket                              |       | $537,957         |       | $3.49                         |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Big Lots                                        |       |             |       |                          |
| Spring Village              |       | 1980/1991  |       | 42%                             |       | 90,263                         |       | 92,763                      |       | N/A                |       | N/A                                             |       | $311,712         |       | $3.45                         |
| Warren Plaza                |       | 1980/1993  |       | 97%                             |       | 90,102                         |       | 187,135                     |       | 160,925            |       | Hy-Vee Supermarket                              |       | $709,038         |       | $7.87                         |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Target (Non-Owned)                              |       |             |       |                          |
| ***Kansas***                |       |       |       |                            |       |                           |       |                        |       |               |       |                                            |       |             |       |                          |
| Mid State Plaza             |       | 1971       |       | 79%                             |       | 286,601                        |       | 293,101                     |       | 152,692            |       | Ashley Furniture Home  Store                    |       | $938,009         |       | $3.27                         |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Sutherlands Lumber                              |       |             |       |                          |
|                             |       |       |       |                            |       |                           |       |                        |       |               |       | Hobby Lobby                                     |       |             |       |                          |
| Santa Fe Square             |       | 1987       |       | 97%                             |       | 133,698                        |       | 133,698                     |       | 55,820             |       | Hy-Vee  Supermarket/Office Depot/Bloom Brothers |       | $1,277,310       |       | $9.55                         |
| Shawnee Parkway Plaza       |       | 1979/1995  |       | 96%                             |       | 92,213                         |       | 92,213                      |       | 59,128             |       | Price Chopper Supermarket                       |       | $641,911         |       | $6.96                         |

 

 

21

 

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| Property Name and Location | ** ** | ** ** | ** ** | **Year Built / Renovated (1)** | ** ** | **% Leased as of 12/31/2005** | ** ** | **Company   Owned   GLA (2)** | ** ** | **Total   GLA (3)** | ** ** | **Anchor   SF (4)**                | ** ** | **Anchors (5)** | ** ** | **Annualized   Base Rent (6)** | ** ** | **Annualized   Base   Rent/Sq. Ft. (7)** |
|----------------------------|------------|------------|------------|--------------------------------|------------|-------------------------------|------------|-------------------------------|------------|---------------------|------------|------------------------------------|------------|-----------------|------------|--------------------------------|------------|------------------------------------------|
| Village Plaza              |       | 1975       |       | 85%                            |       | 55,698                        |       | 55,698                        |       | 31,431              |       | Ray’s Apple Market            |       | $206,582        |       | $3.71                          |
| Westchester Square         |       | 1968/1998  |       | 97%                            |       | 164,944                       |       | 168,644                       |       | 63,000              |       | Hy-Vee Supermarket                 |       | $1,399,805      |       | $8.49                          |
| West Loop Shopping Center  |       | 1986/1998  |       | 99%                            |       | 199,032                       |       | 199,032                       |       | 98,558              |       | Dillons Supermarket                |       | $1,488,061      |       | $7.48                          |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Waters True Value                  |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | American Academy Hair Design       |       |            |       |                           |
| ***Kentucky***             |       |       |       |                           |       |                          |       |                          |       |                |       |                               |       |            |       |                           |
| Dixie Plaza                |       | 1987       |       | 8%                             |       | 48,021                        |       | 82,804                        |       | N/A                 |       | N/A                                |       | $48,239         |       | $1.00                          |
| Midtown Mall               |       | 1970/1994  |       | 99%                            |       | 153,822                       |       | 153,822                       |       | 106,383             |       | Kroger Supermarket                 |       | $1,009,275      |       | $6.56                          |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Big Lots/Odd Lots                  |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Gatti’s Pizza                 |       |            |       |                           |
| Plainview Village Center   |       | 1977       |       | 96%                            |       | 164,367                       |       | 186,167                       |       | 39,399              |       | Kroger Supermarket                 |       | $1,412,120      |       | $8.59                          |
| Stony Brook                |       | 1988       |       | 100%                           |       | 137,013                       |       | 238,213                       |       | 169,775             |       | Kroger Supermarket                 |       | $1,575,032      |       | $11.50                         |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | H.H. Gregg (Non-Owned)             |       |            |       |                           |
| ***Maine***                |       |       |       |                           |       |                          |       |                          |       |                |       |                               |       |            |       |                           |
| Pine Tree Shopping Center  |       | 1958/1973  |       | 99%                            |       | 287,513                       |       | 287,513                       |       | 214,178             |       | AJ Wright                          |       | $936,592        |       | $3.26                          |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Mardens                            |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Jo-Ann Fabrics                     |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Packard Development (Ground Lease) |       |            |       |                           |
| ***Massachusetts***        |       |       |       |                           |       |                          |       |                          |       |                |       |                               |       |            |       |                           |
| Berkshire Crossing         |       | 1996       |       | 100%                           |       | 442,248                       |       | 442,248                       |       | 385,522             |       | Price Chopper Supermarket          |       | $3,604,877      |       | $8.15                          |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Wal-Mart (Ground Lease)            |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Home Depot (Ground Lease)          |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Staples                            |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Michaels                           |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Barnes & Noble                 |       |            |       |                           |
| Burlington Square          |       | 1983/1992  |       | 87%                            |       | 86,290                        |       | 86,290                        |       | 34,097              |       | Staples                            |       | $2,478,668      |       | $28.72                         |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Eastern Mountain Sports            |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       |                               |       |            |       |                           |
| Lynn Market Place          |       | 1966/1993  |       | 100%                           |       | 78,092                        |       | 78,092                        |       | 52,620              |       | Shaw’s Supermarket            |       | $652,400        |       | $8.35                          |
| Watertower Plaza           |       | 1988/1998  |       | 96%                            |       | 296,320                       |       | 296,320                       |       | 214,889             |       | Shaw’s Supermarket            |       | $3,868,919      |       | $13.06                         |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | TJ Maxx                            |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | OfficeMax                          |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Barnes & Noble                 |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Linens N Things                    |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Petco                              |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Michaels                           |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | NAMCO                              |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       |                               |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       |                               |       |            |       |                           |

22

 

----

 

| Westgate Plaza          |   | 1969/1996 |   | 94%    |   | 103,903 |   | 103,903 |   | 77,768  |   | Stop &  Shop/Staples/Ocean State Job Lot |   | $969,091   |   | $9.33  |
|-------------------------|--------|-----------|--------|--------|--------|---------|--------|---------|--------|---------|--------|----------------------------------------------|--------|------------|--------|--------|
|                         |   |      |   |   |   |    |   |    |   |    |   | TJ Maxx                                      |   |       |   |   |
| ***Michigan***          |   |      |   |   |   |    |   |    |   |    |   |                                         |   |       |   |   |
| Cherry Hill Marketplace |   | 1992/1999 |   | 84%    |   | 120,568 |   | 123,468 |   | 53,739  |   | Farmer Jacks                                 |   | $1,189,021 |   | $9.86  |
| The Courtyard           |   | 1989      |   | 96%    |   | 125,967 |   | 265,622 |   | 219,421 |   | V.G. Food Center                             |   | $875,932   |   | $6.95  |
|                    |   |      |   |   |   |    |   |    |   |    |   | OfficeMax                                    |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   | Dunham’s Sporting Goods                 |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   | Home Depot (Non-Owned)                       |   |       |   |   |
| Grand Traverse Crossing |   | 1996      |   | 100%   |   | 387,273 |   | 387,273 |   | 339,156 |   | Wal-Mart (Ground Lease)                      |   | $2,692,094 |   | $6.95  |
|                         |   |      |   |   |   |    |   |    |   |    |   | Home Depot (Ground Lease)                    |   |       |   |   |
|                         |   |      |   |   |   |    |   |    |   |    |   | Borders (Ground Lease)                       |   |       |   |   |
|                         |   |      |   |   |   |    |   |    |   |    |   | Toys R Us                                    |   |       |   |   |
|                         |   |      |   |   |   |    |   |    |   |    |   | Staples                                      |   |       |   |   |
|                         |   |      |   |   |   |    |   |    |   |    |   | PetsMart                                     |   |       |   |   |
| Redford Plaza           |   | 1956/1987 |   | 96%    |   | 284,448 |   | 284,448 |   | 194,014 |   | Kroger Supermarket                           |   | $2,285,863 |   | $8.04  |
|                    |   |      |   |   |   |    |   |    |   |    |   | Burlington Coat Factory                      |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   | Bally Total Fitness                          |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   | AJ Wright                                    |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   | Aco Hardware                                 |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   | The Resource Network                         |   |       |   |   |
| ***Minnesota***         |   |      |   |   |   |    |   |    |   |    |   |                                         |   |       |   |   |
| Austin Town Center      |   | 1999      |   | 60%    |   | 110,680 |   | 200,680 |   | 130,049 |   | Aldi Foods                                   |   | $491,586   |   | $4.44  |
|                    |   |      |   |   |   |    |   |    |   |    |   | Staples                                      |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   | Target (Non-Owned)                           |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   |                                         |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   |                                         |   |       |   |   |
| Brookdale Square        |   | 1971/1994 |   | 41%    |   | 185,883 |   | 185,883 |   | 66,834  |   | Brookdale Theater                            |   | $470,165   |   | $2.53  |
|                         |   |      |   |   |   |    |   |    |   |    |   | Pep Boys                                     |   |       |   |   |
|                         |   |      |   |   |   |    |   |    |   |    |   | Up Front Event Center                        |   |       |   |   |
| Burning Tree Plaza      |   | 1987/1998 |   | 100%   |   | 182,969 |   | 182,969 |   | 117,716 |   | Best Buy                                     |   | $1,699,660 |   | $9.29  |
|                    |   |      |   |   |   |    |   |    |   |    |   | TJ Maxx                                      |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   | Hancock Fabrics                              |   |       |   |   |
|                    |   |      |   |   |   |    |   |    |   |    |   | Dunham’s Sporting Goods                 |   |       |   |   |
| Central Valu Center     |   | 1961/1984 |   | 92%    |   | 124,700 |   | 124,700 |   | 90,946  |   | Rainbow Foods                                |   | $827,957   |   | $6.64  |
|                         |   |      |   |   |   |    |   |    |   |    |   | Slumberland Clearance                        |   |       |   |   |
| Division Place          |   | 1991      |   | 87%    |   | 129,753 |   | 134,753 |   | 24,016  |   | TJ Maxx                                      |   | $1,347,026 |   | $10.38 |
| Elk Park Center         |   | 1995/1999 |   | 98%    |   | 204,992 |   | 302,635 |   | 200,677 |   | Cub Foods                                    |   | $2,015,544 |   | $9.83  |
|                         |   |      |   |   |   |    |   |    |   |    |   | Target (Non-Owned)                           |   |       |   |   |
|                         |   |      |   |   |   |    |   |    |   |    |   | OfficeMax                                    |   |       |   |   |

 

 

23

 

----

| Property Name and Location                                   | ** ** | ** ** | ** ** | **Year Built / Renovated (1)** | ** ** | **% Leased as of 12/31/2005** | ** ** | **Company   Owned   GLA (2)** | ** ** | **Total   GLA (3)** | ** ** | **Anchor   SF (4)**                  | ** ** | **Anchors (5)** | ** ** | **Annualized   Base Rent (6)** | ** ** | **Annualized   Base   Rent/Sq. Ft. (7)** |
|--------------------------------------------------------------|------------|------------|------------|--------------------------------|------------|-------------------------------|------------|-------------------------------|------------|---------------------|------------|--------------------------------------|------------|-----------------|------------|--------------------------------|------------|------------------------------------------|
| Har Mar Mall                                                 |       | 1965/1992  |       | 98%                            |       | 433,082                       |       | 433,082                       |       | 254,539             |       | Cub Foods                            |       | $4,885,324      |       | $11.28                         |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Barnes & Noble                   |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Marshalls                            |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Homegoods                            |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | TJ Maxx                              |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | AMC Theatres                         |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Michaels                             |       |            |       |                           |
| Hub West (9)         |       |       |       |                           |       |                          |       |                          |       |                |       |                                 |       |            |       |                           |
| Richfield Hub                                                |       | 1952/1992  |       | 99%                            |       | 214,855                       |       | 217,655                       |       | 129,400             |       | Rainbow Foods                        |       | $2,429,827      |       | $11.31                         |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Bally Total Fitness                  |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Marshalls                            |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Michaels                             |       |            |       |                           |
| Marketplace at 42                                            |       | 1999       |       | 98%                            |       | 120,487                       |       | 150,687                       |       | 72,371              |       | Rainbow Foods                        |       | $1,626,477      |       | $13.50                         |
|                                                         |       |       |       |                           |       |                          |       |                          |       |                |       | Walgreens (Non-Owned)                |       |            |       |                           |
| Roseville Center                                             |       | 1950/2000  |       | 98%                            |       | 76,894                        |       | 155,694                       |       | 65,000              |       | Rainbow Foods  (Non-Owned)           |       | $895,926        |       | $11.65                         |
| Southport Centre                                             |       | 1992       |       | 100%                           |       | 124,937                       |       | 426,985                       |       | 346,566             |       | Cub Foods  (Non-Owned)               |       | $1,802,929      |       | $14.43                         |
|                                                         |       |       |       |                           |       |                          |       |                          |       |                |       | Best Buy                             |       |            |       |                           |
|                                                         |       |       |       |                           |       |                          |       |                          |       |                |       | Dollar Tree                          |       |            |       |                           |
|                                                         |       |       |       |                           |       |                          |       |                          |       |                |       | Super Target (Non-Owned)             |       |            |       |                           |
|                                                         |       |       |       |                           |       |                          |       |                          |       |                |       | OfficeMax (Non-Owned)                |       |            |       |                           |
| Sun Ray Shopping Center                                      |       | 1958/1992  |       | 95%                            |       | 287,385                       |       | 287,385                       |       | 181,950             |       | Cub Foods (Ground Lease)             |       | $2,520,124      |       | $8.77                          |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | TJ Maxx                              |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Bally Total Fitness                  |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Michaels                             |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | Valu Thrift Store                    |       |            |       |                           |
| Ten Acres Center                                             |       | 1972/1986  |       | 100%                           |       | 162,364                       |       | 162,364                       |       | 133,894             |       | Cub Foods                            |       | $1,202,897      |       | $7.41                          |
|                                                         |       |       |       |                           |       |                          |       |                          |       |                |       | Burlington Coat Factory              |       |            |       |                           |
| Terrace Mall                                                 |       | 1979/1993  |       | 90%                            |       | 135,031                       |       | 250,031                       |       | 212,430             |       | Rainbow Foods                        |       | $1,006,599      |       | $7.45                          |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | North Memorial Hospital  (Non-Owned) |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       | North Memorial Medical  Center       |       |            |       |                           |
| Westwind Plaza                                               |       | 1985       |       | 100%                           |       | 87,933                        |       | 147,933                       |       | 80,245              |       | Cub Foods  (Non-Owned)               |       | $1,165,209      |       | $13.25                         |
|                                                         |       |       |       |                           |       |                          |       |                          |       |                |       | Northern Tool and  Equipment         |       |            |       |                           |
| White Bear Hills                                             |       | 1990/1996  |       | 100%                           |       | 73,095                        |       | 81,895                        |       | 45,679              |       | Festival Foods                       |       | $629,086        |       | $8.61                          |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       |                                 |       |            |       |                           |
|                                                              |       |       |       |                           |       |                          |       |                          |       |                |       |                                 |       |            |       |                           |

24

 

----

 

| ***Mississippi***           |   |      |   |   |   |    |   |    |   |    |   |                             |   |       |   |   |
|-----------------------------|--------|-----------|--------|--------|--------|---------|--------|---------|--------|---------|--------|----------------------------------|--------|------------|--------|--------|
| County Line Plaza           |   | 1997      |   | 99%    |   | 221,567 |   | 268,367 |   | 171,062 |   | Haverty’s Furniture         |   | $2,916,188 |   | $13.16 |
|                             |   |      |   |   |   |    |   |    |   |    |   | OfficeMax                        |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Barnes & Noble               |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Old Navy                         |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Shoe Station                     |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Circuit City (Non-Owned)         |   |       |   |   |
| ***Missouri***              |   |      |   |   |   |    |   |    |   |    |   |                             |   |       |   |   |
| Clocktower Place            |   | 1987      |   | 97%    |   | 214,198 |   | 222,348 |   | 129,807 |   | Dierberg’s Market           |   | $2,295,624 |   | $10.72 |
|                             |   |      |   |   |   |    |   |    |   |    |   | TJ Maxx                          |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Office Depot                     |   |       |   |   |
| Ellisville Square           |   | 1990      |   | 99%    |   | 146,052 |   | 149,552 |   | 107,772 |   | K-Mart                           |   | $1,395,887 |   | $9.56  |
|                        |   |      |   |   |   |    |   |    |   |    |   | Lukas Liquors                    |   |       |   |   |
| Grandview Plaza             |   | 1961/1991 |   | 78%    |   | 296,008 |   | 296,008 |   | 169,892 |   | Schnuck’s  Supermarket      |   | $1,781,900 |   | $6.02  |
|                             |   |      |   |   |   |    |   |    |   |    |   | Old Time Pottery                 |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Walgreens                        |   |       |   |   |
| Hub Shopping Center         |   | 1972/1995 |   | 94%    |   | 160,423 |   | 160,423 |   | 103,322 |   | Price Chopper  Supermarket       |   | $783,853   |   | $4.89  |
| Liberty Corners             |   | 1987/1996 |   | 99%    |   | 124,858 |   | 214,358 |   | 136,500 |   | Price Chopper Supermarket        |   | $943,009   |   | $7.55  |
|                             |   |      |   |   |   |    |   |    |   |    |   | Sutherlands (Non-Owned)          |   |       |   |   |
| Maplewood Square            |   | 1998      |   | 100%   |   | 71,590  |   | 75,590  |   | 57,575  |   | Shop n’ Save Supermarket    |   | $545,405   |   | $7.62  |
| Marketplace at Independence |   | 1988      |   | 95%    |   | 241,896 |   | 253,396 |   | 133,942 |   | Price Chopper Supermarket        |   | $2,110,316 |   | $8.72  |
|                             |   |      |   |   |   |    |   |    |   |    |   | Old Navy                         |   |       |   |   |
| Prospect Plaza              |   | 1979/1999 |   | 96%    |   | 189,996 |   | 189,996 |   | 136,566 |   | Price Chopper  Supermarket       |   | $1,543,290 |   | $8.12  |
|                        |   |      |   |   |   |    |   |    |   |    |   | Hobby Lobby                      |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | The Salvation Army Family  Store |   |       |   |   |
| Watts Mill Plaza            |   | 1973/1997 |   | 94%    |   | 161,717 |   | 169,717 |   | 91,989  |   | Price Chopper  Supermarket       |   | $1,409,089 |   | $8.71  |
|                             |   |      |   |   |   |    |   |    |   |    |   | Westlake Hardware                |   |       |   |   |
| ***Nebraska***              |   |      |   |   |   |    |   |    |   |    |   |                             |   |       |   |   |
| Bishop Heights              |   | 1971/1997 |   | 78%    |   | 34,388  |   | 128,448 |   | 106,992 |   | Russ’ IGA Supermarket       |   | $109,088   |   | $3.17  |
|                             |   |      |   |   |   |    |   |    |   |    |   | Shopko (Non-Owned)               |   |       |   |   |
| Cornhusker Plaza            |   | 1988      |   | 96%    |   | 84,083  |   | 163,063 |   | 121,723 |   | Hy-Vee Supermarket               |   | $468,733   |   | $5.57  |
|                        |   |      |   |   |   |    |   |    |   |    |   | Wal-Mart (Non-Owned)             |   |       |   |   |
| Eastville Plaza             |   | 1986      |   | 100%   |   | 68,546  |   | 139,636 |   | 99,046  |   | Hy-Vee Supermarket               |   | $568,788   |   | $8.30  |
|                             |   |      |   |   |   |    |   |    |   |    |   | Menard’s (Non-Owned)        |   |       |   |   |
| Edgewood Shopping Center    |   | 1980/1994 |   | 99%    |   | 179,964 |   | 406,514 |   | 210,020 |   | SuperSaver  Supermarket          |   | $1,679,481 |   | $9.33  |
|                        |   |      |   |   |   |    |   |    |   |    |   | Osco Drug                        |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | Target (Non-Owned)               |   |       |   |   |

25

 

----

 

| The Meadows                  |   | 1998           |   | 100%   |   | 67,840  |   | 70,840  |   | 50,000  |   | Russ’ IGA  Supermarket             |   | $521,475   |   | $7.69  |
|------------------------------|--------|----------------|--------|--------|--------|---------|--------|---------|--------|---------|--------|-----------------------------------------|--------|------------|--------|--------|
| Miracle Hills Park           |   | 1988           |   | 87%    |   | 69,606  |   | 139,606 |   | 66,000  |   | Cub Foods  (Non-Owned)                  |   | $641,814   |   | $9.22  |
| Stockyards Plaza             |   | 1988           |   | 100%   |   | 129,459 |   | 148,659 |   | 85,649  |   | Hy-Vee Supermarket                      |   | $1,063,721 |   | $8.22  |
|                              |   |           |   |   |   |    |   |    |   |    |   | Movies 8                                |   |       |   |   |
| ***New  Hampshire***         |   |           |   |   |   |    |   |    |   |    |   |                                    |   |       |   |   |
| Bedford Grove                |   | 1989           |   | 99%    |   | 216,941 |   | 216,941 |   | 182,745 |   | Shop N’ Save                       |   | $1,736,229 |   | $8.00  |
|                              |   |           |   |   |   |    |   |    |   |    |   | Wal-Mart (Ground Lease)                 |   |       |   |   |
|                              |   |           |   |   |   |    |   |    |   |    |   |                                    |   |       |   |   |
| Bedford Mall                 |   | 1963/1999      |   | 89%    |   | 265,091 |   | 265,091 |   | 192,207 |   | Marshalls                               |   | $2,477,027 |   | $9.34  |
|                         |   |           |   |   |   |    |   |    |   |    |   | Bob’s Stores                       |   |       |   |   |
|                         |   |           |   |   |   |    |   |    |   |    |   | Staples                                 |   |       |   |   |
|                         |   |           |   |   |   |    |   |    |   |    |   | Linens N Things                         |   |       |   |   |
|                         |   |           |   |   |   |    |   |    |   |    |   | Decathalon Sports (Ground  Lease)       |   |       |   |   |
|                         |   |           |   |   |   |    |   |    |   |    |   | Hoyts Cinemas                           |   |       |   |   |
| Capitol Shopping Center      |   | 1961/1999      |   | 100%   |   | 182,821 |   | 189,821 |   | 129,551 |   | Demoulas Market  Basket                 |   | $1,415,399 |   | $7.74  |
|                              |   |           |   |   |   |    |   |    |   |    |   | Burlington Coat Factory                 |   |       |   |   |
|                              |   |           |   |   |   |    |   |    |   |    |   | Marshalls                               |   |       |   |   |
| Tri City Plaza               |   | 1968/1992      |   | 97%    |   | 146,947 |   | 146,947 |   | 84,920  |   | Demoulas Market Basket                  |   | $992,093   |   | $6.75  |
|                         |   |           |   |   |   |    |   |    |   |    |   | TJ Maxx                                 |   |       |   |   |
| ***New Jersey***             |   |           |   |   |   |    |   |    |   |    |   |                                    |   |       |   |   |
| Cross Keys Common            |   | 1995           |   | 92%    |   | 216,428 |   | 417,388 |   | 279,945 |   | Super Wal-Mart  (Non-Owned)             |   | $3,150,173 |   | $14.56 |
|                         |   |           |   |   |   |    |   |    |   |    |   | AJ Wright                               |   |       |   |   |
|                         |   |           |   |   |   |    |   |    |   |    |   | Staples                                 |   |       |   |   |
|                         |   |           |   |   |   |    |   |    |   |    |   | Ross Dress for Less                     |   |       |   |   |
| Morris Hills Shopping Center |   | 1957/1994      |   | 100%   |   | 159,454 |   | 159,454 |   | 109,161 |   | Mega Marshalls                          |   | $2,463,277 |   | $15.45 |
|                              |   |           |   |   |   |    |   |    |   |    |   | Clearview Cinema (Ground  Lease)        |   |       |   |   |
|                              |   |           |   |   |   |    |   |    |   |    |   | Michaels                                |   |       |   |   |
| Old Bridge Gateway           |   | 1956/1991/1995 |   | 97%    |   | 235,995 |   | 235,995 |   | 106,380 |   | Bayshore Fitness  & Wellness Center |   | $3,325,620 |   | $14.09 |
|                         |   |           |   |   |   |    |   |    |   |    |   | Marshalls                               |   |       |   |   |
|                         |   |           |   |   |   |    |   |    |   |    |   | Modell’s Sporting Goods            |   |       |   |   |
|                         |   |           |   |   |   |    |   |    |   |    |   | Best Home Furnishings                   |   |       |   |   |
| ***New Mexico***             |   |           |   |   |   |    |   |    |   |    |   |                                    |   |       |   |   |
| St. Francis Plaza            |   | 1992/1993      |   | 100%   |   | 35,800  |   | 35,800  |   | 20,850  |   | Wild Oats Market                        |   | $401,670   |   | $11.22 |

26

 

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| ***New York***                    |   |      |   |   |   |    |   |    |   |    |   |                                         |   |       |   |   |
|-----------------------------------|--------|-----------|--------|--------|--------|---------|--------|---------|--------|---------|--------|----------------------------------------------|--------|------------|--------|--------|
| College Plaza                     |   | 1975/1994 |   | 100%   |   | 175,086 |   | 175,086 |   | 126,812 |   | Bob’s Stores                            |   | $1,538,184 |   | $8.79  |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Marshalls                                    |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Eckerd Drugs                                 |   |       |   |   |
|                                   |   |      |   |   |   |    |   |    |   |    |   | Staples                                      |   |       |   |   |
| Dalewood I Shopping  Center       |   | 1966/1995 |   | 97%    |   | 59,569  |   | 59,569  |   | 36,989  |   | Pathmark                                     |   | $651,541   |   | $10.94 |
| Dalewood II Shopping Center       |   | 1970/1995 |   | 100%   |   | 81,326  |   | 81,326  |   | 59,326  |   | Turco’s  Supermarket                    |   | $2,071,605 |   | $25.47 |
|                              |   |      |   |   |   |    |   |    |   |    |   | Bed, Bath & Beyond                       |   |       |   |   |
| Dalewood III Shopping  Center     |   | 1972/1995 |   | 100%   |   | 48,390  |   | 48,390  |   | 28,361  |   | TJ Maxx                                      |   | $1,208,497 |   | $24.97 |
| Falcaro’s Plaza              |   | 1968/1993 |   | 100%   |   | 61,295  |   | 63,295  |   | 29,887  |   | OfficeMax                                    |   | $1,039,604 |   | $16.96 |
| Kings Park Shopping  Center       |   | 1963/1985 |   | 100%   |   | 71,940  |   | 73,940  |   | 48,870  |   | Key Foods                                    |   | $1,047,477 |   | $14.56 |
|                              |   |      |   |   |   |    |   |    |   |    |   | TJ Maxx                                      |   |       |   |   |
| Nesconset Shopping Center         |   | 1961/1999 |   | 100%   |   | 122,996 |   | 124,996 |   | 33,460  |   | Office  Depot/HomeGoods                      |   | $1,648,016 |   | $13.40 |
| Parkway Plaza                     |   | 1973/1992 |   | 95%    |   | 89,704  |   | 89,704  |   | 31,600  |   | TJ Maxx                                      |   | $1,820,144 |   | $20.29 |
| Roanoke Plaza                     |   | 1972/1994 |   | 100%   |   | 99,131  |   | 101,631 |   | 58,150  |   | Best Yet Market                              |   | $1,360,147 |   | $13.72 |
|                              |   |      |   |   |   |    |   |    |   |    |   | TJ Maxx                                      |   |       |   |   |
| Rockville Centre Shopping  Center |   | 1975      |   | 100%   |   | 44,131  |   | 44,131  |   | 27,781  |   | HomeGoods                                    |   | $604,374   |   | $13.70 |
| Salmon Run Plaza                  |   | 1993      |   | 100%   |   | 68,761  |   | 181,195 |   | 164,614 |   | Hannaford’s  Supermarket                |   | $1,097,978 |   | $15.97 |
|                              |   |      |   |   |   |    |   |    |   |    |   | K-Mart (Non-Owned)                           |   |       |   |   |
| Suffolk Plaza                     |   | 1967/1998 |   | 100%   |   | 84,480  |   | 89,680  |   | 56,759  |   | Waldbaum’s  Supermarket                 |   | $857,119   |   | $10.15 |
| Three Village Plaza               |   | 1964/1991 |   | 100%   |   | 77,458  |   | 77,458  |   | 38,955  |   | King Kullen  Grocery                         |   | $1,332,745 |   | $17.21 |
| Turnpike Plaza                    |   | 1971/1994 |   | 100%   |   | 52,950  |   | 52,950  |   | 30,700  |   | Waldbaum’s  Supermarket                 |   | $958,716   |   | $18.11 |
| ***North Carolina***              |   |      |   |   |   |    |   |    |   |    |   |                                         |   |       |   |   |
| The Commons at Chancellor  Park   |   | 1994      |   | 98%    |   | 348,604 |   | 358,204 |   | 309,041 |   | Home Depot (Ground Lease)                    |   | $2,404,331 |   | $6.90  |
|                              |   |      |   |   |   |    |   |    |   |    |   | Hobby Lobby                                  |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Circuit City                                 |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Marshalls                                    |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Value City                                   |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   | Peak Fitness                                 |   |       |   |   |
| Crown Point Shopping Center       |   | 1990      |   | 76%    |   | 147,200 |   | 164,200 |   | 100,000 |   | Lowe’s Home  Centers / Old Time Pottery |   | $760,800   |   | $5.17  |
|                              |   |      |   |   |   |    |   |    |   |    |   |                                         |   |       |   |   |
|                              |   |      |   |   |   |    |   |    |   |    |   |                                         |   |       |   |   |

27

 

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| Franklin Square                     |   | 1990   |   | 95%    |   | 318,435 |   | 517,735 |   | 379,568 |   | Super Wal-Mart  (Non-Owned)                 |   | $3,140,083 |   | $9.86  |
|-------------------------------------|--------|--------|--------|--------|--------|---------|--------|---------|--------|---------|--------|---------------------------------------------|--------|------------|--------|--------|
|                                     |   |   |   |   |   |    |   |    |   |    |   | Best Buy                                    |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Ross Dress for Less                         |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Bed, Bath & Beyond                      |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Dollar Tree                                 |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Pep Boys (Ground Lease)                     |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | OfficeMax                                   |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Michaels                                    |   |       |   |   |
| Innes Street Market                 |   | 1998   |   | 100%   |   | 349,433 |   | 349,433 |   | 296,740 |   | Food Lion  Supermarket                      |   | $3,397,369 |   | $9.72  |
|                                |   |   |   |   |   |    |   |    |   |    |   | Lowe’s Home Centers                    |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Tinseltown Cinema                           |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Marshalls                                   |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Staples                                     |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Circuit City                                |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Old Navy                                    |   |       |   |   |
| McMullen Creek Shopping Center (10) |   | 1988   |   | 80%    |   | 283,323 |   | 292,923 |   | 53,166  |   | Burlington Coat  Factory                    |   | $2,511,816 |   | $8.87  |
| New Centre Market                   |   | 1998   |   | 100%   |   | 143,763 |   | 266,263 |   | 202,040 |   | Target (Non-Owned)                          |   | $1,646,201 |   | $11.45 |
|                                |   |   |   |   |   |    |   |    |   |    |   | Marshalls                                   |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | PetsMart                                    |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | OfficeMax                                   |   |       |   |   |
| Tarrymore Square                    |   | 1989   |   | 76%    |   | 260,405 |   | 260,405 |   | 85,447  |   | Marshalls                                   |   | $1,893,388 |   | $7.27  |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Carolina Clearing House                     |   |       |   |   |
| University Commons                  |   | 1989   |   | 98%    |   | 235,396 |   | 235,396 |   | 135,326 |   | Lowes Foods                                 |   | $2,713,653 |   | $11.53 |
|                                |   |   |   |   |   |    |   |    |   |    |   | TJ Maxx                                     |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Homegoods                                   |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | AC Moore Arts &  Crafts                 |   |       |   |   |
| University Commons Greenville       |   | 1996   |   | 100%   |   | 232,820 |   | 338,020 |   | 270,249 |   | Kroger Supermarket                          |   | $2,699,890 |   | $11.60 |
|                                     |   |   |   |   |   |    |   |    |   |    |   | TJ Maxx                                     |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Circuit City                                |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Barnes & Noble                          |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Target (Non-Owned)                          |   |       |   |   |
|                                     |   |   |   |   |   |    |   |    |   |    |   | Linens N Things                             |   |       |   |   |
| Wendover Place                      |   | 1997   |   | 100%   |   | 406,775 |   | 538,075 |   | 441,954 |   | Harris-Teeter/Michaels/Ross  Dress for Less |   | $4,409,700 |   | $10.84 |
|                                |   |   |   |   |   |    |   |    |   |    |   | Kohl’s                                 |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Dick’s Sporting Goods                  |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Babies R Us                                 |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | PetsMart                                    |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Old Navy                                    |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Linens N Things                             |   |       |   |   |
|                                |   |   |   |   |   |    |   |    |   |    |   | Target (Non-Owned)                          |   |       |   |   |

 

28

 

----

| Property Name and Location | ** ** | ** ** | ** ** | **Year Built / Renovated (1)** | ** ** | **% Leased as of 12/31/2005** | ** ** | **Company   Owned   GLA (2)** | ** ** | **Total   GLA (3)** | ** ** | **Anchor   SF (4)**             | ** ** | **Anchors (5)** | ** ** | **Annualized   Base Rent (6)** | ** ** | **Annualized   Base   Rent/Sq. Ft. (7)** |
|----------------------------|------------|------------|------------|--------------------------------|------------|-------------------------------|------------|-------------------------------|------------|---------------------|------------|---------------------------------|------------|-----------------|------------|--------------------------------|------------|------------------------------------------|
| ***Ohio***                 |       |       |       |                           |       |                          |       |                          |       |                |       |                            |       |            |       |                           |
| 30th Street Plaza          |       | 1951/1999  |       | 96%                            |       | 157,055                       |       | 157,055                       |       | 111,251             |       | Giant Eagle Supermarket         |       | $1,475,538      |       | $9.40                          |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Marc’s Pharmacy            |       |            |       |                           |
| Clock Tower Plaza          |       | 1989       |       | 100%                           |       | 237,975                       |       | 244,475                       |       | 172,300             |       | Ray’s Supermarket          |       | $1,497,883      |       | $6.29                          |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Wal-Mart                        |       |            |       |                           |
| Salem Consumer Square      |       | 1988       |       | 92%                            |       | 274,652                       |       | 274,652                       |       | 131,650             |       | Cub Foods                       |       | $2,319,942      |       | $8.45                          |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Office Depot                    |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Michigan Sporting Goods         |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | AJ Wright                       |       |            |       |                           |
| ***Pennsylvania***         |       |       |       |                           |       |                          |       |                          |       |                |       |                            |       |            |       |                           |
| Boyertown Plaza            |       | 1961       |       | 30%                            |       | 83,229                        |       | 88,629                        |       | N/A                 |       | N/A                             |       | $383,227        |       | $4.60                          |
| Colonial Commons           |       | 1991/2003  |       | 88%                            |       | 433,362                       |       | 451,462                       |       | 291,835             |       | Giant Foods                     |       | $6,145,092      |       | $14.18                         |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Dick's Sporting Goods           |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Linens N Things                 |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | AMC Theatres 9                  |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Ross Dress for Less             |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Marshalls                       |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | TJ Maxx                         |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | OfficeMax                       |       |            |       |                           |
| Lehigh Shopping Center     |       | 1955/1999  |       | 76%                            |       | 372,243                       |       | 376,243                       |       | 211,215             |       | Giant Foods  (Ground Lease)     |       | $2,042,685      |       | $5.49                          |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Mega Marshalls                  |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Staples                         |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | D&D Budget &  Clearance |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       | Dan Schantz Nursery             |       |            |       |                           |
| Warminster Towne Center    |       | 1997       |       | 100%                           |       | 237,234                       |       | 317,917                       |       | 276,840             |       | Shop Rite  Supermarket          |       | $3,098,745      |       | $13.06                         |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Kohl's (Non-Owned)              |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Ross Dress for Less             |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | PetsMart                        |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | OfficeMax                       |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Pep Boys (Ground Lease)         |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Rag Shop                        |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Old Navy                        |       |            |       |                           |
| ***South  Carolina***      |       |       |       |                           |       |                          |       |                          |       |                |       |                            |       |            |       |                           |
| Fairview Corners           |       | 2004       |       | 99%                            |       | 131,002                       |       | 254,682                       |       | 181,741             |       | Super Target (Non-Owned)        |       | $1,674,908      |       | $12.79                         |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Ross Dress for Less             |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | TJ Maxx                         |       |            |       |                           |
| ***South  Dakota***        |       |       |       |                           |       |                          |       |                          |       |                |       |                            |       |            |       |                           |
| Baken Park                 |       | 1962/1997  |       | 90%                            |       | 195,526                       |       | 195,526                       |       | 95,039              |       | Nash Finch Supermarket          |       | $1,370,511      |       | $7.01                          |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Ben Franklin                    |       |            |       |                           |
|                            |       |       |       |                           |       |                          |       |                          |       |                |       | Boyd's Drug                     |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       |                            |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       |                            |       |            |       |                           |
|                       |       |       |       |                           |       |                          |       |                          |       |                |       |                            |       |            |       |                           |

29

 

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| ***Tennessee***             |   |      |   |   |   |    |   |    |   |    |   |                             |   |       |   |   |
|-----------------------------|--------|-----------|--------|--------|--------|---------|--------|---------|--------|---------|--------|----------------------------------|--------|------------|--------|--------|
| The Market of Wolf Creek    |   | 2000      |   | 90%    |   | 298,586 |   | 471,924 |   | 313,652 |   | Target (Non-Owned)               |   | $3,546,257 |   | $11.88 |
|                             |   |      |   |   |   |    |   |    |   |    |   | Haverty's Furniture  (Non-Owned) |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | The Sports Authority             |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Best Buy                         |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Office Depot                     |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Cost Plus World Market           |   |       |   |   |
| Oakwood Commons (11)        |   | 1989/1997 |   | 97%    |   | 278,017 |   | 280,767 |   | 178,769 |   | Publix Supermarket               |   | $2,635,741 |   | $9.48  |
|                        |   |      |   |   |   |    |   |    |   |    |   | Bed, Bath & Beyond           |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | Ross Dress for Less              |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | PetsMart                         |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | Peebles Department Store         |   |       |   |   |
| Watson Glen Shopping Center |   | 1989      |   | 100%   |   | 264,360 |   | 264,360 |   | 206,427 |   | Bi-Lo Foods                      |   | $1,985,984 |   | $7.51  |
|                             |   |      |   |   |   |    |   |    |   |    |   | K-Mart                           |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Goody's Family Clothing          |   |       |   |   |
|                             |   |      |   |   |   |    |   |    |   |    |   | Franklin Athletic Club           |   |       |   |   |
| Williamson Square           |   | 1988/1993 |   | 99%    |   | 330,226 |   | 340,476 |   | 202,102 |   | Kroger Supermarket               |   | $2,625,542 |   | $7.95  |
|                        |   |      |   |   |   |    |   |    |   |    |   | Hobby Lobby                      |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | USA Baby                         |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | Hancock Fabrics                  |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | New River Fellowship             |   |       |   |   |
| ***Texas***                 |   |      |   |   |   |    |   |    |   |    |   |                             |   |       |   |   |
| Buckingham Place            |   | 1980/1997 |   | 93%    |   | 150,228 |   | 156,228 |   | 96,274  |   | Minyard Food Stores              |   | $1,009,502 |   | $6.72  |
|                        |   |      |   |   |   |    |   |    |   |    |   | Big Lots                         |   |       |   |   |
| The Crossing                |   | 2000/2001 |   | 89%    |   | 187,075 |   | 253,454 |   | 150,963 |   | Kroger Signature  (Non-Owned)    |   | $1,858,786 |   | $9.94  |
|                             |   |      |   |   |   |    |   |    |   |    |   | Kohl's (Ground Lease)            |   |       |   |   |
| Las Colinas Village         |   | 2001/2002 |   | 86%    |   | 104,682 |   | 131,682 |   | 24,025  |   | Staples                          |   | $1,810,846 |   | $17.30 |
| Randall's Bay Area          |   | 1989/2001 |   | 98%    |   | 78,650  |   | 78,650  |   | 55,200  |   | Randall's Food  Market           |   | $663,650   |   | $8.44  |
| Randall's Fairmont          |   | 1985/2003 |   | 86%    |   | 105,869 |   | 112,069 |   | 56,358  |   | Randall's Food  Market           |   | $911,418   |   | $8.61  |
| Royal Oaks Village          |   | 2001/2002 |   | 98%    |   | 145,286 |   | 145,286 |   | 85,380  |   | HEB Grocery                      |   | $2,892,180 |   | $19.91 |
| Trinity Commons (12)        |   | 1998      |   | 95%    |   | 197,423 |   | 197,423 |   | 84,228  |   | Tom Thumb                        |   | $3,097,076 |   | $15.69 |
|                        |   |      |   |   |   |    |   |    |   |    |   | DSW Shoe Warehouse               |   |       |   |   |
| ***Vermont***               |   |      |   |   |   |    |   |    |   |    |   |                             |   |       |   |   |
| Rutland Plaza               |   | 1966/1996 |   | 99%    |   | 224,514 |   | 224,514 |   | 182,264 |   | Price Chopper Supermarket        |   | $1,882,104 |   | $8.38  |
|                        |   |      |   |   |   |    |   |    |   |    |   | Wal-Mart                         |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | TJ Maxx                          |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   | Plaza Movie Plex                 |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   |                             |   |       |   |   |
|                        |   |      |   |   |   |    |   |    |   |    |   |                             |   |       |   |   |

30

 

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| ***Virginia***                |       |       |       |       |       |           |       |           |       |           |       |                      |       |             |       |       |
|-------------------------------|------------|------------|------------|------------|------------|----------------|------------|----------------|------------|----------------|------------|---------------------------|------------|------------------|------------|------------|
| Spradlin Farm                 |       | 2000/2001  |       | 100%       |       | 181,055        |       | 442,055        |       | 366,962        |       | Home Depot (Non-Owned)    |       | $2,390,725       |       | $13.20     |
|                          |       |       |       |       |       |           |       |           |       |           |       | Target (Non-Owned)        |       |             |       |       |
|                          |       |       |       |       |       |           |       |           |       |           |       | TJ Maxx                   |       |             |       |       |
|                          |       |       |       |       |       |           |       |           |       |           |       | Barnes & Noble        |       |             |       |       |
|                          |       |       |       |       |       |           |       |           |       |           |       | Michaels                  |       |             |       |       |
|                          |       |       |       |       |       |           |       |           |       |           |       | Goody's Family Clothing   |       |             |       |       |
| ***Wisconsin***               |       |       |       |       |       |           |       |           |       |           |       |                      |       |             |       |       |
| Fairacres Shopping Center     |       | 1992       |       | 94%        |       | 79,736         |       | 82,486         |       | 58,678         |       | Pick 'N Save Supermarket  |       | $626,066         |       | $7.85      |
| Fitchburg Ridge               |       | 1980       |       | 94%        |       | 50,555         |       | 61,805         |       | 16,631         |       | Wisconsin Dialysis        |       | $456,526         |       | $9.03      |
| Fox River Plaza               |       | 1987       |       | 100%       |       | 169,883        |       | 173,383        |       | 137,113        |       | Pick 'N Save  Supermarket |       | $833,479         |       | $4.91      |
|                          |       |       |       |       |       |           |       |           |       |           |       | K-Mart                    |       |             |       |       |
| Madison Plaza                 |       | 1988/1994  |       | 62%        |       | 54,275         |       | 127,584        |       | N/A            |       | N/A                       |       | $325,844         |       | $6.00      |
|                          |       |       |       |       |       |           |       |           |       |           |       |                      |       |             |       |       |
| Mequon Pavilions              |       | 1967/1991  |       | 95%        |       | 213,436        |       | 213,436        |       | 65,995         |       | Sendik's Food Market      |       | $2,976,273       |       | $13.94     |
|                          |       |       |       |       |       |           |       |           |       |           |       | Bed, Bath & Beyond    |       |             |       |       |
| Moorland Square               |       | 1990       |       | 100%       |       | 98,303         |       | 195,403        |       | 149,674        |       | Pick 'N Save  Supermarket |       | $867,625         |       | $8.83      |
|                               |       |       |       |       |       |           |       |           |       |           |       | K-Mart (Non-Owned)        |       |             |       |       |
| Oak Creek Centre              |       | 1988       |       | 40%        |       | 91,510         |       | 99,510         |       | N/A            |       | N/A                       |       | $159,464         |       | $1.74      |
| Park Plaza                    |       | 1959/1993  |       | 91%        |       | 113,655        |       | 113,655        |       | 74,054         |       | Big Lots                  |       | $626,764         |       | $5.51      |
|                          |       |       |       |       |       |           |       |           |       |           |       | Hobby Lobby               |       |             |       |       |
| Spring Mall                   |       | 1967/1994  |       | 92%        |       | 204,861        |       | 204,861        |       | 135,055        |       | Pick 'N Save  Supermarket |       | $1,478,156       |       | $7.22      |
|                               |       |       |       |       |       |           |       |           |       |           |       | TJ Maxx                   |       |             |       |       |
|                               |       |       |       |       |       |           |       |           |       |           |       | Walgreens                 |       |             |       |       |
| Taylor Heights                |       | 1989       |       | 84%        |       | 85,072         |       | 223,862        |       | 158,630        |       | Piggly Wiggly  Foods      |       | $785,335         |       | $9.23      |
|                          |       |       |       |       |       |           |       |           |       |           |       | Wal-Mart (Non-Owned)      |       |             |       |       |
| ***TOTAL SHOPPING CENTERS***  | ** ** | ** ** | ** ** | **92%**    | ** ** | **28,733,853** | ** ** | **34,972,571** | ** ** | **22,348,777** | ** ** | ** **                | ** ** | **$263,757,648** | ** ** | **$9.18**  |
| **Office Buildings:**         |       |       |       |       |       |           |       |           |       |           |       |                      |       |             |       |       |
| William J. McCarthy Building  |       | 1963/1995  |       | 89%        |       | 93,019         |       | 93,019         |       |           |       | N/A                       |       | $2,685,185       |       | $28.87     |
| 545 Boylston Street           |       | 1972/1996  |       | 91%        |       | 89,075         |       | 89,075         |       |           |       | Allied Advertising        |       | $2,772,608       |       | $31.13     |
|                          |       |       |       |       |       |           |       |           |       |           |       | Trinity Church            |       |             |       |       |
|                               |       |       |       |       |       |           |       |           |       |           |       | Norca Corporation         |       |             |       |       |
|                               |       |       |       |       |       |           |       |           |       |           |       | Sol G Atlas Realty        |       |             |       |       |
| Executive Office Building     |       | 1970       |       | 94%        |       | 40,180         |       | 40,180         |       |           |       | Heritage                  |       | $791,913         |       | $19.71     |
| ***TOTAL  OFFICE BUILDINGS*** | ** ** | ** ** | ** ** | **91%**    | ** ** | **222,274**    | ** ** | **222,274**    | ** ** | ** **     | ** ** | ** **                | ** ** | **$6,249,706**   | ** ** | **$28.12** |
| ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** **     | ** ** | ** **     | ** ** | ** **                | ** ** | ** **       | ** ** | ** ** |
| ***TOTAL PORTFOLIO***         | ** ** | ** ** | ** ** | **92%**    | ** ** | **28,956,127** | ** ** | **35,194,845** | ** ** | ** **     | ** ** | ** **                | ** ** | **$270,007,354** | ** ** | **$9.32**  |

----

(1)                Represents the year the property originally opened forbusiness and, if applicable, the year in which a substantial renovation wascompleted. These dates do not include years in which tenant improvements weremade to the properties.

31

 

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(2)                Represents gross leasable area owned by us, including1,568,720 square feet of gross leaseable area subject to ground leases andexcludes 6,238,744 square feet of non-owned gross leasable area.

(3)                Some of our shopping centers contain space not owned byus and space leased to tenants under ground leases. In addition to CompanyOwned GLA, Total GLA includes approximately 6.2 million square feet ofthis non-owned gross leasable area, which generally is owned directly by theanchor occupying this space, and 1.6 million square feet of ground leasedgross leaseable area.

(4)                Represents square feet of gross leasable area at aproperty that an anchor tenant either leases or owns.

(5)                We define anchor tenants as single tenants which lease15,000 square feet or more at a property. We define major tenants at our officebuildings as tenants which lease 10% or more of the rentable square footage ata property.

(6)                We calculate Annualized Base Rent for all leases inplace in which tenants are in occupancy at December 31, 2005 as follows:total base rent to be received during the entire term of each lease, divided bythe terms in months for such leases, multiplied by 12. For any leases relatingto properties we acquired from NETT’s real estate company upon our formation orrelating to properties acquired from Bradley, we calculate total base rent tobe received beginning from the date we acquired the property.

(7)                Represents Annualized Base Rent divided by CompanyOwned GLA at December 31, 2005.

(8)                Property contains 11,627 square feet of office space.

(9)                Property is comprised of two shopping centers.

(10)           Property contains 32,638 square feet of office space.

(11)           We hold a leasehold interest in this property pursuantto a ground lease that expires in 2088.

(12)           We hold a leasehold interest in this property pursuantto a ground lease that expires in 2037.

32

 

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**Top Tenantsby Annualized Base Rent**

|   |   | **Tenant**                      | ** ** | **# of   Stores** | ** ** | **Total  GLA** | ** ** | **GLA as a %  of Total** | ** ** | **Tenant  Annualized  Base Rent(1)** | ** ** | **% of Total  Annualized  Base Rent(2)** | ** ** | **Type of Business** |                  |   |
|--------|--------|---------------------------------|------------|-----------------------------|------------|----------------|------------|-----------------------------------------|------------|-------------------------------------------|------------|---------------------------------------------------------|------------|--------------------------------|-----------------------|--------|
| 1      |   | TJX Companies(3)                |       | 52                          |       | 1,602,424      |       | 5.53%                                   |       | $                                         | 14,392,564 |                                                    | 5.33%      |                           | Off  Price/Soft Goods |   |   |
| 2      |   | Kroger(4)                       |       | 13                          |       | 725,952        |       | 2.51%                                   |       | 5,067,342                                 |       | 1.88%                                                   |       | Grocer                         |                  |   |
| 3      |   | Supervalu(5)                    |       | 10                          |       | 657,733        |       | 2.27%                                   |       | 4,700,273                                 |       | 1.74%                                                   |       | Grocer                         |                  |   |
| 4      |   | Office Max                      |       | 13                          |       | 333,835        |       | 1.15%                                   |       | 3,518,266                                 |       | 1.30%                                                   |       | Office  Products               |                  |   |
| 5      |   | Staples                         |       | 12                          |       | 296,940        |       | 1.03%                                   |       | 3,440,910                                 |       | 1.27%                                                   |       | Office  Products               |                  |   |
| 6      |   | Associated Wholesale Grocers(6) |       | 9                           |       | 571,947        |       | 1.98%                                   |       | 3,363,503                                 |       | 1.25%                                                   |       | Grocer                         |                  |   |
| 7      |   | Charming Shoppes(8)             |       | 38                          |       | 304,995        |       | 1.05%                                   |       | 3,352,096                                 |       | 1.24%                                                   |       | Discount/Apparel               |                  |   |
| 8      |   | Roundy’s(7)                |       | 8                           |       | 491,482        |       | 1.70%                                   |       | 3,252,686                                 |       | 1.20%                                                   |       | Grocer                         |                  |   |
| 9      |   | Home Depot                      |       | 4                           |       | 459,073        |       | 1.59%                                   |       | 3,049,963                                 |       | 1.13%                                                   |       | Home  Improvement              |                  |   |
| 10     |   | Sears Holding Corporation(9)    |       | 13                          |       | 664,381        |       | 2.29%                                   |       | 2,946,160                                 |       | 1.09%                                                   |       | Discount                       |                  |   |
| 11     |   | Wal-Mart                        |       | 8                           |       | 727,634        |       | 2.51%                                   |       | 2,941,622                                 |       | 1.09%                                                   |       | Discount                       |                  |   |
| 12     |   | Safeway(10)                     |       | 5                           |       | 327,249        |       | 1.13%                                   |       | 2,924,301                                 |       | 1.08%                                                   |       | Grocer                         |                  |   |
| 13     |   | Barnes & Noble         |       | 7                           |       | 178,936        |       | 0.62%                                   |       | 2,905,676                                 |       | 1.08%                                                   |       | Books/Cards/Gifts              |                  |   |
| 14     |   | Blockbuster                     |       | 26                          |       | 168,669        |       | 0.58%                                   |       | 2,885,282                                 |       | 1.07%                                                   |       | Video  Sales/Rentals           |                  |   |
| 15     |   | Hy-Vee                          |       | 9                           |       | 547,466        |       | 1.89%                                   |       | 2,728,627                                 |       | 1.01%                                                   |       | Grocer                         |                  |   |
| 16     |   | Bed, Bath, & Beyond    |       | 7                           |       | 198,291        |       | 0.68%                                   |       | 2,704,209                                 |       | 1.00%                                                   |       | Soft  Goods                    |                  |   |
| 17     |   | Hallmark                        |       | 42                          |       | 216,015        |       | 0.75%                                   |       | 2,635,280                                 |       | 0.98%                                                   |       | Cards/Gifts                    |                  |   |
| 18     |   | PetsMart                        |       | 10                          |       | 222,314        |       | 0.77%                                   |       | 2,625,950                                 |       | 0.97%                                                   |       | Pet  Supplies                  |                  |   |
| 19     |   | Dollar Tree                     |       | 34                          |       | 335,796        |       | 1.16%                                   |       | 2,525,956                                 |       | 0.94%                                                   |       | Discount                       |                  |   |
| 20     |   | Walgreens                       |       | 15                          |       | 194,260        |       | 0.67%                                   |       | 2,509,756                                 |       | 0.93%                                                   |       | Drug Store                     |                  |   |
|        |        |                                 |            |                             |            |                |            |                                         |            |                                           |            |                                                         |            |                                |                       |        |  |

----

(1)    We calculateannualized base rent for all leases in place in which tenants are in occupancyat December 31, 2005 as follows: total base rent to be received during theentire term of each lease, divided by the terms in months for such leases,multiplied by 12. For any leases relating to properties we acquire, wecalculate total base rent to be received beginning from the date we acquiredthe property.

(2)    Representstotal Tenant Annualized Base Rent divided by Total Annualized Base Rent of$270,007,355.

(3)    TJXCompanies include: TJ Maxx (23), Marshalls (17), A.J. Wright (6), Homegoods (4) andBob’s Stores (2).

(4)    TheKroger Co. includes: Kroger (11), Pay Less Supermarket (1) and Dillons(1).

(5)    SupervaluInc. includes: Cub Foods (5), Shop n’ Save (1), Shop Rite (1) and Ray’sSupermarket (1). Supervalu Inc. also includes (2) Cub Foods locationsleased by a limited liability corporation of which Supervalu Inc. is a member.

(6)    AssociatedWholesale Grocers includes: Price Chopper (6), Russ’ IGA (2) and SuperSaver (1).

(7)    Roundy’s, Inc.includes: Pick N Save (4) and Rainbow Foods (4).

(8)    CharmingShoppes includes: Fashion Bug (28), Lane Bryant (7) and Catherine’s (4).

(9)    SearsHolding Corporation includes: K-Mart (6), Sears (3), Sears Dental (1), SearsNTB (1), Sears Paint & Hardware (1) and Lands’ End (1).

(10)  Safeway includes: Dominick’s (2), Randall’s Food Market(2) and Tom Thumb (1).

33

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**TotalLease Expiration Roll Out—December 31, 2005**

| **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)** | ** ** |
|-------------------------------------|------------|------------|------------|--------------------------------------|------------|--------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|------------------------------------------|-----------------|------------------------------------------------|------------|
| 2006(3)                             |       |       | 575        |                                 |       | 2,182,091                      |       |                                                 | 8.2        | %                               |       | $                                        | 22,913,820      |                                           |       | 8.3 | % |   |   | $ | 10.50 |   |   |
| 2007                                |       |       | 566        |                                 |       | 3,042,288                      |       |                                                 | 11.4       | %                               |       | 32,992,416                               |            |                                           | 11.9       | % |   |   | 10.84 |   |   |
| 2008                                |       |       | 608        |                                 |       | 3,351,678                      |       |                                                 | 12.5       | %                               |       | 36,438,362                               |            |                                           | 13.2       | % |   |   | 10.87 |   |   |
| 2009                                |       |       | 449        |                                 |       | 3,396,401                      |       |                                                 | 12.7       | %                               |       | 35,191,692                               |            |                                           | 12.7       | % |   |   | 10.36 |   |   |
| 2010                                |       |       | 413        |                                 |       | 2,572,067                      |       |                                                 | 9.6        | %                               |       | 31,150,532                               |            |                                           | 11.2       | % |   |   | 12.11 |   |   |
| 2011                                |       |       | 216        |                                 |       | 2,291,171                      |       |                                                 | 8.6        | %                               |       | 23,573,439                               |            |                                           | 8.5        | % |   |   | 10.29 |   |   |
| 2012                                |       |       | 101        |                                 |       | 1,082,274                      |       |                                                 | 4.0        | %                               |       | 13,012,694                               |            |                                           | 4.7        | % |   |   | 12.02 |   |   |
| 2013                                |       |       | 87         |                                 |       | 1,440,926                      |       |                                                 | 5.4        | %                               |       | 13,810,524                               |            |                                           | 5.0        | % |   |   | 9.58 |   |   |
| 2014                                |       |       | 92         |                                 |       | 1,321,050                      |       |                                                 | 4.9        | %                               |       | 14,696,741                               |            |                                           | 5.3        | % |   |   | 11.13 |   |   |
| 2015                                |       |       | 73         |                                 |       | 1,270,642                      |       |                                                 | 4.7        | %                               |       | 11,815,497                               |            |                                           | 4.3        | % |   |   | 9.30 |   |   |
| 2016 and  Thereafter                |       |       | 151        |                                 |       | 4,804,011                      |       |                                                 | 18.0       | %                               |       | 41,468,040                               |            |                                           | 14.9       | % |   |   | 8.63 |   |   |
| **Totals**                          | ** ** | ** ** | **3,331**  |                                 | ** ** | **26,754,599**                 | ** ** | ** **                                           | **100.0**  | **%**                           | ** ** | **$**                                    | **277,063,757** | ** **                                     | ** ** | **100.0** | **%** | ** ** | ** ** | **$** | **10.36** |   |   |

----

(1)          Represents the last12 months of rent payable immediately prior to the expiration of thelease.

(2)          Represents Expiring BaseRent divided by Expiring Square Feet.

(3)          Includes tenants on amonth-to-month agreement.

**Item 3:        LegalProceedings**

On October 31, 2001, a complaint was filedagainst us in the Superior Court of Suffolk County of the Commonwealth ofMassachusetts by Weston Associates and its president, Paul Donahue, allegingthat we owe Mr. Donahue and his firm a fee in connection with services heclaims he performed on our behalf in connection with our acquisition of BradleyReal Estate Inc. On September 18, 2000, we acquired Bradley, apublicly traded REIT based in Illinois with nearly 100 shopping centerproperties located primarily in the Midwest, at an aggregate cost ofapproximately $1.2 billion. Through his personal relationships with theparties involved, at our request, Mr. Donahue introduced us to Bradley andits senior management team. Mr. Donahue alleges, however, that he playedan instrumental role in the negotiation and completion of our acquisition ofBradley beyond merely introducing the parties. For these alleged efforts, Mr. Donahuedemands that he receive a fee equal to 2% of the aggregate consideration wepaid to acquire Bradley, or a fee of approximately $24 million. Inaddition, Mr. Donahue also seeks treble damages based on alleged unfair ordeceptive business practices under Massachusetts law.

On November 29, 2002, the court granted ourmotion to dismiss Mr. Donahue’s claims. Mr. Donahue subsequentlyfiled an appeal of the court’s decision and, on March 4, 2004, an oralargument was heard with respect to Mr. Donahue’s appeal. On July 14,2004, the Massachusetts Appellate Court reversed the lower court’s decisiondismissing Mr. Donahue’s claims. The Appellate Court’s decision revertsthe case back to the Superior Court for discovery and additional proceedings,which are currently ongoing. It is not possible at this time to predict theoutcome of this litigation and we intend to vigorously defend against theseclaims.

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

34

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**Item 4:        Submissionof Matters to a Vote of Security Holders**

**None**

**PART II**

**Item 5:        Marketfor Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities**

Our common stock began trading on the New York StockExchange on April 24, 2002, under the symbol “HTG”. As of March 10,2006, we had approximately 5,000 common stockholders of record.

Thefollowing 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 andper-share distributions declared during the last two fiscal years: 

| ** **           | ** ** | **High** | ** ** | **Low** | ** ** | **Distributions** | ** ** |
|----------------------|------------|----------|------------|---------|------------|-------------------|------------|
| First Quarter  2004  |       | $        | 31.38      |    | $          | 27.58             |       |   | $ | 0.525 |   |   |
| Second Quarter  2004 |       | $        | 31.04      |    | $          | 24.83             |       |   | $ | 0.525 |   |   |
| Third Quarter  2004  |       | $        | 29.24      |    | $          | 26.98             |       |   | $ | 0.525 |   |   |
| Fourth Quarter  2004 |       | $        | 33.78      |    | $          | 29.74             |       |   | $ | 0.525 |   |   |
| First Quarter  2005  |       | $        | 32.35      |    | $          | 29.33             |       |   | $ | 0.525 |   |   |
| Second Quarter  2005 |       | $        | 35.89      |    | $          | 29.55             |       |   | $ | 0.525 |   |   |
| Third Quarter  2005  |       | $        | 37.77      |    | $          | 32.98             |       |   | $ | 0.525 |   |   |
| Fourth Quarter 2005  |       | $        | 35.50      |    | $          | 30.90             |       |   | $ | 0.525 |   |   |

 

We intend to continue todeclare quarterly distributions. No assurance, however, can be provided as tothe amounts or timing of future distributions, as the maintenance of thosedistributions is subject to various factors, including the discretion of ourBoard of Directors, limitations contained in our debt instruments, the abilityto pay dividends under Maryland law, the availability of cash to make thenecessary dividend payments and the effect of REIT distribution requirements. Inorder to qualify for the beneficial tax treatment accorded to REITs under theCode, we must distribute to holders of our shares in an amount equal to 90% ofour “real estate investment trust taxable income,” as defined in Section 857of the Code.

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**Item 6:        SelectedFinancial Data**

As discussed in thebeginning of “**Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**” under the heading “**Restatement Summary**,” we previouslyrestated our financial statements and other financial information for the yearsended December 31, 2004 and 2003, and for each of the quarters therein, aswell as the quarterly periods ended March 31, 2005 and June 30,2005. The table below reflects the impact of that restatement of thosehistorical financial statements.

Thefollowing selected historical consolidated financial and operating data shouldbe read together with “**Management’s Discussionand Analysis of Financial Condition and Results of Operations**” andour consolidated financial statements on page F-1 of this Form 10-K.Our historical financial information has been presented on an accrual basis inaccordance with U.S. generally accepted accounting principles, (“GAAP”),applicable to real estate investment trusts for all periods presented. 

| ** **                                                                          | ** ** | **Year Ended December 31,**                         | ** ** |
|-------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                          | ** ** | **2005**                                                           | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                                                          | ** ** | **(In thousands, except per share data)** | ** ** |
| **STATEMENT  OF OPERATIONS DATA:**                                                  |       |                                                               |       |   |   |   |   |   |   |   |   |
| Revenue:                                                                            |       |                                                               |       |   |   |   |   |   |   |   |   |
| Rentals and recoveries                                                              |       | $                                                                  | 350,345    |   | $ | 325,947 |   | $ | 297,666 |   | $ | 273,343 |   | $ | 250,624 |   |
| Interest, other, and joint venture fee income                                       |       | 1,071                                                              |       | 993 |   | 495 |   | 100 |   | 298 |   |
| Total revenue                                                                       |       | 351,416                                                            |       | 326,940 |   | 298,161 |   | 273,443 |   | 250,922 |   |
| Expenses:                                                                           |       |                                                               |       |   |   |   |   |   |   |   |   |
| Operating                                                                           |       | 101,844                                                            |       | 94,927 |   | 86,424 |   | 78,529 |   | 73,511 |   |
| General and administrative                                                          |       | 32,828                                                             |       | 29,668 |   | 25,198 |   | 23,351 |   | 12,640 |   |
| Depreciation and amortization                                                       |       | 100,411                                                            |       | 88,678 |   | 78,548 |   | 69,601 |   | 63,686 |   |
| Interest                                                                            |       | 86,435                                                             |       | 77,269 |   | 69,415 |   | 72,312 |   | 90,342 |   |
| Loss on prepayment of debt                                                          |       | —                                                             |       | — |   | — |   | 6,749 |   | — |   |
| Total expenses                                                                      |       | 321,518                                                            |       | 290,542 |   | 259,585 |   | 250,542 |   | 240,179 |   |
| Income before net  gains                                                            |       | 29,898                                                             |       | 36,398 |   | 38,576 |   | 22,901 |   | 10,743 |   |
| Net gains on sales of real estate investments,  equipment and marketable securities |       | 8                                                                  |       | 557 |   | — |   | 2,924 |   | 4,159 |   |
| Net derivative  (losses) gains                                                      |       | —                                                             |       | — |   | — |   | (7,766 | ) | 986 |   |
| Income before  allocation to minority interests and discontinued operations         |       | 29,906                                                             |       | 36,955 |   | 38,576 |   | 18,059 |   | 15,888 |   |
| Equity in (loss)  income from unconsolidated joint ventures                         |       | (77                                                                | )          | 86 |   |   |   |   |   |   |   |
| Income allocated  to minority interests                                             |       | (241                                                               | )          | (2,382 | ) | (6,870 | ) | (6,872 | ) | (6,656 | ) |
| Income from  discontinued operations                                                |       | —                                                             |       | 4,654 |   | 4,837 |   | 3,256 |   | 3,004 |   |
| Net income                                                                          |       | 29,588                                                             |       | 39,313 |   | 36,543 |   | 14,443 |   | 12,236 |   |
| Preferred stock  distributions                                                      |       | —                                                             |       | — |   | — |   | (14,302 | ) | (43,345 | ) |
| Accretion of  redeemable equity                                                     |       | —                                                             |       | — |   | — |   | (328 | ) | (995 | ) |
| Net income (loss)  attributable to common shareholders                              |       | $                                                                  | 29,588     |   | $ | 39,313 |   | $ | 36,543 |   | $ | (187 | ) | $ | (32,104 | ) |

 

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| ** **                                                                                   | ** ** | **Year Ended December 31,**                         | ** ** |
|----------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                                   | ** ** | **2005**                                                           | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                                                                   | ** ** | **(In thousands, except per share data)** | ** ** |
| Per Share Data:                                                                              |       |                                                               |       |   |   |   |   |   |   |   |   |
| Basic income  attributable to common shareholders before discontinued operations per share   |       | $                                                                  | 0.63       |   | $ | 0.75 |   | $ | 0.76 |   | $ | (0.11 | ) | $ | (4.71 | ) |
| Basic income  (loss) attributable to common shareholder                                      |       | $                                                                  | 0.63       |   | $ | 0.85 |   | $ | 0.88 |   | $ | (0.01 | ) | $ | (5.15 | ) |
| Diluted income  attributable to common shareholders before discontinued operations per share |       | $                                                                  | 0.62       |   | $ | 0.74 |   | $ | 0.75 |   | $ | (0.11 | ) | $ | (4.71 | ) |
| Diluted income  (loss) attributable to common shareholders                                   |       | $                                                                  | 0.62       |   | $ | 0.84 |   | $ | 0.87 |   | $ | (0.01 | ) | $ | (5.15 | ) |
| Dividends declared  per share                                                                |       | $                                                                  | 2.10       |   | $ | 2.10 |   | $ | 2.10 |   | $ | 1.89 |   | $ | 0.73 |   |
| Weighted average  common shares outstanding—Basic                                  |       | 46,888                                                             |       | 46,385 |   | 41,747 |   | 30,257 |   | 6,818 |   |
| Weighted average  common and common equivalent shares outstanding—Diluted               |       | 48,176                                                             |       | 47,288 |   | 42,484 |   | 30,257 |   | 6,818 |   |
| **BALANCE SHEET DATA: (at end of period)**                                                   |       |                                                               |       |   |   |   |   |   |   |   |   |
| Real estate  investments, before accumulated depreciation                                    |       | $                                                                  | 2,711,088  |   | $ | 2,540,841 |   | $ | 2,399,973 |   | $ | 2,178,533 |   | $ | 1,948,968 |   |
| Total assets                                                                                 |       | 2,458,229                                                          |       | 2,352,550 |   | 2,227,575 |   | 2,059,557 |   | 1,907,265 |   |
| Total liabilities                                                                            |       | 1,580,293                                                          |       | 1,419,673 |   | 1,185,741 |   | 1,095,396 |   | 1,218,751 |   |
| Minority interests                                                                           |       | 17,125                                                             |       | 15,433 |   | 85,052 |   | 85,553 |   | 77,952 |   |
| Redeemable equity                                                                            |       | —                                                             |       | — |   | — |   | — |   | 123,094 |   |
| Shareholders’  equity                                                                   |       | 860,811                                                            |       | 917,444 |   | 956,782 |   | 878,608 |   | 487,468 |   |
| **OTHER DATA:**                                                                              |       |                                                               |       |   |   |   |   |   |   |   |   |
| # of shopping  centers (at end of period)                                                    |       | 171                                                                |       | 164 |   | 162 |   | 152 |   | 142 |   |
| Gross leasable  area of shopping centers (sq. ft. at end of period, in thousands)(1)         |       | 28,734                                                             |       | 28,004 |   | 27,502 |   | 25,925 |   | 23,154 |   |
| % leased (at end  of period)                                                                 |       | 92                                                                 | %          | 93 | % | 92 | % | 93 | % | 93 | % |
| Total portfolio  net operating income(2)                                                     |       | $                                                                  | 248,501    |   | $ | 231,020 |   | $ | 211,242 |   | $ | 194,814 |   | $ | 177,113 |   |
| Funds from  Operations(3)                                                                    |       | $                                                                  | 129,766    |   | $ | 123,523 |   | $ | 112,207 |   | $ | 66,003 |   | $ | 27,460 |   |
| Cash flow from  operating activities                                                         |       | $                                                                  | 124,361    |   | $ | 123,042 |   | $ | 148,688 |   | $ | 121,172 |   | $ | 78,726 |   |
| Cash flow from  investing activities                                                         |       | $                                                                  | (169,705   | ) | $ | (122,115 | ) | $ | (165,131 | ) | $ | (129,257 | ) | $ | (39,216 | ) |
| Cash flow from  financing activities                                                         |       | $                                                                  | 38,624     |   | $ | 329 |   | $ | 20,440 |   | $ | 3,430 |   | $ | (37,450 | ) |

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(1)    Represents the total GLA of all Company-owned andoperated shopping center square footage.

(2)    Net operating income, or “NOI,” is a non-GAAP financialmeasure equal to net income available to common shareholders (the most directlycomparable GAAP financial measure), plus accretion of redeemable equity,preferred stock distributions, minority interest in Bradley Operating LimitedPartnership, net derivative losses (gains), losses (gains) on investments insecurities, losses from prepayment of debt, general and administrative expense,depreciation and amortization, and interest expense, less income fromdiscontinued operations, gains (losses) on sales of real estate investments andmarketable securities, and interest, other and joint venture fee income. We useNOI internally, and believe NOI provides useful information to investors, as a performancemeasure in evaluating the operating performance of our real estate assets. Thisis because NOI reflects only those income and expense items that are incurredat the property level and excludes certain components from net income in orderto provide results that more closely relate to a property’s results ofoperations. Our presentation of NOI may not be comparable to NOI reported byother REITs that define NOI differently. We believe that in order to obtain aclear understanding of our operating results, NOI should be examined inconjunction with net income as presented in our consolidated financialstatements. NOI should not be considered as an alternative to net income as anindication of our performance or to cash flows as a measure of liquidity orability to make distributions.

(3)    We calculate Funds From Operations, or “FFO,” inaccordance with the best practices described in the April 2001 NationalPolicy Bulletin of the National Association of Real Estate Investment Trusts,referred to as NAREIT, and NAREIT’s 1995 White Paper on Funds from Operations.The White Paper defines FFO as net income (loss) (computed in accordance withGAAP), excluding gains (or losses) from extraordinary items and sales ofproperty, plus real estate related depreciation and amortization and afteradjustments for unconsolidated partnerships and joint ventures. Given thenature of our business as a real estate owner and operator, we believe that FFOis helpful to investors as a starting point in measuring our operationalperformance because it excludes various items included in net income that donot relate to, or are not indicative of, our operating performance, such asgains (or losses) from sales of real estate investments and depreciation andamortization, which can make periodic and peer analyses of operatingperformance more difficult. However, FFO (i) should not be considered asan alternative to net income (determined in accordance with GAAP) as anindicator of our financial performance, (ii) is not an alternative to cashflow from operating activities (determined in accordance with GAAP) as ameasure of our liquidity, and (iii) is not indicative of funds availableto fund our cash needs, including our ability to make distributions. Ourcomputation of FFO may differ from the methodology utilized by other equityREITs to calculate FFO and, therefore, may not be comparable to other REITs.

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**Item7:**                       Management’sDiscussion and Analysis of Financial Condition and Results of Operations

*The following discussion should be read in conjunctionwith the selected financial data and the historical consolidated financialstatements and related notes thereto.*

**Restatement Summary**

In November 2005, we amended and restated ourfinancial statements and other financial information for the years ended December 31,2004 and 2003, and for each of the quarters therein, as well as for thequarterly periods ended March 31 and June 30, 2005. Those amendmentswere made to correct an error pertaining to the unrecorded effects of certainstock options previously granted to Thomas C. Prendergast, our Chairman,President and Chief Executive Officer.

In 2000, Heritage enteredinto an employment agreement with Mr. Prendergast, which provides forHeritage to make annual grants to Mr. Prendergast of stock options. Theagreement also provided for Heritage to reimburse Mr. Prendergast in cashfor any taxes he would have incurred in connection with the vesting andexercise of those stock options. In October 2005, we discovered that thetax-offset payment provision in respect of Mr. Prendergast’s stock optionsshould have been accounted for as a liability in our financial statements fromthe moment the fair market value of our stock exceeded the exercise price ofthe options. Additionally, this liability also should have caused the intrinsicvalue of Mr. Prendergast’s stock options to be expensed on a variablebasis.

To correct the error, werestated our financial statements for the years ended December 31, 2004and 2003, and the quarterly periods ended March 31, 2005 and June 30,2005, to record a liability and to recognize compensation expense, a componentof general and administrative expense, associated with the tax-offsetprovision, and filed on November 9, 2005 an amendment to our Annual Reporton Form 10-K/A for the fiscal year ended December 31, 2004 torestate our previously issued audited financial statements for the fiscal yearsended December 31, 2004 and 2003, and an amendment to our QuarterlyReports on Form 10-Q/A for the quarterly periods ended March 31,2005 and June 30, 2005, to restate our unaudited quarterly financialstatements for those quarterly periods.

On December 30, 2005,Mr. Prendergast’s employment agreement was amended to eliminate thetax-offset provision in respect of his stock options. In consideration for hisagreement to eliminate the provision, Mr. Prendergast received a one-timecash payment of $6.4 million. As a result of this amendment, in fiscal periodsending after December 31, 2005, we are no longer required to record aliability relating to the tax-offset provision on these stock options and Mr. Prendergast’sstock options are no longer subject to variable accounting treatment. SeeNote 2 to the Consolidated Financial Statements of this Form 10-Kfor a summary of the restatement and the accounting impact of the eliminationof the tax-offset provision.

**Overview**

We are a fully integrated,self-administered and self-managed real estate investment trust, or “REIT.” Weare one of the nation’s largest owners of neighborhood and community shoppingcenters. As of December 31, 2005, we had a shopping center portfolioconsisting of 171 shopping centers, located in 30 states and totalingapproximately 35.0 million square feet of GLA, of which approximately28.7 million square feet was Company-owned GLA. Our shopping centerportfolio was approximately 92.4% leased as of December 31, 2005.

Our operating strategy isto own (directly or indirectly through joint ventures) and manage a qualityportfolio of community and neighborhood shopping centers that will providestable cash flow and investment returns. Our focus is to own primarily grocer-and multi-anchored centers with a diverse tenant base in attractive geographiclocations with strong demographics and growth prospects. We derive 

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substantiallyall of our revenues from rentals and recoveries received from tenants underexisting leases on our properties. Our operating results therefore dependprimarily on our tenants’ ability to pay rent.

Generally, we do notexpect our net operating income to deviate significantly in the short-term.This is because our leases with our tenants provide us a stable cash flow overthe long-term. In addition, other than in circumstances such as higher thananticipated snow removal costs, utility expenses or real estate taxes, ouroperating expenses generally remain predictable.

However, as an owner ofcommunity and neighborhood shopping centers, our performance is linked toeconomic conditions in the retail industry in those markets where our centersare located. The retail sector continues to change as a result of industryconsolidation. This consolidation has created an excess of available retailspace and increased competition for that space. We believe the nature of theproperties that we own and invest in, primarily grocer- and multi-anchoredneighborhood and community shopping centers in attractive markets with strongeconomic and demographic characteristics and growth prospects, provides arelatively stable revenue flow in uncertain economic times, as these propertiesare more resistant to economic down cycles. This stability is due to the factthat consumers still need to purchase food and other goods found at grocers andother retailers, even in difficult economic times.

In the face of thesechallenging market conditions, we follow a dual growth strategy. The first partof our growth strategy is to focus on increasing our internal growth byleveraging our existing tenant relationships to improve the performance of ourexisting shopping center portfolio.  In2006, we anticipate that we will experience lower growth in net operatingincome within our existing portfolio than in the past two years as a result ofhigher vacancy and lower rental growth rates at certain properties locatedprimarily in the Midwest.

We believe that some ofthese properties continue to meet our long-term ownership criteria. We expectsignificant leasing activity to occur at these properties in 2006, althoughthis activity is not likely to have a positive impact on our performance untillate 2006 or early 2007. We also may incur higher revenue enhancing capitalexpenditures, such as tenant improvements and leasing commissions, than inprior periods, as we re-let vacant space at these centers.

In other instances, we have concluded that someproperties do not meet our long-term ownership criteria as a result of theirlocation, size or tenant mix. In the near future, we intend to dispose of theseproperties, allowing us to improve the overall quality of our portfolio andtake advantage of favorable market conditions. In January 2006, wefinalized an agreement to sell eight such properties located in Nebraska andSouth Dakota, and we are actively working toward disposing of other assets thatfit this category.

The disposition ofshopping center properties pursuant to our capital recycling program may leadto short-term decreases in our net income. However, we intend to offset anysuch decreases by re-investing the cash proceeds received in connection withsuch sales. We may use these cash proceeds to grow our existing portfolioeither by direct acquisition or through future joint ventures or to funddevelopment or redevelopment commitments. We may also use those proceeds toimprove the quality of our balance sheet, such as by reducing our outstandingindebtedness, or to buyback shares of our common stock pursuant to our stockbuyback program.

In connection with ourcapital recycling program, we may sell a property at a price that is less thanthe net book value of that property in our financial statements. In connectionwith a sale of a property, we may also prepay existing mortgage indebtedness ona property and incur a prepayment penalty in connection with that prepayment. Inthose circumstances, we may incur significant losses and expenses that couldnegatively and materially impact our financial results.

The second part of ourgrowth strategy is to focus on achieving external growth through the expansionof our portfolio. We continue to pursue targeted acquisitions of primarilygrocer- and multi-anchored neighborhood and community shopping centers inattractive markets with strong economic and 

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demographiccharacteristics. In recent years, the market for acquisitions has beenparticularly competitive with a greater number of potential buyers pursuingproperties. The low cap rate environment and reduced costs of funds havefurther served to dramatically increase prices paid for shopping centerproperties, which has adversely affected our ability to acquire new properties.We expect these conditions to persist for the foreseeable future.

To increase access topotential acquisitions and alternative sources of capital to fund futureacquisitions, we have been pursuing, and will continue to pursue, joint venturearrangements with institutional investors and third party developers. In February 2006,we reached a tentative agreement to establish a capital raising joint ventureplatform involving a contribution of certain of our existing assets, in returnfor cash and a membership interest in the joint venture. If completed, this jointventure will enable us to increase our sources of capital and our ability topursue high quality acquisitions. The contribution of shopping centerproperties to the joint venture will represent a disposition of property, whichmay lead to short-term decreases in our net operating income. We expect that asubstantial amount of our future acquisition activity will be completed throughjoint ventures.

During the past few years,as reflected below, our general and administrative expenses have been higherthan anticipated as a result of increased staffing, various businessinitiatives aimed at future growth, the increased costs associated with being apublic company, and unanticipated severance costs. In particular, we haveincurred higher costs associated with our review of our internal controls toensure compliance with Section 404 of the Sarbanes-Oxley Act.

As described above under “**Restatement Summary**”, we have also incurred additionalunanticipated compensation expense to reflect the effect of the presence andelimination of the tax-offset provision contained in the employment agreementof Thomas C. Prendergast, our Chairman, President and Chief Executive Officer,relating to certain stock options granted to Mr. Prendergast. In addition,we have incurred significant costs associated with the restatement of ourhistorical financial statements relating to the tax-offset provision, includingunanticipated professional fees (primarily, legal and accounting) and Board meetingcosts.

While there can be noassurance, in 2006, we anticipate a significant reduction in our general andadministrative expenses, particularly in the amount of incentive compensationto be paid to our senior management.

We currently expect toincur additional debt in connection with future acquisitions. As of December 31,2005, we had $1.5 billion of indebtedness, of which approximately$828.0 million was unsecured indebtedness. Although we expect to assumeadditional secured debt in connection with acquisitions, particularlyacquisitions made through joint ventures, we intend to finance our operationsand growth in the future primarily through borrowings under our line of creditfacility, unsecured private or public debt offerings or by additional equityofferings.

**Critical Accounting Policies**

We have identified the following critical accountingpolicies that affect our more significant judgments and estimates used in thepreparation of our consolidated financial statements. The preparation of ourconsolidated financial statements in conformity with GAAP requires us to makejudgments and estimates that affect the reported amounts of assets andliabilities, revenues and expenses, and related disclosures of contingentassets and liabilities. As a result, these estimates are subject to a degree ofuncertainty.

On an ongoing basis, weevaluate our estimates, including those related to revenue recognition and theallowance for doubtful accounts receivable, real estate investments and assetimpairment, and derivatives used to hedge interest-rate and credit rate risks.We state these critical accounting policies in the notes to our consolidatedfinancial statements and at relevant sections in this discussion and analysis.Our estimates are based on information that is currently available to us and onvarious other assumptions 

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that webelieve are reasonable under the circumstances. Actual results could differfrom those estimates and those estimates could be different under varyingassumptions or conditions.

*Revenue Recognition*

Rental income with scheduledrent increases is recognized using the straight-line method over the term ofthe leases commencing when the tenant takes possession of the space. Theaggregate excess of rental revenue recognized on a straight-line basis overcash received under applicable lease provisions is included in accountsreceivable. In addition, leases for both retail and office space generallycontain provisions under which the tenants reimburse us for a portion ofproperty operating expenses and real estate taxes incurred by us, requiring usto estimate the amount of revenue from these recoveries. Such recoveriesrevenue is recorded based on management’s estimate of its recovery of certainoperating expenses and real estate tax expenses, pursuant to the termscontained in related leases. In addition, certain of our operating leases forretail space contain contingent rent provisions under which tenants arerequired to pay a percentage of their sales in excess of a specified amount asadditional rent. We do not recognize this contingent rental income until thosetenants meet their specified sales targets, thereby triggering the additionalrent obligations.

We must estimate theuncollectibility of our accounts receivable related to minimum rent, deferredrent, expense reimbursements and other revenue or income. We specificallyanalyze accounts receivable and historical bad debts, tenant concentrations,tenant creditworthiness, current economic trends and changes in our tenantpayment terms when evaluating the adequacy of the allowance for doubtfulaccounts receivable. These estimates have a direct impact on our net income,because a higher bad debt allowance would result in lower net income.

*Real EstateInvestments*

When we formed in July 1999, contributed realestate investments were recorded at the carry-over basis of our predecessor,which was the fair market value of the assets in conformity with GAAPapplicable to pension funds. Subsequent acquisitions of real estateinvestments, including those acquired in connection with our acquisition ofBradley Real Estate, Inc. in September 2000 and other acquisitionssince our formation, have been, and will continue to be, recorded at cost.Expenditures that substantially extend the useful life of a real estateinvestment are capitalized. Expenditures for maintenance, repairs andbetterments that do not materially extend the useful life of a real estateinvestment are expensed as incurred. Thus, we must make judgments as to whetheran expenditure will materially extend the useful life of a real estateinvestment and be capitalized, or rather, immediately expensed as a repair.

Theprovision for depreciation and amortization has been calculated using thestraight-line method over the following estimated useful lives:

| Land improvements           |   | 10-15  years                                     |   |
|-----------------------------|--------|--------------------------------------------------|--------|
| Buildings and  improvements |   | 20-39  years                                     |   |
| Tenant improvements         |   | Shorter of useful life  or term of related lease |   |

 

We are required to make subjective assessments as tothe useful lives of our properties for purposes of determining the amount ofdepreciation 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 toshorten the expected useful life of our properties or improvements, we woulddepreciate them over fewer years, resulting in higher depreciation expense andlower net income on an annual basis during these periods.

We apply Statement ofFinancial Accounting Standards (“SFAS”) No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets*, to recognize and measure impairment of long-livedassets. We review each real estate investment for impairment whenever events orcircumstances indicate that the 

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carryingvalue of a real estate investment may not be recoverable. The review ofrecoverability is based on an estimate of the future undiscounted cash flows,excluding interest charges, expected to result from the real estate investment’suse and eventual disposition. These cash flows consider factors such asexpected future operating income, trends and prospects, as well as the effectsof leasing demand, competition and other factors. If impairment exists due tothe inability to recover the carrying value of a real estate investment, animpairment loss is recorded to the extent that the carrying value exceeds estimatedfair market value, resulting in a lower net income. No such impairment losseshave been recognized to date.

Real estate investmentsheld for sale are carried at the lower of carrying amount or fair value, lesscost to sell. Depreciation and amortization are suspended during the periodheld for sale.

We apply SFAS No. 141,*Business Combinations*, toproperty acquisitions. Accordingly, the fair value of the real estate acquiredis allocated to the acquired tangible assets, and identified intangible assetsand liabilities, consisting of the value of above-market and below-marketleases, other value of in-place leases and value of tenant relationships, basedin each case on their fair values.

The fair value of thetangible assets of an acquired property is determined by valuing the propertyas if it were vacant, and the “as-if-vacant” value is then allocated based onmanagement’s determination of the relative fair values of these assets.Management determines the as-if-vacant fair value of a property using methodssimilar to those used by independent appraisers. Factors considered bymanagement in performing these analyses include an estimate of carrying costsduring the expected lease-up periods considering current market conditions andcosts to execute similar leases. In estimating carrying costs, managementincludes real estate taxes, insurance and other operating expenses andestimates of lost rental revenue during the expected lease-up periods based oncurrent market demand. Management also estimates costs to execute similarleases including leasing commissions, legal and other related costs. The “as-if-vacant”value is then allocated among land, land improvements, building, and buildingimprovements based on the Company’s estimate of replacement costs.

In allocating the fairvalue of the identified intangible assets and liabilities of an acquiredproperty, above-market and below-market in-place lease values are recordedbased on the present value (using an interest rate that reflects the risksassociated with the leases acquired) of the difference between (i) thecontractual amounts to be paid pursuant to the in-place leases and (ii) management’sestimate of fair market lease rates for the corresponding in-place leases,measured over a period equal to the remaining non-cancelable term of the lease.The capitalized above-market lease values are amortized as a reduction ofrental income over the remaining non-cancelable terms of the respective leases.The capitalized below-market lease values are amortized as an increase torental income over the initial term and any fixed rate renewal periods in therespective leases.

The aggregate value of other acquired intangibleassets, consisting of in-place leases and tenant relationships, is measured bythe excess of (i) the purchase price paid for a property after adjustingexisting in-place leases to market rental rates over (ii) the estimatedfair value of the property as if vacant, determined as set forth above. Thisaggregate value is allocated between in-place lease values and tenantrelationships, if any, based on management’s evaluation of the specificcharacteristics of each tenant’s lease; however, the value of tenantrelationships has not been separated from in-place lease value for theadditional interests in real estate entities because such value and its impacton amortization expense is estimated to be immaterial for these particularacquisitions. Should future acquisitions of properties result in allocatingmaterial amounts to the value of tenant relationships, an amount would beseparately allocated and amortized over the estimated life of the relationship.The value of in-place leases exclusive of the value of above-market andbelow-market in-place leases is amortized to expense over the remaining non-cancelableperiods of the respective leases. If a lease were to be terminated prior to itsstated expiration, all unamortized amounts relating to that lease would bewritten off.

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*Investments in Joint Ventures*

Upon entering into a jointventure agreement, the Company assesses whether or not the joint venture isconsidered a variable interest entity in accordance with Financial AccountingStandards Board (“FASB”) Interpretation No. 46R, *Consolidation of Variable Interest Entities*(“FIN 46R”). As of December 31, 2005, the Company had one investment in ajoint venture that is a variable interest entity of which the Company hasdetermined that it is the primary beneficiary, as defined by FIN 46R. Thisinvestment is therefore consolidated in the accompanying consolidated financialstatements of the Company included in Item 8 of this Annual Report.

The Company accounts forits investments in joint ventures that are not deemed to be variable interestentities pursuant to Accounting Principles Board (“APB”) No. 18, *The Equity Method of Accounting for Investments inCommon Stock*and**Statement of Position No. 78-9,*Accounting for Investments in Real EstateVentures* (“SOP No. 78-9”). As of December 31, 2005,the Company accounted for its two unconsolidated joint ventures under theequity method of accounting, because the Company does not control theseentities, despite having the ability to exercise significant influence overthem. These investments were recorded initially at cost, as Investments inUnconsolidated Joint Ventures, and subsequently adjusted for an allocation ofequity in earnings, plus cash contributions, and less cash distributions. Underthe equity method of accounting, the net equity investment of the Company isreflected on the consolidated balance sheet, and the Company’s allocation ofnet income or loss from the joint ventures is included on the consolidatedstatements of operations as Equity in (Loss) Income From Unconsolidated JointVentures. The Company’s allocation of joint venture income or loss follows thejoint venture’s distribution priorities. In accordance with the provisions ofSOP No. 78-9, the Company recognizes fees received from jointventures relating solely to the extent of the outside partner’s interest. Suchfees are classified on the consolidated statements of operations as Interest,Other, and Joint Venture Fee Income.

*Hedging Activities*

From time to time, we usederivative financial instruments to limit our exposure to changes in interestrates. During 2005, we entered into forward-starting interest rate swaps tomitigate the risk of changes in forecasted interest payments on $150 million offorecasted issuance of long-term debt. These swap agreements were designated ascash flow hedges. We were not subject to any hedging agreements with respect toour floating rate debt as of December 31, 2004. We occasionally usederivative financial instruments to manage, or hedge, interest rate risksrelated to our borrowings, from lines of credit to medium and long-termfinancings. We require that hedging derivative instruments effectively reducethe interest rate risk exposure that they are designed to hedge. We do not usederivatives for trading or speculative purposes and only enter into contractswith major financial institutions based on their credit rating and otherfactors.

If interest rateassumptions and other factors used to estimate a derivative’s fair value ormethodologies used to determine hedge effectiveness were different, amountsreported in earnings and other comprehensive income and losses expected to bereclassified into earnings in the future could be affected.

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**Results of Operations**

Between January 1,2003 and December 31, 2005, we increased our total portfolio of properties(after reflecting dispositions) (“Total Portfolio”) from 166 properties to 174properties and from 26.2 million Company-owned GLA to 29.0 millionCompany-owned GLA. As a result of this growth of our Total Portfolio, thefinancial data presented below show significant changes in revenues andexpenses from period-to-period attributable to these acquisitions. In order toprovide an additional meaningful comparison of results for the years endedDecember 31, 2005, 2004, and 2003, we present below changes in operatingresults with respect to those properties that we owned for each period compared(we refer to this comparison as our “Same Property Portfolio” for theapplicable period) as well as with respect to our Total Portfolio.

In addition, amounts classified as discontinuedoperations in the accompanying consolidated financial statements are excludedfrom the Total Portfolio information. In 2004, we completed the partialdisposition of a property. Amounts related to the portion of that propertydisposed, consisting of $0.6 million  forthe year ended December 31, 2004, are included in the Total Portfolio asthe sale of the portion of the property was not considered to be a discontinuedoperation. However those operations are excluded from the Same PropertyPortfolio.

As discussed in the beginning of this section underthe heading, “**Restatement Summary**,”we previously restated our financial statements and other financial informationfor the years ended December 31, 2004 and 2003, and for each of thequarters in those years, as well as the quarterly periods endedMarch 31, 2005 and June 30, 2005. The information below reflectsthe impact of that restatement.

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*Comparison of the yearended December 31, 2005 to the year ended December 31, 2004*

Thefollowing table shows selected operating information for our Total Portfolioand the 163 properties acquired prior to January 1, 2004 that remained inthe Total Portfolio through December 31, 2005, which constitute the SameProperty Portfolio for the years ended December 31, 2005 and 2004 (inthousands):

| ** **                                                      | ** ** | **Same Property Portfolio** | ** ** | **Total Portfolio** | ** ** |
|-----------------------------------------------------------------|------------|---------------------------------------|------------|--------------------------|------------|
| ** **                                                      | ** ** | **2005**                              | ** ** | **2004**                 | ** ** | **Increase/  (Decrease)** | ** ** | **%  Change** | ** ** | **2005** | ** ** | **2004** | ** ** | **Increase/  (Decrease)** | ** ** | **%  Change** | ** ** |
| Revenue:                                                        |       |                                  |       |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rentals                                                         |       | $                                     | 243,171    |                     | $          | 241,721 |   |   | $ | 1,450 |   |   |   | 0.6 | % |   | $ | 260,498 |   | $ | 246,110 |   |   | $ | 14,388 |   |   |   | 5.8 | % |   |
| Percentage rent                                                 |       | 3,257                                 |       | 3,671                    |       |   | (414 | ) |   |   | (11.3 | )% |   | 3,257 |   | 3,828 |   |   | (571 | ) |   |   | (14.9 | )% |   |
| Recoveries                                                      |       | 79,237                                |       | 73,587                   |       |   | 5,650 |   |   |   | 7.7 | % |   | 83,451 |   | 74,422 |   |   | 9,029 |   |   |   | 12.1 | % |   |
| Other property                                                  |       | 3,111                                 |       | 1,517                    |       |   | 1,594 |   |   |   | 105.1 | % |   | 3,139 |   | 1,587 |   |   | 1,552 |   |   |   | 97.8 | % |   |
| Total revenue                                                   |       | 328,776                               |       | 320,496                  |       |   | 8,280 |   |   |   | 2.6 | % |   | 350,345 |   | 325,947 |   |   | 24,398 |   |   |   | 7.5 | % |   |
| Expenses:                                                       |       |                                  |       |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property operating  expenses                                    |       | 47,064                                |       | 45,233                   |       |   | 1,831 |   |   |   | 4.0 | % |   | 49,910 |   | 45,954 |   |   | 3,956 |   |   |   | 8.6 | % |   |
| Real estate taxes                                               |       | 48,740                                |       | 48,378                   |       |   | 362 |   |   |   | 0.7 | % |   | 51,934 |   | 48,973 |   |   | 2,961 |   |   |   | 6.0 | % |   |
| Net operating  income (*)                                       |       | $                                     | 232,972    |                     | $          | 226,885 |   |   | $ | 6,087 |   |   |   | 2.7 | % |   | 248,501 |   | 231,020 |   |   | 17,481 |   |   |   | 7.6 | % |   |
| Add:                                                            |       |                                  |       |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest, other,  and joint venture fee income                  |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 1,071 |   | 993 |   |   | 78 |   |   |   | 7.9 | % |   |
| Gain on sale of  marketable securities                          |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 8 |   | 529 |   |   | (521 | ) |   |   | (98.5 | )% |   |
| Gain on sale of  real estate investment                         |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | — |   | 28 |   |   | (28 | ) |   |   | (100.0 | )% |   |
| Equity in (loss)  income from unconsolidated joint ventures     |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | (77 | ) | 86 |   |   | (163 | ) |   |   | (189.5 | )% |   |
| Income from  discontinued operations                            |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | — |   | 4,654 |   |   | (4,654 | ) |   |   | (100.0 | )% |   |
| Deduct:                                                         |       |                                  |       |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                                  |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 100,411 |   | 88,678 |   |   | 11,733 |   |   |   | 13.2 | % |   |
| Interest                                                        |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 86,435 |   | 77,269 |   |   | 9,166 |   |   |   | 11.9 | % |   |
| General and  administrative                                     |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 32,828 |   | 29,668 |   |   | 3,160 |   |   |   | 10.7 | % |   |
| Income allocated  to exchangeable limited partnerships units    |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 241 |   | 206 |   |   | 35 |   |   |   | 17.0 | % |   |
| Income allocated  to Series B & C Preferred Units |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | — |   | 2,176 |   |   | (2,176 | ) |   |   | (100.0 | )% |   |
| Net income  attributable to common shareholders                 |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | $ | 29,588 |   | $ | 39,313 |   |   | $ | (9,725 | ) |   |   | (24.7 | )% |   |

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*                      For adetailed discussion of net operating income (“NOI”), including the reasonsmanagement believes NOI is useful to investors, and a reconciliation of NOI toa GAAP measure, see page 65.

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The following discussionof our results of operations for the years ended December 31, 2005 and2004 relates to the Total Portfolio, except where otherwise noted.

**Revenue**

*RentalRevenue.**  *Rentalrevenue, including termination fee income, increased primarily as a result of:

·       anincrease of approximately $13.3 million due to eleven properties acquired afterJanuary 1, 2004, partially offset by a $0.4 million decrease related tothe 2004 partial property disposition; and

·       ona Same Property Portfolio basis, an increase of $1.5 million primarily as aresult of an increase in minimum rent attributable to increased occupancy andleases and rollovers of existing tenants at higher rental rates and a $0.2million increase in temporary income due to rent payments from seasonaltenants. The increase in rental revenue was partially offset by a decrease of$1.7 million in termination fee income and an increase in the provision fordoubtful accounts of $0.8 million due to increased reserves associated withhigher outstanding accounts receivable balances.

*Percentage Rent.**  *Percentage rent decreased primarilyas a result of:

·       adecrease of $0.2 million related to the 2004 partial property disposition; and

·       ona Same Property Portfolio basis, a decrease of $0.4 million due to $0.1 millionof  renewed leases no longer containingpercentage rent clauses and lower sales volume and higher sales breakpoints forleases with significant percentage rent provisions.

*Recoveries Revenue.**  *Recoveries revenue increasedprimarily due to the following:

·       anincrease of $3.4 million due to eleven properties acquired after January 1,2004; and

·       ona Same Property Portfolio basis, an increase of $5.7 million primarily due toan increase in property operating recovery income of $3.5 million and realestate tax recovery income of $2.7 million partially offset by an increasein the provision for doubtful accounts of $0.3 million. The increase inproperty operating recovery income was a result of a $1.8 million increasein property operating expenses and an increase in recovery rates due to higheroccupancy of rent paying tenants. The increase in real estate tax recoveryincome was a result of a $1.5 million increase in real estate tax expense aswell as an increase in overall recovery rates due to higher occupancy.

*Other Property Income.**  *Other property income increasedprimarily as a result of an additional $1.1 million of tax incentivefinancing income received at one of our shopping centers and an additional $0.4million received in settlement of prior bankruptcies in excess of amountspreviously written off.

**Expenses**

*Property OperatingExpenses.**  *Propertyoperating expenses increased due to the following:

·       anincrease of $2.1 million due to eleven properties acquired after January 1,2004; and

·       ona Same Property Portfolio basis, an increase of $1.8 million primarily due to a$1.9 million increase in snow removal costs, $0.3 million increase in cleaningcosts, and $0.3 million increase in utility costs, partially offset by a$0.3 million decrease in insurance costs and a $0.3 million decrease inmaintenance and supervision expense, due to lower bonus expense and a greaternumber of properties to share in the expense.

*Real Estate Taxes.**  *Real estate taxes increasedprimarily due to the following:

·       anincrease of $2.6 million due to eleven properties acquired after January 1,2004; and

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·       ona Same Property Portfolio basis, an increase of $0.4 million primarily due toincreased valuations assessed for certain properties primarily located in theMidwest offset by an increase in capitalized real estate tax expense associatedwith redevelopment projects.

**Other**

*Interest,other, and joint venture fee income.*   Interest,other, and joint venture fee income increased primarily due to increasedinterest income due to higher cash balances outstanding in 2005.

*Gainon Sale of Marketable Securities.**  *Gain on sale of marketablesecurities decreased due to the Company having sold fewer marketable securitiesin the year ended December 31, 2005.

*Gainon Sale of Real Estate Investment.**  *Gain on sale of real estateinvestment decreased as the result of the Company not having sold any realestate investments during the year ended December 31, 2005.

*Incomefrom Discontinued Operations.**  *Income from discontinued operationsdecreased as a result of the Company not having disposed of any propertiesduring the year ended December 31, 2005, as compared to three propertiesdisposed of during fiscal year 2004, excluding the partial disposition, whichwas not considered a discontinued operation.

*Depreciationand Amortization.**  *Expensesattributable to depreciation and amortization increased due to depreciationattributable to new properties acquired and depreciation of new capital andtenant improvements implemented within the Same Property Portfolio.

*InterestExpense.**  *Interestexpense increased $9.2 million primarily as a result of an increase in overallindebtedness of $164.0 million from December 31, 2004 to December 31,2005. This increase was primarily due to indebtedness incurred in connectionwith the acquisition of properties. Overall, the weighed average effectiveinterest rates remained relatively constant in 2005 compared with 2004. TheCompany’s weighted average effective interest rate was 6.18% at December 31,2005 as compared with 6.19% at December 31, 2004.

*Generaland Administrative Expenses.**  *Our general and administrative expenses, consistingprimarily of salaries, bonuses, employee benefits, insurance and othercorporate-level expenses, increased $3.2 million, which included $0.8 millionof professional costs, primarily legal and accounting, incurred in 2005 due tothe restatement of prior financial statements, partially offset by a decreaseof $1.3 million in stock option expense related to variable accounting ofcertain stock options (as discussed in the “**RestatementSummary**” above). The tax-offset provision and intrinsic value ofthese stock options decreased $2.9 million in the year ended December 31,2005 compared with December 31, 2004 due to a greater decrease in theCompany’s stock price during that time period. This decrease was partiallyoffset by an increase in expense of $1.6 million related to the payment andrelated taxes associated with amending the employment agreement to eliminatethe tax-offset provision in respect of these stock options.

After considerationof the non-recurring items related to the restatement of prior financialstatements as described above, the net $3.7 million increase in general andadministrative expenses is primarily due to:

·       anincrease of $1.9 million primarily due to an increase in stock compensation and$0.5 million due to higher payroll costs associated with a larger workforce. Theincrease in stock compensation expense is primarily due to the amortization offour grants of performance based shares in the year ended December 31,2005 as compared with the amortization of three grants of performance basedshares in the year ended December 31, 2004;

·       anincrease in office related costs of $0.6 million primarily due to increasedrecruiting costs and higher office expenses due to a larger workforce;

·       anincrease in advertising and related costs of $0.4 million primarily due toincreased corporate promotions and other advertising costs; and

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·       anincrease of $0.3 million in board compensation due to increasedcompensation to board members and greater number of meetings of the board ofdirectors and board committees.

*Equityin (Loss) Income from Unconsolidated Joint Ventures.**  *Equity in (loss) income fromunconsolidated joint ventures decreased $0.2 million due to a net lossallocated to the Company from its unconsolidated joint ventures.

*Incomeallocated to exchangeable limited partnerships units.**  *Income allocated to exchangeablelimited partnership units increased primarily as a result of a higherallocation due to the increased units issued by the Company in connection withthe acquisition of properties in the fourth quarter of 2004 and the thirdquarter of 2005.

*Income allocated to Series B andC Preferred Units.**  *Incomeallocated to Series B and C Preferred Units decreased as a result of theCompany redeeming all Series B and C Preferred Units of Bradley OP in thefirst and third quarters of 2004, respectively.

48

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*Comparison of theyear ended December 31, 2004 to year ended December 31, 2003*

Thetable below shows selected operating information for our Total Portfolio andthe 152 properties acquired prior to January 1, 2003 that remained in theTotal Portfolio through December 31, 2004, which constitute the SameProperty Portfolio for the years ended December 31, 2004 and 2003 (inthousands):

| ** **                                                      | ** ** | **Same Property Portfolio** | ** ** | **Total Portfolio** | ** ** |
|-----------------------------------------------------------------|------------|---------------------------------------|------------|--------------------------|------------|
| ** **                                                      | ** ** | **2004**                              | ** ** | **2003**                 | ** ** | **Increase/  (Decrease)** | ** ** | **%  Change** | ** ** | **2004** | ** ** | **2003** | ** ** | **Increase/  (Decrease)** | ** ** | **%  Change** | ** ** |
| Revenue:                                                        |       |                                  |       |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rentals                                                         |       | $                                     | 221,166    |                     | $          | 219,840 |   |   | $ | 1,326 |   |   |   | 0.6 | % |   | $ | 246,110 |   | $ | 226,757 |   |   | $ | 19,353 |   |   |   | 8.5 | % |   |
| Percentage rent                                                 |       | 3,779                                 |       | 3,971                    |       |   | (192 | ) |   |   | (4.8 | )% |   | 3,828 |   | 3,972 |   |   | (144 | ) |   |   | (3.6 | )% |   |
| Recoveries                                                      |       | 67,269                                |       | 63,956                   |       |   | 3,313 |   |   |   | 5.2 | % |   | 74,422 |   | 65,461 |   |   | 8,961 |   |   |   | 13.7 | % |   |
| Other property                                                  |       | 1,478                                 |       | 1,466                    |       |   | 12 |   |   |   | 0.8 | % |   | 1,587 |   | 1,476 |   |   | 111 |   |   |   | 7.5 | % |   |
| Total revenue                                                   |       | 293,692                               |       | 289,233                  |       |   | 4,459 |   |   |   | 1.5 | % |   | 325,947 |   | 297,666 |   |   | 28,281 |   |   |   | 9.5 | % |   |
| Expenses:                                                       |       |                                  |       |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property operating  expenses                                    |       | 41,109                                |       | 42,158                   |       |   | (1,049 | ) |   |   | (2.5 | )% |   | 45,954 |   | 43,102 |   |   | 2,852 |   |   |   | 6.6 | % |   |
| Real estate taxes                                               |       | 43,975                                |       | 42,312                   |       |   | 1,663 |   |   |   | 3.9 | % |   | 48,973 |   | 43,322 |   |   | 5,651 |   |   |   | 13.0 | % |   |
| Net operating  income (*)                                  |       | $                                     | 208,608    |                     | $          | 204,763 |   |   | $ | 3,845 |   |   |   | 1.9 | % |   | 231,020 |   | 211,242 |   |   | 19,778 |   |   |   | 9.4 | % |   |
| Add:                                                            |       |                                  |       |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest, other,  and joint venture fee income                  |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 993 |   | 495 |   |   | 498 |   |   |   | 100.6 | % |   |
| Gain on sale of  marketable securities                          |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 529 |   | — |   |   | 529 |   |   |   | 100.0 | % |   |
| Gain on sale of  real estate investment                         |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 28 |   | — |   |   | 28 |   |   |   | 100.0 | % |   |
| Equity in income  from unconsolidated joint ventures            |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 86 |   | — |   |   | 86 |   |   |   | 100.0 | % |   |
| Income from  discontinued operations                            |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 4,654 |   | 4,837 |   |   | (183 | ) |   |   | (3.8 | )% |   |
| Deduct:                                                         |       |                                  |       |                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                                  |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 88,678 |   | 78,548 |   |   | 10,130 |   |   |   | 12.9 | % |   |
| Interest                                                        |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 77,269 |   | 69,415 |   |   | 7,854 |   |   |   | 11.3 | % |   |
| General and  administrative                                     |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 29,668 |   | 25,198 |   |   | 4,470 |   |   |   | 17.7 | % |   |
| Income allocated  to exchangeable limited partnerships units    |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 206 |   | 214 |   |   | (8 | ) |   |   | (3.7 | )% |   |
| Income allocated  to Series B & C Preferred Units |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | 2,176 |   | 6,656 |   |   | (4,480 | ) |   |   | (67.3 | )% |   |
| Net income  attributable to common shareholders                 |       |                                  |       |                     |       |   |   |   |   |   |   |   |   | $ | 39,313 |   | $ | 36,543 |   |   | $ | 2,770 |   |   |   | 7.6 | % |   |

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*                      For adetailed discussion of net operating income (“NOI”), including the reasonsmanagement believes NOI is useful to investors, and a reconciliation of NOI toa GAAP measure, see page 65.

The following discussion of our results of operationsfor the years ended December 31, 2004 and 2003 relates to the TotalPortfolio, except where otherwise noted.

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**Revenue**

*Rental Revenue.**  *Rental revenue, includingtermination fee income, increased primarily as a result of:

·       anincrease of approximately $18.2 million due to fifteen properties acquiredafter January 1, 2003, partially offset by a $0.2 million decrease relatedto the 2004 partial property disposition; and

·       ona Same Property Portfolio basis, an increase of $1.5 million, primarily as aresult of  a $0.5 million increase inminimum rent, partially offset by a $0.8 million decrease in termination feeincome net of termination buyout costs. Minimum rent increased as a result ofnew leases and rollovers of existing tenants at higher rental rates. Althoughour weighted average actual occupancy on a same property basis declined to92.2% as of December 31, 2004 from 92.7% as of December 31, 2003, thenew leasing activity offset any loss of rental income related to the decreasein weighted average occupancy.  Theincrease in rental revenue also included a $1.6 million decrease in theprovision for doubtful accounts. A lower provision was required for the yearended December 31, 2004 as compared with the year ended December 31,2003 as a result of a decrease in large tenant bankruptcies and recoveries ofamounts previously written off.

*Percentage Rent.**  *Percentage rent decreased primarilyas a result of:

·       adecrease of $0.1 million related to the 2004 partial property disposition; and

·       ona Same Property Portfolio basis, a decrease of $0.3 million primarily due to a$0.2 million decrease related to the loss of four anchor tenants withsignificant percentage rent components as well as the uncertainty ofrealization that certain tenant sales thresholds have been met.

*Recoveries Revenue.**  *Recoveries revenue increasedprimarily due to the following:

·       anincrease of $5.6 million due to fifteen properties acquired after January 1,2003; and

·       ona Same Property Portfolio basis, an increase of $3.3 million, or 5.2%,primarily due to an overall increase in real estate tax recovery income of$2.6 million, a decrease in the provision for allowance for doubtfulaccounts of $0.4 million and an increase in property operating expenserecovery income and other reimbursement income of $0.3 million. Realestate recovery income increased primarily as a result of an increase in realestate tax expense as well as an increase in the real estate tax expenserecovery rates due to true-ups related to the improved annual reconciliationprocess. Property operating expense recovery income increased primarily as aresult of an increase in the property operating expense recovery rates due totrue-ups related to the annual reconciliation process offset by a decrease inreimbursable property operating expenses.

*Other Property Income.**  *Other property income increased ona Total Portfolio basis primarily due to fifteen properties acquired after January 1,2003.

**Expenses**

*Property OperatingExpenses.**  *Propertyoperating expenses increased due to the following:

·       anincrease of $3.9 million due to fifteen properties acquired after January 1,2003; offset by

·       ona Same Property Portfolio basis, a decrease of $1.0 million, or 2.5%, primarilyas a result of a $0.5 million lease buy-out expense recorded in the prior year,a $0.5 million decrease in insurance expense, and a $0.3 milliondecrease in snow removal and related costs. These decreases were partiallyoffset by a $0.2 million increase in maintenance and supervision expenseand a $0.2 million increase in utility expense.

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*Real Estate Taxes.**  *Real estate taxes increasedprimarily due to the following:

·       anincrease of $4.0 million due to fifteen properties acquired after January 1,2003; and

·       a$1.7 million increase in real estate taxes on a Same Property Portfolio basisprimarily related to increased valuations assessed for certain propertiesprimarily located in the Midwest.

**Other**

*Interest,Other, and Joint Venture Fee Income.**  *Interest, other, and joint venturefee income increased because in 2003, the Company had no investments inunconsolidated joint ventures compared to one investment in an unconsolidatedjoint venture in 2004.

*Gainon Sale of Marketable Securities.**  *Gain on sale of marketablesecurities increased due to the Company having sold marketable securities inthe year ended December 31, 2004 compared with not having sold any in theyear ended December 31, 2003.

*Gainon Sale of Real Estate Investment.**  *Gain on sale of real estateinvestment increased as the result of the Company having sold real estateinvestments during the year ended December 31, 2004.

*Equityin Income from Unconsolidated Joint Ventures.**  *Equity in income fromunconsolidated joint ventures increased due to the Company having entered intoits first joint venture agreement in May 2004 with a third party developerfor the development and construction of a property.

*Incomefrom Discontinued Operations.**  *Income from discontinued operationsdecreased due to four properties classified as discontinued operations in 2003,compared to three properties in 2004.

*Depreciationand Amortization.**  *Expensesattributable to depreciation and amortization increased due to depreciationattributable to new properties acquired and depreciation of new capital andtenant improvements implemented within the Same Property Portfolio.

*InterestExpense.**  *Interestexpense increased $7.9 million primarily due to the issuance of$350.0 million of unsecured notes payable, higher average balances underthe Company’s line of credit, and an increase in mortgage loans payable as aresult of the assumption of debt from various property acquisitions in 2004offset by the repayment of $100.0 million of bonds payable. Overall, theweighted average interest rate remained relatively constant in 2004 as comparedwith 2003. The Company’s weighted average effective interest rate was 6.19% at December 31,2004 as compared with 6.24% at December 31, 2003.

*General and AdministrativeExpenses.**  *Ourgeneral and administrative expenses, consisting primarily of salaries, bonuses,employee benefits, insurance and other corporate-level expenses, increased $4.5million. This increase was primarily due to:

·       anincrease of $1.2 million in stock compensation costs due to an increase in theintrinsic value of certain variable stock options. The intrinsic valueincreased due to a greater increase in our stock price during the year ended December 31,2004 as compared with year ended December 31, 2003;

·       anincrease of $1.1 million in other stock compensation expense  and $0.4 million due to higher payroll costsassociated with a larger workforce. The increase in stock compensation expenseis primarily due to the amortization of three annual grants of performancebased restricted shares in the year ended December 31, 2004 as comparedwith the amortization of two annual grants of performance based restrictedshares in the year ended December 31, 2003;

·       anincrease of $1.5 million in salary and incentive compensation expense due to alarger workforce, including the retention of two additional senior officersresponsible for joint venture initiatives and as corporate counsel, and thereplacement of stock options to be issued to senior management by the issuanceof additional restricted shares of substantially equal value;

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·       anincrease of $0.9 million in office rent due to the Company’s relocation of itscorporate office in February 2004; and

·       anincrease of $0.5 million in expenses associated with being a public company,including compliance with the Sarbanes-Oxley Act; and

·       anincrease of $0.4 million in office expenses primarily due to expenses relatedto the relocation of the corporate office as well as increased consulting fees.

These increased costs were partially offset by$1.3 million less severance costs for the year ended December 31,2004 as compared with the year ended December 31, 2003.

*Incomeallocated to exchangeable limited partnerships units.**  *Income allocated to exchangeablelimited partnership units decreased primarily as a result of a redemption ofunits in the third quarter of 2004.

*Income allocated to Series B andC Preferred Units.**  *Incomeallocated to Series B and C Preferred Units decreased as a result of theCompany redeeming all Series B and C Preferred Units of Bradley OP in thefirst and third quarters of 2004, respectively.

**Liquidity and Capital Resources**

We generally do not maintain significant cash or cashequivalent balances. As a REIT, we are required to distribute at least 90% ofour taxable income to our stockholders on an annual basis. Therefore, as ageneral matter, we meet our liquidity needs from cash generated from operationsand external sources of capital.

At December 31, 2005,we had $1.5 billion of indebtedness. This indebtedness has a weightedaverage interest rate of 6.18% with an average maturity of 4.2 years. Asof December 31, 2005, our market capitalization was $3.1 billion,resulting in a debt-to-total market capitalization ratio of approximately47.6%.

*Short-TermLiquidity Requirements*

Our short-termliquidity requirements consist primarily of funds necessary to pay foroperating expenses and other expenditures directly associated with our properties,including:

·       Recurringmaintenance capital expenditures necessary to properly maintain our properties;

·       Interestexpense and scheduled principal payments on outstanding indebtedness;

·       Capitalexpenditures incurred to facilitate the leasing of space at our properties,including tenant improvements and leasing commissions; and

·       Futuredistributions paid to our stockholders.

We incur maintenance capital expenditures at ourproperties, which include such expenses as parking lot improvements, roof repairsand replacements and other non-revenue enhancing capital expenditures.Maintenance capital expenditures were approximately $9.7 million, or $0.34per square foot, for the year ended December 31, 2005. We have alsoincurred and expect to continue to incur revenue enhancing capital expendituressuch as tenant improvements and leasing commissions in connection with theleasing or re-leasing of retail space.

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We believe that we qualify and we intend to continueto qualify as a REIT under Sections 856-860 of the Code. As a REIT, weare allowed to reduce taxable income by all or a portion of our distributionspaid to stockholders. We believe that our existing working capital and cashprovided by operations will be sufficient to allow us to pay distributionsnecessary to enable us to continue to qualify as a REIT.

However, under some circumstances, we may be requiredto pay distributions in excess of cash available for those distributions inorder to meet these distribution requirements, and we may need to borrow funds,most likely under our line of credit, to pay distributions in the future.

Historically, we have satisfied our short-termliquidity requirements through our existing working capital and cash providedby our operations as well as with borrowings under our line of credit. Webelieve that our existing working capital and cash provided by operationsshould be sufficient to meet our short-term liquidity requirements. Cash flowsprovided by operating activities increased to $124.4 million for the yearended December 31, 2005 from $123.0 million for the year endedDecember 31, 2004.

There are a number offactors that could adversely affect our cash flow. The continuation of aneconomic downturn in one or more of our markets may impede the ability of ourtenants to make lease payments and may impact our ability to renew leases orre-let space as leases expire. In addition, an economic downturn or recessioncould also lead to an increase in tenant bankruptcies, increases in our overallvacancy rates or declines in rents we can charge to re-let properties uponexpiration of current leases. In all of these cases, our cash flow would beadversely affected.

*Long-Term LiquidityRequirements*

Our long-term liquidity requirements consist primarilyof funds necessary to pay for scheduled debt maturities, renovations,redevelopment, expansions and other non-recurring capital expenditures that arerequired periodically to our properties, and the costs associated withacquisitions of properties and third party developer joint ventureopportunities that we pursue.

Historically, we have satisfied our long-termliquidity requirements through various sources of capital, including ourexisting working capital, cash provided by operations, our line of credit,bridge financing, the issuance of additional debt and equity securities andlong-term property mortgage indebtedness. We believe these sources of capitalwill continue to be available to us in the future to fund our long-termliquidity requirements. In addition, we also intend to pursue additionalcapital for acquisitions through strategic joint ventures with institutionalinvestors.

There are certain factors that may have a materialadverse effect on our access to capital resources, including our degree ofleverage, the value of our unencumbered assets, our credit rating and borrowingrestrictions imposed on us by existing lenders. Currently, we have a creditrating from three major rating agencies—Standard & Poor’s, which hasgiven us a rating of BBB-, Moody’s Investor Service, which has given us arating of Baa3, and Fitch Ratings, which has given us a rating of BBB-. Allthree of these rating agencies have currently stated our company’s outlook isstable. A downgrade in outlook or rating by a rating agency could occur at anytime if the agency perceives adverse change in our financial condition, resultsof operations or ability to service our debt.

Based on our internal valuation of our properties, webelieve the estimated value of our properties exceeds the outstanding amount ofmortgage debt encumbering those properties as of December 31, 2005.Therefore, at this time, we believe that we could obtain additional funds,either in the form of additional unsecured borrowings or mortgage debt, withoutviolating the financial covenants contained in our line of credit, bridge loan,or unsecured public notes.

Our ability to raise fundsthrough the issuance of equity securities is dependent upon, among otherthings, general market conditions for REITs and the market’s perceptionsregarding the Company and its prospects. We will continue to analyze whichsource of capital is most advantageous to us at any particular 

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point intime, but raising funds through the equity markets may not be consistentlyavailable to us on terms that are attractive or at all.

*EnvironmentalMatters*

We currently have fifteen properties in our portfoliothat are undergoing, or have been identified as requiring, some form of remediation(including monitoring for compliance) to clean up contamination. In these cases,contamination has resulted from on-site uses by current or former owners ortenants, such as gas stations or dry cleaners, which have released pollutantssuch as gasoline or dry-cleaning solvents into soil and/or groundwater. We alsocurrently have eleven properties in our portfolio that we are monitoring forcompliance as a result of contamination on adjacent properties.

Of the approximately fifteen properties cited above, nineof those properties were contributed to us by Net Realty Holding Trust, ourlargest stockholder, upon our formation in July 1999. All of these contributedproperties (together with eleven other contributed properties for which noremediation is currently taking place) are the subject of an indemnityarrangement under which Net Realty Holding Trust has agreed to indemnify usagainst environmental liabilities up to $50 million in the aggregate.Since our formation, we have been reimbursed by Net Realty Holding Trust forapproximately $2.0 million of environmental costs pursuant to thisindemnity. As of December 31, 2005, we were due $0.6 million under thisindemnity. Although we do not believe that the aggregate indemnity amount willbe needed, we believe that Net Realty Holding Trust has the ability to performunder its indemnity up to the aggregate amount. In addition, each of theproperties for which we are actively pursuing remediation to clean upcontamination is covered by this indemnity.

With respect to theremaining properties cited above not covered by the Net Realty Holding Trustindemnity, no clean-up activities are currently taking place and our requisiteon-going responsibilities are to monitor those properties for compliance and todetermine if any remediation or other action may be required in the future. Webelieve that the costs of monitoring these properties are not material,individually or in the aggregate, to our financial condition and we haveestablished reserves for such costs. Any failure to remediate the contaminationat our properties properly may result in liability to federal, state or localgovernments for damages to natural resources or liability to third parties forproperty damage or personal injury and may adversely affect our ability tooperate, lease or sell the contaminated property. Further, no assurance can begiven that any environmental studies performed have identified or will identifyall material environmental conditions, that any prior owner of the propertiesdid not create a material environmental condition not known to us or that amaterial environmental condition does not otherwise exist with respect to anyof our properties.

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*ContractualObligations and Contingent Liabilities*

Thefollowing table summarizes our repayment obligations under our indebtednessoutstanding as of December 31, 2005 (in thousands):

| **Property**                                          | ** ** | ** ** | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010** | ** ** | **Thereafter** | ** ** | **Total**  | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|----------|------------|----------------|------------|------------|------------|
| **Mortgage  loans payable:**                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |     | ** ** | ** **     |       | ** ** | ** ** |
| Meridian Village Plaza(1)                             |       | $          | 4,841      |       | —     |       | —     |       | —     |       | —     |     |       | —         | ** ** |       | 4,841      |   |
| Spring Mall                                           |       | 8,021      |       | —     |       | —     |       | —     |       | —     |       |     | —     | ** **     |       | 8,021      |       |
| Southport Centre                                      |       | 171        |       | 9,593      |       | —     |       | —     |       | —     |       |     | —     | ** **     |       | 9,764      |       |
| Long Meadow Commons (1)(2)                            |       | 344        |       | 8,717      |       | —     |       | —     |       | —     |       |     | —     | ** **     |       | 9,061      |       |
| Innes Street Market                                   |       | 380        |       | 12,098     |       | —     |       | —     |       | —     |       |     | —     | ** **     |       | 12,478     |       |
| Southgate Shopping Center                             |       | 119        |       | 2,166      |       | —     |       | —     |       | —     |       |     | —     | ** **     |       | 2,285      |       |
| Hale Road & Northern  Hills                       |       | —     |       | 14,600     |       | —     |       | —     |       | —     |       |     | —     | ** **     |       | 14,600     |       |
| Salem Consumer Square                                 |       | 508        |       | 563        |       | 8,731      |       | —     |       | —     |       |     | —     | ** **     |       | 9,802      |       |
| St. Francis Plaza                                     |       | 207        |       | 225        |       | 243        |       | —     |       | —     |       |     | —     | ** **     |       | 675        |       |
| Burlington Square(1)                                  |       | 209        |       | 227        |       | 243        |       | 12,724     |       | —     |       |     | —     | ** **     |       | 13,403     |       |
| Crossroads III &  Slater Street(1)                |       | 185        |       | 201        |       | 214        |       | 13,295     |       | —     |       |     | —     | ** **     |       | 13,895     |       |
| Buckingham Place(1)                                   |       | 69         |       | 74         |       | 79         |       | 5,054      |       | —     |       |     | —     | ** **     |       | 5,276      |       |
| County Line Plaza(1)                                  |       | 222        |       | 240        |       | 256        |       | 16,002     |       | —     |       |     | —     | ** **     |       | 16,720     |       |
| Trinity Commons (1)                                   |       | 185        |       | 200        |       | 214        |       | 13,776     |       | —     |       |     | —     | ** **     |       | 14,375     |       |
| 8 shopping centers, cross  collaterialized            |       | 1,843      |       | 1,993      |       | 2,154      |       | 72,132     |       | —     |       |     | —     | ** **     |       | 78,122     |       |
| Montgomery Commons(1)                                 |       | 86         |       | 94         |       | 100        |       | 102        |       | 7,334      |       |     | —     | ** **     |       | 7,716      |       |
| Warminster Towne  Center(1)                           |       | 283        |       | 307        |       | 329        |       | 362        |       | 18,294     |       |     | —     | ** **     |       | 19,575     |       |
| Clocktower Place(1)                                   |       | 132        |       | 144        |       | 154        |       | 171        |       | 11,838     |       |     | —     | ** **     |       | 12,439     |       |
| 545 Boylston Street and  William J. McCarthy Building |       | 711        |       | 772        |       | 838        |       | 910        |       | 30,896     |       |     | —     | ** **     |       | 34,127     |       |
| 29 shopping centers,  cross collateralized            |       | 2,728      |       | 2,955      |       | 3,147      |       | 3,461      |       | 220,654    |       |     | —     | ** **     |       | 232,945    |       |
| The Market of Wolf Creek  III(1)                      |       | 98         |       | 106        |       | 113        |       | 125        |       | 135        |       |     | 8,042      | ** **     |       | 8,619      |       |
| Spradlin Farm(1)                                      |       | 203        |       | 219        |       | 232        |       | 253        |       | 272        |       |     | 15,915     | ** **     |       | 17,094     |       |
| The Market of Wolf Creek  I(1)                        |       | 163        |       | 176        |       | 188        |       | 206        |       | 222        |       |     | 9,105      | ** **     |       | 10,060     |       |
| Berkshire Crossing                                    |       | 472        |       | 503        |       | 534        |       | 571        |       | 608        |       |     | 11,342     | ** **     |       | 14,030     |       |
| Grand Traverse Crossing                               |       | 394        |       | 424        |       | 457        |       | 492        |       | 530        |       |     | 10,621     | ** **     |       | 12,918     |       |
| Salmon Run Plaza(1)                                   |       | 349        |       | 381        |       | 417        |       | 456        |       | 498        |       |     | 2,238      | ** **     |       | 4,339      |       |
| Elk Park Center                                       |       | 321        |       | 346        |       | 374        |       | 403        |       | 435        |       |     | 6,068      | ** **     |       | 7,947      |       |
| Grand Traverse Crossing -  Wal-Mart                   |       | 179        |       | 193        |       | 208        |       | 225        |       | 156        |       |     | 4,034      | ** **     |       | 4,995      |       |
| The Market of Wolf Creek  II(1)                       |       | 103        |       | 111        |       | 120        |       | 129        |       | 140        |       |     | 1,288      | ** **     |       | 1,891      |       |
| Montgomery Towne Center                               |       | 393        |       | 307        |       | 335        |       | 364        |       | 396        |       |     | 4,866      | ** **     |       | 6,661      |       |
| Bedford Grove-Wal-Mart                                |       | 164        |       | 178        |       | 191        |       | 207        |       | 223        |       |     | 2,952      | ** **     |       | 3,915      |       |
| Berkshire Crossing-Home  Depot/Wal-Mart               |       | 258        |       | 278        |       | 300        |       | 324        |       | 349        |       |     | 4,869      | ** **     |       | 6,378      |       |
| Total mortgage loans  payable                         |       | $          | 24,341     |       | 58,391     |       | 20,171     |       | 141,744    |       | 292,980    |     |       | 81,340         | ** ** |       | 618,967    |   |
| Unsecured notes payable (3)                           |       | 1,490      |       | —     |       | 100,000    |       | 150,000    |       | —     |       |     | 200,000    | ** **     |       | 451,490    |       |
| Line of credit facility                               |       | —     |       | —     |       | 328,000    |       | —     |       | —     |       |     | —     | ** **     |       | 328,000    |       |
| Bridge loan payable                                   |       | 50,000     |       | —     |       | —     |       | —     |       | —     |       |     | —     | ** **     |       | 50,000     |       |
| Total indebtedness                                    |       | $          | 75,831     |       | 58,391     |       | 448,171    |       | 291,744    |       | 292,980    |     |       | 281,340        | ** ** |       | 1,448,457  |   |

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(1)             The aggregate repayment amount for mortgage loanspayable of $618,967 does not reflect the unamortized mortgage loan premiumstotaling $11,852 related to the assumption of sixteen mortgage loans withabove-market contractual interest rates.

(2)             Property is encumbered by two mortgage loans maturingin July 2007.

(3)             The aggregate repayment amount of $451,490 does notreflect the unamortized original discounts of $1,526 related to the April andOctober 2004 bond issuances.

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As of December 31,2005, the indebtedness described in the table above requires principalamortization and balloon payments of $75.8 million in 2006. It is likelythat we will not have sufficient funds on hand to repay the remaining balloonamounts at maturity. We currently expect to refinance these and other futureballoon payments through borrowings under our line of credit. We may alsorefinance this debt through unsecured private or public debt offerings, throughadditional debt financings secured by individual properties or groups ofproperties or through additional equity offerings.

As of December 31,2005, in addition to the repayment obligations under the indebtedness describedabove, we have future contractual payment obligations relating to constructioncontracts, ground leases, and leases for the rental of office space as follows(in thousands):

| ** **                                                 | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | ** ** |
|------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|------------|
| Construction  contracts and tenant improvement obligations |       | $        | 7,650      |     | —     |     | —     |     | —     |     | —     |           |       | —    |       |       | $ | 7,650 |   |   |
| Ground leases and  subleases                               |       | 1,727    |       | 1,817    |       | 1,826    |       | 1,819    |       | 1,812    |       |           | 68,571     |      |       | 77,572     |   |   |
| Office leases                                              |       | 1,185    |       | 1,189    |       | 1,192    |       | 1,301    |       | 1,274    |       |           | 4,971      |      |       | 11,112     |   |   |
| Total                                                      |       | $        | 10,562     |     | 3,006      |     | 3,018      |     | 3,120      |     | 3,086      |           |       | 73,542    |       |       | $ | 96,334 |   |   |

 

In addition to the contractual payment obligationsincluded above, we have various existing utility and service contracts withvendors related to our property management. We enter into these contracts inthe ordinary course of business, which vary based on usage and may extendbeyond one year. These contracts are generally for one year or less and includeterms that provide for termination with insignificant or no cancellationpenalties.

The future contractualpayment obligations in the above table do not reflect the matters describedbelow under “*Off-Balance Sheet Arrangements*.”  Additionally, the repayment obligations reflectedin the above table do not reflect interest payments on debt. In addition, wehave obligations under a retirement benefit plan, which are more fullydescribed in Note 15 of the “**Notes to ConsolidatedFinancial Statements**” included under Item 8 of this Annual Report,and which are not included in the above table. Funding requirements forretirement benefits after 2005 cannot be estimated due to the significantvariability in the assumptions required to project the timing of future cashpayments.

*La Vista*

Through a joint venturewith Westwood Development Group, our joint venture has committed to purchasetwo parcels of land in La Vista, Nebraska adjoining a site our joint venturealready owns. The purchase is expected to occur prior to November 30, 2007,at a purchase price of $11 million, resulting in a total purchase pricefor all three parcels of $26 million. These parcels of land will be developedinto a new 550,000 square foot shopping center expected to be completed inthe second quarter of 2008.

*Off-Balance SheetArrangements*

We do not believe that we currently have anyoff-balance sheet arrangements that have, or are reasonably likely to have, amaterial current or future effect on our financial condition, changes infinancial condition, revenues or expenses, results of operations, liquidity,capital expenditures or capital resources.

However, in a few cases, we have made commitments toprovide funds to our existing unconsolidated joint ventures (discussed below)under certain circumstances. The commitments associated with theseunconsolidated joint ventures are not reflected as liabilities on ourconsolidated financial statements. These existing unconsolidated joint venturesare not variable interest entities nor do we have control of these partnershipsand, therefore, we account for them using the equity method of accounting.

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In May 2004, the Company entered into a jointventure agreement with a third party developer for the development andconstruction of Lakes Crossing Shopping Center in Muskegon, Michigan. As ofDecember 31, 2005, the Company does not consolidate the operations of theLakes Crossing joint venture in its financial statements. Under the terms ofthe Lakes Crossing joint venture, we have a 50% interest in the venture and wehave agreed to contribute any capital that might be required by the jointventure. Under the joint venture agreement, at any time subsequent to thesecond anniversary of the completion of Lakes Crossing, which is estimated tooccur in late 2006, the Company may be required to purchase the third party’sjoint venture interest. The purchase price for this interest would be at theagreed-upon fair market value.

We have also fully guaranteed the repayment of a$22 million construction loan obtained by the Lakes Crossing joint venturefrom Key Bank, National Association, which is an off-balance sheet arrangement.The Key Bank loan matures in November 2006 (subject to a one-yearextension). As of December 31, 2005, $17.8 million is outstanding underthe construction loan. This amount is recorded on the books and records of thejoint venture. In the event we are obligated to repay all or a portion of theconstruction loan pursuant to the guarantee, we (i) may remove the managerof the joint venture for cause and terminate all agreements with the manager,(ii) would receive a promissory note from the joint venture for the amountpaid by us together with a first priority mortgage on the shopping center, and(iii) may prohibit all distributions from the joint venture or payment offees by the joint venture until the principal and accrued interest on the loanis repaid. The estimated fair value of the guarantee as of December 31,2005 is not material to our financial position. Accordingly, no liability oradditional investment has been recorded related to the fair value of theguarantee.

In April 2005, we formeda joint venture with a fund managed by Intercontinental Real Estate Corporationfor the specific purpose of acquiring Skillman Abrams Shopping Center, a133,000 square foot shopping center in Dallas, Texas. Under the terms of theSkillman Abrams joint venture, we have a 25% interest in the venture and wehave agreed to contribute our *pro rata* shareof any capital that might be required by the joint venture. The joint venturehad a contractual obligation related to a mortgage loan outstanding of approximately$14.7 million as of December 31, 2005. We have agreed to indemnifythe mortgage lender for bad acts and environmental liabilities with respect tothe Skillman Abrams loan. As of December 31, 2005, the carrying value ofour investment in the joint venture was approximately $1.1 million.

We have entered intoadditional joint venture arrangements with third party developers for thedevelopment of sites under contract in which the underlying projects are stillin the approval and entitlement process. In some cases, we have paid depositsin connection with our joint venture entering into purchase and sale agreementswith respect to such sites. In the case of projects still in the due diligenceor investigative period, these deposits are either fully or partiallyrefundable by the seller or by our joint venture partner.

*Financings*

*Bridge Loan*

On November 28, 2005, we entered into a $100million term loan, or “bridge loan,” with Wachovia Capital Markets, LLC, asarranger, Wachovia Investment Holdings, LLC, as agent, and certain otherfinancial institutions, expiring August 28, 2006, subject to a two yearextension. Our ability to borrow under the bridge loan is subject to ourongoing compliance with a number of financial and other covenants. This bridgeloan, except under some circumstances, limits our ability to make distributionsin excess of 95% of our annual funds from operations. In addition, amountsborrowed under this bridge loan bear interest at either the lender’s base rateor a floating rate based on a spread over LIBOR ranging from 55 basis points to115 basis points, depending upon our debt rating. The variable rate in effectat December 31, 2005 was 

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5.09%. This bridge loanalso has a facility fee based on the amount committed ranging from 12.5 to 25 basispoints, depending upon our debt rating, and requires quarterly payments. We arethe borrower under this bridge loan, and Bradley OP and Heritage OP haveguaranteed this bridge loan. This bridge loan is being used principally to fundgrowth opportunities and for working capital purposes. As of December 31,2005, $50.0 million had been drawn under the bridge loan. We anticipate fullyrepaying the bridge loan in the second or third quarter of 2006 with theproceeds of an unsecured financing.

*Line of Credit*

On March 29, 2005, we refinanced our thenexisting line of credit, entering into a new three-year $400 millionunsecured line of credit with a group of lenders and Wachovia Bank, NationalAssociation, as agent, expiring March 28, 2008, subject to a one-yearextension. At our request, subject to the agent’s consent, this line of creditmay be increased to $500 million. Our ability to borrow under this line ofcredit is subject to our ongoing compliance with a number of financial andother covenants. This line of credit, except under some circumstances, limitsour ability to make distributions in excess of 95% of our annual funds fromoperations. In addition, this line of credit bears interest at either thelender’s base rate or a floating rate based on a spread over LIBOR ranging from62.5 basis points to 115 basis points, depending upon our debt rating. This newcredit facility also includes a competitive bid option that allows the Companyto hold auctions among the participating lenders in the facility for up tofifty percent of the facility amount. The variable rate in effect at December 31,2005 was 4.98%. This line of credit also has a facility fee based on the amountcommitted ranging from 15 to 25 basis points, depending upon our debt rating,and requires quarterly payments.

We are the borrower under this line of credit andBradley OP, Heritage OP and certain of our other subsidiaries have guaranteedthis line of credit. This line of credit is being used principally to fundgrowth opportunities and for working capital purposes. As of December 31,2005, $328.0 million was outstanding under this line of credit.

We believe that we are incompliance with all of the financial covenants under the bridge loan and theline of credit as of the date of this Form 10-K. However, if ourproperties do not perform as expected, or if unexpected events occur thatrequire us to borrow additional funds, compliance with these covenants maybecome difficult and may restrict our ability to pursue some of our business initiatives.In addition, these financial covenants may restrict our ability to pursueparticular acquisition transactions, including for example, acquiring aportfolio of properties that is highly leveraged. These constraints onacquisitions could significantly impede our growth. Furthermore, because theinterest rate on the line of credit is variable and based upon LIBOR rates, asLIBOR rates increase so will the interest rate on the bridge loan and the lineof credit.

*Debt Offerings*

**Heritage Notes**

The Company hasoutstanding two series of unsecured notes. These notes were issued pursuant tothe terms of two separate but substantially identical indentures the Companyentered into with LaSalle Bank National Association, as trustee. Theseindentures contain various covenants, including covenants that restrict theamount of indebtedness that may be incurred by us and our subsidiaries.Specifically, for as long as the debt securities issued under these indenturesare outstanding:

·       TheCompany is not permitted to incur any additional indebtedness if the aggregateprincipal amount of all indebtedness of the Company and its subsidiaries wouldbe greater than 60% of the total assets, as defined, of the Company and itssubsidiaries.

·       TheCompany is not permitted to incur any additional indebtedness if the ratio ofthe Company’s consolidated income available for debt service to the annual debtservice charge for the four 

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consecutive fiscalquarters most recently ended prior to the date the additional indebtedness isto be incurred would be less than 1.5:1 on a pro forma basis.

·       TheCompany is not permitted to incur any additional indebtedness if, after givingeffect to such additional indebtedness, the total secured indebtedness of theCompany and its subsidiaries is greater than 40% of the total assets, asdefined, of the Company and its subsidiaries.

·       TheCompany and its subsidiaries may not at any time own total unencumbered assetsequal to less than 150% of the aggregate outstanding principal amount ofunsecured indebtedness of the Company and its subsidiaries.

**Notesdue 2009.****  **OnOctober 15, 2004, the Company completed the issuance and sale of $150million principal amount of unsecured 4.50% notes due 2009 (the “2009 Notes”).The 2009 Notes bear interest at a rate of 4.50% and mature on October 15,2009. The 2009 Notes may be redeemed at any time at our option, in whole or inpart, at a redemption price equal to the sum of (1) the principal amountof the notes being redeemed plus accrued interest on the notes to theredemption date and (2) a make-whole amount, if any, with respect to thenotes that is designed to provide yield maintenance protection to the holdersof these notes.

**Notesdue 2014.****  **OnApril 1, 2004, the Company completed the issuance and sale of $200 millionprincipal amount of unsecured 5.125% notes due 2014 (the “2014 Notes”). The2014 Notes bear interest at a rate of 5.125% and mature on April 15, 2014.The 2014 Notes may be redeemed at any time at our option, in whole or in part,at a redemption price equal to the sum of (1) the principal amount of thenotes being redeemed plus accrued interest on the notes to the redemption dateand (2) a make-whole amount, if any, with respect to the notes that isdesigned to provide yield maintenance protection to the holders of these notes.

Our two series of outstanding unsecured notes havebeen guaranteed by our two operating partnerships, Heritage OP and Bradley OP.

We believe we are in compliancewith all applicable covenants under these indentures as of December 31,2005.

**Bradley Notes**

Prior to ouracquisition of Bradley Real Estate, Inc., Bradley OP completed the sale ofthree series of senior, unsecured debt securities. We repaid in full one ofthese series of Bradley OP debt securities upon maturity in November 2004.These debt securities were issued pursuant to the terms of an indenture and twosupplemental indentures entered into by Bradley OP with LaSalle Bank NationalAssociation, as trustee, beginning in 1997. The indenture and two supplementalindentures contain various covenants, including covenants that restrict theamount of indebtedness that may be incurred by Bradley OP and those of oursubsidiaries that are owned directly or indirectly by Bradley OP. Specifically,for as long as these debt securities are outstanding, Bradley OP is notpermitted to:

·       incurany additional indebtedness if the aggregate principal amount of allindebtedness of Bradley OP and its subsidiaries would be greater than 60% ofthe total assets of Bradley OP and its subsidiaries.

·       incurany additional indebtedness if the ratio of Bradley OP’s consolidated incomeavailable for debt service to the annual debt service charge for the fourconsecutive fiscal quarters most recently ended prior to the date theadditional indebtedness is to be incurred would be less than 1.5:1 on a proforma basis.

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·       incurany additional indebtedness if, after giving effect to any additionalindebtedness, the total secured indebtedness of Bradley OP and its subsidiariesis greater than 40% of the total assets, as defined, of Bradley OP and itssubsidiaries.

·       own,along with its subsidiaries, total unencumbered assets equal to less than 150%of the aggregate outstanding principal amount of unsecured indebtedness ofBradley OP and its subsidiaries.

For purposes of these covenants, any indebtednessincurred by Heritage, Heritage OP or any of the Company’s subsidiaries that areowned directly or indirectly by Heritage OP is not included as indebtedness ofBradley OP.

**Notesdue 2006.****  **InMarch 2000, Bradley OP completed the offering of $75 millionaggregate principal amount of its 8.875% Notes due 2006 (the “2006 Notes”). The2006 Notes bear interest at 8.875% per year and mature on March 15, 2006.The 2006 Notes may be redeemed at any time at the option of Bradley OP, inwhole or in part, at a redemption price equal to the sum of (1) theprincipal amount of the 2006 Notes being redeemed plus accrued interest on the2006 Notes to the redemption date and (2) a make-whole amount, if any,with respect to the 2006 Notes that is designed to provide yield maintenanceprotection to the holders of these notes. In connection with the Bradleyacquisition, we repurchased approximately $73.5 million of the 2006 Notesat a purchase price equal to the principal and accrued interest on the 2006Notes as of the date of purchase, so that approximately $1.5 million ofthe 2006 Notes were outstanding as of December 31, 2005. We will repay the2006 Notes upon maturity with borrowings under our line of credit.

**Notesdue 2008.****  **InJanuary 1998, Bradley OP completed the offering of $100 millionaggregate principal amount of its 7.2% Notes due 2008 (the “2008 Notes”). The2008 Notes bear interest at 7.2% per year and mature on January 15, 2008.The 2008 Notes may be redeemed at any time at the option of Bradley OP, inwhole or in part, at a redemption price equal to the sum of (1) theprincipal amount of the 2008 Notes being redeemed plus accrued interest on the2008 Notes to the redemption date and (2) a make-whole amount, if any,with respect to the 2008 Notes that is designed to provide yield maintenanceprotection to the holders of these notes.

We believe Bradley OP isin compliance with all applicable covenants under these indentures as of December 31,2005.

*Equity Financings*

In April 2002, we completed our initial publicoffering and sold 14,080,556 shares of our common stock at a price of $25.00per share resulting in net proceeds to us of $323 million. We used the netproceeds of the IPO to repay outstanding indebtedness. In connection with ourIPO, all shares of our Series A Cumulative Convertible Preferred Stock andredeemable equity then outstanding converted automatically into shares of ourcommon stock on a one for one basis.

In December 2003, wecompleted a secondary public offering of our common stock and sold a total of3,932,736 shares at a net price of $28.27 per share, resulting in net proceedsto us of $111 million. We used the net proceeds of this offering to repayoutstanding indebtedness. 

**Funds From Operations**

We calculate Funds from Operations in accordance withthe best practices described in the April 2001 National Policy Bulletin ofthe National Association of Real Estate Investment Trusts, referred to asNAREIT, and NAREIT’s 1995 White Paper on Funds from Operations, as supplementedin November 1999. The White Paper defines Funds From Operations as netincome (loss) (computed in accordance with GAAP), excluding gains (or losses)from extraordinary items and sales of property, plus real estate related depreciationand amortization and after adjustments for unconsolidated partnerships 

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and joint ventures. Fundsfrom Operations should not be considered as an alternative to net income(determined in accordance with GAAP) as an indicator of our financialperformance or to cash flow from operating activities (determined in accordancewith GAAP) as a measure of our liquidity, nor is it indicative of fundsavailable to fund our cash needs, including our ability to make distributions.We believe that Funds from Operations is helpful to investors as a measure ofour performance as an equity REIT because, along with cash flows from operatingactivities, financing activities and investing activities, it providesinvestors with an understanding of our ability to incur and service debt andmake capital expenditures. Our computation of Funds from Operations may,however, differ from the methodology for calculating Funds from Operationsutilized by other equity REITs and, therefore, may not be comparable to suchother REITs.

Thetable set forth below reconciles our Funds from Operations to our net income.As described in the “**Restatement Summary”**at the beginning of Item 7 “**Management's****Discussionand Analysis of Financial Condition and Results of Operations**” ofthis Annual Report, we restated our financial statements and otherfinancial information for the years ended December 31, 2004 and 2003, andfor each of the quarters therein, as well as for the quarterly periods endedMarch 31, 2005 and June 30, 2005. This restatement adjusted ournet income. The following table reflects the impact of those restatedhistorical financial statements (in thousands).

| ** **                                                   | ** ** | **Year Ended December 31,** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                   | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net income                                                   |       | $                                          | 29,588     |   | $ | 39,313 |   | $ | 36,543 |   |
| Add (deduct):                                                |       |                                       |       |   |   |   |   |
| Depreciation and  amortization (real-estate related)         |       |                                       |       |   |   |   |   |
| Continuing operations                                        |       | 99,738                                     |       | 87,869 |   | 77,931 |   |
| Discontinued operations                                      |       | —                                     |       | 314 |   | 416 |   |
| Pro-rata share of unconsolidated joint venture  depreciation |       | 440                                        |       | 13 |   | — |   |
| Net gains on  sales of real estate investments and equipment |       | —                                     |       | (3,986 | ) | (2,683 | ) |
| Funds from  Operations                                       |       | $                                          | 129,766    |   | $ | 123,523 |   | $ | 112,207 |   |

 

**Related Party Transactions**

*The TJX Companies*

In July 1999, BernardCammarata became a member of our board of directors. Until September 2005,Mr. Cammarata was non-executive Chairman of the Board of TJXCompanies, Inc., our largest tenant. In September 2005,Mr. Cammarata became President and Chief Executive Officer of TJX,positions he previously held. In October 2005, TJX appointed a new President,with Mr. Cammarata continuing to serve as Chief Executive Officer.Annualized base rent from the TJX Companies represents approximately 5.3% ofour total annualized base rent for all leases in which tenants were inoccupancy at December 31, 2005. In addition, accounts receivable forcontractual and straight-line rent of $2.0 million were outstanding as ofDecember 31, 2005. TJX pays us rent in accordance with 52 leases at ourproperties.

*Ahold USA*

In July 1999, WilliamM. Vaughn, III became a member of our board of directors. Until December31, 2005, Mr. Vaughn was Senior Vice President, Labor Relations of AholdUSA, Inc., the parent company of Giant Foods and Stop & Shop.Mr. Vaughn is also a member of the Board of Trustees of our largeststockholder, New England Teamsters & Trucking Industry Pension Fund(“NETT”). Annualized base rent from Ahold USA and its subsidiary companiesrepresents approximately 0.6% of our total annualized base rent for all leasesin which tenants were in occupancy at December 31, 2005. In addition, accounts 

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receivablefor contractual and straight-line rent of $0.4 million were outstanding as ofDecember 31, 2005. Ahold USA and its subsidiary companies pay us rent inaccordance with 3 leases at our properties.

*A.C. Moore*

InJune 2004, Michael J. Joyce became a member of our board ofdirectors.  In July 2004, Mr. Joycebecame a member of the board of directors of A.C. Moore Arts & Crafts.  Annualized base rent from A.C. Moorerepresents 0.2% of our total annualized base rent for all leases in whichtenants were in occupancy at December 31, 2005. In addition, accountsreceivable for contractual and straight-line rent of $0.1 million wereoutstanding as of December 31, 2005. A.C. Moore pays us rent in accordancewith 3 leases at our properties.

*131 Dartmouth Street Joint Venture and Lease*

In November 1999, weentered into a joint venture with an affiliate of NETT for the acquisition anddevelopment of a 365,000 square foot commercial office building at 131Dartmouth Street, Boston, Massachusetts. This joint venture is owned 94% by theaffiliate of NETT and 6% by us. We were issued this interest as part of amanagement arrangement with the joint venture pursuant to which we manage thebuilding. We have no ongoing capital contribution requirements with respect tothis office building, which was completed in 2003. We account for our interestin this joint venture using the cost method and we have not expended anyamounts on the office building through December 31, 2005.

In February 2004, weentered into an eleven-year lease with our joint venture with NETT forapproximately 31,000 square feet of space at 131 Dartmouth Street and we movedour corporate headquarters to this space during the first quarter of 2004. Underthe terms of this lease, we began paying rent to the joint venture inFebruary 2005. We pay $1.1 million per year in minimum rent through2009 and $1.2 million per year from 2010 through 2014. We believe that therent payable under this lease is consistent with market rates.

**Contingencies**

*Legal and Other Claims*

We are subject to legaland other claims incurred in the normal course of business. Based on our reviewand consultation with counsel of those matters known to exist, including thosematters described on page 35, we do not believe that the ultimate outcomeof these claims would materially affect our financial position or results ofoperations.

*Recourse LoanGuarantees*

In addition to ourunsecured line of credit and unsecured debt securities we and Bradley OP haveissued, we have fully guaranteed the repayment of a $22 million constructionloan obtained by our Lakes Crossing joint venture from Key Bank, NationalAssociation. The Key Bank loan matures in November 2006 (subject to aone-year extension).

*Non-Recourse Loan Guarantees*

In connection with theBradley acquisition, we entered into a special securitized facility withPrudential Mortgage Capital Corporation (“PMCC”) pursuant to which$244 million of collateralized mortgage-backed securities were issued by atrust created by PMCC. The trust consists of a single mortgage loan due from asubsidiary we created, Heritage SPE LLC, to which we contributed 29 of ourproperties. This loan is secured by all 29 properties we contributed to theborrower.

In connection with thesecuritized financing with PMCC, we entered into several indemnification andguaranty agreements with PMCC under the terms of which we agreed to indemnifyPMCC for various bad 

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acts ofHeritage SPE LLC and with respect to specified environmental liabilities withrespect to the properties contributed by us to Heritage SPE LLC.

We also have agreed toindemnify other mortgage lenders for bad acts and environmental liabilities inconnection with other mortgage loans that we have assumed.

**Inflation**

Inflation has had aminimal impact on the operating performance of our properties. However, many ofour leases contain provisions designed to mitigate the adverse impact ofinflation. These provisions include clauses enabling us to receive payment ofadditional rent calculated as a percentage of tenants’ gross sales abovepre-determined thresholds, which generally increase as prices rise, and/orescalation clauses, which generally increase rental rates during the terms ofthe leases. These escalation clauses often are at fixed rent increases orindexed escalations (based on the consumer price index or other measures). Manyof our leases are also for terms of fewer than ten years, which permits us toseek to increase rents to market rates upon renewal. In addition, most of ourleases require the tenant to pay an allocable share of operating expenses,including common area maintenance costs, real estate taxes and insurance. Webelieve this reduces our exposure to increases in costs and operating expensesresulting from inflation.

**New AccountingStandards**

In December 2004, theFASB issued SFAS No. 123R, *Share-BasedCompensation (*“SFAS No. 123R”). SFAS No. 123R supersedesAPB Opinion No. 25, *Accounting forStock Issued to Employees* (“APB No. 25”), and amends SFASNo. 95, *Statement of Cash Flows*.SFAS No. 123R requires all share-based payments to employees, includinggrants of employee stock options, to be recorded as an expense based on theirfair values. The grant-date fair value of employee share options and similarinstruments will be estimated using an option-pricing model adjusted for anyunique characteristics of a particular instrument. If an equity award ismodified after the grant date, incremental compensation cost will be recognizedin an amount equal to the excess of the fair value of the modified award overthe fair value of the original award immediately before the modification.Currently, we account for share-based compensation in accordance with APBNo. 25 and related Interpretations. We are required to account forshare-based compensation to employees in accordance with SFAS No. 123R ona modified prospective basis beginning January 1, 2006. Under the modifiedprospective basis, compensation cost is recognized beginning with the effectivedate (a) based on the requirements of SFAS No. 123R for allshare-based payments granted after the effective date and (b) based on therequirements of SFAS No. 123 for all awards granted to employees prior tothe effective date of SFAS No. 123R that remain unvested on the effectivedate. We do not expect the adoption of SFAS No. 123R to have a materialimpact on our results of operations, financial position, or liquidity.

In March 2005, theFASB issued FASB Interpretation No. 47, *Accountingfor Conditional Asset Retirement Obligations, an interpretation of FASBStatement No. 143*(“FIN 47”). FIN 47 clarifies thatconditional asset retirement obligations meet the definition of liabilities andshould be recognized when incurred if their fair values can be reasonablyestimated. FIN 47 is effective for the fiscal year ended December 31,2005. The adoption of FIN 47 did not have a material effect on ourconsolidated results of operations, financial position, or liquidity.

In May 2005, the FASBissued Statement of Financial Accounting Standard No. 154, *Accounting Changes and Error Corrections* (“SFASNo. 154”). SFAS No. 154 replaces APB Opinion No. 20, *Accounting Changes,* and SFAS No. 3, *Reporting Accounting Changes in Interim Financial Statements,*andchanges the requirements for the accounting for and reporting of a change inaccounting principle. APB Opinion No. 20 previously required that mostvoluntary changes in accounting principle be recognized by including in netincome of the period of the change the cumulative effect of changing to the newaccounting principle. SFAS No. 154 requires retrospective application toprior periods’ financial statements of changes 

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inaccounting principle, unless it is impracticable to determine either theperiod-specific effects or the cumulative effect of the change. SFASNo. 154 is effective for accounting changes and corrections of errors madein fiscal years beginning after December 15, 2005. We do not expectthe adoption of SFAS No. 154 to have a material impact on our financialcondition and results of operations, financial position, or liquidity.

In September 2005, theEmerging Issues Task Force issued Issue 04-5, *Investor’sAccounting for an Investment in a Limited Partnership When the Investor is theSole General Partner and the Limited Partners Have Certain Rights,*(“EITF 04-5”). At issue is what rights held by the limited partner(s)preclude consolidation in circumstances in which the sole general partner wouldconsolidate the limited partnership in accordance with U.S. generally acceptedaccounting principles. The assessment of limited partners’ rights and theirimpact on the presumption of control of the limited partnership by the sole generalpartner should be made when an investor becomes the sole general partner andshould be reassessed if (i) there is a change to the terms or in the exercisabilityof the rights of the limited partners, (ii) the sole general partner increasesor decreases its ownership of limited partnership interests, or (iii) there isan increase or decrease in the number of outstanding limited partnershipinterests. This issue is effective no later than for fiscal years beginningafter December 15, 2005 and as of June 29, 2005 for new or modified arrangements.The adoption of EITF 04-5 did not have a material impact on our financialcondition and results of operations, financial position, or liquidity.

**Net Operating Income**

Net operating income, or“NOI,” is a non-GAAP financial measure equal to net income available to commonshareholders (the most directly comparable GAAP financial measure), plus incomeallocated to minority interests in Bradley OP, general and administrativeexpense, depreciation and amortization, and interest expense, less income fromdiscontinued operations, and interest, other, and joint venture fee income.

We use NOI internally, and believe NOI provides usefulinformation to investors, as a performance measure in evaluating the operatingperformance of our real estate assets. This is because NOI reflects only thoseincome and expense items that are incurred at the property level and excludescertain components from net income in order to provide results that moreclosely relate to a property’s results of operations. Our presentation of NOImay not be comparable to NOI reported by other REITs that define NOIdifferently. We believe that in order to obtain a clear understanding of ouroperating results, NOI should be examined in conjunction with net incomeas presented in our consolidated financial statements. NOI should not beconsidered as an alternative to net income as an indication of our performanceor to cash flows as a measure of liquidity or ability to make distributions.

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Thefollowing sets forth a reconciliation of NOI to net income available to commonshareholders. As described in the “**Restatement Summary”**at the beginning of Item 7 “**Management’sDiscussion and Analysis of Financial Condition and Results of Operations**” of this Annual Report, we restatedour financial statements and other financial information for the years ended December 31,2004 and 2003, and for each of the quarters therein, as well as for thequarterly periods ended March 31, 2005 and June 30, 2005. Thisrestatement adjusted our net income. The following table reflects the impact ofthose restated historical financial statements (in thousands):

| ** **                                                  | ** ** | **Years ended December 31,** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                  | ** ** | **2005**                                    | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| Net operating income                                        |       | $                                           | 248,501    |   | $ | 231,020 |   | $ | 211,242 |   | $ | 194,814 |   | $ | 177,113 |   |
| Add:                                                        |       |                                        |       |   |   |   |   |   |   |   |   |
| Interest, other, and  joint venture fee income              |       | 1,071                                       |       | 993 |   | 495 |   | 100 |   | 298 |   |
| Gain on sale of  marketable securities                      |       | 8                                           |       | 529 |   | — |   | — |   | — |   |
| Gains on sales of real  estate investments                  |       | —                                      |       | 28 |   | — |   | 2,924 |   | 4,159 |   |
| Income from discontinued  operations                        |       | —                                      |       | 696 |   | 2,154 |   | 2,872 |   | 3,004 |   |
| Gains on sales of  discontinued operations                  |       | —                                      |       | 3,958 |   | 2,683 |   | 384 |   | — |   |
| Equity in (loss) income  from unconsolidated joint ventures |       | (77                                         | )          | 86 |   | — |   | — |   | — |   |
| Net derivative gains                                        |       | —                                      |       | — |   | — |   | — |   | 986 |   |
| Deduct:                                                     |       |                                        |       |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                              |       | 100,411                                     |       | 88,678 |   | 78,548 |   | 69,601 |   | 63,686 |   |
| Interest                                                    |       | 86,435                                      |       | 77,269 |   | 69,415 |   | 72,312 |   | 90,342 |   |
| General and  administrative                                 |       | 32,828                                      |       | 29,668 |   | 25,198 |   | 23,351 |   | 12,640 |   |
| Loss on prepayment of  debt                                 |       | —                                      |       | — |   | — |   | 6,749 |   | — |   |
| Income allocated to  exchangeable limited partnership units |       | 241                                         |       | 206 |   | 214 |   | 216 |   | — |   |
| Income allocated to  Series B and C Preferred Units    |       | —                                      |       | 2,176 |   | 6,656 |   | 6,656 |   | 6,656 |   |
| Net derivative losses                                       |       | —                                      |       | — |   | — |   | 7,766 |   | — |   |
| Net income                                                  |       | 29,588                                      |       | 39,313 |   | 36,543 |   | 14,443 |   | 12,236 |   |
| Deduct:                                                     |       |                                        |       |   |   |   |   |   |   |   |   |
| Preferred stock  distributions                              |       | —                                      |       | — |   | — |   | 14,302 |   | 43,345 |   |
| Accretion of redeemable  equity                             |       | —                                      |       | — |   | — |   | 328 |   | 995 |   |
| Net income (loss) attributable to common  shareholders      |       | $                                           | 29,588     |   | $ | 39,313 |   | $ | 36,543 |   | $ | (187 | ) | $ | (32,104 | ) |

 

**Item7A:**               Quantitative andQualitative Disclosures About Market Risk

Market risk is the exposure to loss resulting fromadverse changes in market prices, interest rates, foreign currency exchangerates, commodity prices and equity prices. The primary market risk to which weare exposed is interest rate risk, which is sensitive to many factors,including governmental monetary and tax policies, domestic and internationaleconomic and political considerations and other factors that are beyond ourcontrol. Our future income, cash flows and fair values relevant to financialinstruments are dependent upon prevalent market interest rates.

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Thefollowing table presents our contractual fixed rate debt obligations as of December 31,2005 sorted by maturity date and our contractual variable rate debt obligationssorted by maturity date (in thousands):

| ** **        | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011+** | ** ** | **Total(1)** | ** ** | **Weighted   Average   Interest  Rate** | ** ** |
|-------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|--------------|------------|---------------------------------------------------|------------|
| *Secured Debt:*   |       |     |       |     |       |     |       |     |       |     |       |      |       |         |       |                                              |       |   |   |
| Fixed rate        |       | $        | 23,869     |     | $          | 57,888   |       | $        | 19,637     |     | $          | 141,173   |       | $            | 292,372    |                                              | $          | 69,998 |   | $ | 604,937 |   |   | 7.30 | % |   |
| Variable rate     |       | 472      |       | 503      |       | 534      |       | 571      |       | 608      |       | 11,342    |       | 14,030       |       |                                              | 6.29       | % |   |
| *Unsecured Debt:* |       |     |       |     |       |     |       |     |       |     |       |      |       |         |       |                                              |       |   |   |
| Fixed rate        |       | 1,490    |       | —   |       | 100,000  |       | 150,000  |       | —   |       | 200,000   |       | 451,490      |       |                                              | 5.66       | % |   |
| Variable rate     |       | 50,000   |       | —   |       | 328,000  |       | —   |       | —   |       | —    |       | 378,000      |       |                                              | 4.99       | % |   |
| Total             |       | $        | 75,831     |     | $          | 58,391   |       | $        | 448,171    |     | $          | 291,744   |       | $            | 292,980    |                                              | $          | 281,340 |   | $ | 1,448,457 |   |   | 6.18 | % |   |

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(1)          The aggregate repaymentamount of $1,448,457 does not reflect the unamortized mortgage loan premiumstotaling $11,852 related to the assumption of sixteen mortgage loans withabove-market contractual interest rates and the unamortized original issuediscount of $1,526 on the 2004 bond issuances.

If market rates of interest on our variable rate debtoutstanding at December 31, 2005 increase by 10%, or 50 basis points, theincrease in interest expense would decrease future earnings and cash flows by$2.0 million annually.

During 2005, we enteredinto forward-starting interest rate swaps to mitigate the risk of changes inforecasted interest payments on $150 million of forecasted issuances oflong-term debt. We occasionally use derivative financial instruments to manage,or hedge, interest rate risks related to our borrowings, from lines of creditto medium- and long-term financings. We require that hedging derivativeinstruments effectively reduce the interest rate risk exposure that they aredesigned to hedge. We do not use derivatives for trading or speculativepurposes and only enter into contracts with major financial institutions basedon their credit rating and other factors. We do not believe that the interestrate risk represented by our floating rate debt is material as of December 31,2005 in relation to total assets and our total market capitalization.

**Item 8:**                       FinancialStatements and Supplementary Data

See “Index to ConsolidatedFinancial Statements and Financial Statement Schedule” on page F-1of this Form 10-K

**Item 9:**                       Changesin and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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**Item9A:**               Controls andProcedures

**(a)   Restatement**

On October 17, 2005,we determined that our previously issued financial statements for the fiscalyears ended December 31, 2004 and 2003, and for each of the quarterlyperiods within those years, and for the quarterly periods ended March 31,2005 and June 30, 2005, needed to be restated to correct an error. Theerror pertained to the unrecorded effects of certain previously granted stockoptions subject to a tax-offset provision included in the employment agreementof Thomas C. Prendergast, our Chairman, President and Chief Executive Officer.As a result of the error, in November 2005, we restated our historicalfinancial statements to record a liability and to recognize compensationexpense related to the effects of the tax-offset provision and to reflectvariable accounting for the stock options subject to the tax-offset provision.See Note 2 to the Consolidated Financial Statements of this Form 10-Kfor a summary of the restatement.

**(b)   Evaluation of Disclosure Controls andProcedures**

Anevaluation was carried out by the Company’s management, with the participationof our Chief Executive Officer and Chief Financial Officer, of theeffectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) underthe Securities Exchange Act of 1934) as of the end of the period covered bythis report. Based upon that evaluation, our Chief Executive Officer and ChiefFinancial Officer concluded that these disclosure controls and procedures wereeffective as of the end of the period covered by this report.

**(c)   Changes in Internal Control over FinancialReporting**

In connection with therestatement described above, under the direction of our Chief Executive Officerand Chief Financial Officer, during the fourth quarter of 2005, our managementreevaluated our disclosure controls and procedures as of December 31, 2004using the criteria set forth by the Committee of Sponsoring Organizations (“COSO”)of the Treadway Commission on Internal Control—Integrated Framework. During thecourse of this reevaluation, our management concluded that our disclosurecontrols and procedures were not effective as of December 31, 2004 due toa material weakness in internal control over financial reporting with respect toour accounting for significant compensation arrangements, such as executiveemployment and severance agreements and stock-based compensation plans.

A material weakness ininternal control over financial reporting is a control deficiency (within themeaning of PCAOB Auditing Standard No. 2), or combination of controldeficiencies, that results in there being more than a remote likelihood that amaterial misstatement of the annual or interim financial statements will not beprevented or detected. PCAOB Auditing Standard No. 2 identifies a numberof circumstances (including the restatement of previously issued financialstatements to reflect the correction of a misstatement) that, because of theirlikely significant negative effect on internal control over financialreporting, are to be regarded as strong indicators that a material weaknessexists.

Toremediate the material weakness described above, during the fourth quarter of2005, we enhanced our review procedures over the accounting for significantcompensation arrangements. These enhanced review procedures include the formalreview and written determination by our internal accounting staff prior toadoption and implementation of the accounting for all significant compensationarrangements. As of the date of this Form 10-K, we havedesigned and implemented controls over the review of significant compensationarrangements to ensure that the accounting and reporting of such arrangementsare in accordance with U.S. generally accepted accounting principles and in amanner that has remediated the material weakness in our internal control overfinancial reporting as of December 31, 2005.

**(d)   Management’s Annual Report on InternalControl over Financial Reporting**

Management’s Report onInternal Control over Financial Reporting and the Report of IndependentRegistered Public Accounting Firm thereon are set forth in Part II, Item 8of this Form 10-K.

67

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**Item 9B:**              OtherInformation

None.

**PART III**

**Item10:**                Directors andExecutive Officers of the Registrant

The information containedin the sections captioned “Proposal One: Election of Directors” and “Section 16(a) BeneficialOwnership Reporting Compliance” of the Proxy Statement is incorporated hereinby reference.

On June 6, 2005, the Company’s Chief Executive Officersubmitted to the New York Stock Exchange (the “NYSE”) the annual certificationrequired by Section 303A.12 (a) of the NYSE Company Manual. Thiscertificate was not qualified in any respect. In addition, the Company hasfiled with the Securities and Exchange Commission as Exhibits 31.1and 31.2 to this Form 10-K the certifications, requiredpursuant to Section 302 of the Sarbanes-Oxley Act, of the Company’s ChiefExecutive Officer and Chief Financial Officer, respectively, relating to thequality of the Company’s public disclosure.

**Item11:**                ExecutiveCompensation

The information containedin the sections captioned “Proposal One: Election of Directors” and “ExecutiveCompensation” of the Proxy Statement is incorporated herein by reference.

**Item12:**                Security Ownershipof Certain Beneficial Owners and Management and Related Stockholder Matters

The information containedin the section captioned “Security Ownership of Certain Beneficial Owners andManagement” of the Proxy Statement is incorporated herein by reference.

Thefollowing table summarizes the equity compensation plans under which commonstock may be issued as of December 31, 2005: 

| ***Plan Category***                                    | *** *** | ***Number of shares to be issued  upon exercise of outstanding  options, warrants and rights*** | *** ***  | ***Weighted-average exercise price  of outstanding options, warrants  and rights*** | *** *** | ***Number of shares remaining  available for future issuance  under equity compensation plans*** | ** ** |
|-------------------------------------------------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|-------------------------------------------------------------------------------------------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Equity  compensation plans approved by stockholders**     | ** **   |                                                                                                                                                   | **2,738,297** | **(1)**                                                                                                           |         |                                                                                                                                          | **$**      | **25.90** | **(2)** |   |   | **830,050** | ** ** |   |
| **Equity  compensation plans not approved by stockholders** | ** **   |                                                                                                                                                   | **—**    | ** **                                                                                                        |         |                                                                                                                                          | **—** | ** ** |   |   | **—** |   |   |
| **Total**                                                   | ** **   |                                                                                                                                                   | **2,738,297** | ** **                                                                                                        |         |                                                                                                                                          | **$**      | **25.90** | ** ** |   |   | **830,050** |   |   |

----

(1)          Ofthe 2,724,418 shares to be issued upon exercise of outstanding options,warrants, or rights, (a) 2,356,998 are subject to outstanding stockoptions, and (b) 381,299 have been issued as restricted stock awards.

(2)          Computedonly with respect to outstanding stock options. Restricted stock awards underthe plan are issued without an exercise price.

**Item13:**                CertainRelationships and Related Transactions

The information containedin the section captioned “Certain Relationships and Related Transactions” ofthe Proxy Statement is incorporated herein by reference.

**Item14:**                PrincipalAccountant Fees and Services

The information containedin the section captioned “Principal Accountant Fees and Services” of the ProxyStatement is incorporated herein by reference.

68

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**PART IV**

**Item 15:**                Exhibitsand Financial Statement Schedules

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

**Financial Statement Schedule.**

**See page F-1for 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 Bank National Association relating to the Senior Debt Securities  of Bradley Operating Limited Partnership(1)                                                                                                  |
|   | 4.3  |   |   | Supplemental Indenture  No. 2, dated as of January 28, 1998, between Bradley Operating  Limited Partnership and LaSalle Bank National Association(1)                                                                                                                                                                   |
|   | 4.4  |   |   | Supplemental Indenture  No. 3, dated as of March 10, 2000, between Bradley Operating  Limited Partnership and LaSalle Bank National Association(1)                                                                                                                                                                     |
|   | 4.5  |   |   | Supplemental Indenture  No. 4, dated as of May     , 2004, between  Bradley Operating Limited Partnership and LaSalle Bank National  Association(8)                                                                                                                                                |
|   | 4.6  |   |   | Indenture, dated as of  April 1, 2004, by and between Heritage Property Investment  Trust, Inc., Heritage Property Investment Limited Partnership, Bradley  Operating Limited Partnership and LaSalle Bank National Association relating  to 5.125% Notes due 2014 of Heritage Property Investment Trust, Inc.(8) |
|   | 4.7  |   |   | Form of 5.125% Note  due 2014 (Included in Exhibit 4.7)(8)                                                                                                                                                                                                                                                             |
|   | 4.8  |   |   | Guarantee of 5.125%  Notes due 2014, dated as of April 1, 2004, by Heritage Property  Investment Limited Partnership(8)                                                                                                                                                                                                     |
|   | 4.9  |   |   | Guarantee of 5.125%  Notes due 2014, dated as of April 1, 2004, by Bradley Operating Limited  Partnership(8)                                                                                                                                                                                                                |
|   | 4.10 |   |   | Registration Rights  Agreement, dated as of April 1, 2004, by and between Heritage Property  Investment Trust, Inc., Heritage Property Investment Limited  Partnership, Bradley Operating Limited Partnership and the Initial Purchasers  relating to 5.125% Notes due 2014 and Guarantees of 5.125% Notes due 2014(8) |
|   | 4.11 |   |   | Indenture, dated as of  October 15, 2004, by and between Heritage Property Investment Trust,  Inc, Heritage Property Investment Limited Partnership, Bradley Operating  Limited Partnership and LaSalle Bank National Association relating to 4.50%  Notes due 2009 of Heritage Property Investment Trust, Inc.(10)    |
|   | 4.12 |   |   | Form of 4.50% Note  due 2009 (Included in Exhibit 4.12)                                                                                                                                                                                                                                                                |
|   | 4.13 |   |   | Guarantee of 4.50% Notes  due 2009, dated as of October 15, 2004, by Heritage Property Investment  Limited Partnership(10)                                                                                                                                                                                                  |

69

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|   | 4.14  |   |   | Guarantee of 4.50% Notes  due 2009, dated as of October 15, 2004, by Bradley Operating Limited  Partnership(10)                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|-------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 4.15  |   |   | Registration Rights  Agreement, dated as of October 15, 2004, by and between Heritage  Property Investment Trust, Inc., Heritage Property Investment Limited  Partnership, Bradley Operating Limited Partnership and the Initial Purchasers  relating to 4.50% Notes due 2009 and Guarantees of 4.50% Notes due 2009(10)                                                                                                                                                                                                               |
|   | 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 as of  September 18, 2000, to Second Restated Agreement of Limited Partnership  of Bradley Operating Limited Partnership(1)                                                                                                                                                                                                                                                                                                                                                                                                |
|   | 10.4  |   |   | Amendment, dated as of  April 29, 2002, to Second Restated Agreement of Limited Partnership of  Bradley Operating Limited Partnership(1)                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | 10.5  |   |   | Amendment, dated as of  May 17, 2002, to Second Restated Agreement of Limited Partnership of  Bradley Operating Limited Partnership(2)                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | 10.6  |   |   | Amended and Restated  2000 Equity Incentive Plan, as amended(7)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | 10.7  |   |   | Form of restricted  stock and stock option agreements(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | 10.8  |   |   | Supplemental Executive  Retirement Plan(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | 10.9  |   |   | Credit Agreement, dated  as of March 29, 2005 by and among Heritage Property Investment  Trust, Inc., Wachovia Capital Markets, LLC, as Arranger, Wachovia  Bank, National Association, as Agent, each of Deutsche Bank Trust Company  Americas and Key Bank National Association, as Syndication Agents, each of  Bank of America, National Association and Commerzbank Aktiengesellschaft, New  York Branch, as Documentation Agents, and each of the financial institutions  initially a signatory to the Credit Agreement(11) |
|   | 10.10 |   |   | Loan Agreement, dated as  of September 18, 2000, between Heritage SPE LLC and Prudential Mortgage  Capital Company, LLC(1)                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | 10.11 |   |   | 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)                                                                                                                                                                                                                                                                                                                                    |
|   | 10.12 |   |   | Promissory Note, dated  as of September 13, 2000, by Heritage Property Investment Limited  Partnership in favor of The Variable Annuity Life Insurance Company(1)                                                                                                                                                                                                                                                                                                                                                                           |
|   | 10.13 |   |   | Employment Agreement  with Thomas C. Prendergast, President and Chief Executive Officer, as amended  by the First Amendment, dated as of April 3, 2000(1)                                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.14 |   |   | Amendment, dated  July 24, 2002, to Employment Agreement with Thomas C. Prendergast(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | 10.15 |   |   | Amendment, dated December 30,  2005, to Employment Agreement with Thomas C. Prendergast(15)                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

70

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|   | 10.16 |   |   | Change in  Control/Severance Agreements with Bruce Anderson, Vice President,  Acquisitions, Stephen Faberman, Vice President, Corporate Counsel, David Gaw,  Senior Vice President, Chief Financial Officer, Patrick O’Sullivan, Vice  President, Finance and Accounting, Robert Prendergast, Senior Vice President,  Chief Operating Officer, Barry Rodenstein, Vice President, Leasing, David  Sweetser, Vice President, Property Management, Construction and Business  Development, and Louis Zicht, Vice President, General Counsel(9) |
|--------|-------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10.17 |   |   | Second Amended and  Restated Stockholders Agreement, by and among Heritage Property Investment  Trust, Inc., Net Realty Holding Trust and The Prudential Insurance  Company of America(5)                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.18 |   |   | Registration Rights,  Lock-Up and Redemption Agreement, dated as of May 17, 2002, by and among  Heritage Property Investment Trust, Inc., Bradley Operating Limited  Partnership and the holders named therein(6)                                                                                                                                                                                                                                                                                                                      |
|   | 10.19 |   |   | Term Loan Agreement  dated as of November 28, 2005 by and among Heritage Property Investment  Trust, Inc., as borrower, Wachovia Capital Markets, LLC, as arranger,  Wachovia Investment Holdings, LLC, as agent, and each of the financial  institutions initially a signatory to the Term Loan Agreement.(12)                                                                                                                                                                                                                        |
|   | 10.20 |   |   | Amendment to Severance  Agreement, dated as of May 6, 2005, by and between Heritage Property  Investment Trust, Inc. and Robert G. Prendergast(13)                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 10.21 |   |   | Amendments to Change in  Control/Severance Agreements, each dated as of September 12, 2005, by  and between Heritage Property Investment Trust, Inc. and each of Bruce  Anderson, Vice President, Acquisitions, Stephen Faberman, Vice President,  Corporate Counsel, Patrick O’Sullivan, Vice President, Finance and  Accounting, Barry Rodenstein, Vice President, Leasing, David Sweetser, Vice  President, Property Management, Construction and Business Development, and  Louis Zicht, Vice President, General Counsel(14)  |
|   | 21.1  |   |   | List of Subsidiaries of  the registrant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | 23.1  |   |   | Consent of KPMG LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 31.1  |   |   | Certification of Chief  Executive Officer of the Company Pursuant to Securities Exchange Act  Rules 13a-14(a) and 15d-14(a)                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 31.2  |   |   | Certification of Chief  Financial Officer of the Company Pursuant to Securities Exchange Act  Rules 13a-14(a) and 15d-14(a)                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 32.1  |   |   | 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 2003.                                                                                                                                                                                                                                                                                                                                                                               |
|   | 32.2  |   |   | 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 2003.                                                                                                                                                                                                                                                                                                                                                                               |

----

†                    Denotes amanagement contract or compensatory plan, contract or arrangement.

(1)          Incorporated byreference to the Registrant’s Registration Statement on Form S-11(File No. 333-69118).

(2)          Incorporated byreference to the Registrant’s Quarterly Report on Form 10-Q for theperiod ended March 31, 2002.

(3)          Incorporated byreference to the Registrant’s Quarterly Report on Form 10-Q for theperiod ended June 30, 2002.

71

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(4)          Intentionally omitted.

(5)          Incorporated byreference to the Registrant’s Registration Statement on Form S-3(File No. 333-109538).

(6)          Incorporated byreference to the Registrant’s Registration Statement on Form S-3(File No. 333-109537).

(7)          Incorporated byreference to the Registrant’s Annual Report on Form 10-K for theyear ended December 31, 2003.

(8)          Incorporated byreference to the Registrant’s Registration Statement on Form S-4(File No. 333-116298).

(9)          Incorporated byreference to the Registrant’s Current Report on Form 8-K dated October 12,2004.

(10)   Incorporated by reference tothe Registrant’s Registration Statement on Form S-4 (File No. 333-121578).

(11)   Incorporated by reference tothe Registrant’s Current Report on Form 8-K dated March 29,2005.

(12)   Incorporated by reference tothe Registrant’s Current Report on Form 8-K dated December 1,2005.

(13)   Incorporated by reference tothe Registrant’s Current Report on Form 8-K dated May 6, 2005.

(14)   Incorporated by reference tothe Registrant’s Current Report on Form 8-K dated September 13, 2005.

(15)   Incorporated by reference tothe Registrant’s Current Report on Form 8-K dated January 5,2006.

**Reports on Form 8-K.**

On October 20, 2005, the Company filed a CurrentReport on Form 8-K announcing its plan to restate certain priorfinancial statements.

On November 8, 2005, the Company furnished to theSEC under Item 12 of Form 8-K a copy of the Company’s Press Release,dated November 8, 2005, as well as supplemental operating and financialdata regarding the Company for the third quarter of 2005.

On December 1, 2005, the Company filed a Current Reporton Form 8-K Registrant with respect to its entry into a $100.0million term loan agreement.

On December 13, 2005, the Company filed a CurrentReport on Form 8-K with respect to modifications of its outsidedirectors compensation plan.

72

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this Annual Report on Form 10-Kto be signed on its behalf by the undersigned, thereunto duly authorized. 

|                            | HERITAGE PROPERTY INVESTMENT  TRUST, INC. |
|----------------------------|-------------------------------------------|
|                       | By:                                       | /s/  THOMAS C. PRENDERGAST |
|                       |                                      | *Thomas  C. Prendergast* |
|                       |                                      | *President  and Chief Executive Officer* |
| Dated: March 15, 2006 |                                      |   |

 

Pursuant to therequirements of the Securities Act of 1934, this Annual Report on Form 10-Khas been signed below by the following persons in the capacities and on thedates indicated: 

|                                     | **Signature** | ** **                                                         | ** ** |                      | **Title** | ** ** | ** ** |  | **Date** | ** ** |
|-------------------------------------|---------------|--------------------------------------------------------------------|------------|----------------------|-----------|------------|------------|--|----------|------------|
| /s/  THOMAS C. PRENDERGAST          |          | President and  Chief Executive                                     |       | March 15, 2006  |
| Thomas C.  Prendergast              |          | Officer, Director (principal executive officer)                    |       |                 |
| /s/ DAVID G. GAW               |          | Senior Vice President,  Chief                                      |       | March 15,  2006 |
| David G. Gaw                        |          | Financial Officer and Treasurer (principal financial  officer)     |       |                 |
| /s/ PATRICK H. O’SULLIVAN |          | Vice President, Finance  and                                       |       | March 15,  2006 |
| Patrick H.  O’Sullivan         |          | Accounting and Assistant Treasurer (principal  accounting officer) |       |                 |
| /s/ JOSEPH L. BARRY            |          | Director                                                           |       | March 15,  2006 |
| Joseph L. Barry                     |          |                                                               |       |                 |
| /s/ BERNARD CAMMARATA          |          | Director                                                           |       | March 15,  2006 |
| Bernard Cammarata                   |          |                                                               |       |                 |
| /s/ RICHARD C. GARRISON        |          | Director                                                           |       | March 15,  2006 |
| Richard C.  Garrison                |          |                                                               |       |                 |
| /s/ MICHAEL J. JOYCE           |          | Director                                                           |       | March 15,  2006 |
| Michael J. Joyce                    |          |                                                               |       |                 |
| /s/ DAVID W. LAUGHTON          |          | Director                                                           |       | March 15,  2006 |
| David W. Laughton                   |          |                                                               |       |                 |

73

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| /s/ KEVIN  C. PHELAN         |   | Director |   | March 15, 2006 |
|-----------------------------------|--------|----------|--------|---------------------|
| Kevin  C. Phelan                  |   |     |   |                |
| /s/ KENNETH  K. QUIGLEY, JR. |   | Director |   | March 15, 2006 |
| Kenneth  K. Quigley, Jr.     |   |     |   |                |
| /s/ RICH  REARDON            |   | Director |   | March 15, 2006 |
| Rich  Reardon                     |   |     |   |                |
| /s/ WILLIAM  M. VAUGHN III   |   | Director |   | March 15, 2006 |
| William  M. Vaughn III            |   |     |   |                |
| /s/ ROBERT  J. WATSON        |   | Director |   | March 15, 2006 |
| Robert J. Watson                  |   |     |   |                |

 

 

74

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**HERITAGE PROPERTYINVESTMENT TRUST, INC.**

**INDEXTO CONSOLIDATED FINANCIAL STATEMENTS ANDFINANCIAL STATEMENT SCHEDULE**

|                                                                                                                             | ** ** | **Financial  Page** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|---------------------|------------|
| Management’s Annual Report on Internal Control Over  Financial Reporting                                               |       |                | F-2        |   |   |
| Report of Independent Registered Public Accounting  Firm—Internal Control over Financial Reporting                     |       |                | F-3        |   |   |
| Report of Independent Registered Public Accounting  Firm—Financial Statements                                          |       |                | F-4        |   |   |
| Consolidated Balance Sheets as of December 31,  2005 and 2004                                                          |       |                | F-5        |   |   |
| Consolidated Statements of Operations for the years  ended December 31, 2005, 2004,  and 2003                          |       |                | F-6        |   |   |
| Consolidated Statements of Comprehensive Income for  the years ended December 31, 2005, 2004, and 2003                 |       |                | F-7        |   |   |
| Consolidated Statements of Changes in Shareholders’  Equity for the years ended December 31, 2005, 2004, and 2003 |       |                | F-8        |   |   |
| Consolidated Statements of Cash Flows for the years  ended December 31, 2005, 2004,  and 2003                          |       |                | F-9        |   |   |
| Notes to Consolidated Financial Statements                                                                                  |       |                | F-10       |   |   |
| Financial  Statement Schedule—Schedule III                                                                             |       |                | S-III-     | 1 |   |

 

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

F-1

----

**Management’s Annual Report on Internal Controlover Financial Reporting**

Management ofHeritage Property Investment Trust, Inc. is responsible for establishingand maintaining adequate internal control over financial reporting as definedin Rules 13a-15(f) and 15d-15(f) under theSecurities Exchange Act of 1934. Our internal control over financial reportingis a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for externalpurposes in accordance with accounting principles generally accepted in theUnited States of America. Internal control over financial reporting includesthose written policies and procedures that:

·       pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of our assets; 

·       providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with accounting principlesgenerally accepted in the United States of America; 

·       providereasonable assurance that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and 

·       providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of assets that could have a material effect onour consolidated financial statements.

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

Management assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2005. Management basedthis assessment on criteria for effective internal control over financialreporting described in “Internal Control—Integrated Framework” issued by theCommittee of Sponsoring Organizations of the Treadway Commission. Management’sassessment included an evaluation of the design of our internal control overfinancial reporting and testing of the operational effectiveness of ourinternal control over financial reporting.

Based on its assessment, management determined that,as of December 31, 2005, Heritage Property Investment Trust, Inc.maintained effective internal control over financial reporting.

KPMG LLP, an independent registered public accountingfirm, has issued an audit report on management’s assessment of internal controlover financial reporting. This audit report appears on page F-3 ofthis Form 10-K.

F-2

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**Reportof Independent Registered Public Accounting Firm**

The Board of Directors andShareholdersHeritage Property Investment Trust, Inc.:

We have auditedmanagement’s assessment, included in the accompanying Management’s Annual Report on Internal Control over FinancialReporting,**that HeritageProperty Investment Trust, Inc. and subsidiaries (the Company) maintainedeffective internal control over financial reporting as of December 31,2005, based on criteria established in*Internal Control—Integrated Framework*issuedby the Committee of Sponsoring Organizations of the Treadway Commission (COSO).**The Company’s management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting. Our responsibility is to express an opinion on management’sassessment and an opinion on the effectiveness of the Company’s internalcontrol over financial reporting based on our audit.

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal control overfinancial reporting was maintained in all material respects. Our audit includedobtaining an understanding of internal control over financial reporting,evaluating management’s assessment, testing and evaluating the design andoperating effectiveness of internal control, and performing such otherprocedures as we considered necessary in the circumstances. We believe that ouraudit provides a reasonable basis for our opinion.

A company’s internalcontrol over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company;(2) provide reasonable assurance that transactions are recorded as necessaryto permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or dispositionof the company’s assets that could have a material effect on the financialstatements.

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

In our opinion,management’s assessment that the Company maintained effective internal controlover financial reporting as of December 31, 2005, is fairly stated, in allmaterial respects, based on criteriaestablished in*Internal Control—IntegratedFramework* issued by COSO*.*Also,in our opinion, the Company maintained, in all material respects, effectiveinternal control over financial reporting as of December 31, 2005, basedon criteria established in*Internal Control—Integrated Framework*issued by COSO.

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidatedbalance sheets of the Company as of December 31, 2005 and 2004, and therelated consolidated statementsof operations, comprehensive income, changes in shareholders’ equity, and cashflows for each of the years in the three-year period ended December 31,2005, and the financial statement schedule III listed in the index to theconsolidated financial statements and financial statement schedule, and ourreport dated March 10, 2006 expressedan unqualified opinion on thoseconsolidated financial statements and schedule.

/s/ KPMG LLP

Boston, MassachusettsMarch 10, 2006

F-3

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**Reportof Independent Registered Public Accounting Firm**

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

We have audited the accompanying consolidated balance sheets ofHeritage Property Investment Trust, Inc. and subsidiaries (the Company) as of December 31, 2005 and2004, and the related consolidatedstatements of operations, comprehensive income, changes in shareholders’equity, and cash flows for each of the years in the three-year period ended December 31,2005. In connection with our audits of the consolidated financial statements,we also have audited the financial statement schedule III listed in theaccompanying index to consolidated financial statements and financial statementschedule. These consolidatedfinancial statements and financial statement schedule are the responsibility ofthe Company’s management. Our responsibility is to express an opinion on these consolidated financial statements andfinancial statement schedule based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, 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 presentfairly, in all material respects, the financial position of the Company as of December 31,2005 and 2004, and the results of its operations and its cash flows for each ofthe years in the three-year period ended December 31, 2005, in conformitywith U.S. generally accepted accounting principles. Also in our opinion, therelated financial statement schedule, when considered in relation to the basicconsolidated financial statements taken as a whole, presents fairly, in allmaterial respects, the information set forth therein.

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the effectiveness of the Company’s internal control overfinancial reporting as of December 31, 2005, based on criteria established in*Internal Control—Integrated Framework*issuedby the Committee of Sponsoring Organizations of the Treadway Commission**(COSO), and our report dated March 10,2006 expressed an unqualified opinionon management’s assessment of, and the effective operation of, internal controlover financial reporting.

/s/ KPMG LLP

Boston, MassachusettsMarch 10, 2006

F-4

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**HERITAGEPROPERTY INVESTMENT TRUST, INC.Consolidated Balance SheetsDecember 31, 2005 and 2004(In thousands of dollars, except for share amounts)**

| ** **                                                                                                                                                               | ** ** | **December 31,  2005** | ** ** | **December 31,  2004** | ** ** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|------------|
| **Assets**                                                                                                                                                               |       |                        |       |                        |       |       |   |   |   |   |
| Real estate  investments, net                                                                                                                                            |       |                        | $          | 2,305,402                   |       |       |   | $ | 2,222,638 |   |   |   |
| Cash and cash  equivalents                                                                                                                                               |       |                        | —     |                        |       |       | 6,720 |   |   |   |
| Accounts  receivable, net of allowance for doubtful accounts of $10,585 in 2005 and  $9,583 in 2004                                                                      |       |                        | 54,077     |                        |       |       | 41,148 |   |   |   |
| Prepaids and  other assets                                                                                                                                               |       |                        | 30,219     |                        |       |       | 24,488 |   |   |   |
| Investments in  unconsolidated joint ventures                                                                                                                            |       |                        | 5,211      |                        |       |       | 3,406 |   |   |   |
| Deferred  financing and leasing costs                                                                                                                                    |       |                        | 63,320     |                        |       |       | 54,150 |   |   |   |
| Total assets                                                                                                                                                             |       |                        | $          | 2,458,229                   |       |       |   | $ | 2,352,550 |   |   |   |
| **Liabilities and Shareholders’ Equity**                                                                                                                            |       |                        |       |                        |       |       |   |   |   |   |
| Liabilities:                                                                                                                                                             |       |                        |       |                        |       |       |   |   |   |   |
| Mortgage loans payable                                                                                                                                                   |       |                        | $          | 630,819                     |       |       |   | $ | 649,040 |   |   |   |
| Unsecured notes payable                                                                                                                                                  |       |                        | 449,964    |                        |       |       | 449,763 |   |   |   |
| Line of credit facility                                                                                                                                                  |       |                        | 328,000    |                        |       |       | 196,000 |   |   |   |
| Bridge loan payable                                                                                                                                                      |       |                        | 50,000     |                        |       |       | — |   |   |   |
| Accrued expenses and other liabilities                                                                                                                                   |       |                        | 96,286     |                        |       |       | 99,955 |   |   |   |
| Accrued distributions                                                                                                                                                    |       |                        | 25,224     |                        |       |       | 24,915 |   |   |   |
| Total liabilities                                                                                                                                                        |       |                        | 1,580,293  |                        |       |       | 1,419,673 |   |   |   |
| Minority Interests:                                                                                                                                                      |       |                        |       |                        |       |       |   |   |   |   |
| Exchangeable limited partnership units                                                                                                                                   |       |                        | 17,125     |                        |       |       | 13,008 |   |   |   |
| Other minority interest                                                                                                                                                  |       |                        | —     |                        |       |       | 2,425 |   |   |   |
| Total minority interests                                                                                                                                                 |       |                        | 17,125     |                        |       |       | 15,433 |   |   |   |
| Shareholders’  equity:                                                                                                                                              |       |                        |       |                        |       |       |   |   |   |   |
| Common stock, $.001 par value; 200,000,000 shares  authorized; 47,385,995 and 46,934,285 shares issued and outstanding at  December 31, 2005 and 2004, respectively |       |                        | 47         |                        |       |       | 47 |   |   |   |
| Additional paid-in capital                                                                                                                                               |       |                        | 1,174,855  |                        |       |       | 1,160,081 |   |   |   |
| Cumulative distributions in excess of net income                                                                                                                         |       |                        | (309,219   | )                           |       |       | (239,403 | ) |   |   |
| Unearned compensation                                                                                                                                                    |       |                        | (3,672     | )                           |       |       | (2,775 | ) |   |   |
| Other comprehensive loss                                                                                                                                                 |       |                        | (1,200     | )                           |       |       | (506 | ) |   |   |
| Total shareholders’ equity                                                                                                                                          |       |                        | 860,811    |                        |       |       | 917,444 |   |   |   |
| Total liabilities  and shareholders’ equity                                                                                                                         |       |                        | $          | 2,458,229                   |       |       |   | $ | 2,352,550 |   |   |   |

 

See accompanying notes to consolidated financial statements.

F-5

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.Consolidated Statementsof OperationsYears ended December 31, 2005, 2004 and 2003(In thousands, except per-share data)**

| ** **                                                                                                     | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Revenue:                                                                                                       |       |     |       |     |       |     |       |
| Rentals and recoveries                                                                                         |       | $        | 350,345    |     | $          | 325,947  |       | $ | 297,666 |   |
| Interest, other, and joint venture fee income                                                                  |       | 1,071    |       | 993      |       | 495      |       |
| Total revenue                                                                                                  |       | 351,416  |       | 326,940  |       | 298,161  |       |
| Expenses:                                                                                                      |       |     |       |     |       |     |       |
| Property operating expenses                                                                                    |       | 49,910   |       | 45,954   |       | 43,102   |       |
| Real estate taxes                                                                                              |       | 51,934   |       | 48,973   |       | 43,322   |       |
| Depreciation and amortization                                                                                  |       | 100,411  |       | 88,678   |       | 78,548   |       |
| Interest                                                                                                       |       | 86,435   |       | 77,269   |       | 69,415   |       |
| General and administrative                                                                                     |       | 32,828   |       | 29,668   |       | 25,198   |       |
| Total expenses                                                                                                 |       | 321,518  |       | 290,542  |       | 259,585  |       |
| Income before gain on sale of marketable securities  and real estate investment                                |       | 29,898   |       | 36,398   |       | 38,576   |       |
| Gain on sale of  marketable securities                                                                         |       | 8        |       | 529      |       | —   |       |
| Gain on sale of  real estate investment                                                                        |       | —   |       | 28       |       | —   |       |
| Income before equity in (loss) income from  unconsolidated joint ventures and allocation to minority interests |       | 29,906   |       | 36,955   |       | 38,576   |       |
| Equity in (loss)  income from unconsolidated joint ventures                                                    |       | (77      | )          | 86       |       | —   |       |
| Income allocated  to exchangeable limited partnership units                                                    |       | (241     | )          | (206     | )          | (214     | )          |
| Income allocated  to Series B & C Preferred Units                                                |       | —   |       | (2,176   | )          | (6,656   | )          |
| Income before discontinued operations                                                                          |       | 29,588   |       | 34,659   |       | 31,706   |       |
| Discontinued Operations:                                                                                       |       |     |       |     |       |     |       |
| Income from discontinued operations                                                                            |       | —   |       | 696      |       | 2,154    |       |
| Gains on sales of discontinued operations                                                                      |       | —   |       | 3,958    |       | 2,683    |       |
| Income from discontinued operations                                                                            |       | —   |       | 4,654    |       | 4,837    |       |
| Net income attributable to common shareholders                                                                 |       | $        | 29,588     |     | $          | 39,313   |       | $ | 36,543 |   |
| *Basic  per-share data:*                                                                                       |       |     |       |     |       |     |       |
| Income before discontinued operations                                                                          |       | $        | 0.63       |     | $          | 0.75     |       | $ | 0.76 |   |
| Income from discontinued operations                                                                            |       | —   |       | 0.10     |       | 0.12     |       |
| Income attributable to common shareholders                                                                     |       | $        | 0.63       |     | $          | 0.85     |       | $ | 0.88 |   |
| Weighted average common shares outstanding                                                                     |       | 46,888   |       | 46,385   |       | 41,747   |       |
| *Diluted  per-share data:*                                                                                     |       |     |       |     |       |     |       |
| Income before discontinued operations                                                                          |       | $        | 0.62       |     | $          | 0.74     |       | $ | 0.75 |   |
| Income from discontinued operations                                                                            |       | —   |       | 0.10     |       | 0.12     |       |
| Income attributable to common shareholders                                                                     |       | $        | 0.62       |     | $          | 0.84     |       | $ | 0.87 |   |
| Weighted average  common and common equivalent shares outstanding                                              |       | 48,176   |       | 47,288   |       | 42,484   |       |

 

See accompanying notes to consolidated financial statements.

F-6

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.Consolidated Statementsof Comprehensive IncomeYears ended December 31, 2005, 2004, and 2003(In thousands)**

| ** **                                                                               | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | ** ** |
|------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|------------|
| Net income  attributable to common shareholders                                          |       | $        | 29,588     |     | $          | 39,313   |       | $          | 36,543 |   |   |
| Other  comprehensive loss:                                                               |       |     |       |     |       |     |       |       |
| Net realized loss from settlement of cash flow  hedges                                   |       | —   |       | (487     | )          | —   |       |       |
| Unrealized loss on cash flow hedges                                                      |       | (910     | )          | —   |       | —   |       |       |
| Unrealized holding gains on marketable securities                                        |       | 8        |       | 529      |       | —   |       |       |
| Reclassification adjustments for amortization of  realized loss of cash flow hedges, net |       | 216      |       | (19      | )          | —   |       |       |
| Reclassification adjustment for realized gain from  sale of marketable securities        |       | (8       | )          | (529     | )          | —   |       |       |
| Total other  comprehensive loss                                                          |       | (694     | )          | (506     | )          | —   |       |       |
| Comprehensive income                                                                     |       | $        | 28,894     |     | $          | 38,807   |       | $          | 36,543 |   |   |

See accompanying notes to consolidated financial statements.

 

F-7

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**HERITAGEPROPERTY INVESTMENT TRUST, INC. Consolidated Statements of Changes in Shareholders’ Equity Years ended December 31, 2005, 2004 and 2003 (In thousands, except per-share data)**

| ** **                                                                               | ** ** | **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, 2002                                                        |       |              | $          | 42                               |       |                                                                   |       | $                          | 1,006,416  |                                                      |       |      | $          | (126,803 | ) |   |   | $ | (1,047 | ) |   |   | $ | — |   |   | $ | 878,608 |   |
| Net income                                                                               |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | 36,543     |      |       |   | — |   |   |   | — |   |   | 36,543 |   |
| Issuance of common stock                                                                 |       |              | 4          |                             |       |                                                                   | 126,424    |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 126,428 |   |
| Equity issuance costs                                                                    |       |              | —     |                             |       |                                                                   | (3,375     | )                          |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | (3,375 | ) |
| Accrued common stock distributions ($2.10 per share)                                     |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | (90,197    | )         |       |   | — |   |   |   | — |   |   | (90,197 | ) |
| Amendment of warrants                                                                    |       |              | —     |                             |       |                                                                   | 86         |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 86 |   |
| Issuance of restricted stock                                                             |       |              | —     |                             |       |                                                                   | 5,993      |                       |       |                                                      | —     |      |       |   | (5,993 | ) |   |   | — |   |   | — |   |
| Issuance of common stock to directors                                                    |       |              | —     |                             |       |                                                                   | 190        |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 190 |   |
| Compensation expense associated with restricted stock  plans                             |       |              | —     |                             |       |                                                                   | 782        |                       |       |                                                      | —     |      |       |   | 5,217 |   |   |   | — |   |   | 5,999 |   |
| Compensation expense associated with variable stock  options                             |       |              | —     |                             |       |                                                                   | 2,500      |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 2,500 |   |
| Balance at December 31, 2003                                                        |       |              | 46         |                             |       |                                                                   | 1,139,016  |                       |       |                                                      | (180,457   | )         |       |   | (1,823 | ) |   |   | — |   |   | 956,782 |   |
| Net income                                                                               |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | 39,313     |      |       |   | — |   |   |   | — |   |   | 39,313 |   |
| Issuance of common stock                                                                 |       |              | 1          |                             |       |                                                                   | 9,982      |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 9,983 |   |
| Equity issuance costs                                                                    |       |              | —     |                             |       |                                                                   | (114       | )                          |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | (114 | ) |
| Repurchase of common stock                                                               |       |              | —     |                             |       |                                                                   | (34        | )                          |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | (34 | ) |
| Accrued common stock distributions ($2.10 per share)                                     |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | (98,259    | )         |       |   | — |   |   |   | — |   |   | (98,259 | ) |
| Conversion of operating partnership units to common  stock                          |       |              | —     |                             |       |                                                                   | 171        |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 171 |   |
| Issuance of restricted stock                                                             |       |              | —     |                             |       |                                                                   | 6,302      |                       |       |                                                      | —     |      |       |   | (6,302 | ) |   |   | — |   |   | — |   |
| Issuance of common stock to directors                                                    |       |              | —     |                             |       |                                                                   | 254        |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 254 |   |
| Compensation expense associated with restricted stock  plans and deferred stock units    |       |              | —     |                             |       |                                                                   | 1,283      |                       |       |                                                      | —     |      |       |   | 5,350 |   |   |   | — |   |   | 6,633 |   |
| Compensation expense associated with variable stock options                              |       |              | —     |                             |       |                                                                   | 3,221      |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 3,221 |   |
| Realized loss from settlement of cash flow hedges,  net                                  |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | —     |      |       |   | — |   |   |   | (487 | ) |   | (487 | ) |
| Reclassification adjustments for amortization of  realized loss of cash flow hedges, net |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | —     |      |       |   | — |   |   |   | (19 | ) |   | (19 | ) |
| Unrealized holding gains on marketable securities                                        |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | —     |      |       |   | — |   |   |   | 529 |   |   | 529 |   |
| Reclassification adjustment for realized gain from  sale of marketable securities        |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | —     |      |       |   | — |   |   |   | (529 | ) |   | (529 | ) |
| Balance at December 31, 2004                                                        |       |              | 47         |                             |       |                                                                   | 1,160,081  |                       |       |                                                      | (239,403   | )         |       |   | (2,775 | ) |   |   | (506 | ) |   | 917,444 |   |
| Net income                                                                               |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | 29,588     |      |       |   | — |   |   |   | — |   |   | 29,588 |   |
| Issuance of common stock                                                                 |       |              | —     |                             |       |                                                                   | 4,355      |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 4,355 |   |
| Equity issuance costs                                                                    |       |              |       |                             |       |                                                                   | (116       | )                          |       |                                                      |       |      |       |   |   |   |   |   |   |   |   | (116 | ) |
| Issuance of deferred stock units                                                         |       |              | —     |                             |       |                                                                   | 146        |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 146 |   |
| Accrued common stock distributions ($2.10 per share)                                     |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | (99,382    | )         |       |   | — |   |   |   | — |   |   | (99,382 | ) |
| Accrued deferred stock unit distributions ($2.10 per  share)                        |       |              | —     |                             |       |                                                                   | 22         |                       |       |                                                      | (22        | )         |       |   | — |   |   |   | — |   |   | — |   |
| Issuance of restricted stock                                                             |       |              | —     |                             |       |                                                                   | 7,479      |                       |       |                                                      | —     |      |       |   | (7,479 | ) |   |   | — |   |   | — |   |
| Issuance of common stock to directors                                                    |       |              | —     |                             |       |                                                                   | 28         |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 28 |   |
| Compensation expense associated with restricted stock  plans and deferred stock units    |       |              | —     |                             |       |                                                                   | 1,268      |                       |       |                                                      | —     |      |       |   | 6,582 |   |   |   | — |   |   | 7,850 |   |
| Compensation expense associated with variable stock options                              |       |              | —     |                             |       |                                                                   | 1,592      |                       |       |                                                      | —     |      |       |   | — |   |   |   | — |   |   | 1,592 |   |
| Unrealized loss on cash flow hedges                                                      |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | —     |      |       |   | — |   |   |   | (910 | ) |   | (910 | ) |
| Reclassification adjustments for amortization of  realized loss of cash flow hedges, net |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | —     |      |       |   | — |   |   |   | 216 |   |   | 216 |   |
| Unrealized holding gains on marketable securities                                        |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | —     |      |       |   | — |   |   |   | 8 |   |   | 8 |   |
| Reclassification adjustment for realized gain from  sale of marketable securities        |       |              | —     |                             |       |                                                                   | —     |                       |       |                                                      | —     |      |       |   | — |   |   |   | (8 | ) |   | (8 | ) |
| Balance at  December 31, 2005                                                       |       |              | $          | 47                               |       |                                                                   |       | $                          | 1,174,855  |                                                      |       |      | $          | (309,219 | ) |   |   | $ | (3,672 | ) |   |   | $ | (1,200 | ) |   | $ | 860,811 |   |

See accompanying notes to consolidated financial statements.

F-8

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Consolidated Statementsof Cash Flows Years ended December 31, 2005, 2004 and 2003 (In thousands)**

| ** **                                                                               | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | ** ** |
|------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|------------|
| Cash flows from operating  activities:                                                   |       |     |       |     |       |     |       |       |
| Net income                                                                               |       | $        | 29,588     |     | $          | 39,313   |       | $          | 36,543 |   |   |
| Adjustments  to reconcile net income to net cash provided by operating activities:       |       |     |       |     |       |     |       |       |
| Depreciation and amortization                                                            |       | 100,411  |       | 88,992   |       | 78,964   |       |       |
| Amortization of deferred debt financing costs                                            |       | 2,024    |       | 2,057    |       | 2,066    |       |       |
| Amortization of debt premiums and discounts                                              |       | (2,332   | )          | (1,601   | )          | (821     | )          |       |
| Amortization of effective portion of interest rate  swaps                                |       | 216      |       | (19      | )          | —   |       |       |
| Compensation expense associated with stock plans                                         |       | 9,470    |       | 10,108   |       | 8,775    |       |       |
| Net gains on sales of real estate investments                                            |       | —   |       | (3,986   | )          | (2,683   | )          |       |
| Loss (Earnings) from unconsolidated investment in  joint ventures                        |       | 77       |       | (86      | )          | —   |       |       |
| Income allocated to Series B & C  Preferred Units                          |       | —   |       | 2,176    |       | 6,656    |       |       |
| Income allocated to exchangeable limited partnership  units                              |       | 241      |       | 206      |       | 214      |       |       |
| Gain on sale of marketable securities                                                    |       | (8       | )          | (529     | )          | —   |       |       |
| Changes in operating assets and liabilities                                              |       | (15,326  | )          | (13,589  | )          | 18,974   |       |       |
| Net cash provided by operating activities                                                |       | 124,361  |       | 123,042  |       | 148,688  |       |       |
| Cash flows from investing  activities:                                                   |       |     |       |     |       |     |       |       |
| Acquisitions of and additions to real estate  investments and in-place lease value  |       | (158,142 | )          | (141,416 | )          | (174,931 | )          |       |
| Expenditures for investment in unconsolidated joint  ventures                            |       | (1,882   | )          | (3,321   | )          | —   |       |       |
| Investment in mortgage loan receivable                                                   |       | —   |       | (9,188   | )          | —   |       |       |
| Repayment of mortgage loan receivable                                                    |       | —   |       | 9,188    |       | —   |       |       |
| Net proceeds from sales of real estate investments                                       |       | —   |       | 29,848   |       | 15,528   |       |       |
| Proceeds from sale of marketable securities                                              |       | 121      |       | 1,101    |       | —   |       |       |
| Expenditures for capitalized leasing commissions                                         |       | (5,893   | )          | (6,403   | )          | (4,933   | )          |       |
| Expenditures for furniture, fixtures and equipment                                       |       | (477     | )          | (1,924   | )          | (795     | )          |       |
| Redemption of exchangeable limited partnership units                                     |       | (1,007   | )          | —   |       | —   |       |       |
| Purchase of minority interest                                                            |       | (2,425   | )          | —   |       | —   |       |       |
| Net cash used for investing activities                                                   |       | (169,705 | )          | (122,115 | )          | (165,131 | )          |       |
| Cash flows from financing  activities:                                                   |       |     |       |     |       |     |       |       |
| Repayments of mortgage loans payable                                                     |       | (45,166  | )          | (31,098  | )          | (16,390  | )          |       |
| Proceeds from unsecured notes payable                                                    |       | —   |       | 348,138  |       | —   |       |       |
| Repayments of unsecured notes payable                                                    |       | —   |       | (100,000 | )          | —   |       |       |
| Proceeds from prior line of credit facility                                              |       | 26,000   |       | 413,000  |       | 134,000  |       |       |
| Proceeds from line of credit facility                                                    |       | 448,000  |       | —   |       | —   |       |       |
| Repayments under prior line of credit facility                                           |       | (11,000  | )          | (460,000 | )          | (125,000 | )          |       |
| Repayment of prior line of credit facility                                               |       | (211,000 | )          | —   |       | —   |       |       |
| Repayments under line of credit facility                                                 |       | (120,000 | )          | —   |       | —   |       |       |
| Proceeds from bridge loan                                                                |       | 50,000   |       | —   |       | —   |       |       |
| Proceeds from interest swap termination                                                  |       | —   |       | 1,185    |       | —   |       |       |
| Payment for interest swap termination                                                    |       | —   |       | (1,672   | )          | —   |       |       |
| Distributions paid to exchangeable limited  partnership unit holders                     |       | (1,096   | )          | (807     | )          | (715     | )          |       |
| Distributions paid to Series B & C  Preferred Unit holders                 |       | —   |       | (2,176   | )          | (6,656   | )          |       |
| Redemption of Series B & C Preferred  Units                                |       | —   |       | (75,000  | )          | —   |       |       |
| Common stock distributions paid                                                          |       | (99,145  | )          | (97,784  | )          | (87,727  | )          |       |
| Expenditures for deferred debt financing costs                                           |       | (2,208   | )          | (3,205   | )          | (180     | )          |       |
| Expenditures for issuance of common stock                                                |       | —   |       | (201     | )          | (3,320   | )          |       |
| Proceeds from issuance of common stock                                                   |       | 4,355    |       | 9,983    |       | 126,428  |       |       |
| Repurchase of common stock                                                               |       | —   |       | (34      | )          | —   |       |       |
| Expenditures for equity issuance costs                                                   |       | (116     | )          | —   |       | —   |       |       |
| Net cash used for financing activities                                                   |       | 38,624   |       | 329      |       | 20,440   |       |       |
| Net (decrease)  increase in cash and cash equivalents                                    |       | (6,720   | )          | 1,256    |       | 3,997    |       |       |
| Cash and cash  equivalents:                                                              |       |     |       |     |       |     |       |       |
| Beginning of period                                                                      |       | 6,720    |       | 5,464    |       | 1,467    |       |       |
| End of period                                                                            |       | $        | —     |     | $          | 6,720    |       | $          | 5,464 |   |   |

See accompanying notes to consolidated financial statements.

F-9

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  Years ended December 31, 2005, 2004 and 2003**

**1. Organization**

*Background*

Heritage Property Investment Trust, Inc. (“Heritage”or the “Company”) is a Maryland corporation organized as a real estateinvestment trust (“REIT”). Heritage was formed on July 1, 1999 andcommenced operations on July 9, 1999 through the contribution of$550 million of real estate investments and related assets, net ofliabilities, by Net Realty Holding Trust, a wholly-owned subsidiary of the NewEngland 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 InternalRevenue Code of 1986, as amended (the “Code”).

Heritage is a fully-integrated, self-administered andself-managed REIT and is focused on the acquisition, ownership, management,leasing and redevelopment of primarily grocer- and multi-anchored neighborhoodand community shopping centers principally in the Eastern, Midwestern, andSouthwestern United States. At December 31, 2005, the Company owned 171shopping centers and three office buildings.

Heritage PropertyInvestment Limited Partnership (“Heritage OP”) and Bradley Operating LimitedPartnership (“Bradley OP”) are subsidiaries through which the Company conductssubstantially all of its business and owns (either directly or throughsubsidiaries) substantially all of its assets. As of December 31, 2005,the Company owned directly or indirectly all of the ownership interests in Heritage OPand approximately 98.2% of the voting interests in Bradley OP, and is the solegeneral partner of Heritage OP and through a wholly owned subsidiary, ofBradley OP. This structure is commonly referred to as an umbrella partnershipREIT, or UPREIT.

*Issuance of PublicEquity*

In December 2003, theCompany completed a secondary public offering of its common stock and sold atotal of 3,932,736 shares, including the underwriter’s over-allotment of432,736 shares, at a net price of $28.27 per share. The net proceeds of$111 million from this offering were used to repay indebtedness. TheCompany’s two largest stockholders at the time, Net Realty Holding Trust andPrudential, also took part in the offering. Prudential sold approximately$61 million of stock in the offering, reducing its then ownershippercentage to approximately 6.6%. In addition, NETT exercised its contractualpreemptive right and purchased approximately 40%, or $44 million, of theshares sold in the offering.

**2. Restatement Overview**

*Tax OffsetProvision*

On October 17, 2005, the Company determined thatits previously issued financial statements for the fiscal years ended December 31,2004 and 2003, and each of the quarterly periods therein, and the quarterlyperiods ended March 31, 2005 and June 30, 2005, needed to be restatedto correct an error. The error pertained to the unrecorded effects of certainpreviously granted stock options subject to a tax-offset provision included inthe employment agreement of Thomas C. Prendergast, the Company’s Chairman,President and Chief Executive Officer. The error did not require a restatementof the Company’s financial statements for the year ended December 31,2002.

F-10

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**2. RestatementOverview (Continued)**

In January 2000, the Company entered into thisemployment agreement with Mr. Prendergast, providing for, among otherthings, annual grants of stock options to be made to Mr. Prendergast. Inaddition, the employment agreement required the Company to make certainpayments to Mr. Prendergast to offset any taxes he might have incurred inconnection with the exercise of these stock options. As of December 31,2005, Mr. Prendergast had not exercised any stock options.

Prior to the restatement, the Company had not recordedany liability with respect to the tax-offset payments that would be required inconnection with Mr. Prendergast’s future exercise of these stock options. Inaddition, as with stock options granted to other employees under the Company’sequity incentive plan, the Company had accounted for these stock options asfixed awards pursuant to APB Opinion No. 25, *Accounting for Stock Issued to Employees* (“APB Opinion No. 25”),and related Interpretations.

The liability for the tax-offset payments that wouldhave been made to Mr. Prendergast if he were to have exercised any stockoptions should have been recorded as a liability in the Company’s financialstatements and that liability was subject to variable accounting treatmentpursuant to Financial Accounting Standards Board (“FASB”) Interpretation No. 44*Accounting for Certain TransactionsInvolving Stock Compensation—an Interpretation of APB Opinion No. 25*(“FIN No. 44”). The provision of Mr. Prendergast’s employmentagreement requiring the Company to make tax-offset payments in connection withhis exercise of these stock options also required variable accounting treatmentfor those options pursuant to FIN No. 44.  As a result, 920,000 and 780,000 of theCompany’s stock options were subject to variable accounting under APB Opinion No. 25at December 31, 2004 and 2003, respectively.

Accordingly, Heritagefiled on November 9, 2005 an amendment to its Annual Report on Form 10-K/Afor the fiscal year ended December 31, 2004 to restate its previouslyissued audited financial statements for the fiscal years ended December 31,2004 and 2003, and amendments to its Quarterly Reports on Form 10-Q/Afor the quarterly periods ended March 31, 2005 and June 30, 2005, torestate its unaudited quarterly financial statements for those quarterlyperiods. Those restatements recorded a liability and recognized compensationexpense related to the tax-offset payment provision, and reflected compensationexpense for the intrinsic value of the stock options subject to the tax-offsetfeature on a variable basis.

*Elimination of TaxOffset Provision*

On December 30, 2005,Mr. Prendergast’s employment agreement with Heritage was amended toeliminate the tax-offset provision in respect of his stock options. Inconsideration for his agreement to eliminate the provision, Heritage made aone-time cash payment to Mr. Prendergast of $6.4 million. Due to theelimination of the tax-offset provision relating to stock options from Mr. Prendergast’semployment agreement, as of December 31, 2005, Heritage is no longerrequired to record a liability relating to the tax-offset provision and Mr. Prendergast’sstock options are no longer subject to variable accounting treatment pursuantto FIN No. 44.

F-11

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**3. Summary of Significant Accounting Policies**

*Basis ofPresentation*

The consolidated financial statements are prepared onthe accrual basis in accordance with accounting principles generally acceptedin the United States of America (“GAAP”). Management of the Company has made anumber of estimates and assumptions relating to the reporting of assets andliabilities and the disclosure of contingent assets and liabilities at thedates of the consolidated financial statements and the reporting of revenue andexpenses during the periods presented to prepare these consolidated financialstatements in conformity with GAAP. The Company bases its estimates onhistorical experience and other assumptions believed to be reasonable under thecircumstances. Actual results could differ from those estimates under differentassumptions or conditions.

Management considers certain estimates and assumptionsto be most important to the portrayal of the Company’s financial condition andresults of operations, in that they require management’s most subjectivejudgments, to form the basis for the accounting policies deemed to be mostcritical to the Company. These critical estimates and assumptions include theuseful lives used to calculate depreciation and amortization expense on realestate investments, judgments regarding the recoverability or impairment ofeach real estate investment, estimates regarding the recoverability of certainoperating expenses, judgments regarding the ultimate collectibility of accountsreceivable, and assumptions used in accounting for and disclosures of theCompany’s interest rate hedging activities.

If the useful lives ofreal estate investments were different, future operating results could beaffected. Future adverse changes in market conditions or poor operating resultscould result in an inability to recover real estate investment carrying valuesthat may not be reflected in current carrying values and could require animpairment charge in the future. Future adverse changes in market conditionscould also impact the Company’s tenants, thereby impacting the recoverabilityof certain operating expenses as well as the adequacy of the allowance fordoubtful accounts receivable. If the methodologies and assumptions used toestimate the fair value of the Company’s interest rate hedging instruments orto determine hedge effectiveness were different, amounts reported in earningsand other comprehensive income, and amounts expected to be recognized inearnings in the future could be affected.

*Principles ofConsolidation*

The accompanyingconsolidated financial statements of the Company include the accounts andoperations of the Company and its subsidiaries. When the Company obtains aneconomic interest in an entity, the Company evaluates the entity to determineif the entity is a variable interest entity, in accordance with FinancialAccounting Standards Board (“FASB”) Interpretation No. 46R, *Consolidation of Variable Interest Entities*, (“FIN 46R”). Ifthe entity is deemed to be a variable interest entity, the Company thendetermines which equity interest holder is the primary beneficiary. The Companyconsolidates the entities that are variable interest entities of which theCompany is the primary beneficiary and also consolidates entities that arenon-variable interest entities and which the Company is deemed to have acontrolling interest. The portion of these entities not owned by the Company ispresented as minority interest as of and during the periods consolidated. Allsignificant intercompany accounts and transactions are eliminated inconsolidation. As of December 31, 2005, the Company had one investment ina joint venture that is a variable interest entity of which the Company is theprimary beneficiary and which is consolidated in the accompanying financialstatements.

F-12

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**3. Summaryof Significant Accounting Policies (Continued)**

*Real EstateInvestments*

Real estate investments contributed to us in July 1999were recorded at the carry-over basis of the Company’s predecessor, which wasfair market value of the assets in conformity with GAAP applicable to pensionfunds. Subsequent acquisitions of real estate investments, including thoseacquired in the Bradley acquisition in 2000, are recorded at cost. The cost ofbuildings and improvements includes the purchase price of property, legal feesand other acquisition costs.

Real estate investments held for sale are carried atthe lower of carrying amount or fair value less costs to sell. Depreciation andamortization are suspended during the period a property is held for sale. Therewere no properties classified as held for sale at December 31, 2005 or2004.

SFAS No. 144, *Accountingfor the Impairment or Disposal of Long-Lived Assets* (“SFAS No. 144”),requires the Company to periodically perform reviews of its properties todetermine if their carrying amounts will be recovered from future operatingcash flows. If the Company determines that an impairment has occurred, thoseassets are to be reduced to fair value. No such impairment losses have beenrecognized to date.

In addition, SFAS No. 144 retains the basicprovisions of Opinion No. 30, *Reporting the Results ofOperations—Reporting the Effects of Disposal of a Segment of a Business, andExtraordinary, Unusual and Infrequently Occurring Events and Transactions,*for presenting discontinued operations in the statement of operations butbroadens that presentation to include a component of an entity (rather than asegment of a business). The Company adopted SFAS No. 144 on January 1,2002 and accordingly, the operating results of real estate sold during the yearended December 31, 2004 and 2003 have been reclassified and reported asdiscontinued operations.

The Company applies SFAS No. 141, *Business Combinations* (“SFAS No. 141”),to property acquisitions. Accordingly, under the guidance provided by SFAS No. 141,the fair value of the real estate acquired is allocated to the acquiredtangible assets and identified intangible assets and liabilities. Identifiedintangible assets and liabilities may consist of the value of above-market andbelow-market leases, in-place lease value and value of tenant relationships,based in each case on their fair values.

The fair value of the tangible assets of an acquiredproperty is determined by valuing the property as if it were vacant, and the “as-if-vacant”value is then allocated based on management’s determination of the relativefair values of these assets. Management determines the as-if-vacant fair valueof a property using methods similar to those used by independent appraisers.Factors considered by management in performing these analyses include anestimate of carrying costs during the expected lease-up periods consideringcurrent market conditions and costs to execute similar leases. In estimatingcarrying costs, management includes real estate taxes, insurance and other operatingexpenses and estimates of lost rental revenue during the expected lease-upperiods based on current market demand. Management also estimates costs toexecute similar leases including leasing commissions, legal and other relatedcosts.

In allocating the fair value of the identifiedintangible assets and liabilities of an acquired property, above-market andbelow-market in-place lease values are recorded based on the present value(using an interest rate that reflects the risks associated with the leasesacquired) of the difference between (i) the contractual amounts to be paidpursuant to the in-place leases and (ii) management’s estimate of fairmarket lease rates for the corresponding in-place leases, measured over aperiod equal to the remaining 

F-13

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**3. Summaryof Significant Accounting Policies (Continued)**

non-cancelable term of thelease. The capitalized above-market lease values are amortized as a reductionof rental income over the remaining non-cancelable terms of the respectiveleases. The capitalized below-market lease values are amortized as an increaseto rental income over the initial term and any fixed rate renewal periods inthe respective leases.

The aggregate value of other acquired intangibleassets, consisting of in-place leases and tenant relationships, is measured bythe excess of (i) the purchase price paid for a property after adjustingexisting in-place leases to market rental rates over (ii) the estimatedfair value of the property as if vacant, determined as set forth above. Thisaggregate value is allocated between in-place lease values and tenantrelationships, if any, based on management’s evaluation of the specificcharacteristics of each tenant’s lease. However, the value of tenantrelationships has not been separated from in-place lease value for theadditional interests in real estate entities because such value and itsconsequence to amortization expense is estimated to be immaterial for theseparticular acquisitions consummated to date. The value of in-place leasesexclusive of the value of above-market and below-market in-place leases isamortized to expense over the remaining non-cancelable periods of therespective leases. If a lease were to be terminated prior to its stated expiration,all unamortized amounts relating to that lease would be written off. For theyears ended December 31, 2005 and 2004, the Company recognized uponacquisition, additional intangible assets and liabilities as follows (inthousands):

| ** **                    | ** ** | **2005** | ** ** | **Weighted Average  Amortization  Period** | ** ** | **2004** | ** ** | **Weighted Average  Amortization  Period** | ** ** |
|-------------------------------|------------|----------|------------|-------------------------------------------------|------------|----------|------------|-------------------------------------------------|------------|
| Assets:                       |       |     |       |                                            |       |     |       |                                            |       |   |   |   |   |
| Acquired in-place lease value |       | $        | 16,259     |                                            |       | 6.63     |       |                                            | $          | 25,607 |   |   | 7.14 |   |   |
| Acquired above market leases  |       | 1,221    |       |                                            | 8.17       |     |       | 1,548                                           |       |   | 11.03 |   |   |
| Liabilities:                  |       |     |       |                                            |       |     |       |                                            |       |   |   |   |   |
| Acquired below  market leases |       | $        | 2,481      |                                            |       | 9.88     |       |                                            | $          | 2,419 |   |   | 10.49 |   |   |

10.

The Company incurred amortization expense pertainingto acquired in-place lease intangibles of $6.3 million, $2.5 millionand $0.2 million during the years ended December 31, 2005, 2004, and 2003,respectively. Amortization of $0.2 million, $0.1 million, and $0,pertaining to acquired above market leases was applied as a reduction of rentalincome during the years ended December 31, 2005, 2004, and 2003,respectively. Amortization of $0.4 million, $0.2 million, and $0,pertaining to acquired below market leases was applied as an increase to rentalincome during the years ended December 31, 2005, 2004, and 2003,respectively.

F-14

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**3. Summaryof Significant Accounting Policies (Continued)**

The table below presentsthe expected amortization related to the acquired in-place lease value andacquired above and below market leases at December 31, 2005 (inthousands): 

| ** **                             | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** | **Total** | ** ** |
|----------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|
| Amortization  expense:                 |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |   |   |
| Acquired in-place lease value          |       | $        | 7,449      |     | $          | 7,360    |       | $        | 6,201      |     | $          | 6,003          |       | $         | 3,647      |   |   | $ | 10,297 |   |   | $ | 40,957 |   |
| Adjustments to rental income:          |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |   |   |
| Acquired above market leases           |       | $        | (307       | )        | $          | (307     | )          | $        | (298       | )        | $          | (281           | )          | $         | (276       | ) |   | $ | (998 | ) |   | $ | (2,467 | ) |
| Acquired below market leases           |       | 230      |       | 154      |       | 127      |       | 127      |       | 127      |       |           | 1,748      |      |       | 2,513 |   |
| Net adjustment to  rental income  |       | $        | (77        | )        | $          | (153     | )          | $        | (171       | )        | $          | (154           | )          | $         | (149       | ) |   | $ | 750 |   |   | $ | 46 |   |

 

Expenditures for maintenance, repairs and bettermentsthat do not materially extend the useful life of a real estate investment arecharged to operations as incurred and amounted to $6.6 million,$6.6 million and $6.3 million for the years ended December 31,2005, 2004 and 2003, respectively. Expenditures that substantially extend theuseful life of a real estate investment are capitalized. Upon sale or otherdisposition of the real estate investment, the cost and related accumulateddepreciation and amortization are removed and the resulting gain or loss, ifany, is reflected in income from discontinued operations. Interest onsignificant construction projects is capitalized as part of the cost of realestate investments. Interest capitalized for the years ended December 31,2005, 2004 and 2003 was $0.2 million, $0.2 million, and $0 million,respectively.

Theprovision for depreciation and amortization has been calculated using thestraight-line method over the following estimated useful lives: 

| Land improvements           |   | 10 - 15 years                                   |
|-----------------------------|--------|-------------------------------------------------|
| Buildings and  improvements |   | 20 - 39 years                                   |
| Tenant improvements         |   | Shorter of useful life or term of related lease |

 

*Cash and CashEquivalents*

Cash and cash equivalentsconsist of cash in banks and short-term investments with maturities at the dateof purchase of three months or less. The majority of the Company’s cash andcash equivalents are held at major commercial banks. The Company has notexperienced any losses on its invested cash.

*MarketableSecurities*

The Company receivedshares of a publicly traded company during 2005 and 2004 in settlement of therejection of certain leases in connection with bankruptcy proceedings of thepublicly traded company. The Company accounts for investments in securities ofpublicly traded companies in accordance with SFAS No. 115, *Accounting for Certain Investments in Debt and EquityInvestments*, and classified the securities as available-for-sale.The Company recorded a gain on sale of approximately $8,000 and$0.5 million from the sale of these securities during the year ended December 31,2005 and 2004, respectively. As a result, 

F-15

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**3. Summaryof Significant Accounting Policies (Continued)**

noinvestment in marketable securities is included in the accompanying December 31,2005 or 2004 consolidated balance sheets.

*Deferred Leasingand Financing Costs and Other Assets*

Deferred leasing and financing costs and other assetsinclude costs incurred in connection with securing financing for, or leasingspace in, the Company’s real estate investments. Such charges are capitalizedand amortized over the terms of the related financing or lease agreements.Unamortized deferred charges are charged to expense upon prepayment of thefinancing or early termination of the related lease.

The Company capitalizesinternal leasing costs in accordance with SFAS No. 91, *Nonrefundable Fees & Costs Associated withOriginating or Acquiring Loans and Initial Direct Costs of Leases*.These costs amounted to $3.6 million during each of the years ended December 31,2005 and 2004.

*Investments inUnconsolidated Joint Ventures*

The Company accounts for its investments inunconsolidated joint ventures that are not deemed to be variable interestentities pursuant to Statement of Position No. 78-9, *Accounting for Investments in Real Estate Ventures*(“SOP No. 78-9”) and APB No. 18, *The Equity Method of Accounting for Investments in Common Stock.*

As of December 31,2005, the Company had two unconsolidated joint ventures that were accounted forunder the equity method of accounting because it exercises significantinfluence over, but does not control, these entities. These investments arerecorded initially at cost, as Investment in Unconsolidated Joint Ventures, andare subsequently adjusted for an allocation of equity in earnings, plus cashcontributions, and less cash distributions. Under the equity method ofaccounting, the net equity investment of the Company is reflected on theconsolidated balance sheets, and the Company’s allocation of net income or lossfrom the joint ventures is included on the consolidated statements ofoperations as Equity in (Loss) Income from Unconsolidated Joint Ventures. TheCompany’s allocation of joint venture income or loss follows the joint venture’sdistribution priorities. In accordance with the provisions of SOP No. 78-9,the Company recognizes fees received from the joint venture relating solely tothe extent of the outside partner’s interest. Such fees are classified on theconsolidated statements of operations as Interest, Other, and Joint Venture FeeIncome.

*Revenue Recognition*

Management has determined that all of the Company’sleases with its various tenants are operating leases. Rental income from suchleases with scheduled rent increases is recognized using the straight-linemethod over the terms of the leases commencing when the tenant takes possessionof the space. The aggregate excess of rental revenue recognized on astraight-line basis over cash received under applicable lease provisionsamounted to $24.2 million and $21.1 million at December 31, 2005and 2004, respectively, and is included in accounts receivable, net ofallowance for doubtful accounts. Rental revenue recognized over cash receivedis included in revenue from rental and recoveries for the years ended December 31,2005, 2004 and 2003 and amounted to $4.0 million, $5.2 million and$6.0 million, respectively.

F-16

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**3. Summaryof Significant Accounting Policies (Continued)**

Leases for both retail and office space generallycontain provisions under which the tenants reimburse the Company for a portionof property operating expenses and real estate taxes incurred by the Company.Such recoveries revenue is recorded based on management’s estimate of itsrecovery of certain operating expenses and real estate tax expenses pursuant tothe terms contained in related leases. In addition, certain of the Company’soperating leases for retail space contain contingent rent provisions under whichtenants are required to pay a percentage of their sales in excess of aspecified amount as additional rent. The Company defers recognition ofcontingent rental income until such specified targets are met. Reimbursementsfor both operating expenses and real estate taxes as well as contingent rentalincome during the years ended December 31, 2005, 2004 and 2003 were$87.7 million, $79.3 million and $71.3 million, respectively.These items are included in revenue from rentals and recoveries in the consolidatedstatements of operations.

The Company makes estimates of the uncollectibility ofits accounts receivable related to minimum rent, deferred rent, expensereimbursements and other revenue or income. The Company specifically analyzesaccounts receivable and historical bad debts, tenant concentrations, tenantcreditworthiness, current economic trends and changes in tenant payment termswhen evaluating the adequacy of the allowance for doubtful accounts. Theseestimates have a direct impact on the Company’s net income.

Allowances foruncollectible receivables are charged against revenue from rentals andrecoveries and amounted to $4.0 million, $2.8 million and$4.8 million for the years ended December 31, 2005, 2004 and 2003,respectively.

*Sales of Real Estate*

The Company performsevaluations of each real estate sale to determine if full accrual recognitionis appropriate in accordance with SFAS No. 66, *Accounting for Sales of Real Estate*. The application of SFASNo. 66 can be complex and requires the Company to make assumptionsincluding an assessment of whether the risks and rewards of ownership have beentransferred, the extent of the purchaser’s investment in the property beingsold, whether the Company’s receivables, if any, related to the sale are collectibleand are subject to subordination, and the degree of the Company’s continuinginvolvement with the real estate asset after the sale. If full accrualrecognition is not appropriate, the Company accounts for the sale under anappropriate deferral method.

*Credit Risk*

The Company operates inone industry, which is the acquisition, ownership, management, leasing andredevelopment of real estate, and no single tenant accounts for more than 10%of total revenue. Financial instruments potentially subjecting the Company toconcentrations of credit risk consist principally of (1) temporary cashand equivalent instruments, which are held at financial institutions of highcredit quality; and (2) tenant receivables, whose credit risk isdistributed among tenants in different industries and across severalgeographical areas.

*Fair Value ofFinancial Instruments*

SFAS No. 107, *Disclosuresabout Fair Value of Financial Instruments*, requires the Company todisclose fair value information about all financial instruments, whether or notrecognized in the balance sheets, for 

F-17

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**3. Summaryof Significant Accounting Policies (Continued)**

which it is practicable toestimate fair value. The Company’s financial instruments, other than debt, aregenerally short-term in nature and consist of cash and cash equivalents, rentsand other receivables, and accounts payable. The carrying values of theseassets and liabilities, which are recorded at net realizable value in theconsolidated balance sheets, are assumed to be at fair value.

The fair value of theCompany’s fixed rate mortgage loans and unsecured notes payable, which is basedon estimates made by management for rates currently prevailing for comparableloans and notes of comparable maturities, exceeds the aggregate carrying valueby approximately $22 million and $47 million at December 31,2005 and 2004, respectively. The Company’s line of credit facility and bridgeloan facility are at variable rates, resulting in a carrying value that approximatesfair value at December 31, 2005 and 2004.

*Hedging Activities*

From time to time, the Company uses derivativefinancial instruments to limit its exposure to changes in interest rates.During 2005, the Company entered into forward-starting interest rate swaps tomitigate the risk of changes in forecasted interest payments on $150 million offorecasted issuances of long-term debt. The Company was not subject to anyhedging agreements with respect to its floating rate debt as of December 31,2004. See Note 16, “Derivative and Hedging Activities,” for additional detailson the Company’s hedging agreements. The Company occasionally uses derivativefinancial instruments to manage, or hedge, interest rate risks related to itsborrowings, from lines of credit to medium and long-term financings. TheCompany requires that hedging derivative instruments are effective in reducingthe interest rate risk exposure that they are designed to hedge. The Companydoes not use derivatives for trading or speculative purposes and only entersinto contracts with major financial institutions based on their credit ratingand other factors.

If interest rateassumptions and other factors used to estimate a derivative’s fair value ormethodologies used to determine hedge effectiveness were different, amountsreported in earnings and other comprehensive income and losses expected to bereclassified into earnings in the future could be affected.

*Stock-BasedCompensation*

The Company has one stock-based employee compensationplan, which is described more fully in Note 14. The Company accounts forthis plan under the recognition and measurement principles of APB Opinion No. 25,*Accounting for Stock Issued to Employees*(“ABP Opinion No. 25”), and related Interpretations, and applies thedisclosure provisions of SFAS No. 148, *Accountingfor Stock-Based Compensation—Transition and Disclosure*.

As discussed in Note 2 under the heading “*Tax Offset Provision,*” certain of the Company’s stockoptions were subject to variable accounting under APB Opinion No. 25 dueto a tax-offset payment provision contained in one employment agreement. Asalso discussed in Note 2, under the heading “*Eliminationof Tax Offset Provision*,” those stock options ceased to be subjectto variable accounting on December 30, 2005 upon the amendment of thatemployment agreement.

F-18

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**3. Summaryof Significant Accounting Policies (Continued)**

Exceptfor those stock options subject to variable accounting as described above, nostock-based employee compensation cost related to stock option grants isreflected in the Company’s reported results, as all options granted under theplan have an exercise price equal to the market value of the underlying commonstock on the date of grant. The following table illustrates the effect on netincome and earnings per share as if the Company had applied the fair valuerecognition provisions of SFAS No. 123, *Accountingfor Stock-Based Compensation* (“SFAS No. 123”), to stock-basedemployee compensation (in thousands, except per-share data): 

| ** **                                                                                      | ** ** | **Year ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                      | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net income  attributable to common shareholders, as reported                                    |       | $                                          | 29,588     |   | $ | 39,313 |   | $ | 36,543 |   |
| Add: Total stock  based compensation as reported in net income                                  |       | 9,470                                      |       | 10,108 |   | 8,775 |   |
| Less: Stock based  compensation expense determined under fair-value based method for all awards |       | (10,109                                    | )          | (10,714 | ) | (9,348 | ) |
| Pro forma net  income attributable to common shareholders                                       |       | $                                          | 28,949     |   | $ | 38,707 |   | $ | 35,970 |   |
| Income per share:                                                                               |       |                                       |       |   |   |   |   |
| Basic—as reported                                                                          |       | $                                          | 0.63       |   | $ | 0.85 |   | $ | 0.88 |   |
| Basic—pro forma                                                                            |       | $                                          | 0.62       |   | $ | 0.83 |   | $ | 0.86 |   |
| Diluted—as reported                                                                        |       | $                                          | 0.62       |   | $ | 0.84 |   | $ | 0.87 |   |
| Diluted—pro forma                                                                          |       | $                                          | 0.61       |   | $ | 0.82 |   | $ | 0.85 |   |

 

*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 attributableto common shareholders by the weighted average number of common sharesoutstanding during the period. Diluted earnings per share reflects thepotential dilution that could occur if securities or other contracts to issuecommon stock were exercised or converted into common stock or resulted in theissuance of common stock and shared in the earnings of the Company.

*Income Taxes*

The Company has elected tobe treated as a REIT under the Code. In order to qualify as a REIT for incometax purposes, the Company must, among other things, distribute to shareholdersat least 90% of its taxable income. It is the Company’s policy to distribute100% of its taxable income to shareholders. The Company believes it qualifiesas a REIT and, accordingly, no provision has been made for federal incometaxes.

The unaudited tax basis of the Company’s assets andliabilities was approximately $2.2 billion and $1.6 billion, respectively,as of December 31, 2005 and $2.1 billion and $1.4 billion, respectively,as of December 31, 2004.

*Reclassifications*

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

F-19

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**4. Real Estate Investments**

*Summary*

Asummary of real estate investments follows as of December 31 (inthousands): 

| ** **                                       | ** ** | **2005**  | ** ** | **2004**  | ** ** |
|--------------------------------------------------|------------|-----------|------------|-----------|------------|
| Land                                             |       | $         | 395,270    |      | $          | 360,643 |   |
| Land improvements                                |       | 209,029   |       | 196,155   |       |
| Buildings and  improvements                      |       | 2,001,925 |       | 1,894,101 |       |
| Tenant  improvements                             |       | 92,569    |       | 64,241    |       |
| Improvements &  developments in process |       | 12,295    |       | 25,701    |       |
|                                             |       | 2,711,088 |       | 2,540,841 |       |
| Accumulated  depreciation and amortization       |       | (405,686  | )          | (318,203  | )          |
| Net carrying  value                              |       | $         | 2,305,402  |      | $          | 2,222,638 |   |

 

*Acquisitions*

During the year ended December 31, 2005, theCompany completed the acquisition of seven shopping centers aggregating1.3 million square feet of gross leasable area (“GLA”), of which theCompany acquired 0.7 million square feet of GLA. The aggregate investmentin the shopping centers, including amounts allocated to acquired in-place leasevalue and above and below market leases, was $142.8 million, which wasfunded with borrowings under the Company’s line of credit, assumptions ofmortgage loans payable at their estimated fair market value, and the issuanceof exchangeable units of limited partnership interest in one of the Company’soperating partnerships.

In addition, during the year ended December 31,2005, the Company completed the acquisition of the 40% minority partnershipinterest in Williamson Square Shopping Center. As a result, the Company owns100% of the partnership interests in Williamson Square. The investment was $2.9million, which the Company funded with borrowings under its unsecured line ofcredit. The Company also repaid upon maturity the previously outstandingmortgage indebtedness encumbering the shopping center. As a result, WilliamsonSquare is now unencumbered.

During the year ended December 31, 2004, theCompany completed the acquisition of four shopping centers aggregating1.1 million square feet of GLA, of which the Company acquired0.9 million square feet of GLA. The aggregate investment in the shoppingcenters, including amounts allocated to acquired in-place lease value and aboveand below market leases, was $153.0 million, which was funded withborrowings under the Company’s line of credit, assumptions of mortgage loanspayable at their estimated fair market value, and the issuance of exchangeableunits of limited partnership interest in one of the Company’s operatingpartnerships.

During the year ended December 31,2003, the Company completed the acquisition of eleven shopping centersaggregating 2.1 million square feet of GLA, of which the Company acquired1.7 million square feet of GLA. The aggregate investment in the shoppingcenters, including amounts allocated to acquired in-place lease value and aboveand below market leases, was $224.2 million, which was funded withborrowings under the Company’s line of credit, assumptions of mortgage loanspayable at their estimated fair market value, and a short-term bridge loan,which has been fully repaid.

F-20

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**4. Real EstateInvestments (Continued)**

*2004 Dispositions*

In December 2004, the Company completed thedisposition of Garden Plaza, an 80,000 square foot shopping center located inFranklin, Wisconsin for $4.8 million, resulting in a gain of$0.6 million. The results of operations of the Garden Plaza shoppingcenter have been reclassified as discontinued operations for all periodspresented in the accompanying financial statements.

In December 2004, the Company completed thedisposition of a parcel of land located at Madison Plaza located in Madison,Wisconsin for $3.5 million, which approximated the Company’s carryingvalue. The operations and cash flows for the assets sold could not be clearlydistinguished, both operationally and for financial reporting purposes, fromthe rest of the shopping center. Accordingly, no amounts have been reclassifiedas discontinued operations in the accompanying financial statements.

In October 2004, the Company completed thedisposition of Camelot, a 151,000 square foot shopping center located inLouisville, Kentucky for $7.4 million, resulting in a gain of$0.3 million. The results of operations of the Camelot shopping centerhave been reclassified as discontinued operations for all periods presented inthe accompanying financial statements.

In September 2004, the Company completed thedisposition of a parcel of land located at Cross Keys Commons, located inTurnersville, New Jersey for $7.0 million, which approximated the Company’scarrying value. The operations and cash flows for the assets sold could not beclearly distinguished, both operationally and for financial reporting purposes,from the rest of the shopping center. Accordingly, no amounts have beenreclassified as discontinued operations in the accompanying financialstatements.

In April 2004, theCompany completed the disposition of the Fortune office building located inHartsdale, New York, for $7.4 million, resulting in a gain of$3.0 million. The results of operations of the Fortune office buildinghave been reclassified as discontinued operations for all periods presented inthe accompanying financial statements.

*2003 Dispositions*

In September 2003, the Company completed thedisposition of River Ridge Marketplace, a 214,000 square foot shopping centerlocated in Asheville, North Carolina for $13.2 million, resulting in again of $1.9 million. The results of operations of River Ridge Marketplaceshopping center have been reclassified as discontinued operations for allperiods presented in the accompanying financial statements.

In January and February 2003,the Company completed the sales of its 10 remaining single-tenant propertiesfor $2.4 million, resulting in a total gain of $0.8 million. Theresults of operations of these 10 properties have been reclassified asdiscontinued operations for all periods presented in the accompanying financialstatements.

**5. Insurance Recovery**

In October 2005, a hurricane caused damage tofour of the Company’s shopping centers in the Southeast. The hurricane damagedid not cause significant interruption to the business of these shoppingcenters. The Company has comprehensive insurance coverage for property damage,including for these shopping centers, which provides for an aggregate of $50million in coverage. The Company’s damage 

F-21

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**5. InsuranceRecovery (Continued)**

assessment teams, workingwith the insurance provider adjusters, inspected the properties and areimplementing a restoration plan.

The recovery effort is expected to include thereplacement of roofs at three of the shopping centers and a façade at one ofthe shopping centers. As of December 31, 2005, the net book value of theproperty damaged is currently estimated to be $1.4 million. Changes to thisestimate, if any, will be recorded in the periods in which they are determined.

Prior to December 31, 2005, the Company incurredcosts, estimated to be $0.3 million, primarily for temporary repairs andclean-up. As of December 31, 2005, the Company has recorded a write-off ofreal estate investments, net and a corresponding insurance claim recoveryreceivable for $1.4 million and has recorded an additional $0.3 million ofinsurance claim recovery receivable related to the temporary repairs andclean-up. Insurance recovery receivable is included with Prepaids and OtherAssets in accompanying consolidated balance sheet as of December 31, 2005.The Company has recorded these amounts because it believes that it is probablethat the insurance recovery, net of deductibles, will exceed the net book valueof the damaged portion of the assets and costs incurred to date.  The cost recovery is recorded on the expenseline item to which it relates and therefore, there is no net impact to any lineitem on the 2005 statement of operations or of the Company’s 2005 results ofoperations.

While the Company expects the insurance proceeds willbe sufficient to cover the replacement cost of the restoration of the property,the receipt of insurance proceeds is subject to certain deductibles andlimitations. As a result, the Company is unable to determine the timing ofreceipt or total amount of such insurance proceeds or whether those insurancepayments will be sufficient to cover the costs of the entire restoration. Tothe extent that insurance proceeds, which are on a replacement cost basis,ultimately exceed the net book value of the damaged property, a gain will berecorded in the period when all contingencies related to the insurance claimhave been resolved.

The following is a summary of hurricane-relatedactivity recorded (in thousands):

| Probable recovery  of real estate investments, net          |   | $      | 1,420  |   |
|-------------------------------------------------------------|--------|--------|--------|--------|
| Probable recovery  of other costs incurred                  |   | 337    |   |
| Payments received  as of December 31, 2005             |   | — |   |
| Insurance recovery  receivable as of December 31, 2005 |   | $      | 1,757  |   |

 

**6. Investments in Unconsolidated Joint Ventures**

*Lakes CrossingShopping Center*

In May 2004, the Company acquired a 50% interestin a joint venture for the development and construction of a 303,000 squarefoot shopping center, of which the joint venture will own approximately 215,000square feet, located in a suburb of Grand Rapids, Michigan. The Companyaccounts for the joint venture under the equity method of accounting and madean initial equity investment of $3.3 million and subsequently increasedthat investment with an additional $0.7 million anticipated contribution in thethree-month period ended June 30, 2005. At the time of the joint venture’sformation, the Company also provided a short-term bridge loan of approximately$9.2 million to the joint venture, which was repaid in November 2004.The Company is not the record-keeper of the joint venture, and otherwise doesnot have 

F-22

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**6. Investmentsin Unconsolidated Joint Ventures (Continued)**

immediate access to suchrecords. Therefore, the operations of the joint venture, primarily consistingof incidental activity related to operating restaurants located on out-parcels,are being reported on a three-month lag basis. Hence, the operations for theperiod from October 1, 2004 through September 30, 2005 and from theacquisition in May 2004 through September 30, 2004 are included inthe accompanying consolidated statements of operations for the year ended December 31,2005 and 2004, respectively, and are classified as Equity in (Loss) Income fromUnconsolidated Joint Ventures.

The Company has fullyguaranteed the repayment of a $22 million construction loan obtained bythe joint venture from Key Bank, National Association. The Key Bank loanmatures in November 2006 (subject to a one-year extension). As of December 31,2005, $17.8 million was outstanding under the construction loan. Such amount isrecorded on the books and records of the joint venture. In the event theCompany is obligated to repay all or a portion of the construction loanpursuant to the guarantee, the Company (i) may remove the manager of thejoint venture for cause and terminate all agreements with the manager, (ii) wouldreceive a promissory note from the joint venture for the amount paid by theCompany together with a first priority mortgage on the property, and (iii) mayprohibit all distributions from the joint venture or payment of fees by thejoint venture until the principal and accrued interest on the loan is repaid.The estimated fair value of the guarantee as of December 31, 2005 is notmaterial to the Company’s financial position. Accordingly, no liability oradditional investment has been recorded related to the fair value of theguarantee.

*Skillman AbramsShopping Center*

In April 2005, theCompany, through its joint venture with Intercontinental Real Estate InvestmentFund III, LLC, a fund sponsored and managed by Intercontinental Real EstateCorporation, acquired the Skillman Abrams Shopping Center (“Skillman Abrams”),a 133,000 square foot shopping center located in Dallas, Texas, for a totalpurchase price of approximately $19 million, including assumed mortgage debt.The Company has a 25% interest in the joint venture and is the property managerof Skillman Abrams pursuant to a property management agreement. The Companyaccounts for the joint venture under the equity method of accounting and is therecord-keeper of the joint venture. Therefore, there is no lag in reporting theoperations of the joint venture and the operations for the period from theacquisition in April 2005 through December 31, 2005 are included inthe accompanying 2005 consolidated statement of operations and are classifiedas Equity in (Loss) Income from Unconsolidated Joint Ventures.

**7. Supplemental Cash Flow Information**

During 2005, 2004 and 2003, interest paid was$86.1 million, $74.6 million, and $67.8 million, respectively,and state income and franchise tax payments, net of refunds, were$1.2 million, $1.2 million, and $0.4 million, respectively.

During 2005, 2004, and 2003, the Company assumed $29.5million, $48.9 million, and $80.5 million, respectively, of existing debt inconnection with the acquisition of properties.

During 2005, 2004,and 2003, the Company issued176,509, 189,588, and 0, respectively, exchangeable limited partnership unitsin Bradley OP with a fair value of $6.1 million, $6.2 million and $0,respectively, in connection with acquisitions of properties.

F-23

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**7. SupplementalCash Flow Information (Continued)**

During 2004, 7,814 shares of the Company’s commonstock were issued in exchange for 7,814 exchangeable operating partnershipunits in Bradley OP with a fair value of $0.2 million.

Included in accrued expenses and other liabilities at December 31,2005, 2004 , and 2003 are accrued expenditures for real estate investments of$3.6 million, $8.0 million, and $5.7 million, respectively. Also includedin accrued expenses and other liabilities at December 31, 2004 and 2003was $0.1 million related to debt issuance costs.

Only the cash portion ofthe above transactions is reflected in the accompanying consolidated statementsof cash flows.

**8. Operating Leases**

Scheduledfuture minimum rental payments to be received under the Company’snon-cancelable operating leases are as follows at December 31, 2005 (inthousands): 

| **Year Ending  December 31** | ** ** | ** ** | ** ** | **Amount** | ** ** |
|-----------------------------------|------------|------------|------------|------------|------------|
| 2006                              |       | $261,364   |       |
| 2007                              |       | 240,192    |       |
| 2008                              |       | 204,034    |       |
| 2009                              |       | 169,519    |       |
| 2010                              |       | 139,498    |       |
| Thereafter                        |       | 756,903    |       |
| Total minimum  future receipts    |       | $1,771,510 |       |

 

TheCompany has contractual commitments under non-cancelable operating leases,primarily ground leases expiring at various dates through 2087. Rental expensewas $3,343, $2,824, and $814 for the years ended December 31, 2005, 2004,and 2003, respectively. Committed amounts under non-cancelable operating leasesin effect at December 31, 2005 were as follows: 

| **Year Ending December 31** | ** ** | ** ** | ** ** | **Amount** | ** ** |
|--------------------------------------------|------------|------------|------------|------------|------------|
| 2006                                       |       | $          | 2,912      |       |
| 2007                                       |       | 3,006      |       |
| 2008                                       |       | 3,018      |       |
| 2009                                       |       | 3,120      |       |
| 2010                                       |       | 3,086      |       |
| Thereafter                                 |       | 73,542     |       |
| Total minimum future payments              |       | $          | 88,684     |       |

 

**9. Debt**

*Mortgage LoansPayable*

Mortgage loans consist of various non-recourseissuances collateralized by 66 and 65 real estate investments with an aggregatenet carrying value of $934.7 million and $973.9 million at December 31,2005 and 2004, respectively. The loans require monthly payments of principaland interest under fixed and 

F-24

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**9. Debt(Continued)**

variable terms, through2020 at effective interest rates ranging from 5.05% to 10.13% and have a weightedaverage effective interest rate of 7.27% at December 31, 2005. The loansare generally subject to prepayment penalties.

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

| **Property**                                         | ** ** | ** ** | ** ** | **Effective  Interest  Rate** | ** ** | **Contractual  Interest  Rate** | ** ** | **Maturity** | ** ** | **2005(1)** | ** ** | **2004(2)** | ** ** |
|------------------------------------------------------|------------|------------|------------|-------------------------------|------------|---------------------------------|------------|--------------|------------|-------------|------------|-------------|------------|
| Franklin Square                                      |       |       | 9.00       | %                             |       |                            | 9.00       | %            |       |        | Jun-05     |        |       | — |   | 13,583 |   |
| Williamson Square                                    |       |       | 8.00       | %                             |       |                            | 8.00       | %            |       |        | Aug-05     |        |       | — |   | 10,830 |   |
| Riverchase Village Shopping Center                   |       |       | 7.62       | %                             |       |                            | 7.62       | %            |       |        | Sep-05     |        |       | — |   | 9,764 |   |
| Meridian Village Plaza                               |       |       | 5.05       | %                             |       |                            | 7.88       | %            |       |        | May-06     |        |       | 4,922 |   | 5,348 |   |
| Spring Mall                                          |       |       | 9.39       | %                             |       |                            | 9.39       | %            |       |        | Oct-06     |        |       | 8,021 |   | 8,141 |   |
| Southport Centre                                     |       |       | 6.94       | %                             |       |                            | 6.94       | %            |       |        | Jul-07     |        |       | 9,764 |   | 9,924 |   |
| Long Meadow Commons                                  |       |       | 5.11       | %                             |       |                            | 7.98       | %            |       |        | Jul-07     |        |       | 9,472 |   | 10,028 |   |
| Innes Street Market                                  |       |       | 7.63       | %                             |       |                            | 7.63       | %            |       |        | Oct-07     |        |       | 12,478 |   | 12,830 |   |
| Southgate Shopping Center                            |       |       | 8.38       | %                             |       |                            | 8.38       | %            |       |        | Oct-07     |        |       | 2,285 |   | 2,395 |   |
| Hale Road & Northern Hills                  |       |       | 5.31       | %                             |       |                            | 5.31       | %            |       |        | Dec-07     |        |       | 14,600 |   | — |   |
| Salem Consumer Square                                |       |       | 10.13      | %                             |       |                            | 10.13      | %            |       |        | Sep-08     |        |       | 9,802 |   | 10,284 |   |
| St. Francis Plaza                                    |       |       | 8.13       | %                             |       |                            | 8.13       | %            |       |        | Dec-08     |        |       | 675 |   | 866 |   |
| Burlington Square                                    |       |       | 5.31       | %                             |       |                            | 8.28       | %            |       |        | Jan-09     |        |       | 14,522 |   | 15,051 |   |
| Crossroads III & Slater Street              |       |       | 5.85       | %                             |       |                            | 7.86       | %            |       |        | Jun-09     |        |       | 14,762 |   | — |   |
| Buckingham Place                                     |       |       | 5.89       | %                             |       |                            | 7.88       | %            |       |        | Aug-09     |        |       | 5,627 |   | 5,773 |   |
| County Line Plaza                                    |       |       | 5.64       | %                             |       |                            | 7.91       | %            |       |        | Aug-09     |        |       | 17,997 |   | 18,506 |   |
| Trinity Commons                                      |       |       | 5.64       | %                             |       |                            | 7.93       | %            |       |        | Aug-09     |        |       | 15,482 |   | 15,916 |   |
| 8 shopping centers, cross collateralized             |       |       | 7.82       | %                             |       |                            | 7.82       | %            |       |        | Dec-09     |        |       | 78,122 |   | 79,827 |   |
| Montgomery Commons                                   |       |       | 6.38       | %                             |       |                            | 8.48       | %            |       |        | Jan-10     |        |       | 8,305 |   | 8,506 |   |
| Warminster Towne Center                              |       |       | 6.01       | %                             |       |                            | 8.24       | %            |       |        | Feb-10     |        |       | 21,201 |   | 21,797 |   |
| Clocktower Place                                     |       |       | 5.75       | %                             |       |                            | 8.56       | %            |       |        | Apr-10     |        |       | 13,768 |   | 14,160 |   |
| 545 Boylston Street and William J. McCarthy Building |       |       | 8.26       | %                             |       |                            | 8.26       | %            |       |        | Oct-10     |        |       | 34,127 |   | 34,782 |   |
| 29 shopping centers, cross collateralized            |       |       | 7.88       | %                             |       |                            | 7.88       | %            |       |        | Oct-10     |        |       | 232,945 |   | 235,465 |   |
| The Market of Wolf Creek III                         |       |       | 5.71       | %                             |       |                            | 7.88       | %            |       |        | Feb-11     |        |       | 9,407 |   | 9,634 |   |
| Spradlin Farm                                        |       |       | 6.53       | %                             |       |                            | 7.25       | %            |       |        | Jan-12     |        |       | 17,734 |   | 18,003 |   |
| The Market of Wolf Creek I                           |       |       | 5.71       | %                             |       |                            | 7.68       | %            |       |        | Oct-12     |        |       | 11,190 |   | 11,475 |   |
| Berkshire Crossing                                   |       |       | 6.29       | %                             |       |                            | 6.29       | %            |       |        | Nov-12     |        |       | 14,030 |   | 14,523 |   |
| Grand Traverse Crossing                              |       |       | 7.42       | %                             |       |                            | 7.42       | %            |       |        | Jan-13     |        |       | 12,918 |   | 13,284 |   |
| Salmon Run Plaza                                     |       |       | 8.10       | %                             |       |                            | 8.95       | %            |       |        | Sep-13     |        |       | 4,603 |   | 4,938 |   |
| Elk Park Center                                      |       |       | 7.64       | %                             |       |                            | 7.64       | %            |       |        | Aug-16     |        |       | 7,947 |   | 8,244 |   |
| Grand Traverse Crossing - Wal-Mart                   |       |       | 7.75       | %                             |       |                            | 7.75       | %            |       |        | Oct-16     |        |       | 4,995 |   | 5,160 |   |
| The Market of Wolf Creek II                          |       |       | 5.87       | %                             |       |                            | 7.50       | %            |       |        | Jul-17     |        |       | 2,164 |   | 2,276 |   |
| Montgomery Towne Center                              |       |       | 8.50       | %                             |       |                            | 8.50       | %            |       |        | Mar-19     |        |       | 6,661 |   | 7,043 |   |
| Bedford Grove - Wal-Mart                             |       |       | 7.63       | %                             |       |                            | 7.63       | %            |       |        | Nov-19     |        |       | 3,915 |   | 4,067 |   |
| Berkshire Crossing - Home Depot/Wal-Mart             |       |       | 7.63       | %                             |       |                            | 7.63       | %            |       |        | Mar-20     |        |       | 6,378 |   | 6,617 |   |
| Total/Weighted  average                              |       |       | 7.27       | %                             |       |                            | 7.85       | %            |       |        |       |        |       | $ | 630,819 |   | $ | 649,040 |   |
|                                                      |            |            |            |                               |            |                                 |            |              |            |             |            |             |            |  |  |  |  |  |  |  |  |

----

(1)             The principal amount shown has beenadjusted to reflect the estimated fair value of the mortgage loans payable asof the date the property was acquired. The stated principal balance at December 31,2005 was $619.0 million.

 

(2)             The principal amount shown has beenadjusted to reflect the estimated fair value of the mortgage loans payable asof the date the property was acquired. The stated principal balance at December 31,2004 was $635.6 million.

F-25

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**9. Debt (Continued)**

*Unsecured NotesPayable*

On April 1, 2004, the Company completed theissuance and sale of $200 million principal amount of unsecured 5.125%notes due April 15, 2014. These notes were issued pursuant to the terms ofan indenture the Company entered into with LaSalle Bank National Association astrustee. The notes are shown net of an original issue discount of$1.7 million that is being accreted on a basis that approximates theeffective interest method over the term of the notes. The notes may be redeemedat any time at the option of the Company, in whole or in part, at a redemptionprice equal to the sum of (1) the principal amount of the notes beingredeemed plus accrued interest on the notes to the redemption date and (2) amake-whole amount, if any, with respect to the notes that is designed toprovide yield maintenance protection to the holders of these notes.

On October 15, 2004, the Company completed theissuance and sale of $150 million principal amount of unsecured 4.5% notesdue October 15, 2009. These notes were issued pursuant to the terms of anindenture the Company entered into with LaSalle Bank National Association astrustee. The notes are shown net of an original issue discount of$0.1 million that is being accreted on a basis that approximates theeffective interest method over the term of the notes. The notes may be redeemedat any time at the option of the Company, in whole or in part, at a redemptionprice equal to the sum of (1) the principal amount of the notes beingredeemed plus accrued interest on the notes to the redemption date and (2) amake-whole amount, if any, with respect to the notes that is designed toprovide yield maintenance protection to the holders of these notes.

In addition, all notes described above have beenguaranteed by the Company’s two operating partnerships. The indenture containsvarious covenants, including covenants which restrict the amount ofindebtedness that may be incurred by the Company and its subsidiaries. TheCompany is in compliance with all applicable covenants as of December 31,2005.

In its acquisition ofBradley OP in September 2000, Heritage assumed unsecured notes payableconsisting of a $100 million 7.0% fixed-rate issue maturing on November 15,2004; $100 million 7.2% fixed-rate issue maturing on January 15,2008; and $1.5 million of other debt. These notes are all held directly byBradley OP. On November 15, 2004, the Company repaid all of the$100 million 7% fixed-rate issue maturing on that date. The amount ofunsecured Bradley OP notes payable outstanding at December 31, 2005 and2004 was $101.5 million.

*Line of CreditFacility*

*Prior Line ofCredit*

As of December 31,2004, the Company was party to a $350 million unsecured line of creditwith a group of lenders and Fleet National Bank, as agent. Bradley OP andHeritage OP, the Company’s two operating partnerships, were the borrowers underthis line of credit, and the Company and certain of the Company’s othersubsidiaries guaranteed this line of credit. This line of credit was usedprincipally to fund growth opportunities and for working capital purposes. At December 31,2004, $196.0 million was outstanding on this prior line of credit.

F-26

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**9. Debt (Continued)**

*New Line of Credit*

Under its terms, the Company’s prior line of creditwould have matured on April 29, 2005. However, on March 29, 2005, theCompany refinanced the prior line of credit, entering into a new three-year$400 million unsecured line of credit with a group of lenders and WachoviaBank, National Association, as agent, expiring March 28, 2008, subject toa one-year extension. At the Company’s request, subject to the agent’s consent,this line of credit may be increased to $500 million. Heritage is theborrower under this line of credit and Bradley OP, Heritage OP and certain ofthe Company’s other subsidiaries have guaranteed the line of credit. The lineof credit is being used principally to fund growth opportunities and forworking capital purposes.

The Company’s ability to borrow under the line ofcredit is subject to the Company’s ongoing compliance with a number offinancial and other covenants. This line of credit, except under somecircumstances, limits the Company’s ability to make distributions in excess of95% of the Company’s annual funds from operations. In addition, this line ofcredit bears interest at either the lender’s base rate or a floating rate basedon a spread over LIBOR ranging from 62.5 basis points to 115 basis points,depending upon our debt rating. The new credit facility also includes acompetitive bid option program that allows the Company to hold auctions amongstthe participating lenders in the facility for up to fifty percent of thefacility amount. The variable rate in effect at December 31, 2005 was4.98%. This line of credit also has a facility fee based on the amountcommitted ranging from 15 to 25 basis points, depending upon our debt rating,and requires quarterly payments.

Heritage loaned all of theproceeds from the line of credit to Bradley OP, establishing a related partyline of credit facility. Bradley OP used these funds to repay the entireoutstanding balance of the prior line of credit. As of December 31, 2005,$328.0 million was outstanding under the line of credit facility.

*Bridge Loan*

On November 28, 2005,the Company entered into a $100 million term loan or “bridge loan” withWachovia Capital Markets, LLC, as arranger, Wachovia Investment Holdings, LLC,as agent, and certain other financial institutions, expiring August 28,2006, subject to a two-year extension. The Company’s ability to borrow underthe bridge loan is subject to its ongoing compliance with a number of financialand other covenants. This bridge loan, except under some circumstances, limitsthe Company’s ability to make distributions in excess of 95% of its annualfunds from operations. In addition, amounts borrowed under this bridge loanbear interest at either the lender’s base rate or a floating rate based on aspread over LIBOR ranging from 55 basis points to 115 basis points, dependingupon the Company’s debt rating. The variable rate in effect at December 31,2005 was 5.09%. This bridge loan also has a facility fee based on the amountcommitted ranging from 12.5 to 25 basis points, depending upon the Company’sdebt rating, and requires quarterly payments. The Company is the borrower underthis bridge loan, and Bradley OP and Heritage OP have guaranteed this bridgeloan. This bridge loan is being used principally to fund growth opportunitiesand for working capital purposes. As of December 31, 2005, $50.0 million hadbeen drawn under the bridge loan.

F-27

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**9. Debt (Continued)**

*Scheduled PrincipalRepayments*

Scheduledprincipal repayments on aggregate outstanding debt at December 31, 2005are as follows (in thousands):

| **Year Ending December 31** | ** ** | ** ** | ** ** | **Amount** | ** ** |
|--------------------------------------------|------------|------------|------------|------------|------------|
| 2006                                       |       | $          | 75,831     |       |
| 2007                                       |       | 58,391     |       |
| 2008                                       |       | 448,171    |       |
| 2009                                       |       | 291,744    |       |
| 2010                                       |       | 292,980    |       |
| Thereafter                                 |       | 281,340    |       |
| Total due(1)                               |       | $          | 1,448,457  |       |

 

----

(1)          Theaggregate principal repayment amount of $1,448,457 does not reflect theunamortized adjustment of $11,852 to increase the carrying amount to fair valuefor sixteen mortgages assumed as of December 31, 2005 and the unamortizedoriginal issue discounts of $1,526 related to $350 million of unsecuredindebtedness.

**10. Minority Interests**

*Series B and CPreferred Units*

On September 7, 2004, the Company redeemed all1,000,000 outstanding 8.875% Series C Cumulative Redeemable PerpetualPreferred Units of Bradley OP, at a redemption price of $25.00 per unit, plusapproximately $0.413 of accrued and unpaid distributions. There were nounamortized issuance costs associated with the Series C Preferred Units,therefore, the Company did not incur a charge in connection with thisredemption.

On February 23, 2004,the Company redeemed all 2,000,000 outstanding 8.875% Series B CumulativeRedeemable Perpetual Preferred Units of Bradley OP, at a redemption price of$25.00 per unit, plus approximately $0.3266 of accrued and unpaiddistributions. There were no unamortized issuance costs associated with the Series BPreferred Units, therefore, the Company did not incur a charge in connectionwith this redemption.

*Exchangeable LimitedPartnership Units*

Outstanding exchangeablelimited partnership units consist of 659,051and 522,044 Bradley OP Units (“OPUnits”) at December 31, 2005 and 2004, respectively, not owned by theCompany. The holders of these OP Units may present such OP Units to Bradley OPfor redemption at any time (subject to certain restrictions with particularholders). Upon presentation of an OP Unit, Bradley OP must redeem such OP Unitfor cash equal to the then value of a share of common stock of the Company (“CommonStock”), except that the Company may, at its election, in lieu of a cashredemption, acquire such OP Unit for one share of Common Stock. One share ofCommon Stock is generally the economic equivalent of the OP Unit, and thequarterly distribution that may be paid to the holder of an OP Unit equals thequarterly 

F-28

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**10. MinorityInterests (Continued)**

dividendthat may be paid to the holder of a share of Common Stock. During 2005, 39,502OP units were redeemed for $1.4 million of cash and 176,509 OP units valued at$6.1 million were issued in connection with an acquisition of properties. During2004, 7,814 shares of the Company’s common stock were issued in exchange for7,814 OP units and 189,588 OP Units valued at $6.2 million were issued inconnection with an acquisition of properties.

*Other MinorityInterest*

In July 2005, the Company, through its jointventure with WDG La Vista LLC (“Westwood”), contributed $15.4 million for a 50%interest in a parcel of land in La Vista, Nebraska (“La Vista Joint Venture”)which is to be constructed into a 550,000 square foot lifestyle shopping center.The La Vista Joint Venture was deemed to be a variable interest entity and theCompany was deemed to be the primary beneficiary, in accordance with FIN 46R. Therefore,the financial position of the La Vista Joint Venture is consolidated in theaccompanying consolidated financial statements of the Company as of December 31,2005. The 50% minority interest owned by Westwood was issued in considerationfor locating the site and other development work, and has a carrying value of$0 at December 31, 2005, as Westwood made no equity investment in the LaVista Joint Venture; therefore, there is no balance in Other Minority Interestat December 31, 2005 in the accompanying consolidated balance sheet.

The La Vista Joint Venture has also committed topurchase two additional parcels of land in La Vista, Nebraska. The purchase ofthe remaining two parcels may occur any time up through November 30, 2007for a purchase price of $11 million resulting in a total purchase pricefor all three parcels of $26 million.

The Company had a singleinvestment acquired in its acquisition of Bradley OP in which a minorityinterest participated in earnings based on terms specified in its partnershipagreement. This minority interest amounted to $2.4 million at December 31,2004.  During 2005, the Company purchasedthe outstanding 40% minority partnership interest for $2.9 million.

**11. Related Party Transactions**

*Transactions withNETT*

In connection with the formation of the Company, in July 1999,environmental studies were not completed for all of the properties contributedby the Company’s largest stockholder, Net Realty Holding Trust (“NETT”). NETThas agreed to indemnify the Company for environmental costs of up to$50 million with respect to those contributed properties. Theenvironmental costs include completing environmental studies and any requiredremediation. Since its formation, the Company has been reimbursed by NETT forapproximately $2.0 million of environmental costs pursuant to thisindemnity. As of December 31, 2005 and 2004, the Company was due $0.6million and $0.4 million, respectively, under this indemnity.

In November 1999, the Company entered into ajoint venture with an affiliate of NETT for the acquisition and development ofa 365,000 square foot commercial office building at 131 Dartmouth Street,Boston, Massachusetts. This joint venture is owned 94% by the affiliate of NETTand 6% by the Company. The Company was issued this interest as part of amanagement arrangement with the joint venture 

F-29

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**11. RelatedParty Transactions (Continued)**

pursuant to which theCompany manages the building. The Company has no ongoing capital contributionrequirements with respect to this office building, which was completed in 2003.The Company accounts for its interest in this joint venture using the costmethod and has not expended any amounts on the office building through December 31,2005.

In February 2004, theCompany entered into an eleven-year lease with this joint venture forapproximately 31,000 square feet of space and moved its corporateheadquarters to this space during the first quarter of 2004. Under the terms ofthis lease, which were negotiated on an arms-length basis, the Company beganpaying rent during the three-month period ended March 31, 2005. TheCompany pays $1.1 million per year in minimum rent through 2009 and $1.2million per year from 2009 through 2015.

*Transactions withPrudential*

In connection with its providing advisory services tothe Company in connection with the Company’s initial public offering,Prudential received warrants to acquire shares of the Company’s common stock atan exercise price of $25.00 per share, which was assumed to be equal to thefair 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 9,2003, and on September 18, 2000, 300,000 warrants were issued with anexpiration date of September 18, 2004. The warrants had an estimated fairvalue at issuance of $0.2 million and $0.9 million, respectively, andsuch amounts were recorded as additional paid-in capital.

In February 2003 the Company extended theexpiration date of all warrants to April 29, 2007. The Company recorded a chargeof $0.1 million in connection with this modification.

On March 11, 2004,Prudential informed the Company that it was exercising all of its 375,000warrants in accordance with the cashless exercise provisions of its warrantagreement. Pursuant to the warrant agreement, on March 12, 2004, theCompany issued Prudential 68,166 shares of common stock in full settlement ofthe warrants. The Company did not incur any additional expense as a result ofthe exercise of the warrants.

*The TJX Companies*

In July 1999, BernardCammarata became a member of the Company’s board of directors. Until September 2005,Mr. Cammarata was non-executive Chairman of the Board of TJX Companies, Inc.,the Company’s largest tenant. In September 2005, Mr. Cammarata becamePresident and Chief Executive Officer of TJX, positions he previously held. In October 2005,TJX appointed a new President, with Mr. Cammarata continuing to serve asChief Executive Officer. Annualized base rent from the TJX Companies representsapproximately 5.3% of the Company’s total annualized base rent for all leasesin which tenants were in occupancy at December 31, 2005. In addition, accountsreceivable for contractual and straight-line rent of $2.0 million wereoutstanding as of December 31, 2005. TJX pays the Company rent in accordancewith 52 leases at its properties.

*Ahold USA*

In July 1999, WilliamM. Vaughn, III became a member of the Company’s board of directors. Until December 31,2005, Mr. Vaughn was Senior Vice President, Labor Relations of Ahold USA, Inc.,the 

F-30

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

**11. RelatedParty Transactions (Continued)**

parentcompany of Giant Foods and Stop & Shop. Mr. Vaughn is also amember of the Board of Trustees of the Company’s largest stockholder, NETT.Annualized base rent from Ahold USA and its subsidiary companies representsapproximately 0.6% of the Company’s total annualized base rent for all leasesin which tenants were in occupancy at December 31, 2005. In addition, accountsreceivable for contractual and straight-line rent of $0.4 million were outstandingas of December 31, 2005. Ahold USA and its subsidiary companies pay the Companyrent in accordance with 3 leases at its properties.

*A.C. Moore*

In June 2004, MichaelJ. Joyce became a member of the Company’s board of directors. In July 2004,Mr. Joyce became a member of the board of director’s of A.C. Moore Arts &Crafts (“A.C. Moore”). Annualized base rent from A.C. Moore represents 0.2% ofthe Company’s total annualized base rent for all leases in which tenants werein occupancy at December 31, 2005. In addition, accounts receivable forcontractual and straight-line rent of $0.1 million were outstanding as ofDecember 31, 2005. A.C. Moore pays the Company rent in accordance with 3 leasesat its properties.

**12. SegmentReporting**

The Company predominantlyoperates in one industry segment—real estate ownership and management of retailproperties. As of December 31, 2005 and 2004, the Company owned 171 and164 community and neighborhood shopping centers, respectively. Managementreviews operating and financial data for each property separately andindependently from all other properties when making resource allocationdecisions and measuring performance. The Company defines operating segments asindividual properties with no segment representing more than 10% of rentalrevenue.

**13. Earnings PerShare**

Earningsper 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 numberof common shares used in the computation of basic EPS, which utilizes theweighted average number of common shares outstanding without regard to thedilutive potential common shares, and diluted EPS, which includes all shares,as applicable (in thousands, except per-share data): 

| ** **                                      | ** ** | **For the year ended December 31, 2005** | ** ** |
|-------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **Income  (Numerator)**                                                | ** ** | **Shares  (Denominator)** | ** ** | **Per Share  Amount** | ** ** |
| Basic Earnings Per  Share:                      |       |                                                                   |       |   |   |   |   |   |   |   |   |   |   |
| Net income attributable  to common shareholders |       |                                                                   | $          | 29,588 |   |   |   | 46,888 |   |   |   | $ | 0.63 |   |   |
| Effect of dilutive  securities:                 |       |                                                                   |       |   |   |   |   |   |   |   |   |   |   |
| Stock options                                   |       |                                                                   | —     |   |   |   | 509 |   |   |   | — |   |   |
| Anticipated stock  compensation                 |       |                                                                   | —     |   |   |   | 214 |   |   |   | — |   |   |
| Operating partnership  units                    |       |                                                                   | 241        |   |   |   | 565 |   |   |   | 0.43 |   |   |
| Diluted income per  share:                      |       |                                                                   |       |   |   |   |   |   |   |   |   |   |   |
| Net income attributable to common shareholders  |       |                                                                   | $          | 29,829 |   |   |   | 48,176 |   |   |   | $ | 0.62 |   |   |

 

F-31

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**HERITAGE PROPERTY INVESTMENT TRUST, INC.  Notes to Consolidated Financial Statements  (Continued) Years ended December 31, 2005, 2004 and 2003**

 

| ** **                                      | ** ** | **For the year ended December 31, 2004** | ** ** |
|-------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **Income  (Numerator)**                                                | ** ** | **Shares  (Denominator)** | ** ** | **Per Share  Amount** | ** ** |
| Basic Earnings  Per Share:                      |       |                                                                   |       |   |   |   |   |   |   |   |   |   |   |
| Net income attributable to common shareholders  |       |                                                                   | $          | 39,313 |   |   |   | 46,385 |   |   |   | $ | 0.85 |   |   |
| Effect of  dilutive securities:                 |       |                                                                   |       |   |   |   |   |   |   |   |   |   |   |
| Stock options and warrants                      |       |                                                                   | —     |   |   |   | 311 |   |   |   | — |   |   |
| Anticipated stock compensation                  |       |                                                                   | —     |   |   |   | 243 |   |   |   | — |   |   |
| Operating partnership units                     |       |                                                                   | 206        |   |   |   | 349 |   |   |   | 0.59 |   |   |
| Diluted income  per share:                      |       |                                                                   |       |   |   |   |   |   |   |   |   |   |   |
| Net income  attributable to common shareholders |       |                                                                   | $          | 39,519 |   |   |   | 47,288 |   |   |   | $ | 0.84 |   |   |

 

| ** **                                      | ** ** | **For the year ended December 31, 2003** |
|-------------------------------------------------|------------|------------------------------------------------------------------------|
| ** **                                      | ** ** | **Income  (Numerator)**                                                | ** ** | **Shares  (Denominator)** | ** ** | **Per Share  Amount** |
| Basic Earnings Per Share:                       |       |                                                                   |   |   |   |   |   |   |   |   |   |   |
| Net income attributable to common shareholders  |       |                                                                   | $ | 36,543 |   |   |   | 41,747 |   |   |   | $ | 0.88 |   |
| Effect of dilutive  securities:                 |       |                                                                   |   |   |   |   |   |   |   |   |   |   |
| Stock options and warrants                      |       |                                                                   | — |   |   |   | 204 |   |   |   | — |   |
| Anticipated stock compensation                  |       |                                                                   | — |   |   |   | 193 |   |   |   | — |   |
| Operating partnership units                     |       |                                                                   | 214 |   |   |   | 340 |   |   |   | 0.63 |   |
| Diluted income per  share:                      |       |                                                                   |   |   |   |   |   |   |   |   |   |   |
| Net income  attributable to common shareholders |       |                                                                   | $ | 36,757 |   |   |   | 42,484 |   |   |   | $ | 0.87 |   |

 

**14. Stock-BasedCompensation**

*Overview*

SFAS No. 123, establishes financial accountingand reporting standards for stock-based employee compensation plans, includingall arrangements by which employees receive shares of stock or other equityinstruments of the employer or the employer incurs liabilities to employees inamounts based on the price of the employer’s stock. SFAS No. 123 defines afair value-based method of accounting for an employee stock option or similarequity instrument. However, it also allows an entity to continue to measurecompensation cost using the intrinsic value-based method of accountingprescribed by APB Opinion No. 25 and to make pro-forma disclosures of netincome and earnings per share as if the fair value method of accounting definedin SFAS No. 123 were applied. The Company uses APB Opinion No. 25 andrelated Interpretations to measure compensation costs for its stock-based plan.

F-32

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**14. Stock-BasedCompensation (Continued)**

The Company’s 2000 Equity Incentive Plan, as amended(the “Plan”) authorizes options and other stock-based compensation awards to begranted to employees and directors for up to 5,700,000 shares of common stock.

*Stock Options*

Pursuant to the Plan, the Company periodically grantsoptions to purchase shares of common stock at an exercise price equal to theestimated per-share fair value of the Company’s common stock. The options vestover periods ranging from three to five years and have an expiration of tenyears from the grant date.

As discussed in Note 2 under the heading “*Tax Offset Provision,*” 920,000 and 780,000 of the Company’sstock options were subject to variable accounting under APB Opinion No. 25at December 31, 2004 and 2003, respectively, due to a tax-offset paymentprovision contained in one employment agreement. Also discussed in Note 2 underthe heading “*Elimination of Tax Offset Provision*,”those stock options ceased to be subject to variable accounting on December 30,2005 upon the amendment of that employment agreement.  The total expense related to those stockoptions during the periods in which they were subject to variable accountingwas $2.5 million, $5.5 million, and $4.2 million for the years ended December 31,2005, 2004 and 2003, respectively.

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

Asummary of all option transactions during the periods covered by theseconsolidated financial statements is as follows: 

| ** **                             | ** ** | **Shares** | ** ** | **Weighted Average  Exercise price  per share** | ** ** |
|----------------------------------------|------------|------------|------------|----------------------------------------------------------------|------------|
| Outstanding at  December 31, 2002 |       | 2,051,727  |       |                                                           | $          | 24.99 |   |   |
| Granted                                |       | 737,751    |       |                                                           | $          | 24.39 |   |   |
| Cancelled                              |       | (11,500    | )          |                                                           | $          | 24.65 |   |   |
| Exercised                              |       | (487,655   | )          |                                                           | $          | 24.90 |   |   |
| Outstanding at  December 31, 2003 |       | 2,290,323  |       |                                                           | $          | 24.79 |   |   |
| Granted                                |       | 539,654    |       |                                                           | $          | 28.48 |   |   |
| Cancelled                              |       | (12,666    | )          |                                                           | $          | 24.90 |   |   |
| Exercised                              |       | (398,893   | )          |                                                           | $          | 25.03 |   |   |
| Outstanding at  December 31, 2004 |       | 2,418,418  |       |                                                           | $          | 25.60 |   |   |
| Granted                                |       | 117,500    |       |                                                           | $          | 30.90 |   |   |
| Cancelled                              |       | (5,782     | )          |                                                           | $          | 26.26 |   |   |
| Exercised                              |       | (173,138   | )          |                                                           | $          | 25.14 |   |   |
| Outstanding at  December 31, 2005 |       | 2,356,998  |       |                                                           | $          | 25.90 |   |   |

 

F-33

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**14. Stock-Based Compensation (Continued)**

The following tablesummarizes information about all stock options outstanding at December 31,2005: 

| ** **    | ** **                              | **Options Outstanding** | ** ** | ** **                                | ** ** | **Options Exercisable**                           | ** ** |
|---------------|-----------------------------------------|------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **    | **Range of  Exercise Prices** | ** **                   | ** ** | **Number  Outstanding  at 12/31/05** | ** ** | **Weighted-Average  Remaining  Contractual Life** | ** ** | **Weighted-Average  Exercise Price** | ** ** | **Number  Exercisable  at 12/31/05** | ** ** | **Weighted-Average  Exercise Price** | ** ** |
| $23.95-$30.90 |                                    |                         | 2,356,998  |                                      |       |                                                   | 6.47       |   |   |   | $ | 25.90 |   |   | 1,568,379 |   |   | $ | 25.21 |   |   |
|               |                                         |                              |            |                                           |            |                                                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Forpurposes of the pro forma amounts below, the Company recognizes compensationexpense over the vesting period. The per-share weighted-average fair values ofthe 117,500, 399,654, and 597,751 options not subject to the aforementionedtax-offset feature and issued during the years ended December 31, 2005,2004, and 2003, respectively was $2.75, $1.98, and $1.30, respectively. Theper-share fair value of each option granted is estimated on the date of grantusing the Black-Scholes option-pricing model with the followingweighted-average assumptions for the years ended December 31, 2005, 2004,and 2003: 

| ** **                       | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|----------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Dividend                         |       | $        | 2.10       |     | $          | 2.10     |       | $ | 2.10 |   |
| Expected life of  option         |       | 6 years  |       | 6 years  |       | 6 years  |       |
| Risk-free  interest rate         |       | 3.87     | %          | 3        | %          | 3        | %          |
| Expected stock price  volatility |       | 20       | %          | 20       | %          | 20       | %          |
|                                  |            |          |            |          |            |          |            |  |  |  |

 

As set forth above,the Company previously recorded compensation expense with respect to certainstock options subject to tax-offset provision. The additional compensation costrequired under SFAS No. 123 for the stock performance-based planwould have been $0.6 million for each of the years ended December 31,2005, 2004 and 2003. Had compensation cost for the Company’s grants understock-based compensation plans been determined consistent with SFAS No. 123,the Company’s net income (loss), and net income (loss) per common share for 2005,2004 and 2003 would be the pro forma amounts below (in thousands, exceptper-share data): 

| ** **                                      | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                      | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net income  attributable to common shareholders |       | $                                          | 28,949     |   | $ | 38,707 |   | $ | 35,970 |   |
| Net income per  common share—basic         |       | $                                          | 0.62       |   | $ | 0.83 |   | $ | 0.86 |   |
| Net income per common  share—diluted       |       | $                                          | 0.61       |   | $ | 0.82 |   | $ | 0.85 |   |

 

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

*Special Stock Grants*

In July 2002,the Board of Directors approved the issuance over five years of an aggregate ofup to 775,000 shares of restricted stock with no exercise price to members ofsenior management of the Company. The Company issued the first installment of155,000 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 andtransfer restrictions, which terminated on March 1, 2003, based on thecontinued employment of these individuals 

with theCompany through that date. During the year ended December 31, 2003, theCompany recognized $1.1 million of compensation expense related to theseshares, respectively.

F-34

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**14. Stock-BasedCompensation (Continued)**

On March 3, 2003, the Company issued the secondinstallment consisting of 155,000 shares based on a value of $24.36 per share.These shares were subject to risk of forfeiture and transfer restrictions,which terminated on March 3, 2004, based on the continued employment ofthese individuals with the Company through that date. During the years ended December 31,2004 and 2003, the Company recognized $0.5 million and $3.3 million,respectively of compensation expense related to these shares, including thevesting of 20,000 shares issued to an officer which were accelerated upon hisdeparture from the Company in 2003.

On March 1, 2004, the Company issued the thirdinstallment consisting of 135,000 shares (reduced from 155,000 to reflect thetermination of employment of one of the participants) based on a value of$29.76 per share. These shares are subject to risk of forfeiture and transferrestrictions, which terminated on March 1, 2005, based on the continuedemployment of these individuals with the Company through that date. During theyears ended December 31, 2005 and 2004, the Company recognized $0.7million and $3.3 million, respectively, of compensation expense related tothese shares, including the vesting of 1,000 shares issued to an officer whichwere accelerated upon her departure from the Company.

On March 4, 2005, the Company issued the fourthinstallment of 134,000 shares (reduced from 155,000 to reflect the terminationof employment of two of the participants) based on a fair market value of$30.90 per share on the grant date. These shares are subject to risk offorfeiture and transfer restrictions, which terminated on March 4, 2006,subject to the continued employment of these individuals with the Companythrough that date. During the year ended December 31, 2005, the Companyrecognized $3.5 million of compensation expense related to these shares. Theunamortized compensation expense of $0.7 million is included as unearnedcompensation on the accompanying December 31, 2005 balance sheet and willbe amortized ratably through March 3, 2006.

On March 9, 2006, theCompany issued the fifth and final installment consisting of 134,000 sharesbased on a value of $38.90 per share. These shares are subject to risk offorfeiture and transfer restrictions, which terminate on March 8, 2007,based on the continued employment of these individuals with the Company throughthat date.

*Annual PerformanceShares*

The Company recognizes compensation expense withrespect to performance-based stock grants ratably over the one-year performanceperiod and three-year vesting period.

In March 2003, the Company issued 119,500 sharesof restricted stock related to 2002 performance and based on a fair marketvalue on the date of issuance of $24.36 per share. During the years ended December 31,2005, 2004, and 2003, the Company recognized $1.1 million, $0.8 million and$1.2 million, respectively, of compensation expense related to these shares,including the reimbursement of the taxes to be paid by Mr. Prendergastrelated to the shares. The reimbursement of taxes was paid pursuant to Mr. Prendergast’semployment agreement.

In February 2004, the Company issued 108,000shares of restricted stock related to 2003 performance and based on a fairmarket value on the date of issuance of $28.47 per share. During the yearsended December 31, 2005, 2004, and 2003, the Company recognized $1.2million, $1.1 million, and $1.1 million, respectively, of compensation expenserelated to these shares, including the reimbursement of the taxes to 

F-35

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**14. Stock-BasedCompensation (Continued)**

be paid by Mr. Prendergastrelated to the shares. The unamortized compensation expense of $0.7 million isincluded as unearned compensation on the accompanying December 31, 2005balance sheet and will be amortized ratably through the remaining vestingperiod.

In March 2005, the Company issued 143,800 sharesof restricted stock related to 2004 performance and based on a fair marketvalue on the date of issuance of $30.90 per share. During the each of the yearsended December 31, 2005 and 2004, the Company recognized $1.5 million ofcompensation expense related to these shares, including the reimbursement oftaxes to be paid by Mr. Prendergast related to the shares. The unamortizedcompensation expense of $2.2 million is included as unearned compensation onthe accompanying December 31, 2005 balance sheet and will be amortizedratably through the remaining vesting period.

During the year ended December 31, 2005, theCompany accrued $1.2 million of compensation expense, including the reimbursementof taxes to be paid by Mr. Prendergast related to the shares, related to106,750 shares of restricted stock that were issued by the Company onMarch 9, 2006. The Company recognizes compensation expense with respect toperformance-based stock grants ratably over the performance and three-yearvesting periods.

In addition, on March 9, 2006, the Company issued13,000 shares of restricted stock in lieu of stock options. The Companyrecognizes compensation expense with respect to these shares over thethree-year vesting period.

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

| ** **                                        | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Unvested shares  outstanding at beginning of year |       | 306,000  |       | 238,500  |       | 155,000  |       |
| Shares issued                                     |       | 277,800  |       | 243,000  |       | 276,500  |       |
| Shares forfeited                                  |       | —   |       | —   |       | —   |       |
| Shares vested                                     |       | (202,501 | )          | (175,500 | )          | (193,000 | )          |
| Unvested shares  outstanding at end of year       |       | 381,299  |       | 306,000  |       | 238,500  |       |

 

The Company also grantedto directors 792, 8,336 and 7,493 shares of common stock and recognizedcompensation expense of $28,000, $0.3 million and $0.2 million,respectively, for the years ended December 31, 2005, 2004 and 2003.

*Deferred StockUnits*

The Company maintains a compensation plan relating tothe payment of fees and other compensation to non-employee directors.Non-employee directors (other than directors who are also trustees of theCompany’s largest stockholder, Net Realty Holding Trust) receive an annualretainer, fees for Board meetings attended, Board committee chair retainers andfees for Board committee meetings attended. Except as described below, thesefees are typically paid in cash.

Under the plan, on January 1 of each year, theCompany credits each non-employee director entitled to receive compensationwith an annual grant of 1,000 “deferred stock units” for his or her service onthe Board during the prior year. On January 1 of each service year (“ServiceYear”), the Company begins to 

F-36

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**14. Stock-BasedCompensation (Continued) (Continued)**

accrue compensationexpense for deferred stock units expected to be credited for service on theBoard during that Service Year. The value of the deferred stock units, based onthe fair market value of the Company’s common stock on the date of the grant,is amortized to compensation expense over the Service Year.

In addition, beginning on the date on which deferredstock units are credited to a director for the prior Service Year, the numberof deferred stock units credited is increased by additional deferred stockunits in an amount equal to the relationship of dividends declared to the valueof the common stock of the Company. The deferred stock units credited to adirector are not settled until he or she ceases to be on the Board ofDirectors, at which time an equivalent number of shares of common stock of theCompany will be issued.

Deferred stock units may also be credited to directorsin lieu of the payment of cash compensation. Under the plan, directors mayelect to receive their compensation, which is paid every six months, in the formof cash, shares of common stock or additional deferred stock units. Deferredstock units credited to a director in lieu of cash compensation have the sameterms as deferred stock units credited for annual service, except that theseexpected deferred stock units are credited in January and July ofeach year.

During the year ended December 31, 2005, theCompany incurred $0.6 million of compensation expense related to directorcompensation, of which $0.4 million related to deferred stock units credited todirectors for the 2005 Service Year. On January 1, 2006 an aggregate of6,000 deferred stock units were credited to those directors entitled to receivecompensation for the 2005 Service Year. In addition, three directors elected toreceive all or a portion of their cash compensation for the 2005 Service Yearin the form of deferred stock units. The Company credited these directors anaggregate of 2,112 deferred stock units on July 1, 2005 and 2,971additional deferred stock units on January 1, 2006.

During the year ended December 31,2004, the Company incurred $0.5 million of compensation expense related todirector compensation, of which $0.3 million related to deferred stock unitscredited to directors for the 2004 Service Year. On January 1, 2005 anaggregate of 5,500 deferred stock units were credited to those directorsentitled to receive compensation for the 2004 Service Year. In addition, threedirectors elected to receive all or a portion of their cash compensation forthe 2004 Service Year in the form of deferred stock units. The Company creditedthese directors an aggregate of 2,180 deferred stock units on July 1, 2004and 2,384 additional deferred stock units on January 1, 2005.

**15. Commitments and Contingencies**

*Retirement SavingsPlan*

Effective in January 2000,the Company began to offer its employees a retirement savings plan qualifiedunder Section 401(k) of the Code. Under the Plan, the Companyprovides matching contributions. These matching contributions are currentlyequal to 100% of the employee’s contribution up to 3% of the employee’scompensation, and 50% of the employee’s contribution in excess of 3% and up to5% of the employee’s compensation. These employer contributions aggregated$0.5 million, $0.5 million, and $0.3 million in 2005, 2004 and2003, respectively, and vested immediately.

F-37

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**15. Commitments and Contingencies(Continued)**

*SupplementalExecutive Retirement Plan*

Effective in January 2000, the Company adopted anon-qualified executive retirement plan (“SERP”). Benefits payable under theSERP are based upon a percentage of each participant’s average annual cashcompensation, consisting of base salary and cash bonus, for the three calendaryears of the last ten years of employment which produce the highest averageamount. Benefits earned under the SERP vest over varying periods ranging fromeight to ten years. Participants may begin to receive payments under the SERPfollowing either their 60th or 65th birthday depending on the terms of theirindividual agreement. Benefits under the SERP will terminate upon theparticipant’s death. The Company has accrued a liability pursuant to the SERPof $6.6 million and $5.9 million, at December 31, 2005 and 2004,respectively, representing the Company’s unfunded accumulated benefitobligation. Such amounts are classified in Accrued Expenses and OtherLiabilities in the accompanying balance sheets. In addition, $0.7 millionand $1.2 million, representing a portion of unamortized prior service cost, hasbeen recorded as an intangible asset in other assets as of December 31,2005 and 2004, respectively. As of December 31, 2005, the Company does notexpect to make benefit payments or contributions during the next five years.

Thefollowing is a reconciliation of the accumulated post retirement obligation,assuming no salary rate increase for the year ended December 31, 2005 anda 5% increase for the years ended December 31, 2004 and 2003 and adiscount rate of 5.75%, 5.75%, and 6.0% during the years ended December 31,2005, 2004, and 2003, respectively: 

| ** **                                           | ** ** | **2005**  | ** ** | **2004**  | ** ** | **2003**  | ** ** |
|------------------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
| Accumulated  benefit obligation at beginning of year |       | $         | 5,861,384  |      | $          | 4,174,378 |       | $ | 2,899,301 |   |
| Net periodic  benefit cost:                          |       |      |       |      |       |      |       |
| Service cost                                         |       | 524,070   |       | 441,878   |       | 598,433   |       |
| Interest cost                                        |       | 399,090   |       | 325,155   |       | 333,372   |       |
| Past service cost                                    |       | 357,935   |       | 357,935   |       | 357,935   |       |
| Actuarial loss                                       |       | —    |       | (17,222   | )          | (14,663   | )          |
| Net periodic  benefit cost                           |       | 1,281,095 |       | 1,107,746 |       | 1,275,077 |       |
| Settlement paid  to SERP participant                 |       | —    |       | (576,000  | )          | —    |       |
| Change in  additional minimum liability              |       | (504,344  | )          | 1,155,260 |       | —    |       |
| Accumulated benefit  obligation at end of year       |       | $         | 6,638,135  |      | $          | 5,861,384 |       | $ | 4,174,378 |   |

 

During the year ended December 31,2004, $0.6 million was contributed by the Company to the plan and$0.6 million was distributed to one of the SERP participants, representingthe Company’s full obligation to that participant pursuant to a contractualtermination of the SERP.

*Legal and OtherMatters*

On October 31, 2001, a complaint was filedagainst the Company in the Superior Court of Suffolk County of the Commonwealthof Massachusetts by Weston Associates and its president, Paul Donahue, allegingthat the Company owes Mr. Donahue and his firm a fee in connection withservices he claims he performed on the Company’s behalf in connection with theacquisition of Bradley Real Estate Inc. On September 18, 2000, theCompany acquired Bradley, a publicly traded REIT based in Illinois with nearly100 shopping center properties located primarily in the Midwest, at an aggregatecost of approximately 

F-38

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**15. Commitmentsand Contingencies (Continued)**

$1.2 billion. Throughhis personal relationships with the parties involved, at the Company’s request,Mr. Donahue introduced the Company to Bradley and its senior managementteam. Mr. Donahue alleges, however, that he played an instrumental role inthe negotiation and completion of the Company’s acquisition of Bradley beyondmerely introducing the parties. For these alleged efforts, Mr. Donahuedemands that he receive a fee equal to 2% of the aggregate consideration paidto acquire Bradley, or a fee of approximately $24 million. In addition, Mr. Donahuealso seeks treble damages based on alleged unfair or deceptive businesspractices under Massachusetts law.

On November 29, 2002, the court granted theCompany’s motion to dismiss Mr. Donahue’s claims. Mr. Donahuesubsequently filed an appeal of the court’s decision and on March 4, 2004,an oral argument was heard with respect to Mr. Donahue’s appeal. On July 14,2004, the Massachusetts Appellate Court reversed the lower court’s decisiondismissing Mr. Donahue’s claims. The Appellate Court’s decision revertsthe case back to the Superior Court for discovery and additional proceedings.It is not possible at this time to predict the outcome of this litigation andthe Company intends to vigorously defend against these claims.

Except as set forth above, the Company is not involvedin any material litigation nor, is any material litigation threatened againstthe Company, other than routine litigation arising in the ordinary course ofbusiness, which is generally expected to be covered by insurance. In theopinion of the Company’s management, based upon currently availableinformation, this litigation is not expected to have a material adverse effecton the Company’s business, financial condition or results of operations.

The Company is subject tolegal and other claims incurred in the normal course of business. Based on itsreview and consultation with counsel of such matters known to exist, managementdoes not believe that the ultimate outcome of these claims would materiallyaffect the Company’s financial position or results of operations.

*ConstructionContracts*

The Company has enteredinto construction contracts related to tenant improvements, out parceldevelopment and re-development of various shopping centers. Unexpended butcommitted amounts under construction contracts amounted to $7.6 million asof December 31, 2005.

**16. Derivative and Hedging Activities**

Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities (SFAS 133), asamended and interpreted, establishes accounting and reporting standards forderivative instruments, including certain derivative instruments embedded inother contracts, and for hedging activities. As required by SFAS 133, theCompany records all derivatives on the balance sheet at fair value. Theaccounting for changes in the fair value of derivatives depends on the intendeduse of the derivative and the resulting designation.

The Company’s objective in using derivatives is to addstability to interest expense and to manage its exposure to interest ratemovements or other identified risks. To accomplish this objective, the Companyprimarily uses interest rate swaps as part of its cash flow hedging strategy tohedge the variable cash flows associated with floating-rate debt and forecastedinterest payments on forecasted issuances of debt. 

F-39

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**16. Derivativeand Hedging Activities (Continued)**

Interest rate swapsdesignated as cash flow hedges involve the receipt of variable-rate amounts inexchange for fixed-rate payments over the life of the agreements without exchangeof the underlying principal amount. To date, such derivatives were used tohedge the variable cash flows associated with floating-rate debt and forecastedinterest payments on forecasted issuances of debt.

For derivatives designated as cash flow hedges, theeffective portion of changes in the fair value of the derivative is initiallyreported in Other Comprehensive Income (outside of earnings) and subsequentlyreclassified to earnings when the hedged transactions affect earnings, and theineffective portion of changes in the fair value of the derivative isrecognized directly in earnings. As of December 31, 2005, the Company wasparty to three hedging agreements designated as cash flow hedges. As of December 31,2005, no derivatives were designated as fair value hedges or hedges of netinvestments in foreign operations. Additionally, the Company does not usederivatives for trading or speculative purposes and currently does not have anyderivatives that are not designated as hedges.

During 2005, the Company entered into forward-startinginterest rate swaps to mitigate the risk of changes in forecasted interestpayments on $150 million of forecasted issuances of long-term debt. During2004, the Company terminated the then existing forward-starting swaps at theirfair value of ($0.5) million upon issuance of the relevant hedged debt. Thisamount was deferred in Other Comprehensive Income and is being reclassified tointerest expense as scheduled interest payments are made on the hedged debt.

For the year ended December 31, 2005, the netother comprehensive income for derivatives designated as cash flow hedges was$0.7 million and is separately disclosed in the statement of changes inshareholders’ equity and Other Comprehensive Income. This change is comprisedof decreases in the fair value of cash flow hedges of $0.9 million and netreclassification adjustments of $0.2 million as an increase in interestexpense.

No hedge ineffectivenesson cash flow hedges was recognized during 2005. Amounts reported in OtherComprehensive Income related to these swaps will be reclassified to interestexpense as scheduled interest payments are made on the Company’s notes issuedin the Company’s debt offerings. As of December 31, 2005, the Companyestimates that $0.3 million will be reclassified from Other ComprehensiveIncome as an increase in interest expense during the next 12 months. As of December 31,2005, the Company is hedging its exposure to the variability in future cashflows for forecasted transactions over a maximum period of seven months(excluding forecasted transactions related to the payment of variable intereston existing financial instruments).

**17. Guarantees of Notes Payable**

During 2004, the Company issued $350 millionaggregate principal amount of its unsecured notes in two separate transactions(the “Existing Notes”) to certain initial purchasers, who then sold those notesto qualified institutional buyers in reliance on Rule 144A under theSecurities Act of 1933, as amended (the “Securities Act”). The Existing Noteswere guaranteed (the “Existing Guarantees”) by the Company’s two operatingpartnerships, Heritage OP and Bradley OP (the “Guarantors”). Each of theExisting Guarantees is full and unconditional and joint and several.

Because these notes were sold pursuant to exemptionsfrom registration under the Securities Act, the Existing Notes and ExistingGuarantees were subject to transfer restrictions. In connection with the 

F-40

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**17. Guaranteesof Notes Payable (Continued)**

issuance of the ExistingNotes and Existing Guarantees, the Company and the Guarantors entered into aregistration rights agreements with the initial purchasers pursuant to whichthe Company registered with the Securities and Exchange Commission (“SEC”)under the Securities Act new notes (“Registered Notes”) and new guarantees (“RegisteredGuarantees”) that were exchanged for the Existing Notes and ExistingGuarantees. Each of the Registered Guarantees is full and unconditional andjoint and several.

This footnote is being provided pursuant to Rule 3-10(f) ofRegulation S-X in lieu of providing separate annual financial statementswith respect to Heritage OP, a wholly owned Guarantor. Financial statementswith respect to Bradley OP, a non-wholly owned Guarantor, are separately filedwith the SEC.

The following representssummarized condensed consolidating financial information as of December 31,2005 and 2004 with respect to the financial position of the Company and for theyears ended December 31, 2005, 2004, and 2003 with respect to the resultsof operations and cash flows of the Company and its subsidiaries. The ParentCompany column presents the financial information of the Company, the primaryobligor of the Registered Notes, under the equity method of accounting. TheGuarantors’ columns are segregated between Bradley OP, which is 98.2% owned bythe Company, and Heritage OP, a wholly-owned subsidiary of the Company. TheNon-Guarantor Subsidiaries column presents the financial information of allnon-guarantor subsidiaries, which consists primarily of subsidiaries of theGuarantors.

*Condensed Consolidating Balance Sheets (in thousands)*

| ** **                                                              | ** ** | ** ** | ** ** | **Guarantors** | ** ** | ** **   | ** ** | ** **             | ** ** | ** **       | ** ** |
|-------------------------------------------------------------------------|------------|------------|------------|----------------|------------|--------------|------------|------------------------|------------|------------------|------------|
| ** **                                                              | ** ** | ** ** | ** ** | **Bradley**    | ** ** | **Heritage** | ** ** | **Non-**               | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                                              | ** ** | **Parent** | ** ** | **Operating**  | ** ** | **Property** | ** ** | **Guarantor**          | ** ** | ** **       | ** ** | ** ** | ** ** |
| **December 31, 2005**                                         | ** ** | ** ** | ** ** | **Company**    | ** ** | **LP**       | ** ** | **Investment LP** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| **Assets**                                                              |       |       |       |           |       |         |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Real estate investments, net                                            |       | $          | —     |           | $          | 1,040,373    |       |                   | $          | 239,337          |       |   |   | $ | 1,025,692 |   |   |   | $ | — |   |   |   | $ | 2,305,402 |   |   |
| Other assets                                                            |       | 762,371    |       | 117,677        |       |         | 13,544     |                   |       |             | 96,766     |   |   |   | (837,531 | ) |   |   | 152,827 |   |   |
| Investment in subsidiaries                                              |       | 854,923    |       | 309,762        |       |         | 322,661    |                   |       |             | —     |   |   |   | (1,487,346 | ) |   |   | — |   |   |
| Total assets                                                            |       | $          | 1,617,294  |           | $          | 1,467,812    |       |                   | $          | 575,542          |       |   |   | $ | 1,122,458 |   |   |   | $ | (2,324,877 | ) |   |   | $ | 2,458,229 |   |   |
| **Liabilities  and Shareholders’ Equity/Partners’ Capital**   |       |       |       |           |       |         |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                            |       |       |       |           |       |         |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Indebtedness                                                            |       | 726,474    |       | 869,434        |       |         | 205,512    |                   |       |             | 463,665    |   |   |   | (806,302 | ) |   |   | 1,458,783 |   |   |
| Other liabilities                                                       |       | 30,009     |       | 58,863         |       |         | 37,497     |                   |       |             | 26,370     |   |   |   | (31,229 | ) |   |   | 121,510 |   |   |
| Total liabilities                                                       |       | 756,483    |       | 928,297        |       |         | 243,009    |                   |       |             | 490,035    |   |   |   | (837,531 | ) |   |   | 1,580,293 |   |   |
| Minority interests                                                      |       | —     |       | 22,012         |       |         | —     |                   |       |             | —     |   |   |   | (4,887 | ) |   |   | 17,125 |   |   |
| Shareholders’ equity / partners’ capital                      |       | 860,811    |       | 517,503        |       |         | 332,533    |                   |       |             | 632,423    |   |   |   | (1,482,459 | ) |   |   | 860,811 |   |   |
| Total liabilities  and shareholders’ equity/partners’ capital |       | $          | 1,617,294  |           | $          | 1,467,812    |       |                   | $          | 575,542          |       |   |   | $ | 1,122,458 |   |   |   | $ | (2,324,877 | ) |   |   | $ | 2,458,229 |   |   |
|                                                                         |            |            |            |                |            |              |            |                        |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

** **

F-41

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**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**17. Guaranteesof Notes Payable (Continued)**

 

| ** **                                                              | ** ** | ** ** | ** ** | **Guarantors** | ** ** | ** **             | ** ** | ** **             | ** ** | ** **       | ** ** |
|-------------------------------------------------------------------------|------------|------------|------------|----------------|------------|------------------------|------------|------------------------|------------|------------------|------------|
| ** **                                                              | ** ** | **Parent** | ** ** | **Bradley**    | ** ** | **Heritage  Property** | ** ** | **Non-Guarantor**      | ** ** | ** **       | ** ** | ** ** | ** ** |
| **December 31, 2004**                                         | ** ** | ** ** | ** ** | **Company**    | ** ** | **Operating LP**  | ** ** | **Investment LP** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| **Assets**                                                              |       |       |       |           |       |                   |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Real estate  investments, net                                           |       | $          | —     |           |       | $                      | 1,009,467  |                   |       |             | $          | 289,352 |   |   |   | $ | 923,819 |   |   |   | $ | — |   |   |   | $ | 2,222,638 |   |   |
| Other assets                                                            |       | 391,053    |       |           | 106,532    |                   |       |                   | 14,051     |             |       |   | 72,165 |   |   |   | (453,889 | ) |   |   | 129,912 |   |   |
| Investment in  subsidiaries                                             |       | 906,927    |       |           | 186,749    |                   |       |                   | 324,363    |             |       |   | — |   |   |   | (1,418,039 | ) |   |   | — |   |   |
| Total assets                                                            |       | $          | 1,297,980  |           |       | $                      | 1,302,748  |                   |       |             | $          | 627,766 |   |   |   | $ | 995,984 |   |   |   | $ | (1,871,928 | ) |   |   | $ | 2,352,550 |   |   |
| **Liabilities  and Shareholders’ Equity/Partners’ Capital**   |       |       |       |           |       |                   |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                            |       |       |       |           |       |                   |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Indebtedness                                                            |       | 348,273    |       |           | 689,230    |                   |       |                   | 219,900    |             |       |   | 453,421 |   |   |   | (416,021 | ) |   |   | 1,294,803 |   |   |
| Other liabilities                                                       |       | 32,263     |       |           | 66,098     |                   |       |                   | 35,351     |             |       |   | 29,026 |   |   |   | (37,868 | ) |   |   | 124,870 |   |   |
| Total liabilities                                                       |       | 380,536    |       |           | 755,328    |                   |       |                   | 255,251    |             |       |   | 482,447 |   |   |   | (453,889 | ) |   |   | 1,419,673 |   |   |
| Minority interests                                                      |       | —     |       |           | 16,752     |                   |       |                   | —     |             |       |   | 2,425 |   |   |   | (3,744 | ) |   |   | 15,433 |   |   |
| Shareholders’  equity/partners’ capital                       |       | 917,444    |       |           | 530,668    |                   |       |                   | 372,515    |             |       |   | 511,112 |   |   |   | (1,414,295 | ) |   |   | 917,444 |   |   |
| Total liabilities  and shareholders’ equity/partners’ capital |       | $          | 1,297,980  |           |       | $                      | 1,302,748  |                   |       |             | $          | 627,766 |   |   |   | $ | 995,984 |   |   |   | $ | (1,871,928 | ) |   |   | $ | 2,352,550 |   |   |
|                                                                         |            |            |            |                |            |                        |            |                        |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

*Condensed Statements of Operations (in thousands)*

| ** **                                            | ** ** | ** ** | ** ** | **Guarantors** | ** ** | ** **            | ** ** | ** **             | ** ** | ** **       | ** ** |
|-------------------------------------------------------|------------|------------|------------|----------------|------------|-----------------------|------------|------------------------|------------|------------------|------------|
| ** **                                            | ** ** | ** ** | ** ** | ** **     | ** ** | **Heritage**          | ** ** | **Non-**               | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                            | ** ** | **Parent** | ** ** | **Bradley**    | ** ** | **Property**          | ** ** | **Guarantor**          | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Year ended  December 31, 2005**      | ** ** | ** ** | ** ** | **Company**    | ** ** | **Operating LP** | ** ** | **Investment LP** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Revenue:                                              |       |       |       |           |       |                  |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rentals and recoveries                                |       |       | $          | —         |       |                  |       | $                      | 157,129    |             |       |   | $ | 44,255 |   |   |   | $ | 148,961 |   |   |   | $ | — |   |   |   | $ | 350,345 |   |   |
| Interest, other, and joint venture fee income         |       |       | 27,767     |           |       |                  | 314        |                   |       |             | 515        |   |   |   | 242 |   |   |   | (27,767 | ) |   |   | 1,071 |   |   |
| Total revenue                                         |       |       | 27,767     |           |       |                  | 157,443    |                   |       |             | 44,770     |   |   |   | 149,203 |   |   |   | (27,767 | ) |   |   | 351,416 |   |   |
| Expenses:                                             |       |       |       |           |       |                  |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property operating expenses                           |       |       | —     |           |       |                  | 22,986     |                   |       |             | 5,928      |   |   |   | 20,996 |   |   |   | — |   |   |   | 49,910 |   |   |
| Real estate taxes                                     |       |       | —     |           |       |                  | 26,170     |                   |       |             | 4,836      |   |   |   | 20,928 |   |   |   | — |   |   |   | 51,934 |   |   |
| Depreciation and amortization                         |       |       | —     |           |       |                  | 44,105     |                   |       |             | 12,728     |   |   |   | 43,578 |   |   |   | — |   |   |   | 100,411 |   |   |
| Interest                                              |       |       | 29,236     |           |       |                  | 40,740     |                   |       |             | 11,085     |   |   |   | 33,141 |   |   |   | (27,767 | ) |   |   | 86,435 |   |   |
| General and administrative                            |       |       | —     |           |       |                  | 19,694     |                   |       |             | 7,944      |   |   |   | 5,190 |   |   |   | — |   |   |   | 32,828 |   |   |
| Total expenses                                        |       |       | 29,236     |           |       |                  | 153,695    |                   |       |             | 42,521     |   |   |   | 123,833 |   |   |   | (27,767 | ) |   |   | 321,518 |   |   |
| (Loss) Income before net gains                        |       |       | (1,469     | )              |       |                  | 3,748      |                   |       |             | 2,249      |   |   |   | 25,370 |   |   |   | — |   |   |   | 29,898 |   |   |
| Gain on sale of  marketable securities                |       |       | —     |           |       |                  | —     |                   |       |             | —     |   |   |   | 8 |   |   |   | — |   |   |   | 8 |   |   |
| (Loss) Income before allocation to minority interests |       |       | (1,469     | )              |       |                  | 3,748      |                   |       |             | 2,249      |   |   |   | 25,378 |   |   |   | — |   |   |   | 29,906 |   |   |
| Equity in loss  from unconsolidated joint ventures    |       |       | —     |           |       |                  | (77        | )                      |       |             | —     |   |   |   | — |   |   |   | — |   |   |   | (77 | ) |   |
| Income allocated  to exchangeable partnership units   |       |       | (241       | )              |       |                  | —     |                   |       |             | —     |   |   |   | — |   |   |   | — |   |   |   | (241 | ) |   |
| Subsidiary  earnings                                  |       |       | 31,298     |           |       |                  | 12,118     |                   |       |             | 13,260     |   |   |   | — |   |   |   | (56,676 | ) |   |   | — |   |   |
| Net income                                            |       |       | $          | 29,588         |       |                  |       | $                      | 15,789     |             |       |   | $ | 15,509 |   |   |   | $ | 25,378 |   |   |   | $ | (56,676 | ) |   |   | $ | 29,588 |   |   |
|                                                       |            |            |            |                |            |                       |            |                        |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

F-42

----

**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**17. Guaranteesof Notes Payable (Continued)**

| ** **                                                      | ** ** | ** ** | ** ** | **Guarantors** | ** ** | ** **            | ** ** | ** **             | ** ** | ** **       | ** ** |
|-----------------------------------------------------------------|------------|------------|------------|----------------|------------|-----------------------|------------|------------------------|------------|------------------|------------|
| ** **                                                      | ** ** | ** ** | ** ** | ** **     | ** ** | **Heritage**          | ** ** | **Non-**               | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                                      | ** ** | **Parent** | ** ** | **Bradley**    | ** ** | **Property**          | ** ** | **Guarantor**          | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Year ended December 31, 2004**            | ** ** | ** ** | ** ** | **Company**    | ** ** | **Operating LP** | ** ** | **Investment LP** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Revenue:                                                        |       |       |       |           |       |                  |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rentals and  recoveries                                         |       |       | $          | —         |       |                  |       | $                      | 153,104    |             |       |   | $ | 45,177 |   |   |   | $ | 127,766 |   |   |   | $ | (100 | ) |   |   | $ | 325,947 |   |   |
| Interest, other,  and joint venture fee income                  |       |       | 9,087      |           |       |                  | 369        |                   |       |             | 583        |   |   |   | 41 |   |   |   | (9,087 | ) |   |   | 993 |   |   |
| Total revenue                                                   |       |       | 9,087      |           |       |                  | 153,473    |                   |       |             | 45,760     |   |   |   | 127,807 |   |   |   | (9,187 | ) |   |   | $ | 326,940 |   |   |
| Expenses:                                                       |       |       |       |           |       |                  |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property operating  expenses                                    |       |       | —     |           |       |                  | 22,318     |                   |       |             | 5,767      |   |   |   | 17,869 |   |   |   | — |   |   |   | 45,954 |   |   |
| Real estate taxes                                               |       |       | —     |           |       |                  | 26,540     |                   |       |             | 4,713      |   |   |   | 17,720 |   |   |   | — |   |   |   | 48,973 |   |   |
| Depreciation and  amortization                                  |       |       | —     |           |       |                  | 41,182     |                   |       |             | 12,667     |   |   |   | 34,829 |   |   |   | — |   |   |   | 88,678 |   |   |
| Interest                                                        |       |       | 9,447      |           |       |                  | 32,152     |                   |       |             | 13,350     |   |   |   | 31,407 |   |   |   | (9,087 | ) |   |   | 77,269 |   |   |
| General and  administrative                                     |       |       | 100        |           |       |                  | 17,617     |                   |       |             | 7,285      |   |   |   | 4,766 |   |   |   | (100 | ) |   |   | 29,668 |   |   |
| Total expenses                                                  |       |       | 9,547      |           |       |                  | 139,809    |                   |       |             | 43,782     |   |   |   | 106,591 |   |   |   | (9,187 | ) |   |   | 290,542 |   |   |
| (Loss) Income  before net gains                                 |       |       | (460       | )              |       |                  | 13,664     |                   |       |             | 1,978      |   |   |   | 21,216 |   |   |   | — |   |   |   | 36,398 |   |   |
| Gain on sale of  marketable securities                          |       |       | —     |           |       |                  | —     |                   |       |             | 245        |   |   |   | 284 |   |   |   | — |   |   |   | 529 |   |   |
| Gain on sale of  real estate investment                         |       |       | —     |           |       |                  | 28         |                   |       |             | —     |   |   |   | — |   |   |   | — |   |   |   | 28 |   |   |
| (Loss) Income  before allocation to minority interests          |       |       | (460       | )              |       |                  | 13,692     |                   |       |             | 2,223      |   |   |   | 21,500 |   |   |   | — |   |   |   | 36,955 |   |   |
| Equity in income  from unconsolidated joint ventures            |       |       | —     |           |       |                  | 86         |                   |       |             | —     |   |   |   | — |   |   |   | — |   |   |   | 86 |   |   |
|  

Income allocated  to exchangeable partnership units     |       |       | (206       | )              |       |                  | —     |                   |       |             | —     |   |   |   | — |   |   |   | — |   |   |   | (206 | ) |   |
| Income allocated  to Series B & C preferred units |       |       | —     |           |       |                  | (2,176     | )                      |       |             | —     |   |   |   | — |   |   |   | — |   |   |   | (2,176 | ) |   |
| Subsidiary  earnings                                            |       |       | 39,979     |           |       |                  | 10,364     |                   |       |             | 11,136     |   |   |   | — |   |   |   | (61,479 | ) |   |   | — |   |   |
| Income before  discontinued operations                          |       |       | 39,313     |           |       |                  | 21,966     |                   |       |             | 13,359     |   |   |   | 21,500 |   |   |   | (61,479 | ) |   |   | 34,659 |   |   |
| Discontinued Operations:                                        |       |       |       |           |       |                  |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income from discontinued operations                   |       |       | —     |           |       |                  | 532        |                   |       |             | 164        |   |   |   | — |   |   |   | — |   |   |   | 696 |   |   |
| Gain on sale of discontinued operations                    |       |       | —     |           |       |                  | 970        |                   |       |             | 2,988      |   |   |   | — |   |   |   | — |   |   |   | 3,958 |   |   |
| Income from discontinued operations                             |       |       | —     |           |       |                  | 1,502      |                   |       |             | 3,152      |   |   |   | — |   |   |   | — |   |   |   | 4,654 |   |   |
| Net income                                                      |       |       | $          | 39,313         |       |                  |       | $                      | 23,468     |             |       |   | $ | 16,511 |   |   |   | $ | 21,500 |   |   |   | $ | (61,479 | ) |   |   | $ | 39,313 |   |   |
|                                                                 |            |            |            |                |            |                       |            |                        |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

** **

F-43

----

**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**17. Guaranteesof Notes Payable (Continued)**

| ** **                                                      | ** ** | ** ** | ** ** | **Guarantors** | ** ** | ** **            | ** ** | ** **             | ** ** | ** **       | ** ** |
|-----------------------------------------------------------------|------------|------------|------------|----------------|------------|-----------------------|------------|------------------------|------------|------------------|------------|
| ** **                                                      | ** ** | ** ** | ** ** | ** **     | ** ** | **Heritage**          | ** ** | **Non-**               | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                                      | ** ** | **Parent** | ** ** | **Bradley**    | ** ** | **Property**          | ** ** | **Guarantor**          | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Year ended  December 31, 2003**                | ** ** | ** ** | ** ** | **Company**    | ** ** | **Operating LP** | ** ** | **Investment LP** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Revenue:                                                        |       |       |       |           |       |                  |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rentals and recoveries                                          |       |       | $          | —         |       |                  |       | $                      | 152,078    |             |       |   | $ | 43,674 |   |   |   | $ | 102,869 |   |   |   | $ | (955 | ) |   |   | $ | 297,666 |   |   |
| Interest, other, and joint venture fee income                   |       |       | —     |           |       |                  | 29         |                   |       |             | 189        |   |   |   | 277 |   |   |   | — |   |   |   | 495 |   |   |
| Total revenue                                                   |       |       | —     |           |       |                  | 152,107    |                   |       |             | 43,863     |   |   |   | 103,146 |   |   |   | (955 | ) |   |   | $ | 298,161 |   |   |
| Expenses:                                                       |       |       |       |           |       |                  |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property operating expenses                                     |       |       | —     |           |       |                  | 22,569     |                   |       |             | 5,708      |   |   |   | 14,825 |   |   |   | — |   |   |   | 43,102 |   |   |
| Real estate taxes                                               |       |       | —     |           |       |                  | 25,369     |                   |       |             | 4,613      |   |   |   | 13,340 |   |   |   | — |   |   |   | 43,322 |   |   |
| Depreciation and amortization                                   |       |       | —     |           |       |                  | 39,152     |                   |       |             | 12,416     |   |   |   | 26,980 |   |   |   | — |   |   |   | 78,548 |   |   |
| Interest                                                        |       |       | —     |           |       |                  | 25,813     |                   |       |             | 14,205     |   |   |   | 29,397 |   |   |   | — |   |   |   | 69,415 |   |   |
| General and administrative                                      |       |       | 955        |           |       |                  | 14,562     |                   |       |             | 6,909      |   |   |   | 3,727 |   |   |   | (955 | ) |   |   | 25,198 |   |   |
| Total expenses                                                  |       |       | 955        |           |       |                  | 127,465    |                   |       |             | 43,851     |   |   |   | 88,269 |   |   |   | (955 | ) |   |   | 259,585 |   |   |
| (Loss) Income before allocation to minority interests           |       |       | (955       | )              |       |                  | 24,642     |                   |       |             | 12         |   |   |   | 14,877 |   |   |   | — |   |   |   | 38,576 |   |   |
| Income allocated to exchangeable partnership units              |       |       | (214       | )              |       |                  | —     |                   |       |             | —     |   |   |   | — |   |   |   | — |   |   |   | (214 | ) |   |
| Income allocated to Series B & C  preferred units |       |       | —     |           |       |                  | (6,656     | )                      |       |             | —     |   |   |   | — |   |   |   | — |   |   |   | (6,656 | ) |   |
| Subsidiary earnings                                             |       |       | 37,712     |           |       |                  | 9,778      |                   |       |             | 5,099      |   |   |   | — |   |   |   | (52,589 | ) |   |   | — |   |   |
| Income before discontinued operations                           |       |       | 36,543     |           |       |                  | 27,764     |                   |       |             | 5,111      |   |   |   | 14,877 |   |   |   | (52,589 | ) |   |   | 31,706 |   |   |
| Discontinued  Operations:                                       |       |       |       |           |       |                  |       |                   |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income from discontinued operations                   |       |       | —     |           |       |                  | 615        |                   |       |             | 1,539      |   |   |   | — |   |   |   | — |   |   |   | 2,154 |   |   |
| Gain on sale of discontinued operations                         |       |       | —     |           |       |                  | —     |                   |       |             | 2,683      |   |   |   | — |   |   |   | — |   |   |   | 2,683 |   |   |
| Income from discontinued operations                             |       |       | —     |           |       |                  | 615        |                   |       |             | 4,222      |   |   |   | — |   |   |   | — |   |   |   | 4,837 |   |   |
| Net income                                                      |       |       | $          | 36,543         |       |                  |       | $                      | 28,379     |             |       |   | $ | 9,333 |   |   |   | $ | 14,877 |   |   |   | $ | (52,589 | ) |   |   | $ | 36,543 |   |   |
|                                                                 |            |            |            |                |            |                       |            |                        |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

*CondensedStatements of Cash Flows (in thousands)*

| ** **                                       | ** ** | ** ** | ** ** | **Guarantors** | ** ** | ** **            | ** ** | ** **             | ** ** | ** **       | ** ** |
|--------------------------------------------------|------------|------------|------------|----------------|------------|-----------------------|------------|------------------------|------------|------------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | ** **     | ** ** | **Heritage**          | ** ** | **Non-**               | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Parent** | ** ** | **Bradley**    | ** ** | **Property**          | ** ** | **Guarantor**          | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Year ended  December 31, 2005** | ** ** | ** ** | ** ** | **Company**    | ** ** | **Operating LP** | ** ** | **Investment LP** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Cash flows from operating activities             |       |       | $          | 97,114         |       |                  |       | $                      | 71,140     |             |       |   | $ | 48,319 |   |   |   | $ | 75,891 |   |   |   | $ | (168,103 | ) |   |   | $ | 124,361 |   |   |
| Cash flows from investing activities             |       |       | —     |           |       |                  | (169,970   | )                      |       |             | (6,832     | ) |   |   | (105,698 | ) |   |   | 112,795 |   |   |   | (169,705 | ) |   |
| Cash flows from financing activities             |       |       | (97,114    | )              |       |                  | 95,105     |                   |       |             | (42,446    | ) |   |   | 27,771 |   |   |   | 55,308 |   |   |   | 38,624 |   |   |
| Change in cash and cash equivalents              |       |       | —     |           |       |                  | (3,725     | )                      |       |             | (959       | ) |   |   | (2,036 | ) |   |   | — |   |   |   | (6,720 | ) |   |
| Beginning of period                              |       |       | —     |           |       |                  | 3,725      |                   |       |             | 959        |   |   |   | 2,036 |   |   |   | — |   |   |   | 6,720 |   |   |
| End of period                                    |       |       | $          | —         |       |                  |       | $                      | —     |             |       |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |
|                                                  |            |            |            |                |            |                       |            |                        |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

** **

F-44

----

**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**17. Guaranteesof Notes Payable (Continued)**

| ** **                                           | ** ** | ** ** | ** ** | **Guarantors** | ** ** | ** **            | ** ** | ** **             | ** ** | ** **       | ** ** |
|------------------------------------------------------|------------|------------|------------|----------------|------------|-----------------------|------------|------------------------|------------|------------------|------------|
| ** **                                           | ** ** | ** ** | ** ** | ** **     | ** ** | **Heritage**          | ** ** | **Non-**               | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                           | ** ** | **Parent** | ** ** | **Bradley**    | ** ** | **Property**          | ** ** | **Guarantor**          | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Year ended December 31, 2004** | ** ** | ** ** | ** ** | **Company**    | ** ** | **Operating LP** | ** ** | **Investment LP** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Cash flows from operating activities            |       |       | $          | 93,590         |       |                  |       | $                      | 56,696     |             |       |   | $ | 26,547 |   |   |   | $ | 92,045 |   |   |   | $ | (145,836 | ) |   |   | $ | 123,042 |   |   |
| Cash flows from investing activities            |       |       | —     |           |       |                  | (16,449    | )                      |       |             | 1,696      |   |   |   | (107,362 | ) |   |   | — |   |   |   | (122,115 | ) |   |
| Cash flows from financing activities            |       |       | (93,590    | )              |       |                  | (37,814    | )                      |       |             | (28,423    | ) |   |   | 14,320 |   |   |   | 145,836 |   |   |   | 329 |   |   |
| Change in cash and cash equivalents                  |       |       | —     |           |       |                  | 2,433      |                   |       |             | (180       | ) |   |   | (997 | ) |   |   | — |   |   |   | 1,256 |   |   |
| Beginning of period                                  |       |       | —     |           |       |                  | 1,292      |                   |       |             | 1,139      |   |   |   | 3,033 |   |   |   | — |   |   |   | 5,464 |   |   |
| End of period                                        |       |       | $          | —         |       |                  |       | $                      | 3,725      |             |       |   | $ | 959 |   |   |   | $ | 2,036 |   |   |   | $ | — |   |   |   | $ | 6,720 |   |   |
|                                                      |            |            |            |                |            |                       |            |                        |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                       | ** ** | ** ** | ** ** | **Guarantors** | ** ** | ** **            | ** ** | ** **             | ** ** | ** **       | ** ** |
|--------------------------------------------------|------------|------------|------------|----------------|------------|-----------------------|------------|------------------------|------------|------------------|------------|
| ** **                                       | ** ** | ** ** | ** ** | ** **     | ** ** | **Heritage**          | ** ** | **Non-**               | ** ** | ** **       | ** ** | ** ** | ** ** |
| ** **                                       | ** ** | **Parent** | ** ** | **Bradley**    | ** ** | **Property**          | ** ** | **Guarantor**          | ** ** | ** **       | ** ** | ** ** | ** ** |
| **Year ended  December 31, 2003** | ** ** | ** ** | ** ** | **Company**    | ** ** | **Operating LP** | ** ** | **Investment LP** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Cash flows from operating activities        |       |       | $          | 87,727         |       |                  |       | $                      | 82,919     |             |       |   | $ | 43,103 |   |   |   | $ | 65,237 |   |   |   | $ | (130,298 | ) |   |   | $ | 148,688 |   |   |
| Cash flows from investing activities        |       |       | —     |           |       |                  | (15,769    | )                      |       |             | (133,119   | ) |   |   | (16,243 | ) |   |   | — |   |   |   | (165,131 | ) |   |
| Cash flows from financing activities        |       |       | (87,727    | )              |       |                  | (66,199    | )                      |       |             | 91,855     |   |   |   | (47,787 | ) |   |   | 130,298 |   |   |   | 20,440 |   |   |
| Change in cash and cash equivalents              |       |       | —     |           |       |                  | 951        |                   |       |             | 1,839      |   |   |   | 1,207 |   |   |   | — |   |   |   | 3,997 |   |   |
| Beginning of period                              |       |       | —     |           |       |                  | 341        |                   |       |             | (700       | ) |   |   | 1,826 |   |   |   | — |   |   |   | 1,467 |   |   |
| End of period                                    |       |       | $          | —         |       |                  |       | $                      | 1,292      |             |       |   | $ | 1,139 |   |   |   | $ | 3,033 |   |   |   | $ | — |   |   |   | $ | 5,464 |   |   |
|                                                  |            |            |            |                |            |                       |            |                        |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**18. SupplementaryQuarterly Data (unaudited)**

Thetables below reflect the Company’s selected quarterly information for the yearsended December 31, 2005, and 2004. Certain prior quarter amounts have beenreclassified to conform to the current presentation of discontinued operations(in thousands, except per-share data):

| ** **                                      | ** ** | **Quarter ended** | ** ** |
|-------------------------------------------------|------------|------------------------|------------|
| ** **                                      | ** ** | **March 31**      | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** |
| **2005**                                        |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue from  rentals and recoveries            |       |                   | $          | 87,959 |   |   | $ | 85,343 |   |   | $ | 86,208 |   |   |   | $ | 90,835 |   |   |
| Net income                                      |       |                   | $          | 13,202 |   |   | $ | 1,325 |   |   | $ | 8,448 |   |   |   | $ | 6,613 |   |   |
| Net income  attributable to common shareholders |       |                   | $          | 13,202 |   |   | $ | 1,325 |   |   | $ | 8,448 |   |   |   | $ | 6,613 |   |   |
| Basic and diluted net  income per common share* |       |                   | $          | 0.28 |   |   | $ | 0.03 |   |   | $ | 0.18 |   |   |   | $ | 0.14 |   |   |

 

| ** **                                      | ** ** | **Quarter ended** | ** ** |
|-------------------------------------------------|------------|------------------------|------------|
| ** **                                      | ** ** | **March 31**      | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** |
| **2004**                                        |       |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue from  rentals and recoveries            |       |                   | $          | 80,601 |   |   | $ | 79,088 |   |   | $ | 82,085 |   |   |   | $ | 84,173 |   |   |
| Net income                                      |       |                   | $          | 7,483 |   |   | $ | 17,146 |   |   | $ | 7,889 |   |   |   | $ | 6,795 |   |   |
| Net income  attributable to common shareholders |       |                   | $          | 7,483 |   |   | $ | 17,146 |   |   | $ | 7,889 |   |   |   | $ | 6,795 |   |   |
| Basic net income  per common share*             |       |                   | $          | 0.16 |   |   | $ | 0.37 |   |   | $ | 0.17 |   |   |   | $ | 0.15 |   |   |
| Diluted net income per  common share*           |       |                   | $          | 0.16 |   |   | $ | 0.37 |   |   | $ | 0.17 |   |   |   | $ | 0.14 |   |   |

----

*                    Incomeper common share is computed independently for each of the quarters presented,which when added together may not equal income per common share for the year.

F-45

----

**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**19. Newly Issued Accounting Standards**

In December 2004, FASB issued SFAS No. 123R,*Share-Based Compensation* (“SFAS No. 123R”).SFAS No. 123R supersedes APB Opinion No. 25, and amends SFAS No. 95,*Statement of Cash Flows*.Statement No. 123R requires all share-based payments to employees,including grants of employee stock options, to be recorded as an expense basedon their fair values. The grant-date fair value of employee share options andsimilar instruments will be estimated using an option-pricing model adjustedfor any unique characteristics of a particular instrument. If an equity awardis modified after the grant date, incremental compensation cost will berecognized in an amount equal to the excess of the fair value of the modifiedaward over the fair value of the original award immediately before themodification. Currently, the Company accounts for share-based compensation inaccordance with APB No. 25 and related Interpretations. The Company isrequired to account for share-based compensation to employees in accordancewith SFAS No. 123R on a modified prospective basis beginning January 1,2006. Under the modified prospective basis, compensation cost is recognizedbeginning with the effective date (a) based on the requirements of SFAS No. 123Rfor all share-based payments granted after the effective date and (b) basedon the requirements of SFAS No. 123 for all awards granted to employeesprior to the effective date of SFAS No. 123R that remain unvested on theeffective date. The Company does not expect the adoption of SFAS No. 123Rto have a material impact on the Company’s results of operations, financialposition, or liquidity.

In March 2005, the FASB issued FASBInterpretation No. 47, *Accounting forConditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143*(“FIN 47”). FIN 47 clarifies that conditional assetretirement obligations meet the definition of liabilities and should berecognized when incurred if their fair values can be reasonably estimated. FIN47 is effective for the fiscal year ended December 31, 2005. The adoptionof FIN 47 did not have a material effect on the Company’s consolidatedresults of operations, financial position, or liquidity.

In May 2005, the FASB issued Statement ofFinancial Accounting Standard No. 154, *Accounting Changes andError Corrections* (“SFAS No. 154”). SFAS No. 154 replacesAPB Opinion No. 20, *Accounting Changes,*and SFAS No. 3, *Reporting AccountingChanges in Interim Financial Statements,*and changes therequirements for the accounting for and reporting of a change in accountingprinciple. APB Opinion No. 20 previously required that most voluntarychanges in accounting principle be recognized by including in net income of theperiod of the change the cumulative effect of changing to the new accountingprinciple. SFAS No. 154 requires retrospective application to priorperiods’ financial statements of changes in accounting principle, unless it isimpracticable to determine either the period-specific effects or the cumulativeeffect of the change. SFAS No. 154 is effective for accounting changes andcorrections of errors made in fiscal years beginning after December 15, 2005.The Company does not expect the adoption of SFAS No. 154 to have amaterial impact on the Company’s financial condition and results of operations,financial position, or liquidity.

In September 2005, the Emerging Issues Task Forceissued Issue 04-5, *Investor’s Accounting foran Investment in a Limited Partnership When the Investor is the Sole GeneralPartner and the Limited Partners Have Certain Rights,*(“EITF 04-5”). At issue is what rights held by the limited partner(s)preclude consolidation in circumstances in which the sole general partner wouldconsolidate the limited partnership in accordance with U.S. generally acceptedaccounting principles. The assessment of limited partners’ rights and theirimpact on the presumption of control of the limited partnership by the sole 

F-46

----

**HERITAGE PROPERTY INVESTMENT TRUST, INC. Notes to Consolidated Financial Statements (Continued) Years ended December 31, 2005, 2004 and 2003**

**19. Newly Issued Accounting Standards(Continued)**

generalpartner should be made when an investor becomes the sole general partner andshould be reassessed if (i) there is a change to the terms or in theexercisability of the rights of the limited partners, (ii) the sole generalpartner increases or decreases its ownership of limited partnership interests,or (iii) there is an increase or decrease in the number of outstanding limitedpartnership interests. This issue is effective no later than for fiscal yearsbeginning after December 15, 2005 and as of June 29, 2005 for new or modifiedarrangements. The adoption of EITF 04-5 did not have a material effect on theCompany’s consolidated results of operations, financial position, or liquidity.

**20. Subsequent Event**

In late January 2006,the Company finalized an agreement to sell 8 of its shopping centers,consisting of 0.8 million square feet of Company owned GLA. The shoppingcenters are being sold as a portfolio to a single buyer and constitute all ofthe Company’s centers in Nebraska and South Dakota. The transaction is expectedto be completed by the end of the first quarter of 2006. The carrying amount ofthe associated assets and liabilities at December 31, 2005 were $52.5million and $0.8 million, respectively. It is expected that the results ofoperations of these shopping centers will be reclassified to discontinuedoperations in the Company’s prospective financial statements.

F-47

----

**SCHEDULE III**

**HERITAGE PROPERTY INVESTMENT TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2005(In thousands)**

The following table sets forth detail with respect tothe properties, and related encumbrances, owned by the Company at December 31,2005.

| ** **                                    | ** ** | ** ** | ** ** | **Initial Cost to the Company** | ** ** | **Capitalized**        | ** ** | **Gross Amount Carried at December 31, 2005** | ** ** | ** **        | ** ** | **Lives on Which** | ** ** |
|-----------------------------------------------|------------|------------|------------|-----------------------------------------------------|------------|------------------------|------------|-----------------------------------------------------------------------------|------------|-------------------|------------|------------------------------|------------|
| ** **                                    | ** ** | ** ** | ** ** | **Land and**                                   | ** ** | **Buildings and** | ** ** | **Subsequent to**                                                      | ** ** | **Land and** | ** ** | **Buildings and**       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | **Date Acquired** | ** ** | **Depreciation is** | ** ** |
| **Property Name and Location** | ** ** | ** ** | ** ** | **Encumbrances**                                    | ** ** | **Improvements**       | ** ** | **Improvements**                                                            | ** ** | **Acquisition**   | ** ** | **Improvements**             | ** ** | **Improvements** | ** ** | **Total** | ** ** | **Depreciation** | ** ** | **by Company** | ** ** | **Computed** | ** ** |
| **RETAIL SHOPPING CENTERS**                   |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ALABAMA                                       |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Montgomery Commons                            |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |            |            |            |                                                     |            |                        |            |                                                                             |            |                   |            |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

| Montgomery, AL                      |   |   | $       | 8,305  |   |   |   | $      | 2,527  |   |   |   | $      | 8,459  |   |   |   | $      | 175    |   |   |   | $      | 2,527  |   |   |   | $      | 8,634  |   |   | $      | 11,161 |   |   | $      | 963      |   |   |   | 2002 |   |   |   | 3  - 39 |   |   |
|-------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|--------|--------|------|--------|--------|--------|---------|--------|--------|
| Mongtomery Towne Center             |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Montgomery, AL                      |   |   | 6,661   |   |   |   | 4,307  |   |   |   | 14,421 |   |   |   | 8      |   |   |   | 4,307  |   |   |   | 14,429 |   |   | 18,736 |   |   | 1,970  |   |   |   | 2002   |   |   |   | 3  - 39  |   |   |
| Riverchase Village  Shopping Center |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Hoover, AL                          |   |   | —  |   |   |   | 4,094  |   |   |   | 13,718 |   |   |   | 1,511  |   |   |   | 4,094  |   |   |   | 15,229 |   |   | 19,323 |   |   | 3,971  |   |   |   | 1999   |   |   |   | 4  - 39  |   |   |
| CONNECTICUT                         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Crossroads I &  II         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Manchester, CT                      |   |   | —  |   |   |   | 5,758  |   |   |   | 19,276 |   |   |   | — |   |   |   | 5,758  |   |   |   | 19,276 |   |   | 25,034 |   |   | 241    |   |   |   | 2005   |   |   |   | 15  - 39 |   |   |
| Crossroads III                      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Manchester, CT                      |   |   | 14,762  | (1)    |   |   | 2,733  |   |   |   | 9,150  |   |   |   | — |   |   |   | 2,733  |   |   |   | 9,150  |   |   | 11,883 |   |   | 86     |   |   |   | 2005   |   |   |   | 15  - 39 |   |   |
| Hale Road                           |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Manchester, CT                      |   |   | 14,600  | (2)    |   |   | 4,036  |   |   |   | 13,512 |   |   |   | — |   |   |   | 4,036  |   |   |   | 13,512 |   |   | 17,548 |   |   | 126    |   |   |   | 2005   |   |   |   | 15  - 39 |   |   |
| Northern Hills                      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Manchester, CT                      |   |   | (2      | )      |   |   | 1,025  |   |   |   | 3,433  |   |   |   | — |   |   |   | 1,025  |   |   |   | 3,433  |   |   | 4,458  |   |   | 32     |   |   |   | 2005   |   |   |   | 15  - 39 |   |   |
| Slater Street                       |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Manchester, CT                      |   |   | (1      | )      |   |   | 2,521  |   |   |   | 8,438  |   |   |   | — |   |   |   | 2,521  |   |   |   | 8,438  |   |   | 10,959 |   |   | 79     |   |   |   | 2005   |   |   |   | 15  - 39 |   |   |
| Torrington Plaza                    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Torrington, CT                      |   |   | 232,945 | (3)    |   |   | 2,548  |   |   |   | 8,538  |   |   |   | 621    |   |   |   | 2,578  |   |   |   | 9,129  |   |   | 11,707 |   |   | 2,476  |   |   |   | 1999   |   |   |   | 6  - 39  |   |   |
| FLORIDA                             |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Barton Commons                      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Rockledge, FL                       |   |   | (3      | )      |   |   | 1,652  |   |   |   | 5,546  |   |   |   | 463    |   |   |   | 1,652  |   |   |   | 6,009  |   |   | 7,661  |   |   | 1,624  |   |   |   | 1999   |   |   |   | 4  - 39  |   |   |
| Naples Shopping Center              |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Naples, FL                          |   |   | 78,122  | (4)    |   |   | 4,783  |   |   |   | 16,029 |   |   |   | (344   | )      |   |   | 4,784  |   |   |   | 15,684 |   |   | 20,468 |   |   | 4,051  |   |   |   | 1999   |   |   |   | 4  - 39  |   |   |
| Park Shore Shopping  Center         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Naples, FL                          |   |   | (3      | )      |   |   | 3,099  |   |   |   | 10,391 |   |   |   | 2,345  |   |   |   | 3,334  |   |   |   | 12,501 |   |   | 15,835 |   |   | 3,284  |   |   |   | 1999   |   |   |   | 5  - 39  |   |   |
| Shoppers Haven Shopping  Center     |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Pompano Beach, FL                   |   |   | —  |   |   |   | 3,286  |   |   |   | 10,933 |   |   |   | 4,172  |   |   |   | 3,303  |   |   |   | 15,088 |   |   | 18,391 |   |   | 3,741  |   |   |   | 1999   |   |   |   | 3  - 39  |   |   |
| Venetian Isle Shopping  Center      |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Lighthouse Point, FL                |   |   | (3      | )      |   |   | 3,605  |   |   |   | 12,084 |   |   |   | 398    |   |   |   | 3,606  |   |   |   | 12,481 |   |   | 16,087 |   |   | 3,273  |   |   |   | 1999   |   |   |   | 5  - 39  |   |   |
| GEORGIA                             |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Shenandoah Plaza                    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Newnan, GA                          |   |   | —  |   |   |   | 1,352  |   |   |   | 4,530  |   |   |   | 71     |   |   |   | 1,353  |   |   |   | 4,600  |   |   | 5,953  |   |   | 994    |   |   |   | 2000   |   |   |   | 4  - 39  |   |   |
| ILLINOIS                            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Bartonville Square                  |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Bartonville, IL                     |   |   | —  |   |   |   | 572    |   |   |   | 1,914  |   |   |   | 227    |   |   |   | 572    |   |   |   | 2,141  |   |   | 2,713  |   |   | 459    |   |   |   | 2000   |   |   |   | 10  - 39 |   |   |
| Butterfield Square                  |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Libertyville, IL                    |   |   | —  |   |   |   | 3,328  |   |   |   | 11,139 |   |   |   | 179    |   |   |   | 3,344  |   |   |   | 11,302 |   |   | 14,646 |   |   | 2,510  |   |   |   | 2000   |   |   |   | 5  - 39  |   |   |
| The Commons of Chicago  Ridge       |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Chicago Ridge, IL                   |   |   | —  |   |   |   | 9,254  |   |   |   | 30,982 |   |   |   | 2,359  |   |   |   | 9,273  |   |   |   | 33,322 |   |   | 42,595 |   |   | 7,685  |   |   |   | 2000   |   |   |   | 4  - 39  |   |   |
| The Commons of Crystal  Lake        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Crystal Lake, IL                    |   |   | —  |   |   |   | 7,193  |   |   |   | 24,079 |   |   |   | 888    |   |   |   | 7,455  |   |   |   | 24,705 |   |   | 32,160 |   |   | 5,470  |   |   |   | 2000   |   |   |   | 4 - 39   |   |   |

 

S-III-1

 

----

**SCHEDULE III**

**HERITAGE PROPERTYINVESTMENT TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2005(In thousands)**

Thefollowing table sets forth detail with respect to the properties, and relatedencumbrances, owned by the Company at December 31, 2005.

| ** **                                | ** ** | ** ** | ** ** | **Initial Cost to the Company** | ** ** | **Capitalized **        | ** ** | **Gross Amount Carried at December 31, 2005** | ** ** | ** **              | ** ** | **Lives on Which ** | ** ** |
|-------------------------------------------|------------|------------|------------|---------------------------------|------------|------------------------------|------------|----------------------------------------------------|------------|-------------------------|------------|------------------------------------|------------|
| ** **                                | ** ** | ** ** | ** ** | **Land and **         | ** ** | **Buildings and ** | ** ** | **Subsequent to **                       | ** ** | **Land and ** | ** ** | **Buildings and **       | ** ** | ** ** | ** ** | **Accumulated ** | ** ** | **Date Acquired** | ** ** | **Depreciation is** | ** ** |
| Property Name and Location | ** ** | ** ** | ** ** | **Encumbrances**                | ** ** | **Improvements**             | ** ** | **Improvements**                                   | ** ** | **Acquisition**         | ** ** | **Improvements**                   | ** ** | **Improvements** | ** ** | **Total** | ** ** | **Depreciation** | ** ** | **by Company** | ** ** | **Computed** | ** ** |
| Crossroads Centre                         |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fairview Heights,  IL                     |       |       | —     |                            |       |                         | 3,614      |                                               |       |                    | 12,099     |                               |       |   | 755 |   |   |   | 3,802 |   |   |   | 12,666 |   |   | 16,468 |   |   | 2,744 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Fairhills Shopping Center                 |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Springfield, IL                           |       |       | —     |                            |       |                         | 1,369      |                                               |       |                    | 4,583      |                               |       |   | 443 |   |   |   | 1,369 |   |   |   | 5,026 |   |   | 6,395 |   |   | 1,036 |   |   |   | 2000 |   |   |   | 10  - 39 |   |   |
| Heritage Square                           |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Naperville, IL                            |       |       | —     |                            |       |                         | 5,554      |                                               |       |                    | 18,593     |                               |       |   | 721 |   |   |   | 5,625 |   |   |   | 19,243 |   |   | 24,868 |   |   | 4,294 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| High Point Centre                         |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Lombard, IL                               |       |       | —     |                            |       |                         | 5,621      |                                               |       |                    | 18,817     |                               |       |   | 1,037 |   |   |   | 5,736 |   |   |   | 19,739 |   |   | 25,475 |   |   | 4,312 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| Long Meadow Commons                       |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mundelein, IL                             |       |       | 9,472      |                            |       |                         | 3,507      |                                               |       |                    | 11,741     |                               |       |   | 117 |   |   |   | 3,597 |   |   |   | 11,768 |   |   | 15,365 |   |   | 749 |   |   |   | 2004 |   |   |   | 3  - 39 |   |   |
| Parkway Pointe                            |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Springfield, IL                           |       |       | —     |                            |       |                         | 1,059      |                                               |       |                    | 3,546      |                               |       |   | (1 | ) |   |   | 1,059 |   |   |   | 3,545 |   |   | 4,604 |   |   | 773 |   |   |   | 2000 |   |   |   | 10  - 39 |   |   |
| Rivercrest                                |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Crestwood, IL                             |       |       | —     |                            |       |                         | 10,043     |                                               |       |                    | 33,620     |                               |       |   | 909 |   |   |   | 10,042 |   |   |   | 34,530 |   |   | 44,572 |   |   | 7,568 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| Rollins Crossing                          |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Round Lake Beach,  IL                     |       |       | —     |                            |       |                         | 3,839      |                                               |       |                    | 12,852     |                               |       |   | 136 |   |   |   | 3,839 |   |   |   | 12,988 |   |   | 16,827 |   |   | 2,823 |   |   |   | 2000 |   |   |   | 1  - 39 |   |   |
| Sangamon Center North                     |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Springfield, IL                           |       |       | —     |                            |       |                         | 2,450      |                                               |       |                    | 8,204      |                               |       |   | 132 |   |   |   | 2,450 |   |   |   | 8,336 |   |   | 10,786 |   |   | 1,817 |   |   |   | 2000 |   |   |   | 10  - 39 |   |   |
| Sheridan Village                          |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Peoria, IL                                |       |       | —     |                            |       |                         | 5,293      |                                               |       |                    | 17,716     |                               |       |   | 1,867 |   |   |   | 5,660 |   |   |   | 19,216 |   |   | 24,876 |   |   | 4,249 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| Sterling Bazaar                           |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Peoria, IL                                |       |       | —     |                            |       |                         | 1,619      |                                               |       |                    | 5,419      |                               |       |   | 235 |   |   |   | 1,779 |   |   |   | 5,494 |   |   | 7,273 |   |   | 1,250 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Twin Oaks Centre                          |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Silvis, IL                                |       |       | —     |                            |       |                         | 1,832      |                                               |       |                    | 6,131      |                               |       |   | 295 |   |   |   | 1,841 |   |   |   | 6,417 |   |   | 8,258 |   |   | 1,495 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Wardcliffe Shopping Center                |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Peoria, IL                                |       |       | —     |                            |       |                         | 503        |                                               |       |                    | 1,682      |                               |       |   | 257 |   |   |   | 566 |   |   |   | 1,876 |   |   | 2,442 |   |   | 434 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Westview Center                           |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Hanover Park, IL                          |       |       | —     |                            |       |                         | 6,527      |                                               |       |                    | 21,852     |                               |       |   | 1,014 |   |   |   | 6,944 |   |   |   | 22,449 |   |   | 29,393 |   |   | 4,994 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| INDIANA                                   |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Apple Glen Crossing                       |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fort Wayne, IN                            |       |       | —     |                            |       |                         | 4,337      |                                               |       |                    | 14,518     |                               |       |   | 88 |   |   |   | 4,337 |   |   |   | 14,606 |   |   | 18,943 |   |   | 1,690 |   |   |   | 2002 |   |   |   | 5  - 39 |   |   |
| County Line Mall                          |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Indianapolis, IN                          |       |       | —     |                            |       |                         | 4,616      |                                               |       |                    | 15,451     |                               |       |   | 2,785 |   |   |   | 4,629 |   |   |   | 18,223 |   |   | 22,852 |   |   | 3,733 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| Double Tree Plaza                         |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Winfield, IN                              |       |       | —     |                            |       |                         | 1,404      |                                               |       |                    | 4,703      |                               |       |   | 36 |   |   |   | 1,420 |   |   |   | 4,723 |   |   | 6,143 |   |   | 1,041 |   |   |   | 2000 |   |   |   | 10  - 39 |   |   |
| Germantown Shopping Center                |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Jasper, IN                                |       |       | —     |                            |       |                         | 1,829      |                                               |       |                    | 6,124      |                               |       |   | 1,781 |   |   |   | 1,899 |   |   |   | 7,835 |   |   | 9,734 |   |   | 1,898 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| King’s Plaza                         |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Richmond, IN                              |       |       | —     |                            |       |                         | 983        |                                               |       |                    | 3,290      |                               |       |   | 498 |   |   |   | 1,111 |   |   |   | 3,660 |   |   | 4,771 |   |   | 881 |   |   |   | 2000 |   |   |   | 10  - 39 |   |   |
| Lincoln Plaza                             |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| New Haven, IN                             |       |       | —     |                            |       |                         | 1,241      |                                               |       |                    | 4,155      |                               |       |   | 425 |   |   |   | 1,241 |   |   |   | 4,580 |   |   | 5,821 |   |   | 993 |   |   |   | 2000 |   |   |   | 9  - 39 |   |   |
| Martin’s Bittersweet Plaza           |       |       |       |                            |       |                         |       |                                               |       |                    |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mishawaka, IN                             |       |       | —     |                            |       |                         | 1,110      |                                               |       |                    | 3,717      |                               |       |   | 946 |   |   |   | 1,110 |   |   |   | 4,663 |   |   | 5,773 |   |   | 874 |   |   |   | 2000 |   |   |   | 3 - 39 |   |   |
|                                           |            |            |            |                                 |            |                              |            |                                                    |            |                         |            |                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

S-III-2

 

----

**SCHEDULE III**

**HERITAGE PROPERTY INVESTMENT TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2005(In thousands)**

The following tablesets forth detail with respect to the properties, and related encumbrances,owned by the Company at December 31, 2005.

| ** **                                    | ** ** | ** ** | ** ** | **Initial Cost to the Company** | ** ** | **Capitalized**        | ** ** | **Gross Amount Carried at December 31, 2005** | ** ** | ** **        | ** ** | **Lives on Which** | ** ** |             |
|-----------------------------------------------|------------|------------|------------|-----------------------------------------------------|------------|------------------------|------------|-----------------------------------------------------------------------------|------------|-------------------|------------|------------------------------|------------|------------------|
| ** **                                    | ** ** | ** ** | ** ** | **Land and**                                   | ** ** | **Buildings and** | ** ** | **Subsequent to**                                                      | ** ** | **Land and** | ** ** | **Buildings and**       | ** ** | ** **       | ** ** | **Accumulated** | ** ** | **Date Acquired** | ** ** | **Depreciation is** | ** ** |   |
| **Property Name and Location** | ** ** | ** ** | ** ** | **Encumbrances**                                    | ** ** | **Improvements**       | ** ** | **Improvements**                                                            | ** ** | **Acquisition**   | ** ** | **Improvements**             | ** ** | **Improvements** | ** ** | **Total** | ** ** | **Depreciation** | ** ** | **by Company** | ** ** | **Computed** | ** ** |   |
| Meridian Village                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Carmel, IN                                    |       |       | 4,922      |                                                |       |                   | 3,120      |                                                                        |       |              | 10,446     |                         |       |             | 96 |   |   |   | 3,120 |   |   |   | 10,542 |   |   | 13,662 |   |   | 1,083 |   |   |   | 2003 |   |   |   | 3 - 39 |   |   |
| Rivergate Shopping Center                     |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shelbyville, IN                               |       |       | —     |                                                |       |                   | 1,299      |                                                                        |       |              | 4,350      |                         |       |             | 385 |   |   |   | 1,299 |   |   |   | 4,735 |   |   | 6,034 |   |   | 1,007 |   |   |   | 2000 |   |   |   | 5 - 39 |   |   |
| Sagamore Park Centre                          |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| West Lafayette, IN                            |       |       | —     |                                                |       |                   | 1,768      |                                                                        |       |              | 5,919      |                         |       |             | 888 |   |   |   | 1,768 |   |   |   | 6,807 |   |   | 8,575 |   |   | 1,416 |   |   |   | 2000 |   |   |   | 5 - 39 |   |   |
| Speedway SuperCenter                          |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Indianapolis, IN                              |       |       | —     |                                                |       |                   | 11,446     |                                                                        |       |              | 38,322     |                         |       |             | 4,756 |   |   |   | 11,677 |   |   |   | 42,847 |   |   | 54,524 |   |   | 9,297 |   |   |   | 2000 |   |   |   | 3 - 39 |   |   |
| The Village                                   |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gary, IN                                      |       |       | —     |                                                |       |                   | 2,649      |                                                                        |       |              | 8,871      |                         |       |             | 5,436 |   |   |   | 2,678 |   |   |   | 14,278 |   |   | 16,956 |   |   | 3,164 |   |   |   | 2000 |   |   |   | 2 - 39 |   |   |
| Washington Lawndale Commons                   |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Evansville, IN                                |       |       | —     |                                                |       |                   | 4,757      |                                                                        |       |              | 15,924     |                         |       |             | 2,391 |   |   |   | 5,524 |   |   |   | 17,548 |   |   | 23,072 |   |   | 3,979 |   |   |   | 2000 |   |   |   | 4 - 39 |   |   |
| IOWA                                          |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Burlington Plaza West                         |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Burlington, IA                                |       |       | —     |                                                |       |                   | 1,409      |                                                                        |       |              | 4,719      |                         |       |             | 560 |   |   |   | 1,544 |   |   |   | 5,144 |   |   | 6,688 |   |   | 1,095 |   |   |   | 2000 |   |   |   | 2 - 39 |   |   |
| Davenport Retail Center                       |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Davenport, IA                                 |       |       | —     |                                                |       |                   | 1,355      |                                                                        |       |              | 4,539      |                         |       |             | 1 |   |   |   | 1,356 |   |   |   | 4,539 |   |   | 5,895 |   |   | 990 |   |   |   | 2000 |   |   |   | 10 - 39 |   |   |
| Kimberly West                                 |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Davenport, IA                                 |       |       | —     |                                                |       |                   | 1,380      |                                                                        |       |              | 4,623      |                         |       |             | 407 |   |   |   | 1,442 |   |   |   | 4,968 |   |   | 6,410 |   |   | 1,072 |   |   |   | 2000 |   |   |   | 5 - 39 |   |   |
| Parkwood Plaza                                |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Urbandale, IA                                 |       |       | —     |                                                |       |                   | 1,950      |                                                                        |       |              | 6,527      |                         |       |             | 123 |   |   |   | 1,950 |   |   |   | 6,650 |   |   | 8,600 |   |   | 1,480 |   |   |   | 2000 |   |   |   | 4 - 39 |   |   |
| Southgate Shopping Center                     |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Des Moines, IA                                |       |       | 2,285      |                                                |       |                   | 994        |                                                                        |       |              | 3,327      |                         |       |             | 664 |   |   |   | 1,200 |   |   |   | 3,785 |   |   | 4,985 |   |   | 848 |   |   |   | 2000 |   |   |   | 7 - 39 |   |   |
| Spring Village                                |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Davenport, IA                                 |       |       | —     |                                                |       |                   | 673        |                                                                        |       |              | 2,255      |                         |       |             | 566 |   |   |   | 798 |   |   |   | 2,696 |   |   | 3,494 |   |   | 675 |   |   |   | 2000 |   |   |   | 5 - 39 |   |   |
| Warren Plaza                                  |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dubuque, IA                                   |       |       | —     |                                                |       |                   | 1,439      |                                                                        |       |              | 4,818      |                         |       |             | 168 |   |   |   | 1,590 |   |   |   | 4,835 |   |   | 6,425 |   |   | 1,088 |   |   |   | 2000 |   |   |   | 5 - 39 |   |   |
| KANSAS                                        |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mid State Plaza                               |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salina, KS                                    |       |       | —     |                                                |       |                   | 1,718      |                                                                        |       |              | 5,752      |                         |       |             | 3,641 |   |   |   | 2,343 |   |   |   | 8,768 |   |   | 11,111 |   |   | 1,637 |   |   |   | 2000 |   |   |   | 2 - 39 |   |   |
| Santa Fe Square                               |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Olathe, KS                                    |       |       | —     |                                                |       |                   | 2,465      |                                                                        |       |              | 8,252      |                         |       |             | 984 |   |   |   | 2,786 |   |   |   | 8,915 |   |   | 11,701 |   |   | 1,975 |   |   |   | 2000 |   |   |   | 3 - 39 |   |   |
| Shawnee Parkway Plaza                         |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shawnee, KS                                   |       |       | —     |                                                |       |                   | 1,176      |                                                                        |       |              | 3,936      |                         |       |             | 337 |   |   |   | 1,298 |   |   |   | 4,151 |   |   | 5,449 |   |   | 1,024 |   |   |   | 2000 |   |   |   | 4 - 39 |   |   |
| Village Plaza                                 |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Manhattan, KS                                 |       |       | —     |                                                |       |                   | 497        |                                                                        |       |              | 1,664      |                         |       |             | 31 |   |   |   | 499 |   |   |   | 1,693 |   |   | 2,192 |   |   | 345 |   |   |   | 2001 |   |   |   | 4 - 39 |   |   |
| Westchester Square                            |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Lenexa, KS                                    |       |       | —     |                                                |       |                   | 3,128      |                                                                        |       |              | 10,473     |                         |       |             | 506 |   |   |   | 3,246 |   |   |   | 10,861 |   |   | 14,107 |   |   | 2,521 |   |   |   | 2000 |   |   |   | 3 - 39 |   |   |
| West Loop Shopping Center                     |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Manhattan, KS                                 |       |       | —     |                                                |       |                   | 3,285      |                                                                        |       |              | 10,997     |                         |       |             | 568 |   |   |   | 3,456 |   |   |   | 11,394 |   |   | 14,850 |   |   | 2,478 |   |   |   | 2000 |   |   |   | 2 - 39 |   |   |
| KENTUCKY                                      |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dixie Plaza                                   |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Louisville, KY                                |       |       | —     |                                                |       |                   | 719        |                                                                        |       |              | 2,406      |                         |       |             | 21 |   |   |   | 719 |   |   |   | 2,427 |   |   | 3,146 |   |   | 538 |   |   |   | 2000 |   |   |   | 5 - 39 |   |   |
|                                               |            |            |            |                                                     |            |                        |            |                                                                             |            |                   |            |                              |            |                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

S-III-3

 

----

**SCHEDULE III**

**HERITAGE PROPERTY INVESTMENT TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2005(In thousands)**

Thefollowing table sets forth detail with respect to the properties, and relatedencumbrances, owned by the Company at December 31, 2005.

| ** **                                    | ** ** | ** ** | ** ** | **Initial Cost to the Company** | ** ** | **Capitalized**        | ** ** | **Gross Amount Carried at December 31, 2005** | ** ** | ** **        | ** ** | **Lives on Which** | ** ** |
|-----------------------------------------------|------------|------------|------------|-----------------------------------------------------|------------|------------------------|------------|-----------------------------------------------------------------------------|------------|-------------------|------------|------------------------------|------------|
| ** **                                    | ** ** | ** ** | ** ** | **Land and**                                   | ** ** | **Buildings and** | ** ** | **Subsequent to**                                                      | ** ** | **Land and** | ** ** | **Buildings and**       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | **Date Acquired** | ** ** | **Depreciation is** | ** ** |
| **Property Name and Location** | ** ** | ** ** | ** ** | **Encumbrances**                                    | ** ** | **Improvements**       | ** ** | **Improvements**                                                            | ** ** | **Acquisition**   | ** ** | **Improvements**             | ** ** | **Improvements** | ** ** | **Total** | ** ** | **Depreciation** | ** ** | **by Company** | ** ** | **Computed** | ** ** |
| Midtown Mall                                  |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ashland, KY                                   |       |       | —     |                                                |       |                   | 1,924      |                                                                        |       |              | 6,444      |                         |       |   | 497 |   |   |   | 1,925 |   |   |   | 6,940 |   |   | 8,865 |   |   | 1,636 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| Plainview Village Center                      |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Louisville, KY                                |       |       | —     |                                                |       |                   | 2,701      |                                                                        |       |              | 9,044      |                         |       |   | 1,018 |   |   |   | 2,738 |   |   |   | 10,025 |   |   | 12,763 |   |   | 2,209 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| Stony Brook                                   |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Louisville, KY                                |       |       | —     |                                                |       |                   | 3,319      |                                                                        |       |              | 11,110     |                         |       |   | 615 |   |   |   | 3,428 |   |   |   | 11,616 |   |   | 15,044 |   |   | 2,534 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| MAINE                                         |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pine Tree Shopping Center                     |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Portland, ME                                  |       |       |       | (3)                                                 |       |                   | 2,390      |                                                                        |       |              | 8,018      |                         |       |   | 2,067 |   |   |   | 2,401 |   |   |   | 10,074 |   |   | 12,475 |   |   | 2,678 |   |   |   | 1999 |   |   |   | 9  - 39 |   |   |
| MASSACHUSETTS                                 |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Berkshire Crossing                            |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pittsfield, MA                                |       |       | 20,408     |                                                |       |                   | 6,964      |                                                                        |       |              | 23,313     |                         |       |   | 1,277 |   |   |   | 6,989 |   |   |   | 24,565 |   |   | 31,554 |   |   | 3,265 |   |   |   | 2002 |   |   |   | 3  - 39 |   |   |
| Burlington Square                             |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Burlington, MA                                |       |       | 14,522     |                                                |       |                   | 5,930      |                                                                        |       |              | 19,853     |                         |       |   | 95 |   |   |   | 5,930 |   |   |   | 19,948 |   |   | 25,878 |   |   | 789 |   |   |   | 2004 |   |   |   | 4  - 39 |   |   |
| Lynn Market Place                             |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Lynn, MA                                      |       |       |       | (3)                                                 |       |                   | 1,340      |                                                                        |       |              | 4,490      |                         |       |   | 441 |   |   |   | 1,340 |   |   |   | 4,931 |   |   | 6,271 |   |   | 1,378 |   |   |   | 1999 |   |   |   | 5  - 39 |   |   |
| Watertower Plaza                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leominster, MA                                |       |       |       | (3)                                                 |       |                   | 6,669      |                                                                        |       |              | 22,350     |                         |       |   | 4,732 |   |   |   | 6,673 |   |   |   | 27,078 |   |   | 33,751 |   |   | 7,756 |   |   |   | 1999 |   |   |   | 5  - 39 |   |   |
| Westgate Plaza                                |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Westfield, MA                                 |       |       |       | (3)                                                 |       |                   | 2,062      |                                                                        |       |              | 6,911      |                         |       |   | 35 |   |   |   | 2,079 |   |   |   | 6,929 |   |   | 9,008 |   |   | 1,840 |   |   |   | 1999 |   |   |   | 10  - 39 |   |   |
| MICHIGAN                                      |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cherry Hill Marketplace                       |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Westland, MI                                  |       |       | —     |                                                |       |                   | 2,639      |                                                                        |       |              | 4,113      |                         |       |   | 6,525 |   |   |   | 2,640 |   |   |   | 10,637 |   |   | 13,277 |   |   | 2,349 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Grand Traverse Crossing                       |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Traverse City, MI                             |       |       | 17,913     |                                                |       |                   | 5,375      |                                                                        |       |              | 17,993     |                         |       |   | 360 |   |   |   | 5,453 |   |   |   | 18,275 |   |   | 23,728 |   |   | 2,501 |   |   |   | 2002 |   |   |   | 4  - 39 |   |   |
| The Courtyard                                 |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Burton, MI                                    |       |       | —     |                                                |       |                   | 2,039      |                                                                        |       |              | 6,831      |                         |       |   | 294 |   |   |   | 2,040 |   |   |   | 7,124 |   |   | 9,164 |   |   | 1,523 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Redford Plaza                                 |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Redford, MI                                   |       |       | —     |                                                |       |                   | 5,520      |                                                                        |       |              | 18,482     |                         |       |   | 961 |   |   |   | 5,521 |   |   |   | 19,442 |   |   | 24,963 |   |   | 4,254 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| MINNESOTA                                     |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Austin Town Center                            |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Austin, MN                                    |       |       | —     |                                                |       |                   | 2,096      |                                                                        |       |              | 7,015      |                         |       |   | 139 |   |   |   | 2,095 |   |   |   | 7,155 |   |   | 9,250 |   |   | 1,613 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Brookdale Square                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Brooklyn Center, MN                           |       |       | —     |                                                |       |                   | 2,191      |                                                                        |       |              | 7,335      |                         |       |   | 504 |   |   |   | 2,220 |   |   |   | 7,810 |   |   | 10,030 |   |   | 1,654 |   |   |   | 2000 |   |   |   | 10  - 39 |   |   |
| Burning Tree Plaza                            |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Duluth, MN                                    |       |       | —     |                                                |       |                   | 3,355      |                                                                        |       |              | 11,230     |                         |       |   | 1,488 |   |   |   | 3,462 |   |   |   | 12,611 |   |   | 16,073 |   |   | 2,600 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Central Valu Center                           |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Columbia Heights, MN                          |       |       | —     |                                                |       |                   | 2,144      |                                                                        |       |              | 7,176      |                         |       |   | 57 |   |   |   | 2,193 |   |   |   | 7,184 |   |   | 9,377 |   |   | 1,580 |   |   |   | 2000 |   |   |   | 10  - 39 |   |   |
| Division Place                                |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| St. Cloud, MN                                 |       |       | —     |                                                |       |                   | 2,614      |                                                                        |       |              | 8,751      |                         |       |   | 429 |   |   |   | 2,638 |   |   |   | 9,156 |   |   | 11,794 |   |   | 1,596 |   |   |   | 2001 |   |   |   | 2  - 39 |   |   |
| Elk Park Center                               |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Elk River, MN                                 |       |       | 7,947      |                                                |       |                   | 4,440      |                                                                        |       |              | 14,866     |                         |       |   | 302 |   |   |   | 4,446 |   |   |   | 15,162 |   |   | 19,608 |   |   | 3,409 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Har Mar Mall                                  |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Roseville, MN                                 |       |       | —     |                                                |       |                   | 10,281     |                                                                        |       |              | 34,418     |                         |       |   | 4,881 |   |   |   | 10,383 |   |   |   | 39,197 |   |   | 49,580 |   |   | 8,518 |   |   |   | 2000 |   |   |   | 3 - 39 |   |   |
|                                               |            |            |            |                                                     |            |                        |            |                                                                             |            |                   |            |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

S-III-4

 

----

**SCHEDULE III**

**HERITAGE PROPERTY INVESTMENT TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2005(In thousands)**

Thefollowing table sets forth detail with respect to the properties, and relatedencumbrances, owned by the Company at December 31, 2005.

| ** **                                    | ** ** | ** ** | ** ** | **Initial Cost to the Company** | ** ** | **Capitalized**        | ** ** | **Gross Amount Carried at December 31, 2005** | ** ** | ** **        | ** ** | **Lives on Which** | ** ** |
|-----------------------------------------------|------------|------------|------------|-----------------------------------------------------|------------|------------------------|------------|-----------------------------------------------------------------------------|------------|-------------------|------------|------------------------------|------------|
| ** **                                    | ** ** | ** ** | ** ** | **Land and**                                   | ** ** | **Buildings and** | ** ** | **Subsequent to**                                                      | ** ** | **Land and** | ** ** | **Buildings and**       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | **Date Acquired** | ** ** | **Depreciation is** | ** ** |
| **Property Name and Location** | ** ** | ** ** | ** ** | **Encumbrances**                                    | ** ** | **Improvements**       | ** ** | **Improvements**                                                            | ** ** | **Acquisition**   | ** ** | **Improvements**             | ** ** | **Improvements** | ** ** | **Total** | ** ** | **Depreciation** | ** ** | **by Company** | ** ** | **Computed** | ** ** |
| Hub West / Richfield Hub                      |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Richfield, MN                                 |       |       | —     |                                                |       |                   | 3,269      |                                                                        |       |              | 10,948     |                         |       |   | 1,441 |   |   |   | 3,270 |   |   |   | 12,388 |   |   | 15,658 |   |   | 2,883 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| Marketplace at 42                             |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savage, MN                                    |       |       | —     |                                                |       |                   | 5,070      |                                                                        |       |              | 16,973     |                         |       |   | 535 |   |   |   | 5,094 |   |   |   | 17,484 |   |   | 22,578 |   |   | 3,786 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Roseville Center                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Roseville, MN                                 |       |       | —     |                                                |       |                   | 1,571      |                                                                        |       |              | 5,257      |                         |       |   | 1,249 |   |   |   | 1,570 |   |   |   | 6,507 |   |   | 8,077 |   |   | 1,340 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Southport Centre                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Apple Valley, MN                              |       |       | 9,764      |                                                |       |                   | 3,915      |                                                                        |       |              | 13,106     |                         |       |   | 498 |   |   |   | 3,945 |   |   |   | 13,574 |   |   | 17,519 |   |   | 2,900 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Sun Ray Shopping Center                       |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| St. Paul, MN                                  |       |       | —     |                                                |       |                   | 4,669      |                                                                        |       |              | 15,628     |                         |       |   | 5,869 |   |   |   | 4,725 |   |   |   | 21,441 |   |   | 26,166 |   |   | 3,965 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Ten Acres Center                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| West St. Paul, MN                             |       |       | —     |                                                |       |                   | 2,368      |                                                                        |       |              | 7,930      |                         |       |   | 595 |   |   |   | 2,344 |   |   |   | 8,549 |   |   | 10,893 |   |   | 1,918 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Terrace Mall                                  |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Robbinsdale, MN                               |       |       | —     |                                                |       |                   | 2,030      |                                                                        |       |              | 6,799      |                         |       |   | 678 |   |   |   | 2,031 |   |   |   | 7,476 |   |   | 9,507 |   |   | 1,578 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Westwind Plaza                                |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minnetonka, MN                                |       |       | —     |                                                |       |                   | 2,511      |                                                                        |       |              | 8,409      |                         |       |   | 1,351 |   |   |   | 2,676 |   |   |   | 9,595 |   |   | 12,271 |   |   | 2,263 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| White Bear Hills                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| White Bear Lake, MN                           |       |       | —     |                                                |       |                   | 1,412      |                                                                        |       |              | 4,732      |                         |       |   | 110 |   |   |   | 1,413 |   |   |   | 4,841 |   |   | 6,254 |   |   | 1,067 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| MISSISSIPPI                                   |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| County Line Plaza                             |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Jackson, MS                                   |       |       | 17,997     |                                                |       |                   | 6,731      |                                                                        |       |              | 22,535     |                         |       |   | 228 |   |   |   | 6,823 |   |   |   | 22,671 |   |   | 29,494 |   |   | 1,760 |   |   |   | 2003 |   |   |   | 15  - 39 |   |   |
| MISSOURI                                      |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Clocktower Place                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Florissant, MO                                |       |       | 13,768     |                                                |       |                   | 5,559      |                                                                        |       |              | 18,612     |                         |       |   | 289 |   |   |   | 5,559 |   |   |   | 18,901 |   |   | 24,460 |   |   | 1,757 |   |   |   | 2003 |   |   |   | 4  - 39 |   |   |
| Ellisville Square                             |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ellisville, MO                                |       |       | —     |                                                |       |                   | 2,577      |                                                                        |       |              | 8,627      |                         |       |   | 875 |   |   |   | 2,827 |   |   |   | 9,252 |   |   | 12,079 |   |   | 2,069 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Grandview Plaza                               |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Florissant, MO                                |       |       | —     |                                                |       |                   | 3,555      |                                                                        |       |              | 11,902     |                         |       |   | 1,587 |   |   |   | 3,974 |   |   |   | 13,070 |   |   | 17,044 |   |   | 2,831 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Hub Shopping Center                           |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Independence, MO                              |       |       | —     |                                                |       |                   | 1,578      |                                                                        |       |              | 5,281      |                         |       |   | 673 |   |   |   | 1,709 |   |   |   | 5,823 |   |   | 7,532 |   |   | 1,355 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Liberty Corners                               |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liberty, MO                                   |       |       | —     |                                                |       |                   | 1,904      |                                                                        |       |              | 6,375      |                         |       |   | 712 |   |   |   | 2,039 |   |   |   | 6,952 |   |   | 8,991 |   |   | 1,549 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Maplewood Square                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Maplewood, MO                                 |       |       | —     |                                                |       |                   | 1,080      |                                                                        |       |              | 3,616      |                         |       |   | 87 |   |   |   | 1,080 |   |   |   | 3,703 |   |   | 4,783 |   |   | 850 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Marketplace at  Independence                  |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Independence, MO                              |       |       | —     |                                                |       |                   | 4,612      |                                                                        |       |              | 15,441     |                         |       |   | 523 |   |   |   | 4,758 |   |   |   | 15,818 |   |   | 20,576 |   |   | 2,128 |   |   |   | 2002 |   |   |   | 2  - 39 |   |   |
| Prospect Plaza                                |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gladstone, MO                                 |       |       | —     |                                                |       |                   | 3,479      |                                                                        |       |              | 11,647     |                         |       |   | 501 |   |   |   | 3,479 |   |   |   | 12,148 |   |   | 15,627 |   |   | 2,943 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Watts Mill Plaza                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Kansas City, MO                               |       |       | —     |                                                |       |                   | 3,180      |                                                                        |       |              | 10,645     |                         |       |   | 283 |   |   |   | 3,348 |   |   |   | 10,760 |   |   | 14,108 |   |   | 2,412 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| NEBRASKA                                      |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bishop Heights                                |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Lincoln, NE                                   |       |       | —     |                                                |       |                   | 318        |                                                                        |       |              | 1,062      |                         |       |   | 118 |   |   |   | 370 |   |   |   | 1,128 |   |   | 1,498 |   |   | 250 |   |   |   | 2000 |   |   |   | 5 - 39 |   |   |
|                                               |            |            |            |                                                     |            |                        |            |                                                                             |            |                   |            |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

S-III-5

 

----

**SCHEDULEIII**

**HERITAGE PROPERTY INVESTMENT TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2005(In thousands)**

The following table sets forth detail with respect tothe properties, and related encumbrances, owned by the Company at December 31,2005.

| ** **                                    | ** ** | ** ** | ** ** | **Initial Cost to the Company** | ** ** | **Capitalized**        | ** ** | **Gross Amount Carried at December 31, 2005** | ** ** | ** **        | ** ** | **Lives on Which** | ** ** |
|-----------------------------------------------|------------|------------|------------|---------------------------------|------------|------------------------|------------|----------------------------------------------------|------------|-------------------|------------|------------------------------|------------|
| ** **                                    | ** ** | ** ** | ** ** | **Land and**               | ** ** | **Buildings and** | ** ** | **Subsequent to**                             | ** ** | **Land and** | ** ** | **Buildings and**       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | **Date Acquired** | ** ** | **Depreciation is** | ** ** |
| **Property Name and Location** | ** ** | ** ** | ** ** | **Encumbrances**                | ** ** | **Improvements**       | ** ** | **Improvements**                                   | ** ** | **Acquisition**   | ** ** | **Improvements**             | ** ** | **Improvements** | ** ** | **Total** | ** ** | **Depreciation** | ** ** | **by Company** | ** ** | **Computed** | ** ** |
| Cornhusker Plaza                              |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| South Sioux City, NE                          |       |       | —     |                            |       |                   | 1,122      |                                               |       |              | 3,754      |                         |       |   | 98 |   |   |   | 1,190 |   |   |   | 3,784 | ** ** |   | 4,974 |   |   | 846 | ** ** |   |   | 2000 | ** ** |   |   | 5  - 39 | ** ** |   |
| Eastville Plaza                               |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Fremont, NE                                   |       |       | —     |                            |       |                   | 1,137      |                                               |       |              | 3,805      |                         |       |   | 78 |   |   |   | 1,162 |   |   |   | 3,858 | ** ** |   | 5,020 |   |   | 849 | ** ** |   |   | 2000 | ** ** |   |   | 2  - 39 | ** ** |   |
| Edgewood Shopping Center                      |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Lincoln, NE                                   |       |       | —     |                            |       |                   | 2,890      |                                               |       |              | 9,674      |                         |       |   | 1,220 |   |   |   | 2,982 |   |   |   | 10,802 | ** ** |   | 13,784 |   |   | 2,249 | ** ** |   |   | 2000 | ** ** |   |   | 3  - 39 | ** ** |   |
| La Vista                                      |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| La Vista, NE                                  |       |       | —     |                            |       |                   | 15,433     |                                               |       |              | —     |                         |       |   | 66 |   |   |   | 15,433 |   |   |   | 66 | ** ** |   | 15,499 |   |   | — | ** ** |   |   | 2005 | ** ** |   |   | N/A | ** ** |   |
| The Meadows                                   |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Lincoln, NE                                   |       |       | —     |                            |       |                   | 1,037      |                                               |       |              | 3,471      |                         |       |   | 24 |   |   |   | 1,037 |   |   |   | 3,495 | ** ** |   | 4,532 |   |   | 776 | ** ** |   |   | 2000 | ** ** |   |   | 4  - 39 | ** ** |   |
| Miracle Hills Park                            |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Omaha, NE                                     |       |       | —     |                            |       |                   | 1,739      |                                               |       |              | 5,824      |                         |       |   | 488 |   |   |   | 1,761 |   |   |   | 6,290 | ** ** |   | 8,051 |   |   | 1,406 | ** ** |   |   | 2000 | ** ** |   |   | 3  - 39 | ** ** |   |
| Stockyards Plaza                              |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Omaha, NE                                     |       |       | —     |                            |       |                   | 2,122      |                                               |       |              | 7,102      |                         |       |   | 214 |   |   |   | 2,180 |   |   |   | 7,258 | ** ** |   | 9,438 |   |   | 1,604 | ** ** |   |   | 2000 | ** ** |   |   | 3  - 39 | ** ** |   |
| NEW HAMPSHIRE                                 |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Bedford Mall                                  |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Bedford, NH                                   |       |       | —     |                            |       |                   | 4,686      |                                               |       |              | 15,708     |                         |       |   | 735 |   |   |   | 4,604 |   |   |   | 16,525 | ** ** |   | 21,129 |   |   | 4,432 | ** ** |   |   | 1999 | ** ** |   |   | 4  - 39 | ** ** |   |
| Bedford Grove                                 |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Bedford, NH                                   |       |       | 3,915      |                            |       |                   | 3,595      |                                               |       |              | 12,037     |                         |       |   | 152 |   |   |   | 3,602 |   |   |   | 12,182 | ** ** |   | 15,784 |   |   | 1,659 | ** ** |   |   | 2002 | ** ** |   |   | 5  - 39 | ** ** |   |
| Capitol Shopping Center                       |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Concord, NH                                   |       |       | (4         | )                               |       |                   | 2,300      |                                               |       |              | 7,713      |                         |       |   | 1,761 |   |   |   | 2,353 |   |   |   | 9,421 | ** ** |   | 11,774 |   |   | 2,517 | ** ** |   |   | 1999 | ** ** |   |   | 4  - 39 | ** ** |   |
| Tri City Plaza                                |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Somersworth, NH                               |       |       | (4         | )                               |       |                   | 1,875      |                                               |       |              | 6,287      |                         |       |   | 570 |   |   |   | 2,216 |   |   |   | 6,516 | ** ** |   | 8,732 |   |   | 1,766 | ** ** |   |   | 1999 | ** ** |   |   | 10  - 39 | ** ** |   |
| NEW JERSEY                                    |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Cross Keys Commons                            |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Washington Township, NJ                       |       |       | —     |                            |       |                   | 6,150      |                                               |       |              | 20,589     |                         |       |   | 4,028 |   |   |   | 5,800 |   |   |   | 24,967 | ** ** |   | 30,767 |   |   | 1,754 | ** ** |   |   | 2002 | ** ** |   |   | 5  - 39 | ** ** |   |
| Morris Hills Shopping  Center                 |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Parsippany, NJ                                |       |       | (3         | )                               |       |                   | 4,646      |                                               |       |              | 15,565     |                         |       |   | 706 |   |   |   | 4,646 |   |   |   | 16,271 | ** ** |   | 20,917 |   |   | 4,554 | ** ** |   |   | 1999 | ** ** |   |   | 10  - 39 | ** ** |   |
| Old Bridge Gateway                            |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Old Bridge Township, NJ                       |       |       | —     |                            |       |                   | 8,589      |                                               |       |              | 28,753     |                         |       |   | 256 |   |   |   | 8,589 |   |   |   | 29,009 | ** ** |   | 37,598 |   |   | 449 | ** ** |   |   | 2005 | ** ** |   |   | 15  - 39 | ** ** |   |
| NEW  MEXICO                                   |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| St. Francis Plaza                             |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Santa Fe, NM                                  |       |       | 675        |                            |       |                   | 891        |                                               |       |              | 2,989      |                         |       |   | 55 |   |   |   | 946 |   |   |   | 2,989 | ** ** |   | 3,935 |   |   | 661 | ** ** |   |   | 2000 | ** ** |   |   | 10  - 39 | ** ** |   |
| NEW YORK                                      |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| College Plaza                                 |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Selden, NY                                    |       |       | (3         | )                               |       |                   | 3,093      |                                               |       |              | 10,367     |                         |       |   | 330 |   |   |   | 3,093 |   |   |   | 10,697 | ** ** |   | 13,790 |   |   | 2,804 | ** ** |   |   | 1999 | ** ** |   |   | 5  - 39 | ** ** |   |
| Dalewood I Shopping  Center                   |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Hartsdale, NY                                 |       |       | (3         | )                               |       |                   | 1,767      |                                               |       |              | 5,918      |                         |       |   | 235 |   |   |   | 1,767 |   |   |   | 6,153 | ** ** |   | 7,920 |   |   | 1,601 | ** ** |   |   | 1999 | ** ** |   |   | 9  - 39 | ** ** |   |
| Dalewood II Shopping  Center                  |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Hartsdale, NY                                 |       |       | (3         | )                               |       |                   | 3,780      |                                               |       |              | 12,661     |                         |       |   | 4 |   |   |   | 3,784 |   |   |   | 12,661 | ** ** |   | 16,445 |   |   | 3,366 | ** ** |   |   | 1999 | ** ** |   |   | 10  - 39 | ** ** |   |
| Dalewood III Shopping  Center                 |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Hartsdale, NY                                 |       |       | (3         | )                               |       |                   | 2,646      |                                               |       |              | 8,861      |                         |       |   | 73 |   |   |   | 2,646 |   |   |   | 8,934 | ** ** |   | 11,580 |   |   | 2,400 | ** ** |   |   | 1999 | ** ** |   |   | 5  - 39 | ** ** |   |
| Falcaro’s Plaza                          |       |       |       |                            |       |                   |       |                                               |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   | ** ** |   |   |   |   |   | ** ** |   |   |   | ** ** |   |   |   | ** ** |   |
| Lawrence, NY                                  |       |       | (3         | )                               |       |                   | 1,881      |                                               |       |              | 6,301      |                         |       |   | 109 |   |   |   | 1,881 |   |   |   | 6,410 | ** ** |   | 8,291 |   |   | 1,724 | ** ** |   |   | 1999 | ** ** |   |   | 10 - 39 | ** ** |   |
|                                               |            |            |            |                                 |            |                        |            |                                                    |            |                   |            |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

S-III-6

 

----

**SCHEDULE III**

**HERITAGE PROPERTYINVESTMENT TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2005(In thousands)**

Thefollowing table sets forth detail with respect to the properties, and relatedencumbrances, owned by the Company at December 31, 2005.

| ** **                                    | ** ** | ** ** | ** ** | **Initial Cost to the Company** | ** ** | **Capitalized**        | ** ** | **Gross Amount Carried At December 31, 2005** | ** ** | ** **        | ** ** | **Lives on Which** | ** ** |             |
|-----------------------------------------------|------------|------------|------------|-----------------------------------------------------|------------|------------------------|------------|-----------------------------------------------|------------|-------------------|------------|------------------------------|------------|------------------|
| ** **                                    | ** ** | ** ** | ** ** | **Land and**                                   | ** ** | **Buildings and** | ** ** | **Subsequent to**                        | ** ** | **Land and** | ** ** | **Buildings and**       | ** ** | ** **       | ** ** | **Accumulated** | ** ** | **Date Acquired** | ** ** | **Depreciation is** | ** ** |
| **Property Name and Location** | ** ** | ** ** | ** ** | **Encumbrances**                                    | ** ** | **Improvements**       | ** ** | **Improvements**                              | ** ** | **Acquisition**   | ** ** | **Improvements**             | ** ** | **Improvements** | ** ** | **Total** | ** ** | **Depreciation** | ** ** | **by Company** | ** ** | **Computed** | ** ** |
|                                               |            |            |            |                                                     |            |                        |            |                                               |            |                   |            |                              |            |                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

| Kings Park Shopping Center       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|--------|
| Kings Park, NY                   |   |   | (3     | )      |   |   | 1,839  |   |   |   | 6,160  |   |   |   | 718    |   |   |   | 1,839  |   |   |   | 6,878  |   |   |   | 8,717  |   |   |   | 1,674  |   |   |   | 1999   |   |   |   | 8  - 39  |   |   |
| Nesconset Shopping Center        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Port Jefferson  Station, NY      |   |   | (3     | )      |   |   | 2,622  |   |   |   | 8,787  |   |   |   | 791    |   |   |   | 2,859  |   |   |   | 9,341  |   |   |   | 12,200 |   |   |   | 2,740  |   |   |   | 1999   |   |   |   | 9  - 39  |   |   |
| Parkway Plaza                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Carle Place, NY                  |   |   | (3     | )      |   |   | 3,786  |   |   |   | 12,678 |   |   |   | 427    |   |   |   | 3,786  |   |   |   | 13,105 |   |   |   | 16,891 |   |   |   | 3,511  |   |   |   | 1999   |   |   |   | 3  - 39  |   |   |
| Roanoke Plaza                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Riverhead, NY                    |   |   | (4     | )      |   |   | 1,653  |   |   |   | 5,541  |   |   |   | 754    |   |   |   | 1,858  |   |   |   | 6,090  |   |   |   | 7,948  |   |   |   | 1,597  |   |   |   | 1999   |   |   |   | 10  - 39 |   |   |
| Rockville Centre Shopping Center |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Rockville Centre,  NY            |   |   | (3     | )      |   |   | 897    |   |   |   | 3,006  |   |   |   | 1,252  |   |   |   | 897    |   |   |   | 4,258  |   |   |   | 5,155  |   |   |   | 1,521  |   |   |   | 1999   |   |   |   | 9  - 39  |   |   |
| Salmon Run Plaza                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Watertown, NY                    |   |   | 4,603  |   |   |   | 2,096  |   |   |   | 7,015  |   |   |   | 166    |   |   |   | 2,103  |   |   |   | 7,174  |   |   |   | 9,277  |   |   |   | 945    |   |   |   | 2002   |   |   |   | 15  - 39 |   |   |
| Suffolk Plaza                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| East Setauket, NY                |   |   | (3     | )      |   |   | 1,182  |   |   |   | 4,042  |   |   |   | 513    |   |   |   | 1,182  |   |   |   | 4,555  |   |   |   | 5,737  |   |   |   | 1,196  |   |   |   | 1999   |   |   |   | 5  - 39  |   |   |
| Three Village Plaza              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| East Setauket, NY                |   |   | (3     | )      |   |   | 1,763  |   |   |   | 5,909  |   |   |   | 1,378  |   |   |   | 1,933  |   |   |   | 7,117  |   |   |   | 9,050  |   |   |   | 1,662  |   |   |   | 1999   |   |   |   | 5  - 39  |   |   |
| Turnpike Plaza                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Huntington  Station, NY          |   |   | (4     | )      |   |   | 908    |   |   |   | 3,044  |   |   |   | 107    |   |   |   | 908    |   |   |   | 3,151  |   |   |   | 4,059  |   |   |   | 835    |   |   |   | 1999   |   |   |   | 10  - 39 |   |   |
| NORTH CAROLINA                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| The Commons at Chancellor Park   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Charlotte, NC                    |   |   | — |   |   |   | 4,922  |   |   |   | 16,502 |   |   |   | 2,828  |   |   |   | 4,922  |   |   |   | 19,330 |   |   |   | 24,252 |   |   |   | 4,657  |   |   |   | 1999   |   |   |   | 5  - 39  |   |   |
| Crown Point Shopping Center      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Charlotte, NC                    |   |   | (3     | )      |   |   | 2,096  |   |   |   | 7,026  |   |   |   | 67     |   |   |   | 2,162  |   |   |   | 7,027  |   |   |   | 9,189  |   |   |   | 1,907  |   |   |   | 1999   |   |   |   | 10  - 39 |   |   |
| Franklin Square                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Gastonia, NC                     |   |   | — |   |   |   | 6,084  |   |   |   | 20,369 |   |   |   | 725    |   |   |   | 6,235  |   |   |   | 20,943 |   |   |   | 27,178 |   |   |   | 3,361  |   |   |   | 2001   |   |   |   | 5  - 39  |   |   |
| Innes Street Market              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Salisbury, NC                    |   |   | 12,478 |   |   |   | 6,158  |   |   |   | 20,615 |   |   |   | 4,790  |   |   |   | 6,019  |   |   |   | 25,544 |   |   |   | 31,563 |   |   |   | 8,682  |   |   |   | 1999   |   |   |   | 4  - 39  |   |   |
| McMullen Creek Shopping Center   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Charlotte, NC                    |   |   | (3     | )      |   |   | 6,580  |   |   |   | 22,047 |   |   |   | 1,142  |   |   |   | 6,625  |   |   |   | 23,144 |   |   |   | 29,769 |   |   |   | 6,273  |   |   |   | 1999   |   |   |   | 1  - 39  |   |   |
| New Centre Market                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Wilmington, NC                   |   |   | (4     | )      |   |   | 3,904  |   |   |   | 13,070 |   |   |   | 219    |   |   |   | 3,892  |   |   |   | 13,301 |   |   |   | 17,193 |   |   |   | 3,029  |   |   |   | 1999   |   |   |   | 3  - 39  |   |   |
| Tarrymore Square                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Raleigh, NC                      |   |   | (3     | )      |   |   | 4,891  |   |   |   | 16,392 |   |   |   | 958    |   |   |   | 5,016  |   |   |   | 17,225 |   |   |   | 22,241 |   |   |   | 4,622  |   |   |   | 1999   |   |   |   | 3  - 39  |   |   |
| University Commons               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Wilmington, NC                   |   |   | (3     | )      |   |   | 4,370  |   |   |   | 14,646 |   |   |   | 4,166  |   |   |   | 4,370  |   |   |   | 18,812 |   |   |   | 23,182 |   |   |   | 4,515  |   |   |   | 1999   |   |   |   | 2  - 39  |   |   |
| University Commons Greenville    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Greenville, NC                   |   |   | (4     | )      |   |   | 5,976  |   |   |   | 20,009 |   |   |   | 61     |   |   |   | 5,977  |   |   |   | 20,069 |   |   |   | 26,046 |   |   |   | 4,569  |   |   |   | 1999   |   |   |   | 5  - 39  |   |   |
| Wendover Place                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Greensboro, NC                   |   |   | (4     | )      |   |   | 8,309  |   |   |   | 27,819 |   |   |   | 8,546  |   |   |   | 10,085 |   |   |   | 34,589 |   |   |   | 44,674 |   |   |   | 7,470  |   |   |   | 1999   |   |   |   | 5  - 39  |   |   |
| OHIO                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| 30th Street Plaza                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Canton, OH                       |   |   | — |   |   |   | 3,071  |   |   |   | 10,279 |   |   |   | 64     |   |   |   | 3,098  |   |   |   | 10,316 |   |   |   | 13,414 |   |   |   | 2,249  |   |   |   | 2000   |   |   |   | 8  - 39  |   |   |
| Clock Tower Plaza                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |     |   |   |
| Lima, OH                         |   |   | — |   |   |   | 3,409  |   |   |   | 11,409 |   |   |   | 349    |   |   |   | 3,552  |   |   |   | 11,615 |   |   |   | 15,167 |   |   |   | 2,655  |   |   |   | 2000   |   |   |   | 2 - 39   |   |   |

 

S-III-7

 

----

**SCHEDULE III**

**HERITAGE PROPERTYINVESTMENT TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2005(In thousands)**

The following table setsforth detail with respect to the properties, and related encumbrances, owned bythe Company at December 31, 2005.

| ** **                                    | ** ** | ** ** | ** ** | **Initial Cost to the Company** | ** ** | **Capitalized**        | ** ** | **Gross Amount Carried at December 31, 2005** | ** ** | ** **        | ** ** | **Lives on Which** | ** ** |
|-----------------------------------------------|------------|------------|------------|-----------------------------------------------------|------------|------------------------|------------|-----------------------------------------------------------------------------|------------|-------------------|------------|------------------------------|------------|
| ** **                                    | ** ** | ** ** | ** ** | **Land and**                                   | ** ** | **Buildings and** | ** ** | **Subsequent to**                                                      | ** ** | **Land and** | ** ** | **Buildings and**       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | **Date Acquired** | ** ** | **Depreciation is** | ** ** |
| **Property Name and Location** | ** ** | ** ** | ** ** | **Encumbrances**                                    | ** ** | **Improvements**       | ** ** | **Improvements**                                                            | ** ** | **Acquisition**   | ** ** | **Improvements**             | ** ** | **Improvements** | ** ** | **Total** | ** ** | **Depreciation** | ** ** | **by Company** | ** ** | **Computed** | ** ** |
| Salem Consumer Square                         |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Trotwood, OH                                  |       |       | 9,802      |                                                |       |                   | 5,964      |                                                                        |       |              | 19,965     |                         |       |   | 378 |   |   |   | 6,053 |   |   |   | 20,254 |   |   | 26,307 |   |   | 4,489 |   |   |   | 2000 |   |   |   | 5 - 39 |   |   |   |
| PENNSYLVANIA                                  |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Boyertown Plaza                               |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Boyertown, PA                                 |       |       | (3         | )                                                   |       |                   | 675        |                                                                        |       |              | 2,265      |                         |       |   | 1,172 |   |   |   | 675 |   |   |   | 3,437 |   |   | 4,112 |   |   | 978 |   |   |   | 1999 |   |   |   | 5 - 39 |   |   |   |
| Colonial Commons                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Harrisburg, PA                                |       |       | —     |                                                |       |                   | 11,703     |                                                                        |       |              | 39,179     |                         |       |   | 665 |   |   |   | 11,703 |   |   |   | 39,844 |   |   | 51,547 |   |   | 2,241 |   |   |   | 2004 |   |   |   | 5 - 39 |   |   |   |
| Lehigh Shopping Center                        |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bethlehem, PA                                 |       |       | (3         | )                                                   |       |                   | 4,125      |                                                                        |       |              | 13,831     |                         |       |   | 3,651 |   |   |   | 4,460 |   |   |   | 17,147 |   |   | 21,607 |   |   | 5,158 |   |   |   | 1999 |   |   |   | 5 - 39 |   |   |   |
| Warminster Towne Center                       |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warminster, PA                                |       |       | 21,201     |                                                |       |                   | 7,677      |                                                                        |       |              | 25,703     |                         |       |   | 266 |   |   |   | 7,677 |   |   |   | 25,969 |   |   | 33,646 |   |   | 2,960 |   |   |   | 2002 |   |   |   | 6 - 39 |   |   |   |
| SOUTH CAROLINA                                |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fairview Corners                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Simpsonville, SC                              |       |       | —     |                                                |       |                   | 4,726      |                                                                        |       |              | 15,821     |                         |       |   | — |   |   |   | 4,726 |   |   |   | 15,821 |   |   | 20,547 |   |   | 296 |   |   |   | 2005 |   |   |   | 15 - 39 |   |   |   |
| SOUTH DAKOTA                                  |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Baken Park                                    |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rapid City, SD                                |       |       | —     |                                                |       |                   | 3,119      |                                                                        |       |              | 10,440     |                         |       |   | 803 |   |   |   | 3,119 |   |   |   | 11,243 |   |   | 14,362 |   |   | 2,641 |   |   |   | 2000 |   |   |   | 3 - 39 |   |   |   |
| TENNESSEE                                     |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oakwood Commons                               |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Hermitage, TN                                 |       |       | (3         | )                                                   |       |                   | 3,740      |                                                                        |       |              | 12,542     |                         |       |   | 6,295 |   |   |   | 3,776 |   |   |   | 18,801 |   |   | 22,577 |   |   | 3,623 |   |   |   | 1999 |   |   |   | 3 - 39 |   |   |   |
| Watson Glen Shopping Center                   |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Franklin, TN                                  |       |       | (3         | )                                                   |       |                   | 3,381      |                                                                        |       |              | 11,336     |                         |       |   | 823 |   |   |   | 3,381 |   |   |   | 12,159 |   |   | 15,540 |   |   | 3,162 |   |   |   | 1999 |   |   |   | 5 - 39 |   |   |   |
| Williamson Square                             |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Franklin, TN                                  |       |       | —     |                                                |       |                   | 4,779      |                                                                        |       |              | 15,994     |                         |       |   | 2,671 |   |   |   | 4,874 |   |   |   | 18,570 |   |   | 23,444 |   |   | 4,224 |   |   |   | 2000 |   |   |   | 3 - 39 |   |   |   |
| The Market of Wolfcreek                       |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Memphis, TN                                   |       |       | 22,761     |                                                |       |                   | 8,357      |                                                                        |       |              | 27,977     |                         |       |   | 133 |   |   |   | 8,357 |   |   |   | 28,110 |   |   | 36,467 |   |   | 1,061 |   |   |   | 2004 |   |   |   | 10 - 39 |   |   |   |
| TEXAS                                         |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Buckingham Place                              |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Richardson, TX                                |       |       | 5,627      |                                                |       |                   | 2,283      |                                                                        |       |              | 7,584      |                         |       |   | — |   |   |   | 2,283 |   |   |   | 7,584 |   |   | 9,867 |   |   | 592 |   |   |   | 2003 |   |   |   | 15 - 39 |   |   |   |
| The Crossing                                  |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| North Richland  Hills, TX                     |       |       | —     |                                                |       |                   | 4,916      |                                                                        |       |              | 16,458     |                         |       |   | 427 |   |   |   | 4,916 |   |   |   | 16,885 |   |   | 21,801 |   |   | 1,404 |   |   |   | 2003 |   |   |   | 3 - 39 |   |   |   |
| Las Colinas Village                           |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Irving, TX                                    |       |       | —     |                                                |       |                   | 4,415      |                                                                        |       |              | 14,817     |                         |       |   | 1,234 |   |   |   | 4,703 |   |   |   | 15,763 |   |   | 20,466 |   |   | 1,303 |   |   |   | 2003 |   |   |   | 4 - 39 |   |   |   |
| Randall’s Bay Area                       |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Webster, TX                                   |       |       | —     |                                                |       |                   | 1,635      |                                                                        |       |              | 5,474      |                         |       |   | — |   |   |   | 1,635 |   |   |   | 5,474 |   |   | 7,109 |   |   | 444 |   |   |   | 2003 |   |   |   | 15 - 39 |   |   |   |
| Randall’s Fairmont                       |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pasadena, TX                                  |       |       | —     |                                                |       |                   | 2,590      |                                                                        |       |              | 8,671      |                         |       |   | 35 |   |   |   | 2,590 |   |   |   | 8,706 |   |   | 11,296 |   |   | 712 |   |   |   | 2003 |   |   |   | 5 - 39 |   |   |   |
| Royal Oaks Village                            |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Houston, TX                                   |       |       | —     |                                                |       |                   | 7,318      |                                                                        |       |              | 24,498     |                         |       |   | 127 |   |   |   | 7,318 |   |   |   | 24,625 |   |   | 31,943 |   |   | 2,000 |   |   |   | 2003 |   |   |   | 5 - 39 |   |   |   |
| Trinity Commons                               |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fort Worth, TX                                |       |       | 15,482     |                                                |       |                   | 2,156      |                                                                        |       |              | 20,752     |                         |       |   | 37 |   |   |   | 2,156 |   |   |   | 20,789 |   |   | 22,945 |   |   | 1,625 |   |   |   | 2003 |   |   |   | 5 - 39 |   |   |   |
| VIRGINIA                                      |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Spradlin Farm                                 |       |       |       |                                                |       |                   |       |                                                                        |       |              |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Christianburg, VA                             |       |       | 17,734     |                                                |       |                   | 5,456      |                                                                        |       |              | 18,267     |                         |       |   | 103 |   |   |   | 5,456 |   |   |   | 18,370 |   |   | 23,826 |   |   | 2,012 |   |   |   | 2003 |   |   |   | 5 - 39 |   |   |   |
|                                               |            |            |            |                                                     |            |                        |            |                                                                             |            |                   |            |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

S-III-8

 

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**SCHEDULE III**

**HERITAGE PROPERTY INVESTMENT TRUST, INC.REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2005(In thousands)**

Thefollowing table sets forth detail with respect to the properties, and relatedencumbrances, owned by the Company at December 31, 2005.

| ** **                                    | ** ** | ** ** | ** **     | **Initial Cost to the Company** | ** ** | **Capitalized**        | ** **     | **Gross Amount Carried at December 31, 2005** | ** ** | ** **        | ** **       | **Lives on Which** | ** ** |
|-----------------------------------------------|------------|------------|----------------|-----------------------------------------------------|------------|------------------------|----------------|-----------------------------------------------------------------------------|------------|-------------------|------------------|------------------------------|------------|
| ** **                                    | ** ** | ** ** | ** **     | **Land and**                                   | ** ** | **Buildings and** | ** **     | **Subsequent to**                                                      | ** ** | **Land and** | ** **       | **Buildings and**       | ** ** | ** ** | ** ** | **Accumulated** | ** ** | **Date Acquired** | ** ** | **Depreciation is** | ** ** |
| **Property Name and Location** | ** ** | ** ** | ** **     | **Encumbrances**                                    | ** ** | **Improvements**       | ** **     | **Improvements**                                                            | ** ** | **Acquisition**   | ** **       | **Improvements**             | ** ** | **Improvements** | ** ** | **Total** | ** ** | **Depreciation** | ** ** | **by Company** | ** ** | **Computed** | ** ** |
| VERMONT                                       |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rutland Plaza                                 |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rutland, VT                                   |       |       |           | (3)                                                 |       |                   | 4,037          |                                                                        |       |              | 13,530           |                         |       |   | 337 |   |   |   | 4,037 |   |   |   | 13,867 |   |   | 17,904 |   |   | 3,667 |   |   |   | 1999 |   |   |   | 4  - 39 |   |   |
| WISCONSIN                                     |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fairacres Shopping Center                     |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oshkosh, WI                                   |       |       | —         |                                                |       |                   | 1,563          |                                                                        |       |              | 5,230            |                         |       |   | 223 |   |   |   | 1,612 |   |   |   | 5,404 |   |   | 7,016 |   |   | 1,155 |   |   |   | 2000 |   |   |   | 10  - 39 |   |   |
| Fitchburg Ridge                               |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Madison, WI                                   |       |       | —         |                                                |       |                   | 481            |                                                                        |       |              | 1,611            |                         |       |   | 946 |   |   |   | 531 |   |   |   | 2,507 |   |   | 3,038 |   |   | 529 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Fox River Plaza                               |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Burlington, WI                                |       |       | —         |                                                |       |                   | 1,654          |                                                                        |       |              | 5,536            |                         |       |   | 156 |   |   |   | 1,654 |   |   |   | 5,692 |   |   | 7,346 |   |   | 1,298 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| Madison Plaza                                 |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Madison, WI                                   |       |       | —         |                                                |       |                   | 904            |                                                                        |       |              | 3,026            |                         |       |   | 310 |   |   |   | 904 |   |   |   | 3,336 |   |   | 4,240 |   |   | 853 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Mequon Pavilions                              |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mequon, WI                                    |       |       | —         |                                                |       |                   | 6,296          |                                                                        |       |              | 21,075           |                         |       |   | 2,684 |   |   |   | 6,443 |   |   |   | 23,612 |   |   | 30,055 |   |   | 5,175 |   |   |   | 2000 |   |   |   | 3  - 39 |   |   |
| Moorland Square                               |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| New Berlin, WI                                |       |       | —         |                                                |       |                   | 1,881          |                                                                        |       |              | 6,299            |                         |       |   | 79 |   |   |   | 1,912 |   |   |   | 6,347 |   |   | 8,259 |   |   | 1,392 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Oak Creek Centre                              |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Oak Creek, WI                                 |       |       | —         |                                                |       |                   | 1,357          |                                                                        |       |              | 4,546            |                         |       |   | 995 |   |   |   | 1,380 |   |   |   | 5,518 |   |   | 6,898 |   |   | 1,047 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Park Plaza                                    |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Manitowoc, WI                                 |       |       | —         |                                                |       |                   | 1,586          |                                                                        |       |              | 5,305            |                         |       |   | 734 |   |   |   | 1,693 |   |   |   | 5,932 |   |   | 7,625 |   |   | 1,314 |   |   |   | 2000 |   |   |   | 4  - 39 |   |   |
| Spring Mall                                   |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Greenfield, WI                                |       |       | 8,021          |                                                |       |                   | 3,136          |                                                                        |       |              | 10,499           |                         |       |   | 4,341 |   |   |   | 3,243 |   |   |   | 14,733 |   |   | 17,976 |   |   | 2,921 |   |   |   | 2000 |   |   |   | 5  - 39 |   |   |
| Taylor Heights                                |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sheboygan, WI                                 |       |       | —         |                                                |       |                   | 1,976          |                                                                        |       |              | 6,618            |                         |       |   | 43 |   |   |   | 1,976 |   |   |   | 6,661 |   |   | 8,637 |   |   | 1,447 |   |   |   | 2000 |   |   |   | 7  - 39 |   |   |
| **OFFICE BUILDINGS**                          |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| MASSACHUSETTS                                 |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| William J. McCarthy                           |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Boston, MA                                    |       |       | 34,127         | (5)                                                 |       |                   | 4,700          |                                                                        |       |              | 18,807           |                         |       |   | 3,909 |   |   |   | 4,700 |   |   |   | 22,716 |   |   | 27,416 |   |   | 4,525 |   |   |   | 1999 |   |   |   | 2  - 39 |   |   |
| 545 Boylston Street                           |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Boston, MA                                    |       |       |           | (5)                                                 |       |                   | 4,300          |                                                                        |       |              | 17,206           |                         |       |   | 1,842 |   |   |   | 4,300 |   |   |   | 19,048 |   |   | 23,348 |   |   | 3,851 |   |   |   | 1999 |   |   |   | 3  - 39 |   |   |
| NEW YORK                                      |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Executive Office Building                     |       |       |           |                                                |       |                   |           |                                                                        |       |              |             |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Great Neck, NY                                |       |       | —         |                                                |       |                   | 834            |                                                                        |       |              | 3,338            |                         |       |   | 486 |   |   |   | 834 |   |   |   | 3,824 |   |   | 4,658 |   |   | 819 |   |   |   | 1999 |   |   |   | 3  - 39 |   |   |
| **TOTAL**                                     |       |       | $ 630,819 |                                                |       |                   | $ 592,246 |                                                                        |       |              | $ 1,946,717 |                         |       |   | $ 172,125 |   |   |   | $ 604,299 |   |   |   | $ 2,106,789 |   |   | $ 2,711,088 |   |   | $ 405,686 |   |   |   |   |   |   |   |   |   |   |
|                                               |            |            |                |                                                     |            |                        |                |                                                                             |            |                   |                  |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

S-III-9

 

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(1)          Noted properties arecross collateralized securing total mortgage indebtedness with a balance of$14,762,000 at December 31, 2005.

(2)          Noted properties arecross collateralized securing total mortgage indebtedness with a balance of$14,600,000 at December 31, 2005.

(3)          Noted properties arecross collateralized securing total mortgage indebtedness with a balance of$232,945,000 at December 31, 2005.

(4)          Noted properties arecross collateralized securing total mortgage indebtedness with a balance of $78,122,000at December 31, 2005.

(5)          Noted properties arecross collateralized securing total mortgage indebtedness with a balance of$34,127,000 at December 31, 2005.

| ** **                               | ** ** | **Years ended December 31,** | ** ** |
|------------------------------------------|------------|---------------------------------------------|------------|
| ** **                               | ** ** | **2005**                                    | ** ** | **2004** | ** ** |
| Cost:                                    |       |                                        |       |   |   |
| Balance,  beginning of year              |       | $                                           | 2,540,841  |   | 2,399,973 |   |
| Acquisitions and  other additions        |       | 173,559                                     |       | 178,482 |   |
| Sale of  properties and other deductions |       | (3,312                                      | )          | (37,614 | ) |
| Balance, end of  year                    |       | $                                           | 2,711,088  |   | 2,540,841 |   |
| **Accumulated  Depreciation:**           |       |                                        |       |   |   |
| Balance,  beginning of year              |       | $                                           | 318,203    |   | 242,741 |   |
| Depreciation  provided                   |       | 88,605                                      |       | 81,420 |   |
| Sale of  properties and other deductions |       | (1,122                                      | )          | (5,958 | ) |
| Balance, end of year                     |       | $                                           | 406,686    |   | 318,203 |   |

 

S-III-10

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