SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|ý                                           | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934    
|------------------------------------------- | ----------------------------------------------------------------------------------------
|For the fiscal year ended December 31, 2004
|OR                                         
|o                                           | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-31297

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

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

131 Dartmouth Street
Boston, Massachusetts 02116(Address, including zip code, of principal executive offices)

Registrant's telephone number, including area code: (617) 247-2200

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

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
/x/ No / /

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

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

As
of June 30, 2004, the aggregate market value of the voting stock held by nonaffiliates of the Registrant was $713.1 million.

As
of March 4, 2005, the number of shares outstanding of the Registrant's common stock was 46,940,953.

Documents Incorporated by Reference

Portions
of the proxy statement for the 2005 Annual Meeting of Stockholders are incorporated by reference in Part III:

Part III:
Items 10, 11, 12, 13 and 14 of this report.



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

|Item No. |  |                                                                                                              |  | Page No.
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | --------
|PART I   |  |                                                                                                             
|Item 1:  |  | Business                                                                                                     |  | 1       
|Item 2:  |  | Properties                                                                                                   |  | 21      
|Item 3:  |  | Legal Proceedings                                                                                            |  | 42      
|Item 4:  |  | Submission of Matters to a Vote of Security Holders                                                          |  | 43      
|PART II  |  |                                                                                                             
|Item 5:  |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 43      
|Item 6:  |  | Selected Financial Data                                                                                      |  | 44      
|Item 7:  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                        |  | 46      
|Item 7A: |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 66      
|Item 8:  |  | Financial Statements and Supplementary Data                                                                  |  | 67      
|Item 9:  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 67      
|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 Party 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 by Heritage Property Investment
Trust, Inc. ("Heritage" or the "Company"), contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. The forward-looking statements reflect the Company's current views about future events and are subject to risks, uncertainties,
assumptions and changes in circumstances that may cause the Company's actual results to differ significantly from those expressed in any forward-looking statement. Forward-looking statements involve
known and unknown risks, uncertainties and other factors, which are, in some cases, beyond the Company's control and which could materially affect actual results and therefore should not be relied
upon. The factors that could cause actual results to differ materially from current expectations are discussed under "Item 1BusinessRisk Factors." The forward-looking
statements contained herein represent the Company's judgment as of the date of this report, and the Company cautions readers not to place undue reliance on those statements.

Item 1: Business

Overview

We are a fully integrated, self-administered and self-managed real estate investment trust, or "REIT." We are a Maryland corporation and
one of the nation's largest owners of neighborhood and community shopping centers. We acquire, own, manage, lease and redevelop primarily grocer-anchored neighborhood and community shopping centers
located in the Eastern, Midwestern and Southwestern United States. As of December 31, 2004, we had a shopping center portfolio consisting of 164 shopping centers, located in 29 states and
totaling approximately 33.7 million square feet of total gross leasable area ("GLA"), of which approximately 28.0 million square feet was Company-owned GLA. Our shopping center portfolio
was 93.3% leased as of December 31, 2004.

We
are headquartered in Boston, Massachusetts and have sixteen regional offices located in the Eastern, Midwestern, and Southwestern United States. We also own three office buildings.

Heritage
Property Investment Limited Partnership ("Heritage OP") and Bradley Operating Limited Partnership ("Bradley OP") are subsidiaries through which we conduct substantially all of
our business and own (either directly or through subsidiaries) substantially all of our assets. As of December 31, 2004, we owned directly or indirectly all of the ownership interests in the
Heritage OP and approximately 98.5% of the ownership interests in the Bradley OP, and we are the sole general partner of Heritage OP and, through a wholly owned subsidiary, of Bradley OP. This
structure is commonly referred to as an umbrella partnership REIT or UPREIT.

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

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2004 Highlights and Recent Developments

Expansion of Shopping Center Portfolio

During 2004, we expanded our shopping center portfolio by acquiring four properties aggregating 1.1 million square feet of GLA, of which 0.9 million
square feet was Company-owned. The aggregate investment for the four properties was $153 million, which was funded through borrowings under our line of credit, the assumption of mortgage debt,
and the issuance of common units of limited partnership interest in Bradley OP.

Disposition of Non-Core Assets

During 2004, we also completed the disposition of two shopping centers, two shopping center parcels and one office building. The net proceeds from these
dispositions was $30.1 million, resulting in an aggregate gain of $4.0 million. The proceeds from these sales were used to partially repay our line of credit. The sale of these
properties was consistent with our policy to sell that do not meet our long-term ownership criteria assets and redeploy the capital into the acquisition of shopping centers.

Lakes Crossing Joint Venture

In May 2004, we completed our first joint venture for the development and construction of a shopping center located in Norton Shores (Muskegon), Michigan,
a suburb of Grand Rapids. The joint venture is owned equally by the Company and Westwood Development Group, a regional developer based in Michigan. We made an initial equity investment of
$3.3 million and provided a short-term bridge loan of approximately $9.2 million, which was repaid in November 2004.

The
center, known as Lakes Crossing, began construction in late 2003 and is expected to be completed by the spring of 2006. Lakes Crossing is located on an approximately 58.5 acre site
and is situated at the intersection of US Highway 31 and Harvey Street, directly across from Lakes Crossing Mall. The project will contain approximately 302,000 square feet of retail space, of which
210,000 square feet will be owned by the joint venture. Lakes Crossing is anchored by Kohl's Department Stores (which owns its 88,000 square foot location) and will feature a mix of national and local
retailers. The joint venture has signed lease agreements with Circuit City, Catherine's, Shoe Carnival, Johnny Carino's, Logan's
Roadhouse, Jo 2 Go and Quizno's totaling 67,000 square feet. The joint venture has also entered into letters of intent for leases with additional national retailers totaling 66,000 square feet.

In
November 2004, the joint venture obtained a $22 million construction loan from Key Bank, National Association, a portion of which was used to pay off the
$9.2 million bridge loan referred to above. The Key Bank loan matures in November 2006 (subject to extension) and has been fully guaranteed by the Company.

April Debt Offering

On April 1, 2004, we completed the issuance and sale of $200 million principal amount of unsecured 5.125% notes due April 15, 2014. These
notes were priced to yield 5.236% at a spread of 135 basis points over the comparable U.S. Treasury note. The net proceeds from the offering were used to reduce the outstanding balance on our line of
credit. Including all offering expenses, the original issuance discount and the settlement of forward swaps entered in advance of the issuance of the notes, the all-in effective interest
rate of the unsecured notes is 5.33%.

On
March 8, 2004, in anticipation of our note offering, we entered into forward starting interest rate swaps with a total notional amount of approximately $192.5 million.
The purpose of these forward swaps was to mitigate the risk of changes in interest rates prior to the pricing of our offering. These

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forward
swaps were terminated subsequent to the pricing of the offering. We received a payment of $1.185 million in connection with the termination of these forward swaps.

October Debt Offering

On October 15, 2004, we completed the offering and sale of $150 million principal amount of unsecured 4.50% notes due October 15, 2009. These
notes were priced to yield 4.521% at a spread of 118 basis points over the comparable U.S. Treasury note. The net proceeds from the offering were used to reduce the outstanding balance on our line of
credit. Including all offering expenses and the settlement of the forward swaps in advance of the issuance of the notes, the all-in effective interest rate of the unsecured notes is 5.03%.

On
August 24, 2004, in anticipation of our note offering, we entered into forward starting interest rate swaps with a total notional amount of $146.6 million. The purpose
of these forward swaps was to mitigate the risk of changes in interest rates prior to the pricing of our offering. These forward swaps were terminated subsequent to the pricing of the offering. We
made a payment of approximately $1.7 million in connection with the termination of these forward swaps.

Redemption of Series B Preferred Operating Partnership Units

On February 23, 2004, we redeemed all outstanding 8.875% Series B Cumulative Redeemable Perpetual Preferred Units of Bradley OP. All 2,000,000 of
the outstanding Series B Preferred Units were redeemed at a redemption price of approximately $25.00 per unit. There were no unamortized issuance costs associated with the Series B
Preferred Units, therefore, we did not incur a charge in connection with this redemption.

Redemption of Series C Preferred Operating Partnership Units

On September 7, 2004, we redeemed all outstanding 8.875% Series C Cumulative Redeemable Perpetual Preferred Units of Bradley OP. All 1,000,000 of
the outstanding Series C Preferred Units were redeemed at a redemption price of approximately $25.00 per unit. There were no unamortized issuance costs associated with the Series C
Preferred Units, therefore, we did not incur a charge in connection with this redemption. As a result of the redemption of the Series C Preferred Units, there are currently no preferred units
of Bradley OP outstanding.

Repayment of Bradley OP Bonds

On November 15, 2004, we repaid upon maturity all $100 million aggregate principal amount of 7% Notes due 2004 of Bradley OP, which were issued in
November 1997. We funded this repayment through borrowings under our line of credit.

Board of Director Changes

In June 2004, Michael J. Joyce joined our Board of Directors, following his retirement as an active partner from the public accounting firm,
Deloitte & Touche LLP. Prior to his retirement, Mr. Joyce served as the New England Managing Partner of Deloitte. Mr. Joyce joined the predecessor firm of
Deloitte in 1967 and became an accounting and auditing partner in 1975. Mr. Joyce also serves on our Audit Committee and has been designated as our Board's "audit committee financial expert."
Mr. Joyce was appointed to complete a term of office expiring at the 2005 annual meeting of our stockholders. Our Board has nominated Mr. Joyce to stand for re-election at the upcoming
annual meeting of our stockholders.

On
September 10, 2004, our Board of Directors elected Ritchie Reardon to the Board effective immediately. Mr. Reardon was elected to our Board as the fourth designee of our
largest stockholder,

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Net
Realty Holding Trust. Pursuant to the Second Amended and Restated Stockholders Agreement, dated as of April 29, 2002, among us, Net Realty Holding Trust and The Prudential Insurance Company
of America, Net Realty Holding Trust has the right to appoint four directors to our Board as long as it continues to own at least 25% of our outstanding shares of common stock.

Mr. Reardon
is President of Teamsters Local 25 of Boston, Massachusetts, and is a member of the Boards of Trustees of Net Realty Holding Trust and the New England Teamsters and
Trucking Industry Pension Fund ("NETT"), the parent company of Net Realty Holding Trust. Mr. Reardon was elected to complete the term of office of Paul V. Walsh, who retired as of
December 31, 2003. Mr. Reardon's term of office will expire at the annual meeting of our stockholders to be held in 2006.

Officer Changes

On May 13, 2004, we announced that Robert G. Prendergast, formerly Vice President, Property Management and Construction, had been appointed our Senior Vice
President and Chief Operating Officer effective immediately. In his new role, Mr. Prendergast is responsible for overseeing our day-to-day operations.
Mr. Prendergast has been with us since 1999.

In
addition, we also announced that David C. Sweetser, Vice President, Business Development, was assuming direct responsibility for our property management and construction departments.
Mr. Sweetser, who joined us in February 2004, has over 20 years experience in the real estate business.

Payment of Dividends

During 2004, we paid aggregate dividends on our common stock of $2.10 per share.

New Line of Credit

In February 2005, we obtained a commitment to establish a three-year, $350 million unsecured line of credit with Wachovia Bank, as
agent. Wachovia has agreed to use its "best efforts" to syndicate this line of credit. This new line of credit, which we expect to enter into shortly, will replace our existing unsecured credit
facility. We intend to use this new line of credit principally to fund growth opportunities and for working capital purposes. This new line of credit will bear interest at a floating rate based on a
spread over LIBOR ranging from 62.5 basis points to 115 basis points, including a facility fee, depending upon our debt rating. Based on our current debt rating, we anticipate this new line of credit
will bear interest at a floating rate over LIBOR of 100 basis points, including the facility fee.

Business and Growth Strategies

Our business strategy has been, and will continue to be, to generate stable and increasing cash flow and asset value by acquiring and managing a portfolio of real
estate properties located in attractive markets with strong economic and demographic characteristics. Our business strategy consists of the following elements:



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Our Competitive Strengths

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



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Financing Strategy

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

In
April 2002, we completed our initial public offering and sold 14,080,556 shares of our common stock at a price of $25.00 per share resulting in net proceeds to us of
$323 million. We used the net proceeds of our initial public offering to reduce our indebtedness.

In
December 2003, we completed a secondary public offering of our common stock and sold a total of 3,932,736 shares at a net price of $28.27 per share resulting in net proceeds to
us of $111 million. We used the net proceeds to repay indebtedness.

At
December 31, 2004, we had approximately $1.3 billion of indebtedness consisting of a combination of our unsecured line of credit, unsecured notes issued by the Company
and by one of our operating partnerships and mortgage indebtedness. This aggregate indebtedness has a weighted average interest rate of 6.19% with an average maturity of 5.0 years. As of
December 31, 2004, our market capitalization was $2.8 billion, resulting in a debt-to-total market capitalization ratio of approximately 46.0%.

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We have a three-year $350 million unsecured line of credit with a group of lenders and Bank of America (as successor to Fleet National Bank), as agent, expiring
April 29, 2005. Our two operating partnerships are the borrowers under this line of credit and we, and certain of our other subsidiaries, have guaranteed this line of credit. This line of
credit is being used principally to fund growth opportunities and for working capital purposes. At December 31, 2004, $196 million was outstanding under the line of credit.

In
February 2005, we obtained a commitment to establish a new three-year, $350 million unsecured line of credit with Wachovia Bank, as agent. Wachovia has
agreed to use its "best efforts" to syndicate this line of credit. This new line of credit, which we expect to enter into shortly, will replace our existing line of credit facility. We intend to use
this new line of credit principally to fund growth opportunities and for working capital purposes.

Our
ability to enter into this new line of credit is subject to final approval and satisfactory completion by the lender of its due diligence and preparation and execution of an
acceptable credit agreement. We cannot assure you that we will enter into this new line of credit or that Wachovia will be successful in syndicating this line of credit up to $350 million. In
the event we are unable to enter into this new line of credit on or before April 29, 2005, we would seek an extension of our existing line of credit for up to one year. In addition, in light of
our investment grade credit ratings and prior capital markets activity, we believe there are sufficient alternative financing sources available to us to refinance our existing line of credit,
including through a combination of one or more short-term bridge loans, public or private offerings of common stock, preferred stock or debt securities or the incurrence of additional
indebtedness through secured or unsecured borrowings.

On
April 1, 2004, we completed the issuance and sale of $200 million principal amount of unsecured 5.125% notes due April 15, 2014. These notes were priced to yield
5.236% at a spread of 135 basis points over the comparable U.S. Treasury note. The net proceeds from the offering were used to reduce the outstanding balance on our line of credit. Our two operating
partnerships guaranteed these notes. Including all offering expenses, the original issuance discount and the settlement of forward swaps entered into in advance of the issuance of the notes, the
all-in effective interest rate of the unsecured notes is 5.33%.

On
October 15, 2004, the Company completed the offering and sale of $150 million principal amount of unsecured 4.50% notes due October 15, 2009. These notes were
priced to yield 4.521% at a spread of 118 basis points over the comparable U.S. Treasury note. The net proceeds from the offering were used to reduce the outstanding balance on our line of credit. Our
two operating partnerships guaranteed these notes. Including all offering expenses and the settlement of the forward swaps entered into in advance, the all-in effective interest rate of
the unsecured notes is 5.03%.

We
intend to finance future growth with the most advantageous source of capital available. These sources may include selling common stock, preferred stock or debt securities through
public offerings or private offerings, incurring or assuming additional indebtedness through secured or unsecured borrowings, issuing units of limited partnership interests of one of our operating
partnerships in exchange for contributed property, and reinvesting proceeds received upon the disposition of properties.

In
addition, we expect to enter into joint ventures with institutions or developers to acquire properties or portfolios, reducing the amount of capital required by us to make those
investments. Joint venturing of shopping centers also provides us with a capital source for new development, as well as the opportunity to earn fees for asset and property management services. As
asset manager, we will be engaged by our partners to apply similar operating, investment, and capital strategies to the portfolios owned by the joint ventures.

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During
October 2003, we filed a shelf registration statement on Form S-3 for up to $500 million of debt securities, preferred stock, common stock and
common stock warrants. This shelf registration statement will permit us to utilize the public debt and equity markets as a principal source of capital for our expansion and other needs. As of
March 11, 2005, we had approximately $389 million available for issuance under this shelf registration statement.

We
believe that our existing working capital and cash provided by operations should be sufficient to meet our short-term liquidity requirements, consisting primarily of funds
necessary for operating expenses and other property expenditures, recurring maintenance capital expenditures, interest expense and scheduled principal payments on outstanding indebtedness and future
distributions to our stockholders. In addition, we believe that our existing working capital, cash provided by operations, secured and unsecured indebtedness, our line of credit (or our new line of
credit) and equity capital will continue to be available to us in the future to fund our long-term liquidity requirements consisting primarily of funds necessary to pay for scheduled debt
maturities, renovations, expansions and other non-recurring capital expenditures that need to be made periodically to our properties, and the costs associated with acquisitions of
properties that we pursue.

Growth Strategy

Acquisitions

We target multi-anchored, open-air neighborhood and community shopping centers generally containing greater than 125,000 square feet of GLA. In
particular, we seek to acquire those shopping centers anchored by market-leading grocers or those regional operators who have dominant positions in their trade areas. In addition, we focus on the
presence of, or the ability to add, other additional anchor(s) for these centers, including electronics, home improvement, off-price retailers, office superstores, and fabric and clothing
retailers, all of whom we believe to be generally beneficial to the value of the center. In addition to those anchors, we also seek properties with a diverse tenant mix that includes service
retailers, such as banks, florists, restaurants, and apparel and specialty shops. We seek a convenient and easily accessible location with abundant parking close to residential communities, with
excellent visibility for 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 Midwestern United States. We seek to establish a significant
market presence by owning multiple properties in an area. As our portfolio has grown, we have employed and will, in the future, continue to employ, a dual strategy that focuses our acquisition
activities primarily in the top 50 MSA's. The first part of our strategy is to target properties in geographic areas proximate to our existing neighborhood and community shopping centers, which allows
us to maximize our current resources and manage expenses. In 2004, we acquired four additional shopping centers consistent with this strategy.

The
second part of our strategy is to explore opportunities to expand into other geographic markets, particularly where the opportunity presented is a sizable portfolio that will allow
us to reach an economy of scale. In 2003, we capitalized on just such an opportunity when we entered the Texas marketplace for the first time through our Trademark portfolio acquisition, consisting of
eight properties. In connection with this transaction, we also established a regional office in Dallas, Texas, which will facilitate future growth in Texas. We anticipate that we will use this
transaction to further expand in the Southwestern and/or Western United States marketplaces in the future.

With
the emergence of Wal-Mart and increased consolidation within the traditional grocer industry, in the future, we expect that some of the shopping centers we may acquire
will not contain a traditional grocer-anchor. These centers may, in some instances, contain a specialty grocer. However, we will continue to focus on acquiring our core property
typedominant, well-established grocer- and

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multi-anchored
centers located in densely populated communities in Top 50 MSAs within our core markets.

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

Joint Ventures

In 2004, we added a new component to our growth strategy through our pursuit of strategic joint ventures. These joint ventures will provide us with greater access
to potential acquisitions and alternative sources of capital to fund acquisitions. We expect such joint ventures to take one of two forms.

The
first type of joint venture arrangement we are pursuing are arrangements with third party developers. In these joint ventures, we will partner with a local developer to develop and
construct shopping centers in attractive markets. Fundamentally, this development joint venture strategy is simply an extension of our acquisition philosophy because these joint ventures will enable
us to take advantage of attractive opportunities to "pre-purchase" quality assets. These properties will be substantially similar to those properties within our core portfolio. In
addition, these joint ventures will provide us with the potential for generating fee income.

In
May 2004, we completed our first joint venture for the development and construction of a 302,000 square foot shopping center located in Norton Shores (Muskegon), Michigan, a
suburb of Grand Rapids. The joint venture is owned equally by the Company and Westwood Development Group, a regional developer based in Michigan. The Company made an initial equity investment of
$3.3 million and provided a short-term bridge loan of approximately $9.2 million, which was repaid in November 2004.

The
second type of joint venture arrangement we are pursuing are arrangements with institutional investors. These joint ventures allow us to use our management experience and
infrastructure to expand our portfolio, generating solid returns for both our partners and ourselves and enabling us to earn steady fee income. We expect the types of properties we might acquire
through these joint ventures to be substantially similar to those properties we seek to acquire for our core portfolio.

We
expect to increase our joint venture activity in these areas in 2005.

Dispositions

We generally hold our properties for investment and the production of rental income and not for sale to buyers in the ordinary course of our business. However, we
continually analyze each asset in our portfolio and will consider those properties that might be sold or exchanged for optimal sale prices or exchange values, given prevailing market conditions and
the particular characteristics of each property.

In
2004, we also focused more closely on our capital recycling program as we continued to determine those properties that do not meet our long-term strategy due to their
size, geographic location or lack of sufficient growth opportunities. In 2004, we completed the disposition of two shopping centers, two shopping center parcels and one office building. In the future,
through our capital recycling program, we will dispose of additional properties that are not a strategic fit within our overall portfolio.

In-House Leasing and Property Management Program

We believe that effective leasing is the key to successful asset management. We maintain close relationships with our tenants, properties and markets by
maintaining 16 regional offices in addition to

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our
corporate headquarters in Boston. A majority of these offices are staffed with leasing representatives. Our primary goal is for each leasing representative to become an expert in his or her
marketplace by becoming familiar with current tenants as well as potential local, regional and national tenants who would complement our current tenant mix. The renewal and replacement of tenants is
critical to our leasing and management performance.

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

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

Competition

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

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

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be liable for the costs of removal or remediation
of hazardous or toxic substances present at, on, under, in, or released from its property. We currently have approximately eighteen properties in our portfolio that are undergoing or have been
identified as requiring or potentially requiring some form of remediation (including monitoring for compliance) to clean up contamination. In some cases, contamination has migrated into the
groundwater beneath our properties from adjacent properties, such as service stations. In other cases, contamination has resulted from on-site uses by current or former owners or tenants,
such as gas stations or dry cleaners, which have released pollutants such as gasoline or dry-cleaning solvents into soil and/or groundwater. Based on our experience with properties in our
portfolio, we believe the cost of remediation for contamination resulting from dry-cleaning pollutants will range from approximately $15,000 to $450,000 per property, and the cost of
remediation for contamination from gasoline pollutants will range from approximately $15,000 to $100,000 per property. Any failure to properly remediate the contamination at our properties may result
in liability to federal, state or local governments for damages to natural resources or liability to third parties for property damage or personal injury and may adversely affect our ability to
operate, lease or sell that property.

Of
the approximately eighteen properties cited above, half of those properties were contributed to us by Net Realty Holding Trust, our largest stockholder. These contributed properties
(together with approximately ten other contributed properties for which no remediation is currently taking place) are the subject of an indemnity arrangement under which Net Realty Holding Trust has
agreed to

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indemnify
us against environmental liabilities up to $50 million in the aggregate. Since our formation in 1999, we have been reimbursed by Net Realty Holding Trust for approximately
$2.1 million of environmental costs pursuant to this indemnity. Although we do not believe that the aggregate indemnity amount will be needed, we believe that Net Realty Holding Trust has the
ability to perform under its indemnity up to the aggregate amount. In addition, each of the properties for which we are actively pursuing remediation to clean up contamination is covered by this
indemnity.

With
respect to the remaining properties cited above not covered by the Net Realty Holding Trust indemnity, no clean-up activities are currently taking place and our
requisite on-going responsibilities are to monitor those properties for compliance and to determine if any remediation or other action may be required in the future. We believe that the
costs of monitoring these properties are not material, individually or in the aggregate, to our financial condition and we have established reserves for such costs.

In
addition to the costs of remediation described above, we may incur additional costs to comply with federal, state and local laws, ordinances and regulations relating to environmental
protection and human health and safety generally. These laws, ordinances and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and
above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the management of asbestos and the remediation of contamination. Some of these
laws, ordinances and regulations may impose joint and several liabilities on current or former tenants, owners or operators for the costs of investigation or remediation of contaminated properties,
regardless of fault or the legality of the actions that caused the contamination. Some of these laws and regulations require compliance with new or more stringent standards as of future dates.
Compliance with new or more stringent laws or regulations, stricter interpretation of existing laws or the future discovery of environmental contamination may require material expenditures on our
part. Future laws, ordinances or regulations may impose material environmental liability, or the current environmental condition of our properties may affect the operations of our tenants, the
existing condition of the land, operations in the vicinity of the properties, such as the presence of underground storage tanks, or the activities of unrelated third parties. These laws typically
allow liens to be placed on the affected property. In addition, there are various local, state and federal fire, health, life-safety and similar regulations which may be applicable to our
operations, and which may subject us to liability in the form of fines or damages for noncompliance.

Employees

At December 31, 2004, we had 156 total employees. Our employees included 26 leasing and support personnel, 57 property management and support personnel, 9
legal and support personnel, and 64 corporate management and support personnel. We believe that our relations with our employees are good. None of our employees are unionized.

Available Information

A copy of this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and any amendments to those reports are available free of charge on our Internet website,www.heritagerealty.com,as soon as reasonably practicable
after we electronically file those reports or amendments with, or furnish those reports to, the Securities and Exchange Commission. The information contained on our website does not constitute
incorporation by reference of the information contained on the website and should not be considered part of this document. We will also furnish

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copies
of those reports free of charge upon written request to our Investor Relations department at the following address:



Also
posted on our web site, and available in print upon request of any stockholder to our Investor Relations department, are the charters for our Audit Committee, Compensation Committee
and Nominating and Corporate Governance Committee, our Corporate Governance Guidelines, our Code of Ethics for Financial Professionals, our Code of Business Conduct and Ethics governing our directors,
officers and employees and our Whistleblower Policy. Within the time period required by the SEC and the New York Stock Exchange, we will disclose on our web site any amendment to, or waiver from, a
provision of our Code of Ethics for Financial Professionals and our Code of Business Conduct and Ethics. In addition, our web site includes information concerning purchases and sales of our equity
securities by our executive officers and directors, as well as disclosure relating to certain non-GAAP financial measures (as defined in 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 an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file
electronically with the SEC. The public can obtain any documents that we file with the SEC athttp://www.sec.gov.

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Risk Factors

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

Adverse market conditions affect our results of operations.

The economic performance and value of our real estate assets is subject to all of the risks associated with owning and operating real estate, including risks
related to adverse changes in national, regional and local economic and market conditions. Our properties currently are located in 29 states, primarily in the East and the Midwest. The economic
condition of each of our markets may be dependent on one or more industries. An economic downturn generally or in one of these industry sectors may result in an increase in tenant bankruptcies, which
may harm our performance in the affected market. Economic and market conditions also may impact the ability of our tenants to make lease payments. If our properties do not generate sufficient income
to meet our operating expenses, including future debt service, our income and results of operations would be significantly harmed.

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

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

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

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

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

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possible
that we may recover substantially less than the full value of any unsecured claims we hold, which may harm our financial condition.

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

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

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

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

We face competition from similar retail centers within the trade areas of each of our centers when renewing leases or releasing space as leases expire. In
addition, any new competitive properties that are developed within the trade areas of our existing properties may result in increased competition. Even if our tenants do re-new or we are
successful in re-letting space, it is possible that the terms of renewal or re-letting may be less favorable than existing lease terms.

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

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

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

In
addition, during 2004, the number of entities and the amount of funds competing for suitable investment properties continued to increase. This resulted in increased demand for these
assets and

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therefore
increased prices paid for them. If we pay higher prices for properties, our profitability will be reduced.

Future acquisitions of properties may not yield the results we expect.

We intend to continue acquiring shopping centers. We face the risk that newly acquired properties may fail to perform as we anticipate. For instance, acquired
properties may not perform as well as we anticipate because of changes in demand for retail space that negatively impact our ability to renew leases or re-let space. In addition, our
management may underestimate the costs necessary to integrate acquired properties within our portfolio.

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

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

We have over $1.3 billion of debt, a portion of which is variable rate debt, which may impede our business and operating performance.

We have over $1.3 billion of outstanding indebtedness, approximately $211 million of which bears interest at a variable rate, and we have the
ability to borrow $154 million of additional variable rate debt under our line of credit. Increases in interest rates on our existing indebtedness would increase our interest expense, which
could harm our cash flow and our ability to pay distributions.

As
we anticipate that our internally generated cash will be adequate to repay only a portion of our indebtedness prior to maturity, we expect that we will be required to repay debt
through refinancings and/or equity offerings. In particular, we have outstanding indebtedness, principally our line of credit, which matures on April 29, 2005, that will require principal
amortization and balloon payments of $241 million in 2005. It is likely that we will not have sufficient funds on hand to repay these balloon amounts at maturity and that we will have to borrow
additional funds to make these payments. The amount of our existing indebtedness may adversely affect our ability to repay debt through refinancings. If we are unable to refinance our indebtedness on
acceptable terms, or at all, we might be forced to dispose of one or more of our properties on disadvantageous terms, which might result in losses to us and which might adversely affect cash available
for distributions. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancing, our interest expense would increase, which would adversely
affect our operating results.

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

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



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Our financial covenants may restrict our operating or acquisition activities.

The mortgages on our properties contain customary negative covenants such as those that limit our ability, without the prior consent of the lender, to further
mortgage the applicable property or to discontinue insurance coverage. In addition, our outstanding unsecured debt contains customary restrictions, requirements and other limitations on our ability to
incur indebtedness, including total debt to assets ratios, secured debt to total asset ratios, debt service coverage ratios and minimum ratios of unencumbered assets to unsecured debt, which we must
maintain. Our ability to borrow under our line of credit is subject to compliance with these financial and other covenants.

We
rely on borrowings under our line of credit to finance acquisitions and redevelopment activities and for working capital, and if we were unable to borrow under our line of credit or
to refinance existing indebtedness, our financial condition and results of operations would likely be adversely impacted. Our line of credit and the indentures under which we have previously issued
unsecured public debt also contain limitations on our ability to incur future secured and unsecured debt. If we need to pledge properties in order to borrow additional funds, these covenants could
reduce our flexibility in conducting our operations by limiting our ability to borrow and may create a risk of default on our debt if we cannot continue to satisfy these covenants. If we breach
covenants in our debt agreements, the lender can declare a default and require us to repay the debt immediately and, if the debt is secured, can immediately take possession of the property securing
the loan.

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

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

A downgrade in our credit rating could negatively impact us.

The floating rate of interest applicable to our line of credit is determined based on the credit ratings of our debt provided by independent rating agencies.
Thus, if these credit ratings are downgraded, our interest expense will be, and our ability to raise additional debt may be, negatively impacted.

We do not have exclusive control over our joint venture investments, so we are unable to ensure that our objectives will be pursued.

We have invested in some cases as a co-venturer or partner in the development or redevelopment of new properties, instead of developing projects
directly. These investments involve risks not present in a wholly owned development or redevelopment project. In these investments, we do not have exclusive control over the development, financing,
leasing, management and other aspects of the project. As a result, the co-venturer or partner might have interests or goals that are inconsistent with our interests or goals, take action
contrary to our interests or otherwise impede our objectives. The co-venturer or partner also might become insolvent or bankrupt.

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Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and
New York Stock Exchange rules, are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to
their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing
uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

We
are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have
resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance
activities. In particular, our ongoing efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal
controls over financial reporting
and our external auditors' audit of that assessment has required the commitment of significant financial and managerial resources. We expect these efforts to require the continued commitment of
significant resources. Further, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the performance of their
duties. As a result, we may have difficulty attracting and retaining qualified board members and executive officers, which could harm our business. If our efforts to comply with new or changed laws,
regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed.

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

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

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

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

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

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

Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties in our portfolio in response to changing economic,
financial and investment conditions is limited. The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors,
including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether any price or other terms
offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to complete the sale of a property. In addition, in
recent years, some national anchor tenants have purchased their own parcels within our centers, which could reduce the value of our centers.

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

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

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

Our largest stockholder owns approximately 42% of our common stock, exercises significant control of our company and may delay, defer or prevent us from
taking actions that would be beneficial to our other stockholders.

Our largest stockholder, Net Realty Holding Trust, a wholly-owned subsidiary of NETT, owns approximately 42% of the outstanding shares of our common stock and has
the right to nominate four of our directors. Accordingly, Net Realty Holding Trust is able to exercise significant control over the outcome of substantially all matters required to be submitted to our
stockholders for approval,
including decisions relating to the election of our board of directors, and the determination of our day-to-day corporate and management policies. In addition, Net Realty
Holding Trust is able to exercise significant control over the outcome of any proposed merger or consolidation of our company under Maryland law. Net Realty Holding Trust's ownership interest in our
company may discourage third parties from seeking to acquire control of our company, which may adversely affect the market price of our common stock.

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

Our organizational documents contain provisions which may have the effect of delaying, deferring or preventing a change in control of our company or the removal
of existing management and, as a result, could prevent our stockholders from being paid a premium for their shares of common stock over the then-prevailing market prices. These provisions
include staggered terms for our directors, advance notice requirements for stockholder proposals and the absence of cumulative voting rights. In

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addition,
our organizational documents permit our board of directors to issue up to 50,000,000 shares of preferred stock, having those preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications, or terms or conditions of redemption as determined by our board. Thus, our board could authorize the issuance of preferred stock with
terms and conditions which could have the effect of discouraging a takeover or other transaction in which holders of some or a majority of our shares might receive a premium for their shares over the
then-prevailing market price of our shares.

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

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

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

In order for us to qualify as a REIT, no more than 50% of the value of outstanding shares of our capital stock may be owned, actually or constructively, by five
or fewer individuals at any time during the last half of each taxable year. To make sure that we will not fail to qualify as a REIT under this test, subject to some exceptions, our articles prohibit
any stockholder from owning actually or constructively more than 9.8% of the value or number of outstanding shares of our capital stock. Our board of directors may exempt a person from the 9.8%
ownership limit if the board determines, in its sole discretion that exceeding the 9.8% ownership limit as to any proposed transferee would not jeopardize our qualification as a REIT. This restriction
may: discourage a tender offer or other transactions or a change in management or control that might involve a premium price for our shares or otherwise be in the best interests of our stockholders;
or compel a stockholder who had acquired more than 9.8% of our stock to dispose of the additional shares and, as a result, to forfeit the benefits of owning the additional shares.

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

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

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Even REITs are subject to federal and state income taxes.

Even if we qualify and maintain our status as a REIT, we may become subject to federal income taxes and related state taxes. For example, if we have net income
from a "prohibited transaction," that income will be subject to a 100% tax. A "prohibited transaction" is, in general, the sale or other disposition of inventory or property, other than foreclosure
property, held primarily for sale to customers in the ordinary course of business. We may not be able to make sufficient distributions to
avoid excise taxes applicable to REITs. We may also decide to retain income we earn from the sale or other disposition of our property and pay income tax directly on that income. In that event, our
stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans would
have no benefit from their deemed payment of that tax liability.

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

The lower tax rate on dividends from non-REIT C corporations may adversely affect the value of our
stock.

While
corporate dividends have traditionally been taxed at ordinary income rates, dividends received by individuals through December 31, 2008 from domestic corporations generally
will be taxed at the maximum capital gains tax rate of 15% as opposed to the maximum ordinary income tax rate of 35%. This reduces substantially the so-called "double taxation" (that is,
taxation at both the corporate and stockholder levels) that generally applies to non-REIT corporations but does not apply to REITs because REITs that distribute all of their taxable income
generally do not pay any corporate income tax. REIT dividends are not eligible for the lower capital gains rates, except in certain circumstances where the dividends are attributable to income that
has been subject to corporate-level tax. The application of capital gains rates to non-REIT C corporation dividends could cause individual investors to view stock in non-REIT C
corporations as more attractive than stock in REITs, which may negatively affect the value of our common stock. We cannot predict what effect, if any, the application of the capital gains tax rate to
dividends paid by non-REIT C corporations may have on the value of our stock, either in terms of price or relative to other potential investments.

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Item 2: Properties

Shopping Centers

As of December 31, 2004, we had a shopping center portfolio consisting of 164 shopping centers, located in 29 states and totaling approximately
33.7 million square feet of total GLA, of which approximately 28.0 million square feet is company-owned GLA. Our shopping center portfolio was approximately 93.3% leased as of
December 31, 2004. We believe that our shopping center properties are adequately covered by insurance.

Other Properties

As of December 31, 2004, the Company owned three office buildings, one in New York and two in Boston, totaling 222,000 square feet. We believe that our
office buildings are adequately covered by insurance.

Offices

Our corporate headquarters are located at 131 Dartmouth Street, Boston, Massachusetts, a new office building located in the Back Bay constructed and owned by a
joint venture that we entered into with our largest stockholder. We lease our new corporate headquarters space from the joint venture. Under this lease, which contains a term of eleven years, we lease
approximately 31,000 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 2010 through 2014.

In
addition, we also manage our properties through 16 regional offices, strategically located throughout our portfolio states. We own 15 of our 16 regional offices, some of which are
located in our shopping center properties. We believe that our current and anticipated facilities are adequate for our present and future operations.

The
following tables provide information about our properties, our tenants and lease expirations as of December 31, 2004.

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|Property Name and Location |  | Year Built/
Renovated(1) |  | % Leased as
of 12/31/2004 |   | 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)
Marshalls
Michaels                                                                           |  | $                       | 1,052,298 |                                
|Montgomery Towne Center    |  | 1996                     |  | 83                        | % | 176,361              |  | 266,895      |  | 198,165      |  | Winn Dixie Supermarket (Non-Owned)
Bed, Bath & Beyond
Circuit City
Carmike Cinemas (Non-Owned)
Barnes & Noble
OfficeMax |  | $                       | 1,849,970 |                                
|Riverchase Village SC      |  | 1994                     |  | 91                        | % | 178,511              |  | 190,611      |  | 128,225      |  | Bruno's Supermarket
Best Buy
PetsMart                                                                                   |  | $                       | 1,701,138 |                                
|Connecticut                |  |                          |  |                           |   |                      |  |              |  |              |  |                                                                                                                         |  |                         |           |                                
|Torrington Plaza           |  | 1963/1994                |  | 94                        | % | 125,710              |  | 132,910      |  | 42,037       |  | TJ Maxx
Staples                                                                                                         |  | $                       | 1,281,162 |                                
|Florida                    |  |                          |  |                           |   |                      |  |              |  |              |  |                                                                                                                         |  |                         |           |                                
|Barton Commons             |  | 1989                     |  | 40                        | % | 215,049              |  | 218,049      |  | 52,039       |  | Bealls Dept. Store
Bealls Outlet                                                                                        |  | $                       | 419,198   |                                
|Naples Shopping Center     |  | 1962/1997                |  | 100                       | % | 198,843              |  | 202,343      |  | 162,486      |  | Publix Supermarket
Marshalls
Linens 'N Things
Office Depot
Books A Million                                              |  | $                       | 2,036,359 |                                
|Park Shore Shopping Center |  | 1973/1993                |  | 100                       | % | 231,830              |  | 240,330      |  | 188,180      |  | Fresh Market
K-Mart
Rhodes Furniture
Homegoods
Sound Advice                                                             |  | $                       | 1,851,037 |                                

22

---



|Shoppers Haven Shopping Center   |  | 1959/1998 |  | 88  | % | 207,036 |  | 207,036 |  | 113,273 |  | Winn Dixie Supermarket
Bed, Bath & Beyond
Walgreens
Bealls Outlet                  |  | $ | 1,628,345 |  | $ | 7.87 
|-------------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Venetian Isle Shopping Center(8) |  | 1959/1992 |  | 100 | % | 183,467 |  | 186,967 |  | 111,831 |  | Publix Supermarket
TJ Maxx
Linens 'N Things
Rec Warehouse Pools and Spas           |  | $ | 1,506,158 |  | $ | 8.21 
|Georgia                          |  |           |  |     |   |         |  |         |  |         |  |                                                                                    |  |   |           |  |   |      
|Shenandoah Plaza                 |  | 1987      |  | 99  | % | 141,072 |  | 144,072 |  | 113,922 |  | Ingles Market/Goodwill Emporium
Wal-Mart/Big Lots/ACS                              |  | $ | 695,830   |  | $ | 4.93 
|Illinois                         |  |           |  |     |   |         |  |         |  |         |  |                                                                                    |  |   |           |  |   |      
|Bartonville Square               |  | 1972      |  | 100 | % | 61,678  |  | 61,678  |  | 41,824  |  | Kroger Supermarket                                                                 |  | $ | 296,634   |  | $ | 4.81 
|Butterfield Square               |  | 1997      |  | 96  | % | 106,767 |  | 121,370 |  | 51,677  |  | Sunset Foods                                                                       |  | $ | 1,383,211 |  | $ | 12.96
|The Commons of Chicago Ridge     |  | 1992/1999 |  | 95  | % | 324,080 |  | 324,080 |  | 246,039 |  | Home Depot
Office Depot
Marshalls
Pep Boys (Ground Lease)
Old Navy
X Sport Fitness |  | $ | 3,808,950 |  | $ | 11.75
|The Commons of Crystal Lake      |  | 1995/1998 |  | 97  | % | 273,060 |  | 365,335 |  | 210,569 |  | Jewel Foods/Osco Drugs
Marshalls
Toys R Us
Hobby Lobby (Non-Owned)                 |  | $ | 3,134,906 |  | $ | 11.48
|Crossroads Centre                |  | 1975/1988 |  | 98  | % | 242,470 |  | 247,970 |  | 129,468 |  | KM Fairview Heights LLC/Hobby Lobby (Ground Lease)
TJ Maxx                         |  | $ | 1,535,073 |  | $ | 6.33 

23

---



|Fairhills Shopping Center |  | 1971/1989 |  | 93  | % | 107,584 |  | 117,684 |  | 49,330  |  | Jewel Foods/Osco Drugs                                                                                                                                                                        |  | $ | 607,218   |  | $ | 5.64 
|------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Heritage Square           |  | 1992      |  | 98  | % | 210,852 |  | 210,852 |  | 164,706 |  | Circuit City
Carson Furniture Gallery
DSW Shoe Warehouse
Rhodes Furniture                                                                                                                     |  | $ | 2,560,567 |  | $ | 12.14
|High Point Centre         |  | 1988      |  | 98  | % | 240,002 |  | 240,002 |  | 141,068 |  | Cub Foods
Office Depot
Babies R Us
Big Lots                                                                                                                                                   |  | $ | 2,376,863 |  | $ | 9.90 
|Long Meadow Commons       |  | 1996      |  | 91  | % | 118,471 |  | 118,471 |  | 65,816  |  | Dominick's Supermarket                                                                                                                                                                        |  | $ | 1,587,556 |  | $ | 13.40
|Parkway Pointe            |  | 1996      |  | 100 | % | 38,737  |  | 222,037 |  | 179,300 |  | Wal-Mart (Non-Owned)
Target (Non-Owned)
Party Tree (Non-Owned)                                                                                                                                |  | $ | 532,519   |  | $ | 13.75
|Rivercrest                |  | 1992/1999 |  | 100 | % | 488,680 |  | 847,635 |  | 711,859 |  | Dominick's Supermarket
Best Buy
PetsMart
TJ Maxx
Kimco Realty Corp./K-Mart
Sears
OfficeMax
Hollywood Park
Target (Non-Owned)
Kohl's (Non-Owned)
Menards (Non-Owned)
Sony Theaters (Non-Owned) |  | $ | 4,367,183 |  | $ | 8.94 
|Rollins Crossing          |  | 1995/1998 |  | 98  | % | 148,117 |  | 342,237 |  | 283,704 |  | Super K-Mart (Non-Owned)
Sears Paint & Hardware
Regal Cinema (Ground Lease)                                                                                                                   |  | $ | 1,105,675 |  | $ | 7.46 

24

---



|Sangamon Center North      |  | 1970/1996 |  | 98 | % | 139,907 |  | 151,107 |  | 79,257  |  | Schnuck's Supermarket
U.S. Post Office                                                               |  | $ | 1,120,546 |  | $ | 8.01 
|-------------------------- |  | --------- |  | -- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Sheridan Village           |  | 1954/1995 |  | 99 | % | 303,915 |  | 303,915 |  | 177,409 |  | Bergner's Dept Store
Cohen's Furniture Co.                                                           |  | $ | 2,384,638 |  | $ | 7.85 
|Sterling Bazaar            |  | 1992      |  | 95 | % | 84,535  |  | 84,535  |  | 52,337  |  | Kroger Supermarket                                                                                   |  | $ | 744,079   |  | $ | 8.80 
|Twin Oaks Centre           |  | 1991      |  | 97 | % | 98,197  |  | 98,197  |  | 59,682  |  | Hy-Vee Supermarket                                                                                   |  | $ | 714,870   |  | $ | 7.28 
|Wardcliffe Shopping Center |  | 1976/1977 |  | 96 | % | 67,681  |  | 67,681  |  | 48,341  |  | CVS
Big Lots                                                                                         |  | $ | 341,549   |  | $ | 5.05 
|Westview Center            |  | 1992      |  | 80 | % | 325,507 |  | 416,307 |  | 184,265 |  | Cub Foods
Marshalls
Value City Dept. Store (Non-Owned)
Fashion Bug                                   |  | $ | 2,544,810 |  | $ | 7.82 
|Indiana                    |  |           |  |    |   |         |  |         |  |         |  |                                                                                                      |  |   |           |  |   |      
|Apple Glen Crossing        |  | 2001/2002 |  | 98 | % | 150,446 |  | 440,987 |  | 384,426 |  | Super Wal-Mart (Non-Owned)
Kohl's (Non-Owned)
Dick's Sporting Goods
Best Buy (Ground Lease)
PetsMart |  | $ | 1,798,584 |  | $ | 11.96
|County Line Mall           |  | 1976/1991 |  | 90 | % | 268,589 |  | 271,389 |  | 213,950 |  | Kroger Supermarket
OfficeMax
Old Time Pottery
Sofa Express                                           |  | $ | 1,793,391 |  | $ | 6.68 
|Double Tree Plaza          |  | 1996      |  | 97 | % | 98,342  |  | 110,342 |  | 49,773  |  | Amelia's Supermarket                                                                                 |  | $ | 735,935   |  | $ | 7.48 
|Germantown Shopping Center |  | 1985      |  | 75 | % | 230,417 |  | 237,617 |  | 114,905 |  | Beuhler's Supermarket
Elder Beerman Department Store
Peebles Department Store                        |  | $ | 1,133,525 |  | $ | 4.92 

25

---



|King's Plaza                |  | 1965      |  | 87  | % | 102,788 |  | 104,888 |  | 60,200  |  | Cub Foods                                                                                           |  | $ | 414,628   |  | $ | 4.03 
|--------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Lincoln Plaza               |  | 1968      |  | 94  | % | 101,058 |  | 101,058 |  | 39,104  |  | Kroger Supermarket                                                                                  |  | $ | 681,652   |  | $ | 6.75 
|Martin's Bittersweet Plaza  |  | 1992      |  | 100 | % | 81,720  |  | 84,730  |  | 61,079  |  | Martin's Supermarket
Osco Drug                                                                      |  | $ | 581,590   |  | $ | 7.12 
|Meridian Village            |  | 1990      |  | 98  | % | 130,774 |  | 130,774 |  | 65,030  |  | O'Malia's Supermarket
Godby Home Furnishings                                                        |  | $ | 1,312,458 |  | $ | 10.04
|Rivergate Shopping Center   |  | 1982      |  | 96  | % | 133,086 |  | 137,486 |  | 108,086 |  | Super Foods
Wal-Mart                                                                                |  | $ | 520,238   |  | $ | 3.91 
|Sagamore Park Centre        |  | 1982      |  | 93  | % | 118,436 |  | 118,436 |  | 66,063  |  | Payless Supermarket                                                                                 |  | $ | 973,042   |  | $ | 8.22 
|Speedway SuperCenter        |  | 1960/1998 |  | 88  | % | 569,879 |  | 569,879 |  | 252,624 |  | Kroger Supermarket
AJ Wright
Kohl's
Sears
Factory Card Outlet
Old Navy
Petco                        |  | $ | 4,650,556 |  | $ | 8.16 
|The Village                 |  | 1950      |  | 91  | % | 303,906 |  | 306,706 |  | 115,325 |  | US Factory Outlet
AJ Wright
Dollar Tree
Indiana Department of Employment                            |  | $ | 2,044,878 |  | $ | 6.73 
|Washington Lawndale Commons |  | 1957/1993 |  | 76  | % | 331,912 |  | 331,912 |  | 168,409 |  | Stein Mart
Dunham's Sporting Goods
Gensic's Furniture House
Jo-Ann Fabrics
Books A Million
Big Lots |  | $ | 1,519,469 |  | $ | 4.58 
|Iowa                        |  |           |  |     |   |         |  |         |  |         |  |                                                                                                     |  |   |           |  |   |      
|Burlington Plaza West       |  | 1989      |  | 100 | % | 88,118  |  | 92,118  |  | 52,468  |  | Hobby Lobby                                                                                         |  | $ | 296,742   |  | $ | 3.37 
|Davenport Retail Center     |  | 1996      |  | 100 | % | 62,588  |  | 229,588 |  | 214,433 |  | Staples
PetsMart
Super Target (Non-Owned)                                                           |  | $ | 645,531   |  | $ | 10.31

26

---



|Kimberly West             |  | 1987/1997 |  | 88  | % | 113,713 |  | 116,513 |  | 76,896  |  | Hy-Vee Supermarket                                                 |  | $ | 623,697   |  | $ | 5.48
|------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ------------------------------------------------------------------ |  | - | --------- |  | - | ----
|Parkwood Plaza            |  | 1992      |  | 40  | % | 126,369 |  | 126,369 |  | N/A     |  | N/A                                                                |  | $ | 361,556   |  | $ | 2.86
|Southgate Shopping Center |  | 1972/1996 |  | 89  | % | 155,399 |  | 155,399 |  | 102,065 |  | Hy-Vee Supermarket
Big Lots                                        |  | $ | 497,613   |  | $ | 3.20
|Spring Village            |  | 1980/1991 |  | 98  | % | 90,263  |  | 92,763  |  | 45,763  |  | Eagle Foods                                                        |  | $ | 478,281   |  | $ | 5.30
|Warren Plaza              |  | 1980/1993 |  | 86  | % | 90,102  |  | 187,135 |  | 148,525 |  | Hy-Vee Supermarket
Target (Non-Owned)                              |  | $ | 607,499   |  | $ | 6.74
|Kansas                    |  |           |  |     |   |         |  |         |  |         |  |                                                                    |  |   |           |  |   |     
|Mid State Plaza           |  | 1971      |  | 79  | % | 286,601 |  | 293,101 |  | 157,017 |  | Ashley Furniture Home Store
Sutherlands Lumber
Hobby Lobby         |  | $ | 663,072   |  | $ | 2.31
|Santa Fe Square           |  | 1987      |  | 100 | % | 133,698 |  | 133,698 |  | 55,820  |  | Hy-Vee Supermarket/Office Depot/Bloom Brothers                     |  | $ | 1,294,718 |  | $ | 9.68
|Shawnee Parkway Plaza     |  | 1979/1995 |  | 94  | % | 92,213  |  | 92,213  |  | 59,128  |  | Price Chopper Supermarket                                          |  | $ | 645,431   |  | $ | 7.00
|Village Plaza             |  | 1975      |  | 88  | % | 55,698  |  | 55,698  |  | 31,431  |  | Falley's Food 4 Less                                               |  | $ | 251,522   |  | $ | 4.52
|Westchester Square        |  | 1968/1998 |  | 94  | % | 164,944 |  | 168,644 |  | 63,000  |  | Hy-Vee Supermarket                                                 |  | $ | 1,338,533 |  | $ | 8.12
|West Loop Shopping Center |  | 1986/1998 |  | 99  | % | 199,032 |  | 199,032 |  | 98,558  |  | Dillons Supermarket
Waters True Value
American Academy Hair Design |  | $ | 1,314,101 |  | $ | 6.60
|Kentucky                  |  |           |  |     |   |         |  |         |  |         |  |                                                                    |  |   |           |  |   |     
|Dixie Plaza               |  | 1987      |  | 100 | % | 48,021  |  | 82,804  |  | 59,383  |  | Buehler Fresh Market
Frank's Nursery (Non-Owned)                   |  | $ | 387,401   |  | $ | 8.07

27

---



|Midtown Mall              |  | 1970/1994 |  | 100 | % | 153,822 |  | 153,822 |  | 106,271 |  | Kroger Supermarket
Big Lots/Odd Lots
Gatti's Pizza                                                          |  | $ | 1,003,543 |  | $ | 6.52 
|------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ----------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Plainview Village Center  |  | 1977      |  | 92  | % | 164,454 |  | 186,254 |  | 39,399  |  | Kroger Supermarket                                                                                          |  | $ | 1,307,309 |  | $ | 7.95 
|Stony Brook               |  | 1988      |  | 100 | % | 137,013 |  | 238,213 |  | 169,775 |  | Kroger Supermarket
H.H. Gregg (Non-Owned)                                                                   |  | $ | 1,627,306 |  | $ | 11.88
|Maine                     |  |           |  |     |   |         |  |         |  |         |  |                                                                                                             |  |   |           |  |   |      
|Pine Tree Shopping Center |  | 1958/1973 |  | 99  | % | 254,378 |  | 254,378 |  | 202,178 |  | AJ Wright
Mardens
Jo-Ann Fabrics
Packard Development                                                        |  | $ | 1,711,014 |  | $ | 6.73 
|Massachusetts             |  |           |  |     |   |         |  |         |  |         |  |                                                                                                             |  |   |           |  |   |      
|Berkshire Crossing        |  | 1996      |  | 100 | % | 446,287 |  | 446,287 |  | 389,561 |  | Price Chopper Supermarket
Wal-Mart (Ground Lease)
Home Depot (Ground Lease)
Staples
Michaels
Barnes & Noble |  | $ | 3,480,324 |  | $ | 7.80 
|Burlington Square         |  | 1983/1992 |  | 83  | % | 86,290  |  | 86,290  |  | 34,097  |  | Staples
Eastern Mountain Sports                                                                             |  | $ | 2,423,543 |  | $ | 28.09
|Lynn Market Place         |  | 1966/1993 |  | 100 | % | 78,092  |  | 78,092  |  | 52,620  |  | Shaw's Supermarket                                                                                          |  | $ | 631,788   |  | $ | 8.09 
|Watertower Plaza          |  | 1988/1998 |  | 96  | % | 296,320 |  | 296,320 |  | 214,889 |  | Shaw's Supermarket
TJ Maxx
OfficeMax
Barnes & Noble
Linens 'N Things
Petco
Michaels
NAMCO                   |  | $ | 3,659,743 |  | $ | 12.35
|Westgate Plaza            |  | 1969/1996 |  | 100 | % | 103,903 |  | 103,903 |  | 77,768  |  | Stop & Shop/Staples/Ocean State Job Lot
TJ Maxx                                                             |  | $ | 1,021,333 |  | $ | 9.83 

28

---



|Michigan                |  |           |  |     |   |         |  |         |  |         |  |                                                                                                            |  |   |           |  |   |     
|----------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | ----
|Cherry Hill Marketplace |  | 1992/1999 |  | 80  | % | 122,132 |  | 125,032 |  | 53,739  |  | Farmer Jacks                                                                                               |  | $ | 1,116,444 |  | $ | 9.14
|The Courtyard           |  | 1989      |  | 96  | % | 125,967 |  | 265,622 |  | 219,421 |  | V.G. Food Center
OfficeMax
Dunham's Sporting Goods
Home Depot (Non-Owned)                                  |  | $ | 997,250   |  | $ | 7.92
|Grand Traverse Crossing |  | 1996      |  | 100 | % | 387,273 |  | 387,273 |  | 339,156 |  | Wal-Mart (Ground Lease)
Home Depot (Ground Lease)
Borders (Ground Lease)
Toys R Us
Staples
PetsMart        |  | $ | 2,696,188 |  | $ | 6.96
|Redford Plaza           |  | 1956/1987 |  | 100 | % | 284,448 |  | 284,448 |  | 194,014 |  | Kroger Supermarket
Burlington Coat Factory
Bally Total Fitness
AJ Wright
Aco Hardware
The Resource Network |  | $ | 2,453,569 |  | $ | 8.63
|Minnesota               |  |           |  |     |   |         |  |         |  |         |  |                                                                                                            |  |   |           |  |   |     
|Austin Town Center      |  | 1999      |  | 45  | % | 110,680 |  | 200,680 |  | 170,789 |  | Staples
Target (Non-Owned)                                                                                 |  | $ | 505,251   |  | $ | 4.56
|Brookdale Square        |  | 1971/1994 |  | 41  | % | 185,883 |  | 185,883 |  | 66,834  |  | Brookdale Theater
Pep Boys
Up Front Event Center                                                           |  | $ | 403,352   |  | $ | 2.17
|Burning Tree Plaza      |  | 1987/1998 |  | 99  | % | 182,969 |  | 182,969 |  | 117,716 |  | Best Buy
TJ Maxx
Hancock Fabrics
Dunham's Sporting Goods                                                   |  | $ | 1,695,030 |  | $ | 9.26

29

---



|Central Valu Center     |  | 1961/1984 |  | 95  | % | 123,350 |  | 123,350 |  | 90,946  |  | Rainbow Foods
Slumberland Clearance                                                           |  | $ | 845,041   |  | $ | 6.85 
|----------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Division Place          |  | 1991      |  | 91  | % | 129,753 |  | 134,753 |  | 24,016  |  | TJ Maxx                                                                                       |  | $ | 1,416,693 |  | $ | 10.92
|Elk Park Center         |  | 1995/1999 |  | 98  | % | 204,992 |  | 302,635 |  | 192,843 |  | Cub Foods
Target (Non-Owned)
OfficeMax                                                        |  | $ | 1,974,173 |  | $ | 9.63 
|Har Mar Mall            |  | 1965/1992 |  | 98  | % | 433,232 |  | 433,232 |  | 226,838 |  | Cub Foods
Barnes & Noble
Marshalls
Homegoods
TJ Maxx
AMC Theatres
Michaels                    |  | $ | 4,740,927 |  | $ | 10.94
|Hub West(9)             |  |           |  |     |   |         |  |         |  |         |  |                                                                                               |  |   |           |  |   |      
|Richfield Hub           |  | 1952/1992 |  | 99  | % | 214,855 |  | 217,655 |  | 129,400 |  | Rainbow Foods
Bally Total Fitness
Marshalls
Michaels                                          |  | $ | 2,457,011 |  | $ | 11.44
|Marketplace at 42       |  | 1999      |  | 96  | % | 120,487 |  | 150,687 |  | 72,371  |  | Rainbow Foods
Walgreens (Non-Owned)                                                           |  | $ | 1,709,278 |  | $ | 14.19
|Roseville Center        |  | 1950/2000 |  | 99  | % | 76,616  |  | 155,416 |  | 65,000  |  | Rainbow Foods (Non-Owned)                                                                     |  | $ | 839,704   |  | $ | 10.96
|Southport Centre        |  | 1992      |  | 100 | % | 124,937 |  | 426,985 |  | 346,566 |  | Cub Foods (Non-Owned)
Best Buy
Frank's Nursery
Super Target (Non-Owned)
OfficeMax (Non-Owned) |  | $ | 1,856,247 |  | $ | 14.86
|Sun Ray Shopping Center |  | 1958/1992 |  | 99  | % | 285,911 |  | 285,911 |  | 179,527 |  | Cub Foods (Ground Lease)
TJ Maxx
Bally Total Fitness
Michaels
Valu Thrift Store               |  | $ | 2,313,153 |  | $ | 8.09 
|Ten Acres Center        |  | 1972/1986 |  | 100 | % | 162,364 |  | 162,364 |  | 133,894 |  | Cub Foods
Burlington Coat Factory                                                             |  | $ | 1,190,306 |  | $ | 7.33 

30

---



|Terrace Mall                |  | 1979/1993 |  | 90  | % | 135,031 |  | 250,031 |  | 212,430 |  | Rainbow Foods
North Memorial Hospital (Non-Owned)
North Memorial Medical Center             |  | $ | 1,004,440 |  | $ | 7.44 
|--------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Westwind Plaza              |  | 1985      |  | 100 | % | 87,933  |  | 147,933 |  | 80,245  |  | Cub Foods (Non-Owned)
Northern Tool and Equipment                                           |  | $ | 1,130,321 |  | $ | 12.85
|White Bear Hills            |  | 1990/1996 |  | 100 | % | 73,095  |  | 81,895  |  | 45,679  |  | Festival Foods                                                                              |  | $ | 637,035   |  | $ | 8.72 
|Mississippi                 |  |           |  |     |   |         |  |         |  |         |  |                                                                                             |  |   |           |  |   |      
|County Line Plaza           |  | 1997      |  | 100 | % | 221,567 |  | 268,367 |  | 171,062 |  | Haverty's Furniture
OfficeMax
Barnes & Noble
Old Navy
Shoe Station
Circuit City (Non-Owned) |  | $ | 2,828,236 |  | $ | 12.76
|Missouri                    |  |           |  |     |   |         |  |         |  |         |  |                                                                                             |  |   |           |  |   |      
|Clocktower Place            |  | 1987      |  | 97  | % | 214,198 |  | 222,348 |  | 129,807 |  | Dierberg's Market
TJ Maxx
Office Depot                                                      |  | $ | 2,264,238 |  | $ | 10.57
|Ellisville Square           |  | 1990      |  | 100 | % | 146,052 |  | 149,552 |  | 107,772 |  | K-Mart
Lukas Liquors                                                                        |  | $ | 1,447,276 |  | $ | 9.91 
|Grandview Plaza             |  | 1961/1991 |  | 91  | % | 296,008 |  | 296,008 |  | 200,075 |  | Schnuck's Supermarket
Old Time Pottery
OfficeMax
Walgreens                                  |  | $ | 1,927,421 |  | $ | 6.51 
|Hub Shopping Center         |  | 1972/1995 |  | 94  | % | 163,072 |  | 163,072 |  | 103,322 |  | Price Chopper Supermarket                                                                   |  | $ | 856,108   |  | $ | 5.25 
|Liberty Corners             |  | 1987/1996 |  | 100 | % | 125,432 |  | 214,932 |  | 136,500 |  | Price Chopper Supermarket
Sutherlands (Non-Owned)                                           |  | $ | 982,798   |  | $ | 7.84 
|Maplewood Square            |  | 1998      |  | 100 | % | 71,590  |  | 75,590  |  | 57,575  |  | Shop n' Save Supermarket                                                                    |  | $ | 534,552   |  | $ | 7.47 
|Marketplace at Independence |  | 1988      |  | 94  | % | 241,898 |  | 253,398 |  | 133,942 |  | Price Chopper Supermarket
Old Navy                                                          |  | $ | 2,133,422 |  | $ | 8.82 
|Prospect Plaza              |  | 1979/1999 |  | 100 | % | 189,996 |  | 189,996 |  | 136,566 |  | Price Chopper Supermarket
Hobby Lobby
The Salvation Army Family Store                       |  | $ | 1,472,981 |  | $ | 7.75 

31

---



|Watts Mill Plaza         |  | 1973/1997 |  | 100 | % | 161,717 |  | 169,717 |  | 91,989  |  | Price Chopper Supermarket
Westlake Hardware                                                    |  | $ | 1,485,720 |  | $ | 9.19
|------------------------ |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------------------------------------------- |  | - | --------- |  | - | ----
|Nebraska                 |  |           |  |     |   |         |  |         |  |         |  |                                                                                                |  |   |           |  |   |     
|Bishop Heights           |  | 1971/1997 |  | 100 | % | 34,388  |  | 128,448 |  | 106,992 |  | Russ' IGA Supermarket
Shopko (Non-Owned)                                                       |  | $ | 183,375   |  | $ | 5.33
|Cornhusker Plaza         |  | 1988      |  | 96  | % | 84,083  |  | 163,063 |  | 121,723 |  | Hy-Vee Supermarket
Wal-Mart (Non-Owned)                                                        |  | $ | 468,713   |  | $ | 5.57
|Eastville Plaza          |  | 1986      |  | 100 | % | 68,546  |  | 139,636 |  | 99,046  |  | Hy-Vee Supermarket
Menard's (Non-Owned)                                                        |  | $ | 572,908   |  | $ | 8.36
|Edgewood Shopping Center |  | 1980/1994 |  | 98  | % | 179,964 |  | 406,514 |  | 210,020 |  | SuperSaver Supermarket
Osco Drug
Target (Non-Owned)                                            |  | $ | 1,562,369 |  | $ | 8.68
|The Meadows              |  | 1998      |  | 100 | % | 67,840  |  | 70,840  |  | 50,000  |  | Russ' IGA Supermarket                                                                          |  | $ | 523,453   |  | $ | 7.72
|Miracle Hills Park       |  | 1988      |  | 90  | % | 69,638  |  | 139,638 |  | 66,000  |  | Cub Foods (Non-Owned)                                                                          |  | $ | 575,349   |  | $ | 8.26
|Stockyards Plaza         |  | 1988      |  | 100 | % | 129,459 |  | 148,659 |  | 85,649  |  | Hy-Vee Supermarket
Movies 8                                                                    |  | $ | 1,049,627 |  | $ | 8.11
|New Hampshire            |  |           |  |     |   |         |  |         |  |         |  |                                                                                                |  |   |           |  |   |     
|Bedford Grove            |  | 1989      |  | 100 | % | 216,941 |  | 216,941 |  | 182,745 |  | Shop N' Save
Wal-Mart (Ground Lease)                                                           |  | $ | 1,750,701 |  | $ | 8.07
|Bedford Mall             |  | 1963/1999 |  | 91  | % | 265,091 |  | 265,091 |  | 192,207 |  | Marshalls
Bob's Stores
Staples
Linens 'N Things
Decathalon Sports (Ground Lease)
Hoyts Cinemas |  | $ | 2,593,050 |  | $ | 9.78

32

---



|Capitol Shopping Center      |  | 1961/1999 |  | 100 | % | 182,821 |  | 189,821 |  | 129,551 |  | Demoulas Market Basket
Burlington Coat Factory
Marshalls   |  | $ | 1,655,473 |  | $ | 9.06 
|---------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------- |  | - | --------- |  | - | -----
|Tri City Plaza               |  | 1968/1992 |  | 100 | % | 146,947 |  | 146,947 |  | 84,920  |  | Demoulas Market Basket
TJ Maxx                             |  | $ | 1,051,846 |  | $ | 7.16 
|New Jersey                   |  |           |  |     |   |         |  |         |  |         |  |                                                            |  |   |           |  |   |      
|Cross Keys Common            |  | 1995      |  | 92  | % | 216,805 |  | 417,791 |  | 280,348 |  | Wal-Mart (Non-Owned)
AJ Wright
Staples
Ross Dress for Less |  | $ | 2,472,595 |  | $ | 11.40
|Morris Hills Shopping Center |  | 1957/1994 |  | 100 | % | 159,454 |  | 159,454 |  | 109,161 |  | Mega Marshalls
Clearview Cinema (Ground Lease)
Michaels    |  | $ | 2,404,551 |  | $ | 15.08
|New Mexico                   |  |           |  |     |   |         |  |         |  |         |  |                                                            |  |   |           |  |   |      
|St. Francis Plaza            |  | 1992/1993 |  | 100 | % | 35,800  |  | 35,800  |  | 20,850  |  | Wild Oats Market                                           |  | $ | 401,670   |  | $ | 11.22
|New York                     |  |           |  |     |   |         |  |         |  |         |  |                                                            |  |   |           |  |   |      
|College Plaza                |  | 1975/1994 |  | 100 | % | 175,086 |  | 175,086 |  | 126,812 |  | Bob's Stores
Marshalls
Eckerd Drugs
Staples                |  | $ | 1,407,455 |  | $ | 8.04 
|Dalewood I Shopping Center   |  | 1966/1995 |  | 100 | % | 59,569  |  | 59,569  |  | 36,989  |  | Pathmark                                                   |  | $ | 904,250   |  | $ | 15.18
|Dalewood II Shopping Center  |  | 1970/1995 |  | 100 | % | 81,326  |  | 81,326  |  | 59,326  |  | Turco's Supermarket
Bed, Bath & Beyond                     |  | $ | 1,943,596 |  | $ | 23.90
|Dalewood III Shopping Center |  | 1972/1995 |  | 100 | % | 48,390  |  | 48,390  |  | 28,361  |  | TJ Maxx                                                    |  | $ | 1,208,936 |  | $ | 24.98
|Falcaro's Plaza              |  | 1968/1993 |  | 100 | % | 61,295  |  | 63,295  |  | 29,887  |  | OfficeMax                                                  |  | $ | 996,312   |  | $ | 16.25

33

---



|Kings Park Shopping Center       |  | 1963/1985 |  | 100 | % | 71,940  |  | 73,940  |  | 48,870  |  | Key Foods
TJ Maxx                                                                                                                 |  | $ | 1,040,934 |  | $ | 14.47
|-------------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Nesconset Shopping Center        |  | 1961/1999 |  | 99  | % | 122,996 |  | 124,996 |  | 33,460  |  | Office Depot/HomeGoods                                                                                                            |  | $ | 1,707,061 |  | $ | 13.88
|Parkway Plaza                    |  | 1973/1992 |  | 100 | % | 89,704  |  | 89,704  |  | 31,600  |  | TJ Maxx                                                                                                                           |  | $ | 1,964,535 |  | $ | 21.90
|Roanoke Plaza                    |  | 1972/1994 |  | 100 | % | 99,131  |  | 101,631 |  | 58,150  |  | Best Yet Market
TJ Maxx                                                                                                           |  | $ | 1,541,383 |  | $ | 15.55
|Rockville Centre Shopping Center |  | 1975      |  | 100 | % | 44,131  |  | 44,131  |  | 27,781  |  | HomeGoods                                                                                                                         |  | $ | 593,756   |  | $ | 13.45
|Salmon Run Plaza                 |  | 1993      |  | 100 | % | 68,761  |  | 181,195 |  | 164,614 |  | Hannaford's Supermarket
K-Mart (Non-Owned)                                                                                        |  | $ | 1,097,978 |  | $ | 15.97
|Suffolk Plaza                    |  | 1967/1998 |  | 100 | % | 84,480  |  | 89,680  |  | 56,759  |  | Waldbaum's Supermarket                                                                                                            |  | $ | 814,363   |  | $ | 9.64 
|Three Village Plaza              |  | 1964/1991 |  | 89  | % | 77,458  |  | 77,458  |  | 38,955  |  | King Kullen Grocery                                                                                                               |  | $ | 668,181   |  | $ | 8.63 
|Turnpike Plaza                   |  | 1971/1994 |  | 100 | % | 52,950  |  | 52,950  |  | 30,700  |  | Waldbaum's Supermarket                                                                                                            |  | $ | 962,869   |  | $ | 18.18
|North Carolina                   |  |           |  |     |   |         |  |         |  |         |  |                                                                                                                                   |  |   |           |  |   |      
|The Commons at Chancellor Park   |  | 1994      |  | 100 | % | 341,860 |  | 351,460 |  | 309,041 |  | Home Depot (Ground Lease)
Hobby Lobby
Circuit City
Marshalls
Value City
Gold's Gym                                                |  | $ | 2,370,587 |  | $ | 6.93 
|Crown Point Shopping Center      |  | 1990      |  | 100 | % | 147,200 |  | 164,200 |  | 135,200 |  | Lowe's Home Centers
Babies R US                                                                                                   |  | $ | 1,018,600 |  | $ | 6.92 
|Franklin Square                  |  | 1990      |  | 98  | % | 318,435 |  | 517,735 |  | 379,568 |  | Super Wal-Mart (Non-Owned)
Best Buy
Ross Dress for Less
Bed, Bath & Beyond
Dollar Tree
Pep Boys (Ground Lease)
OfficeMax
Michaels |  | $ | 3,077,016 |  | $ | 9.66 

34

---



|Innes Street Market                |  | 1998 |  | 100 | % | 349,356 |  | 349,356 |  | 296,740 |  | Food Lion Supermarket
Lowe's Home Centers
Tinseltown Cinema
Marshalls
Staples
Circuit City
Old Navy |  | $ | 3,364,280 |  | $ | 9.63 
|---------------------------------- |  | ---- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|McMullen Creek Shopping Center(10) |  | 1988 |  | 94  | % | 283,647 |  | 293,247 |  | 98,222  |  | Winn Dixie Supermarket
Burlington Coat Factory                                                      |  | $ | 2,767,907 |  | $ | 9.76 
|New Centre Market                  |  | 1998 |  | 99  | % | 143,763 |  | 266,263 |  | 202,040 |  | Target (Non-Owned)
Marshalls
PetsMart
OfficeMax                                                     |  | $ | 1,677,624 |  | $ | 11.67
|Tarrymore Square                   |  | 1989 |  | 76  | % | 260,405 |  | 260,405 |  | 85,447  |  | Marshalls
Carolina Clearing House                                                                   |  | $ | 1,646,508 |  | $ | 6.32 
|University Commons                 |  | 1989 |  | 99  | % | 235,396 |  | 235,396 |  | 135,326 |  | Lowes Foods
TJ Maxx
Homegoods
AC Moore                                                              |  | $ | 2,306,966 |  | $ | 9.80 
|University Commons Greenville      |  | 1996 |  | 100 | % | 232,820 |  | 338,020 |  | 270,249 |  | Kroger Supermarket
TJ Maxx
Circuit City
Barnes & Noble
Target (Non-Owned)
Linens 'N Things          |  | $ | 2,640,890 |  | $ | 11.34

35

---



|Wendover Place         |  | 1997      |  | 98  | % | 415,775 |  | 547,075 |  | 441,954 |  | Harris-Teeter/Michaels/Ross Dress for Less
Kohl's
Dick's Sporting Goods
Babies R Us
PetsMart
Old Navy
Linens 'N Things
Target (Non-Owned)     |  | $ | 4,279,742 |  | $ | 10.29
|---------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Ohio                   |  |           |  |     |   |         |  |         |  |         |  |                                                                                                                                               |  |   |           |  |   |      
|30th Street Plaza      |  | 1951/1999 |  | 96  | % | 157,055 |  | 157,055 |  | 111,251 |  | Giant Eagle Supermarket
Marc's Pharmacy                                                                                                       |  | $ | 1,459,102 |  | $ | 9.29 
|Clock Tower Plaza      |  | 1989      |  | 100 | % | 237,975 |  | 244,475 |  | 172,300 |  | Ray's Supermarket
Wal-Mart                                                                                                                    |  | $ | 1,472,688 |  | $ | 6.19 
|Salem Consumer Square  |  | 1988      |  | 93  | % | 274,652 |  | 274,652 |  | 131,650 |  | Cub Foods
Office Depot
Michigan Sporting Goods
AJ Wright                                                                                      |  | $ | 2,276,743 |  | $ | 8.29 
|Pennsylvania           |  |           |  |     |   |         |  |         |  |         |  |                                                                                                                                               |  |   |           |  |   |      
|Boyertown Plaza        |  | 1961      |  | 30  | % | 83,229  |  | 88,629  |  | N/A     |  | N/A                                                                                                                                           |  | $ | 377,977   |  | $ | 4.54 
|Colonial Commons       |  | 1991/2003 |  | 94  | % | 433,362 |  | 451,462 |  | 317,335 |  | Giant Foods (Ground Lease)
Dick's Sporting Goods
Linens 'N Things
AMC Theatres 9
Ross Dress for Less
Marshalls
Ben Franklin
TJ Maxx
OfficeMax |  | $ | 4,844,274 |  | $ | 11.18
|Lehigh Shopping Center |  | 1955/1999 |  | 76  | % | 372,243 |  | 376,243 |  | 211,215 |  | Giant Foods (Ground Lease)
Mega Marshalls
Staples
D&D Budget & Clearance
Frank's Nursery                                                      |  | $ | 1,926,780 |  | $ | 5.18 

36

---



|Warminster Towne Center     |  | 1997      |  | 100 | % | 237,345 |  | 318,028 |  | 260,066 |  | Shop Rite Supermarket
Kohl's (Non-Owned)
Ross Dress for Less
PetsMart
OfficeMax
Pep Boys
Rag Shop
Old Navy |  | $ | 3,105,613 |  | $ | 13.08
|--------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ---------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|South Dakota                |  |           |  |     |   |         |  |         |  |         |  |                                                                                                            |  |   |           |  |   |      
|Baken Park                  |  | 1962/1997 |  | 90  | % | 195,526 |  | 195,526 |  | 95,039  |  | Nash Finch Supermarket
Ben Franklin
Boyd's Drug                                                            |  | $ | 1,316,205 |  | $ | 6.73 
|Tennessee                   |  |           |  |     |   |         |  |         |  |         |  |                                                                                                            |  |   |           |  |   |      
|The Market of Wolf Creek    |  | 2000      |  | 87  | % | 297,099 |  | 470,437 |  | 296,490 |  | Target (Non-Owned)
Haverty's Furniture (Non-Owned)
The Sports Authority
Best Buy
Office Depot              |  | $ | 3,268,913 |  | $ | 11.00
|Oakwood Commons(11)         |  | 1989/1997 |  | 88  | % | 278,017 |  | 280,767 |  | 159,072 |  | Publix Supermarket
Bed, Bath & Beyond
Ross Dress for Less
Peebles Department Store                         |  | $ | 1,799,794 |  | $ | 6.47 
|Watson Glen Shopping Center |  | 1989      |  | 99  | % | 264,360 |  | 264,360 |  | 206,427 |  | Bi-Lo Foods
K-Mart
Goody's Family Clothing
World Gym                                                       |  | $ | 1,930,664 |  | $ | 7.30 
|Williamson Square(12)       |  | 1988/1993 |  | 97  | % | 330,226 |  | 340,476 |  | 202,102 |  | Kroger Supermarket
Hobby Lobby
USA Baby
Hancock Fabrics
New River Fellowship                               |  | $ | 2,436,176 |  | $ | 7.38 
|Texas                       |  |           |  |     |   |         |  |         |  |         |  |                                                                                                            |  |   |           |  |   |      
|Buckingham Place            |  | 1980/1997 |  | 93  | % | 150,228 |  | 156,228 |  | 96,274  |  | Minyard Food Stores
Big Lots                                                                               |  | $ | 1,043,994 |  | $ | 6.95 

37

---



|The Crossing              |  | 2000/2001 |  | 93  | % | 187,075 |  | 253,454 |  | 150,963 |  | Kroger Signature (Non-Owned)
Kohl's (Ground Lease)                                                |  | $ | 2,032,411 |  | $ | 10.86
|------------------------- |  | --------- |  | --- | - | ------- |  | ------- |  | ------- |  | ------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | -----
|Las Colinas Village       |  | 2001/2002 |  | 86  | % | 104,682 |  | 131,682 |  | 24,025  |  | Staples                                                                                           |  | $ | 1,877,065 |  | $ | 17.93
|Randall's Bay Area        |  | 1989/2001 |  | 100 | % | 78,650  |  | 78,650  |  | 55,200  |  | Randall's Food Market                                                                             |  | $ | 678,958   |  | $ | 8.63 
|Randall's Fairmont        |  | 1985/2003 |  | 89  | % | 104,669 |  | 110,869 |  | 55,008  |  | Randall's Food Market                                                                             |  | $ | 943,957   |  | $ | 9.02 
|Royal Oaks Village        |  | 2001/2002 |  | 98  | % | 145,286 |  | 145,286 |  | 83,652  |  | HEB Grocery                                                                                       |  | $ | 2,896,065 |  | $ | 19.93
|Trinity Commons(13)       |  | 1998      |  | 92  | % | 197,423 |  | 197,423 |  | 84,228  |  | Tom Thumb
DSW Shoe Warehouse                                                                      |  | $ | 2,878,589 |  | $ | 14.58
|Vermont                   |  |           |  |     |   |         |  |         |  |         |  |                                                                                                   |  |   |           |  |   |      
|Rutland Plaza             |  | 1966/1996 |  | 99  | % | 224,514 |  | 224,514 |  | 182,264 |  | Price Chopper Supermarket
Wal-Mart
TJ Maxx
Plaza Movie Plex                                       |  | $ | 1,849,426 |  | $ | 8.24 
|Virginia                  |  |           |  |     |   |         |  |         |  |         |  |                                                                                                   |  |   |           |  |   |      
|Spradlin Farm             |  | 2000/2001 |  | 100 | % | 181,055 |  | 442,055 |  | 366,962 |  | Home Depot (Non-Owned)
Target (Non-Owned)
TJ Maxx
Barnes & Noble
Michaels
Goody's Family Clothing |  | $ | 2,353,316 |  | $ | 13.00
|Wisconsin                 |  |           |  |     |   |         |  |         |  |         |  |                                                                                                   |  |   |           |  |   |      
|Fairacres Shopping Center |  | 1992      |  | 99  | % | 79,736  |  | 82,486  |  | 58,678  |  | Pick 'N Save Supermarket                                                                          |  | $ | 678,848   |  | $ | 8.51 
|Fitchburg Ridge           |  | 1980      |  | 94  | % | 50,555  |  | 61,805  |  | 16,631  |  | Wisconsin Dialysis                                                                                |  | $ | 373,798   |  | $ | 7.39 

38

---



|Fox River Plaza              |  | 1987      |  | 100 | % | 169,883    |  | 173,383    |  | 137,113    |  | Pick 'N Save Supermarket
K-Mart             |  | $ | 828,675     |  | $ | 4.88 
|---------------------------- |  | --------- |  | --- | - | ---------- |  | ---------- |  | ---------- |  | ------------------------------------------- |  | - | ----------- |  | - | -----
|Madison Plaza                |  | 1988/1994 |  | 76  | % | 54,275     |  | 127,584    |  | N/A        |  | N/A                                         |  | $ | 381,150     |  | $ | 7.02 
|Mequon Pavilions             |  | 1967/1991 |  | 96  | % | 211,957    |  | 211,957    |  | 65,995     |  | Sendik's Food Market
Bed, Bath & Beyond     |  | $ | 2,896,503   |  | $ | 13.67
|Moorland Square              |  | 1990      |  | 100 | % | 98,288     |  | 195,388    |  | 149,674    |  | Pick 'N Save Supermarket
K-Mart (Non-Owned) |  | $ | 843,563     |  | $ | 8.58 
|Oak Creek Centre             |  | 1988      |  | 39  | % | 91,510     |  | 99,510     |  | N/A        |  | N/A                                         |  | $ | 232,298     |  | $ | 2.54 
|Park Plaza                   |  | 1959/1993 |  | 93  | % | 113,669    |  | 113,669    |  | 74,054     |  | Big Lots
Hobby Lobby                        |  | $ | 447,418     |  | $ | 3.94 
|Spring Mall                  |  | 1967/1994 |  | 90  | % | 204,861    |  | 204,861    |  | 135,055    |  | Pick 'N Save Supermarket
TJ Maxx
Walgreens  |  | $ | 1,478,156   |  | $ | 7.22 
|Taylor Heights               |  | 1989      |  | 88  | % | 85,072     |  | 223,862    |  | 158,630    |  | Piggly Wiggly Foods
Wal-Mart (Non-Owned)    |  | $ | 824,810     |  | $ | 9.70 
|                             |  |           |  |     |   |            |  |            |  |            |  |                                             |  |   |             | 
|TOTAL SHOPPING CENTERS       |  |           |  | 93  | % | 28,003,656 |  | 33,663,855 |  | 21,547,028 |  |                                             |  | $ | 248,535,392 |  | $ | 8.88 
|                             |  |           |  |     |   |            |  |            |  |            |  |                                             |  |   |             | 
|Office Buildings:            |  |           |  |     |   |            |  |            |  |            |  |                                             |  |   |             |  |   |      
|William J. McCarthy Building |  | 1963/1995 |  | 89  | % | 93,018     |  | 93,018     |  |            |  | NETT                                        |  | $ | 2,910,575   |  | $ | 31.29
|545 Boylston Street          |  | 1972/1996 |  | 100 | % | 89,075     |  | 89,075     |  |            |  | Allied Advertising
Trinity Church           |  | $ | 3,120,518   |  | $ | 35.03

39

---



|Executive Office Building |  | 1970 |  | 100 | % | 40,180     |  | 40,180     |  |  |  | Lipner Gordon & Co.
Norca Corporation
Sol G Atlas Realty
Heritage |  | $ | 665,678     |  | $ | 16.57
|------------------------- |  | ---- |  | --- | - | ---------- |  | ---------- |  |  |  | ----------------------------------------------------------------- |  | - | ----------- |  | - | -----
|                          |  |      |  |     |   |            |  |            |  |  |  |                                                                   |  |   |             | 
|TOTAL OFFICE BUILDINGS    |  |      |  | 96  | % | 222,273    |  | 222,273    |  |  |  |                                                                   |  | $ | 6,696,770   |  | $ | 30.13
|                          |  |      |  |     |   |            |  |            |  |  |  |                                                                   |  |   |             | 
|TOTAL PORTFOLIO           |  |      |  | 93  | % | 28,225,929 |  | 33,886,128 |  |  |  |                                                                   |  | $ | 255,232,163 |  | $ | 9.04 
|                          |  |      |  |     |   |            |  |            |  |  |  |                                                                   |  |   |             | 

---

40

---





Top Tenants by 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)                |  | 51          |  | 1,577,596 |  | 5.59                | % | $                              | 13,992,558 |                                    | 5.48 | %               
|2  |  | Kroger(4)                       |  | 13          |  | 720,708   |  | 2.55                | % |                                | 5,050,338  |                                    | 1.98 | %               
|3  |  | Supervalu(5)                    |  | 10          |  | 657,733   |  | 2.33                | % |                                | 4,803,210  |                                    | 1.88 | %               
|4  |  | Associated Wholesale Grocers(6) |  | 10          |  | 603,378   |  | 2.14                | % |                                | 3,441,402  |                                    | 1.35 | %               
|5  |  | Charming Shoppes(7)             |  | 39          |  | 323,503   |  | 1.15                | % |                                | 3,437,480  |                                    | 1.35 | %               
|6  |  | Staples                         |  | 12          |  | 296,940   |  | 1.05                | % |                                | 3,376,079  |                                    | 1.32 | %               
|7  |  | OfficeMax                       |  | 13          |  | 340,520   |  | 1.21                | % |                                | 3,274,333  |                                    | 1.28 | %               
|8  |  | Roundy's(8)                     |  | 8           |  | 491,482   |  | 1.74                | % |                                | 3,251,894  |                                    | 1.27 | %               
|9  |  | Home Depot                      |  | 4           |  | 459,073   |  | 1.63                | % |                                | 3,040,470  |                                    | 1.19 | %               
|10 |  | Wal-Mart                        |  | 8           |  | 727,634   |  | 2.58                | % |                                | 2,941,622  |                                    | 1.15 | %               
|11 |  | Safeway(9)                      |  | 5           |  | 327,249   |  | 1.16                | % |                                | 2,900,020  |                                    | 1.14 | %               
|12 |  | Barnes & Noble                  |  | 7           |  | 178,936   |  | 0.63                | % |                                | 2,871,077  |                                    | 1.12 | %               
|13 |  | Blockbuster                     |  | 26          |  | 163,657   |  | 0.58                | % |                                | 2,733,963  |                                    | 1.07 | %               
|14 |  | Walgreens                       |  | 16          |  | 205,425   |  | 0.73                | % |                                | 2,610,241  |                                    | 1.02 | %               
|15 |  | Hy-Vee                          |  | 9           |  | 535,066   |  | 1.90                | % |                                | 2,607,007  |                                    | 1.02 | %               
|16 |  | Hallmark                        |  | 42          |  | 216,035   |  | 0.77                | % |                                | 2,539,682  |                                    | 1.00 | %               
|17 |  | Linens N Things                 |  | 7           |  | 214,741   |  | 0.76                | % |                                | 2,494,544  |                                    | 0.98 | %               
|18 |  | PetsMart                        |  | 8           |  | 202,617   |  | 0.72                | % |                                | 2,425,162  |                                    | 0.95 | %               
|19 |  | Dollar Tree                     |  | 32          |  | 296,167   |  | 1.05                | % |                                | 2,351,054  |                                    | 0.92 | %               
|20 |  | Ahold USA(10)                   |  | 5           |  | 279,340   |  | 0.99                | % |                                | 2,336,152  |                                    | 0.92 | %               

---

41

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Total Lease Expiration Roll OutDecember 31, 2004

|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)
|--------------------- | ------ | ------------------------- | ----- | -------------------- | ---------- | --------------------------- | ----- | --------------------- | ---------- | -------------------- | ---- | ------------------------------
|2005(3)               |        | 560                       |       | 1,900,072            |            | 7.2                         | %     | $                     | 22,280,323 |                      | 8.4  | %                             
|2006                  |        | 580                       |       | 2,982,678            |            | 11.3                        | %     |                       | 29,383,217 |                      | 11.1 | %                             
|2007                  |        | 558                       |       | 3,029,115            |            | 11.5                        | %     |                       | 32,465,253 |                      | 12.3 | %                             
|2008                  |        | 452                       |       | 2,888,549            |            | 11.0                        | %     |                       | 30,731,356 |                      | 11.6 | %                             
|2009                  |        | 395                       |       | 3,096,691            |            | 11.8                        | %     |                       | 33,447,957 |                      | 12.6 | %                             
|2010                  |        | 215                       |       | 1,869,905            |            | 7.1                         | %     |                       | 19,477,314 |                      | 7.4  | %                             
|2011                  |        | 110                       |       | 1,536,356            |            | 5.8                         | %     |                       | 15,931,994 |                      | 6.0  | %                             
|2012                  |        | 86                        |       | 1,071,682            |            | 4.1                         | %     |                       | 12,326,102 |                      | 4.7  | %                             
|2013                  |        | 84                        |       | 1,407,135            |            | 5.3                         | %     |                       | 12,764,176 |                      | 4.8  | %                             
|2014                  |        | 82                        |       | 1,079,057            |            | 4.1                         | %     |                       | 11,768,935 |                      | 4.4  | %                             
|2015 and Thereafter   |        | 175                       |       | 5,478,661            |            | 20.8                        | %     |                       | 44,068,190 |                      | 16.7 | %                             
|                      |        |                           |       |                      |            |                             |       |                       |            |                      |      |                               
|                      | Totals |                           | 3,297 |                      | 26,339,901 |                             | 100.0 | %                     | $          | 264,644,817          |      | 100.0                         
|                      |        |                           |       |                      |            |                             |       |                       |            |                      |      |                               

---

Item 3: Legal Proceedings

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

On
November 29, 2002, the court granted our motion to dismiss Mr. Donahue's claims. Mr. Donahue subsequently 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 decision dismissing Mr. Donahue's claims. The Appellate Court's decision reverts the 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 and we intend to vigorously defend against these claims.

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

42

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

None

PART II

Item 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock began trading on the New York Stock Exchange on April 24, 2002, under the symbol "HTG". As of March 4, 2005, we had approximately
3,600 common stockholders of record.

The
following table sets forth, for the periods indicated and on a per-share basis, the high and low closing prices as reported by the New York Stock Exchange and
per-share distributions declared during the last two fiscal years:

High

Low

DistributionsFirst Quarter 2003

$
25.92

$
23.81

$
0.525Second Quarter 2003

$
27.90

$
25.01

$
0.525Third Quarter 2003

$
29.20

$
27.30

$
0.525Fourth Quarter 2003

$
29.62

$
27.35

$
0.525First Quarter 2004

$
31.38

$
27.58

$
0.525Second Quarter 2004

$
31.04

$
24.83

$
0.525Third Quarter 2004

$
29.24

$
26.98

$
0.525Fourth Quarter 2004

$
33.78

$
29.74

$
0.525


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

In
August 2004, we issued 7,814 shares of our common stock to an individual in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to (i) Section 4(2) of the Securities Act and Regulation D promulgated thereunder ("Regulation D"), and (ii) the status of the individual as an
"accredited investor" as defined in Rule 501(a) of Regulation D. These shares were issued in exchange for 7,814 units of limited partnership interest in Bradley OP, which units were
redeemable pursuant to Bradley OP's partnership agreement for cash or, at our option, shares of our common stock, on a one-to-one basis (subject to adjustment in the event of
stock splits, stock dividends and similar events). In August 2004, this individual notified us of his desire to require Bradley OP to redeem his units by delivering a notice of redemption. We then
exercised our right to issue shares of our common stock for such redeemed units and issued 7,814 shares of our common stock (the number of units redeemed) to this individual upon redemption of its
units of limited partnership interest Bradley OP.

43

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Item 6: Selected Financial Data

The following selected historical consolidated financial and operating data should be read together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements on page F-1 of this Form 10-K. Our historical financial information has been presented on
an accrual basis in accordance with generally accepted accounting principles, ("GAAP"), applicable to real estate investment trusts for all periods presented.

|                                                                                    |                                                                                             | Year Ended December 31, |          
|----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ----------------------- | ---------
|
|
|STATEMENT OF OPERATIONS DATA:                                                       |                                                                                             |                         |          
|Revenue:                                                                            |                                                                                             |                         |          
|                                                                                    | Rentals and recoveries                                                                      |                         | $        
|                                                                                    | Interest and other                                                                          |                         |          
|                                                                                    |                                                                                             |                         |          
|                                                                                    | Total revenue                                                                               |                         |          
|                                                                                    |                                                                                             |                         |          
|Expenses:                                                                           |                                                                                             |                         |          
|                                                                                    | Operating                                                                                   |                         |          
|                                                                                    | General and administrative                                                                  |                         |          
|                                                                                    | Depreciation and amortization                                                               |                         |          
|                                                                                    | Interest                                                                                    |                         |          
|                                                                                    | Loss on prepayment of debt                                                                  |                         |          
|                                                                                    |                                                                                             |                         |          
|                                                                                    | Total expenses                                                                              |                         |          
|                                                                                    |                                                                                             |                         |          
|Income before net gains                                                             |                                                                                             |                         | 41,938   
|                                                                                    | Net gains on sales of real estate investments, equipment and marketable securities          |                         |          
|                                                                                    | Net derivative (losses) gains                                                               |                         |          
|                                                                                    |                                                                                             |                         |          
|Income before allocation to minority interests and discontinued operations          |                                                                                             |                         | 42,495   
|                                                                                    | Income allocated to minority interests                                                      |                         |          
|                                                                                    | Income from discontinued operations                                                         |                         |          
|                                                                                    |                                                                                             |                         |          
|Net income                                                                          |                                                                                             |                         | 44,708   
|                                                                                    | Preferred stock distributions                                                               |                         |          
|                                                                                    | Accretion of redeemable equity                                                              |                         |          
|                                                                                    |                                                                                             |                         |          
|Net income (loss) attributable to common shareholders                               |                                                                                             | $                       | 44,708   
|                                                                                    |                                                                                             |                         |          
|Per Share Data:                                                                     |                                                                                             |                         |          
|                                                                                    | Basic income attributable to common shareholders before discontinued operations per share   |                         | $        
|                                                                                    | Basic income (loss) attributable to common shareholder                                      |                         | $        
|                                                                                    | Diluted income attributable to common shareholders before discontinued operations per share |                         | $        
|                                                                                    | Diluted income (loss) attributable to common shareholders                                   |                         | $        
|Dividends declared per share                                                        |                                                                                             | $                       | 2.10     
|Weighted average common shares outstandingBasic                                    |                                                                                             |                         | 46,686   
|Weighted average common and common equivalent shares outstandingDiluted            |                                                                                             |                         | 47,393   
|BALANCE SHEET DATA: (at end of period)                                              |                                                                                             |                         |          
|Real estate investments, before accumulated depreciation                            |                                                                                             | $                       | 2,540,841
|Total assets                                                                        |                                                                                             |                         | 2,352,550
|Total liabilities                                                                   |                                                                                             |                         | 1,415,707
|Minority interests                                                                  |                                                                                             |                         | 15,535   
|Redeemable equity                                                                   |                                                                                             |                         |         
|Shareholders' equity                                                                |                                                                                             |                         | 921,308  
|OTHER DATA:                                                                         |                                                                                             |                         |          
|# of shopping centers (at end of period)                                            |                                                                                             |                         | 164      
|Gross leasable area of shopping centers (sq. ft. at end of period, in thousands)(2) |                                                                                             |                         | 28,004   
|% leased (at end of period)                                                         |                                                                                             |                         | 93       
|Total portfolio net operating income(3)                                             |                                                                                             | $                       | 231,020  
|Funds from Operations(4)                                                            |                                                                                             | $                       | 128,918  
|Cash flow from operating activities                                                 |                                                                                             | $                       | 123,042  
|Cash flow from investing activities                                                 |                                                                                             | $                       | (112,115 
|Cash flow from financing activities                                                 |                                                                                             | $                       | 389      

44

---



---

45

---





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

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

Overview

We are a fully integrated, self-administered and self-managed real estate investment trust, or "REIT." We are one of the nation's largest
owners of neighborhood and community shopping centers. As of December 31, 2004, we had a shopping center portfolio consisting of 164 shopping centers, located in 29 states and totaling
approximately 33.7 million square feet of GLA, of which approximately 28.0 million square feet was Company-owned GLA. Our shopping center portfolio was approximately 93.3% leased as of
December 31, 2004.

Our
operating strategy is to own and manage a quality portfolio of community and neighborhood shopping centers that will provide stable cash flow and investment returns. Our focus is to
own primarily grocer-anchored centers with a diverse and multi-anchored tenant base in attractive geographic locations with strong demographics. We derive substantially all of our revenues from
rentals and recoveries received from tenants under existing leases on each of our properties. Our operating results therefore depend primarily on the ability of our tenants to make required rental
payments.

Generally,
we do not expect that our net operating income, a non-GAAP measure, will deviate significantly in the short-term. This is because our leases with our tenants
provide us a stable cash flow over the long-term. In addition, other than in circumstances such as higher than anticipated snow removal costs, utility expenses, insurance costs or real
estate taxes, our operating expenses generally remain predictable.

However,
as an owner of community and neighborhood shopping centers, our performance is linked to economic conditions in the retail industry in those markets in which our centers are
located. The retail sector continues to change dramatically as a result of continued industry consolidation due to the continuing strength of Wal-Mart and large retail bankruptcies in the
recent past
resulting in an excess amount of available retail space, fewer national tenants, and greater competition. We believe that the nature of the properties that we primarily own and invest
ingrocer-anchored neighborhood and community shopping centersprovides a more stable revenue flow in uncertain economic times, as they are more resistant to economic down
cycles. This stability is due to the fact that consumers still need to purchase food and other goods found at grocers, even in difficult economic times.

In
the face of these challenging market conditions, we follow a dual growth strategy. First, we continue to focus on increasing our internal growth by leveraging our existing tenant
relationships to improve the performance of our existing shopping center portfolio. We believe that there are meaningful opportunities to increase our cash flow from our existing properties because of
their desirable locations. For instance, during 2002, 2003, and the first quarter of 2004, we were adversely affected by large retail bankruptcies that created vacant space within our portfolio and by
the increasingly competitive leasing environment resulting from the economic downturn during the early part of this decade. However, as a result of our efforts to re-let space, including
space recovered from bankrupt tenants, as well as the improvement in the overall performance of our portfolio and improving economic conditions within our markets, we experienced an increase of
approximately 2.4% in our same property net operating income during 2004 (excluding lease termination activity). We anticipate our same property net operating income during 2005 will be consistent
with our performance during 2004.

During
2004, in order to re-let vacant space within our portfolio, we incurred higher non-recurring capital expenditures than in prior periods as we
re-positioned several of our centers for future growth. In addition, we anticipate incurring additional non-recurring capital expenditures during 2005 as we seek further
opportunities to reposition vacant space.

46

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Secondly,
we focus on achieving external growth by the expansion of our portfolio and we will continue to pursue targeted acquisitions of multi-anchored, primarily by grocers,
neighborhood and community shopping centers in attractive markets with strong economic and demographic characteristics. We will pursue acquisitions in our existing markets as well as in new markets,
including where a portfolio of properties might be available to enable us to establish a platform for further growth. In recent years, the market for acquisitions has been particularly competitive
with a greater number of potential buyers pursuing fewer properties. The low interest rate environment and reduced costs of funds have further served to dramatically increase prices paid for shopping
center properties. As a result, during 2004, our effort to expand our portfolio through acquisition was adversely affected. We expect that as long as the interest rate environment continues to be
favorable to buyers, this competitive acquisition environment will continue.

As
a means of increasing our access to potential acquisitions and alternative sources of capital to fund future acquisitions, we are pursuing joint venture arrangements with third party
developers and institutional investors. We completed our first joint venture arrangement with a third party developer
during the second quarter of 2004. However, with respect to joint venture arrangements with third party developers, in most cases, we do not anticipate that we will recognize the full economic benefit
of such arrangements for 2-3 years. In 2005, as a means of increasing our external growth, we also expect to aggressively pursue additional growth capital for acquisitions through
strategic joint ventures with institutional investors.

In
the near future, to take advantage of favorable market conditions, we intend to dispose of properties that are not a strategic fit within our overall portfolio. The disposition of
shopping center properties may lead to short-term decreases in net operating income. However, we intend to offset any such decreases by re-investing the proceeds of such sales
to grow our existing portfolio, whether through acquisition or joint venture. We may also use these sale proceeds to reduce our overall outstanding indebtedness, improving the quality of our balance
sheet.

During
2004, as reflected below, our general and administrative expenses have been higher than anticipated as a result of increased staffing, various business initiatives aimed at future
growth, the increased costs associated with being a public company and unanticipated severance costs. In particular, the costs associated with the Company's review of its internal controls to ensure
compliance with Section 404 of the Sarbanes-Oxley Act have been significantly higher than expected. We expect these increased non-severance general and administrative costs to
continue during 2005.

We
currently expect to incur additional debt in connection with future acquisitions of real estate. As of December 31, 2004, we had $1.3 billion of indebtedness, of which
approximately $645.8 million was unsecured indebtedness. Although we expect to assume additional secured debt in connection with the acquisition of real estate, in the future, we intend to
finance our operations and growth primarily through borrowings under our line of credit facility, unsecured private or public debt offerings or by additional equity offerings. We may also pursue joint
venture arrangements aimed at providing alternative sources of capital.

In
addition, our existing unsecured line of credit matures on April 29, 2005. In February 2005, we obtained a commitment to establish a new three-year,
$350 million unsecured line of credit with Wachovia Bank, as agent. Wachovia has agreed to use its "best efforts" to syndicate this new line of credit. This new line of credit, which we expect
to enter into shortly, will replace our existing unsecured credit facility. In the event we are unable to enter into this new line of credit on or before April 29, 2005, we would seek an
extension of our existing line of credit for up to one year. In addition, in light of our investment grade credit ratings and prior capital markets activity, we believe there are sufficient
alternative financing sources available to us to refinance our existing line of credit, including through a combination of one or more short-term bridge loans, public or private offerings
of common stock, preferred stock or debt securities or the incurrence of additional indebtedness through secured or unsecured borrowings.

47

---



Critical Accounting Policies

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

On
an ongoing basis, we evaluate our estimates, including those related to revenue recognition and the allowance for doubtful accounts receivable, real estate investments (including
purchase price allocations) and asset impairment, and derivatives used to hedge interest-rate risks. We state these accounting policies in the notes to our consolidated financial
statements and at relevant sections in this discussion and analysis. Our estimates are based on information that is currently available to us and on various other assumptions that we believe are
reasonable under the circumstances. Actual results could differ from those estimates and those estimates could be different under varying assumptions or conditions.

Revenue Recognition

Rental income with scheduled rent increases is recognized using the straight-line method over the term of the leases commencing when the tenant takes
possession of the space. The aggregate excess of rental revenue recognized on a straight-line basis over cash received under applicable lease provisions is included in accounts receivable.
In addition, leases for both retail and office space generally contain provisions under which the tenants reimburse us for a portion of property operating expenses and real estate taxes incurred by
us, requiring us to estimate the amount of revenue from these recoveries. Such recoveries revenue is recorded based on management's estimate of its recovery of certain operating expenses and real
estate tax expenses, pursuant to the terms contained in related leases. In addition, certain of our operating leases for retail space contain contingent rent provisions under which tenants are
required to pay a percentage of their sales in excess of a specified amount as additional rent. We defer recognition of contingent rental income until those specified targets are met.

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

Real Estate Investments

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

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

Land improvements

15 yearsBuildings and improvements

20-39 yearsTenant improvements

Shorter of useful life or term of related lease


48

---



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

We
apply Statement of Financial Accounting Standards (SFAS) No. 144,Accounting for the Impairment or Disposal of Long-Lived
Assets, to recognize and measure impairment of long-lived assets. We review each real estate investment for impairment whenever events or circumstances indicate
that the carrying value of a real estate investment may not be recoverable. The review of recoverability is based on an estimate of the future undiscounted cash flows, excluding
interest charges, expected to result from the real estate investment's use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects,
as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a real estate investment, an impairment loss is
recorded to the extent that the carrying value exceeds estimated fair market value, resulting in a lower net income. No such impairment losses have been recognized to date.

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

We
apply Statement of Financial Accounting Standards No. 141,Business Combinations, to property acquisitions. Accordingly, the
fair value of the real estate acquired is allocated to the acquired tangible assets, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases,
other value of in-place leases and value of tenant relationships, based in each case on their fair values.

The
fair value of the tangible assets of an acquired property 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 relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar
to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods
considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of
lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and
other related costs. The "as-if-vacant" value is then allocated amongst land, land improvements, building, and building improvements based on the Company's estimate of replacement costs.

In
allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded
based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the
in-place leases and (ii) management's estimate 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 of rental income over the remaining non-cancelable terms of the
respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases.

The
aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the excess of (i) the purchase price
paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as if vacant, determined as set forth above.
This aggregate value is allocated between in-place lease values and tenant relationships, if any, based on management's evaluation of the specific characteristics of

49

---



each
tenant's lease; however, the value of tenant relationships has not been separated from in-place lease value for the additional interests in real estate entities because such value and
its consequence to amortization expense is estimated to be immaterial for these particular acquisitions. Should future acquisitions of properties result in allocating material amounts to the value of
tenant relationships, an amount would be separately allocated and amortized over the estimated life of the relationship. The value of in-place leases exclusive of the value of above-market
and below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its
stated expiration, all unamortized amounts relating to that lease would be written off.

Hedging Activities

From time to time, we use derivative financial instruments to limit our exposure to changes in interest rates. We were not a party to any hedging agreement with
respect to our floating rate debt as of December 31, 2004 or 2003. We have in the past used derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings,
from lines of credit to medium and long-term financings. We require that hedging derivative instruments are effective in reducing the interest rate risk exposure that they are designed to
hedge. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit rating and other factors.

If
interest rate assumptions and other factors used to estimate a derivative's fair value or methodologies used to determine hedge effectiveness were different, amounts reported in
earnings and other comprehensive income and losses expected to be reclassified into earnings in the future could be affected.

Results of Operations

The following discussion is based on our consolidated financial statements for the years ended December 31, 2004, 2003, and 2002.

From
January 1, 2002 through December 31, 2004, we increased our total portfolio of properties (after reflecting dispositions) from 166 properties to 167 properties and
from 26.2 million Company-owned GLA to 28.2 million Company-owned GLA. As a result of this growth of our total portfolio, the financial data presented below with respect to the Total
Portfolio shows significant changes in revenues and expenses from period-to-period and, as a result, we do not believe our period-to-period financial
data, with respect to the Total Portfolio are comparable in any meaningful way. Therefore, the comparison of operating results for the years ended December 31, 2004, 2003, and 2002 show changes
resulting from net operating income for properties that we owned for each period compared (we refer to this comparison as our "Same Property Portfolio" for the applicable period) and the changes for
income before net gains attributable to our Total Portfolio. Unless otherwise indicated, increases in revenue and expenses attributable to the Total Portfolio are due to the acquisition of properties
during the years being compared. In addition, amounts classified as discontinued operations in the accompanying consolidated financial statements are excluded from the Total Portfolio information.

Comparison of the year ended December 31, 2004 to the year ended December 31, 2003

The table below shows selected operating information for our total portfolio and the 152 properties acquired prior to January 1, 2003 that remained in the
total portfolio through December 31,

50

---



2004,
which constitute the Same Property Portfolio for the years ended December 31, 2004 and 2003 (in thousands):

|                             |                               | Same Property Portfolio           |   | Total Portfolio |        
|---------------------------- | ----------------------------- | --------------------------------- | - | --------------- | -------
|
|Rental and recovery revenue: |                               |                                   |   |                 |        
|                             | Rentals                       |                                   | $ | 220,747         |        
|                             | Percentage rent               |                                   |   | 3,621           |        
|                             | Recoveries                    |                                   |   | 67,269          |        
|                             | Other property                |                                   |   | 1,478           |        
|                             |                               |                                   |   |                 |        
|                             |                               | Total rental and recovery revenue |   |                 | 293,115
|Expenses:                    |                               |                                   |   |                 |        
|                             | Property operating expenses   |                                   |   | 41,109          |        
|                             | Real estate taxes             |                                   |   | 43,975          |        
|                             |                               |                                   |   |                 |        
|                             |                               | Net operating income(*)           |   | $               | 208,031
|                             |                               |                                   |   |                 |        
|Add:                         |                               |                                   |   |                 |        
|                             | Interest and other income     |                                   |   | 1,079           |        
|Deduct:                      |                               |                                   |   |                 |        
|                             | Depreciation and amortization |                                   |   | 88,678          |        
|                             | Interest                      |                                   |   | 77,269          |        
|                             | General and administrative    |                                   |   | 24,214          |        
|                             |                               |                                   |   |                 |        
|                             | Income before net gains       |                                   | $ | 41,938          |        
|                             |                               |                                   |   |                 |        

---

The increase in rental revenue, including termination fees, for our Same Property Portfolio is primarily the result of a decrease in the provision
for allowance for doubtful accounts of $1.6 million and an increase in minimum rent of $0.5 million offset by a decrease of $0.8 million from termination fee income net of
termination buyout costs. A lower provision was required for the year ended December 31, 2004 as compared with the year ended December 31, 2003 as a result of a decrease in large tenant
bankruptcies and recoveries of amounts previously written off. Minimum rent increased as a result of new leases and rollovers of existing tenants at higher rental rates. Although our weighted average
actual occupancy on a same property basis declined slightly to 92.2% as of December 31, 2004 from 92.7% as of December 31, 2003, the new leasing activity offset any loss of rental income
related to the decrease in weighted average occupancy.

Percentage
rent revenue decreased for our Same Property Portfolio primarily due to the loss of four anchor tenants with significant percentage rent components comprising
$0.2 million as well as the uncertainty of realization that certain tenant sales thresholds have been met.

Recoveries
revenue increased for our Same Property Portfolio primarily due to an overall increase in real estate tax recovery income of $2.6 million, a decrease in the provision
for allowance for doubtful accounts of $0.4 million and an increase in property operating expense recovery income and other reimbursement income of $0.3 million. Real estate recovery
income increased primarily as a result of an increase in real estate tax expense as well as an increase in the real estate tax expense recovery rates due to true-ups related to the
improved annual reconciliation process. Property operating expense recovery income increased primarily as a result of an increase in the property operating expense recovery rates due to
true-ups related to the annual reconciliation process offset by a decrease in reimbursable property operating expenses.

Property
operating expenses decreased primarily as 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 million decrease in snow removal and related costs. These decreases were partially offset by a $0.2 million increase in maintenance and supervision expense
and a $0.2 million increase in utility expense.

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Real
estate tax expense increased primarily as a result of increased valuations assessed for certain properties primarily located in the Mid-West.

Interest
expense increased due to the issuance of $350 million of unsecured notes payable, higher average balances under the Company's line of credit, and an increase in mortgage
loans payable as a result of the assumption of debt from various property acquisitions offset by a decrease due to the repayment of $100.0 million of bonds payable. Overall, the weighted
average interest rate remained relatively constant in 2004 as compared with 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.

Our
general and administrative expenses, consisting primarily of salaries, incentive compensation, employee benefits, insurance and other corporate-level expenses increased for the year
ended December 31, 2004 as compared with the year ended December 31, 2003. This increase resulted from higher salary and incentive compensation expense due to a larger workforce,
including the retention of two additional senior officers responsible for joint venture initiatives and as corporate counsel, and the replacement of stock options to be issued to senior management by
the issuance of additional restricted shares of substantially equal value. The Company also incurred higher expenses associated with being a public company, including compliance with the
Sarbanes-Oxley Act. In addition, office expenses increased due to the Company's relocation of its corporate office in February 2004. 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.

Comparison of the year ended December 31, 2003 to year ended December 31, 2002

The table below shows selected operating information for our Total Portfolio and the 153 properties acquired prior to January 1, 2002 that remained in our
Total Portfolio through December 31, 2002 (which constitute the Same Property Portfolio for the years ended December 31, 2003 and 2002). Certain 2003 and 2002 amounts for the Total
Portfolio have been reclassified to conform to the current presentation of discontinued operations (in thousands):

|                             |                               | Same Property Portfolio           |   | Total Portfolio |        
|---------------------------- | ----------------------------- | --------------------------------- | - | --------------- | -------
|
|Rental and recovery revenue: |                               |                                   |   |                 |        
|                             | Rentals                       |                                   | $ | 198,656         |        
|                             | Percentage rent               |                                   |   | 3,875           |        
|                             | Recoveries                    |                                   |   | 59,869          |        
|                             | Other property                |                                   |   | 1,629           |        
|                             |                               |                                   |   |                 |        
|                             |                               | Total rental and recovery revenue |   |                 | 264,029
|Expenses:                    |                               |                                   |   |                 |        
|                             | Property operating expenses   |                                   |   | 40,205          |        
|                             | Real estate taxes             |                                   |   | 39,661          |        
|                             |                               |                                   |   |                 |        
|                             |                               | Net operating income(*)           |   | $               | 184,163
|                             |                               |                                   |   |                 |        
|Add:                         |                               |                                   |   |                 |        
|                             | Interest and other income     |                                   |   | 495             |        
|Deduct:                      |                               |                                   |   |                 |        
|                             | Depreciation and amortization |                                   |   | 78,548          |        
|                             | Interest                      |                                   |   | 69,415          |        
|                             | General and administrative    |                                   |   | 20,965          |        
|                             | Loss on prepayment of debt    |                                   |   |                |        
|                             |                               |                                   |   |                 |        
|                             |                               | Income before net gains           |   | $               | 42,809 
|                             |                               |                                   |   |                 |        

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The increase in rental revenue, including termination fees, for our Same Property Portfolio is primarily the result of new leases and rollovers of
existing tenants at higher rental rates and an increase in termination fees of $1.6 million. Although our actual occupancy on a same property basis declined to 91.7% as of December 31,
2003 from 93.3% as of December 31, 2002, this new leasing activity offset any loss of rental income related to (i) new vacancies and bankruptcies, primarily Ames, Kmart and Fleming and
(ii) additional charges to bad debts of $0.6 million.

Percentage
rent revenue decreased for our Same Property Portfolio primarily due to the loss of three anchor tenants with significant percentage rent components comprising
$0.7 million as well as the difference from the prior year timing of notification that sales thresholds have been met.

Recoveries
revenue remained relatively flat for our Same Property Portfolio primarily due to an overall increase in property operating and real estate tax expenses offset by lower
recovery rates resulting from higher vacancies. Recovery rates for recoverable property operating expenses decreased to 82.0% from 85.0% and recovery rates for real estate taxes decreased to 82.7%
from 85.2%. The decrease in recovery rates for property operating expenses and real estate taxes is due to higher vacancies, including the loss of anchor tenants whose parcels were separately assessed
and paid by the former tenants directly to the taxing authority.

Other
property revenue decreased primarily as a result of the timing of notification that sales thresholds have been met for tax incentive financing revenue.

Property
operating expenses increased primarily as a result of $1.5 million of snow removal costs associated with heavy snowfall across the portfolio during the first few calendar
months of 2003 and December 2003 and $0.5 million of lease buyout expense incurred in 2003.

Real
estate tax expense increased primarily as a result of an increase in tax rates across the portfolio, particularly those properties located in Illinois as well as additional tax
expense related to the vacancy of certain anchor tenants who paid their property taxes directly to the taxing authorities.

Interest
expense decreased due to lower average interest rates throughout the year as the Company's weighted average effective interest rate decreased to 6.24% at December 31,
2003 from 6.45% at December 31, 2002. This decrease was offset by an increase in mortgage loans payable as result of the assumption of debt from various property acquisitions.

General
and administrative expenses decreased primarily as a result of lower stock compensation expense incurred in 2003 than in 2002. During 2003, we incurred $6.6 million of
stock compensation expense from the amortization of stock grants made by the Company in 2002 and 2003 and anticipated to be made by the Company in 2004, which included the reimbursement of taxes paid
by one employee and $0.6 million of accelerated stock compensation expense in connection with the departure of a former senior officer. In 2003, we also incurred $1.1 million of
additional compensation expense related to the departure of a former senior officer. During 2002, we incurred $11.0 million of stock compensation expense from the amortization of stock grants
made by the Company, which included the reimbursement of taxes paid by two employees. Included in 2002 stock compensation expense was $6.8 million of expense incurred by us as a result of the
accelerated vesting of all previously granted restricted shares upon completion of our IPO. Excluding stock compensation expense and severance costs, our general and administrative expenses,
consisting primarily of salaries, incentive compensation, employee benefits, insurance and other corporate-level expenses increased by $0.9 million in 2003. This increase consisted primarily of
higher salary and incentive compensation expense due to a larger workforce and higher expenses associated with being a public company for the entire 2003 fiscal year.

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Liquidity and Capital Resources

At December 31, 2004, we had $6.7 million in available cash and cash equivalents. As a REIT, we are required to distribute at least 90% of our
taxable income to our stockholders on an annual basis. Therefore, as a general matter, it is unlikely that we will have any substantial cash balances that could be used to meet our liquidity needs.
Instead, these needs must be met from cash generated from operations and external sources of capital.

At
December 31, 2004, we had $1.3 billion of indebtedness. This indebtedness has a weighted average interest rate of 6.19% with an average maturity of 5.0 years. As
of December 31, 2004, our market capitalization was $2.8 billion, resulting in a debt-to-total market capitalization ratio of approximately 46.0%.

Short-Term Liquidity Requirements

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



We
incur maintenance capital expenditures at our properties, which include such expenses as parking lot improvements, roof repairs and replacements and other non-revenue
enhancing capital expenditures. Maintenance capital expenditures were approximately $7.0 million, or $0.25 per square foot, for the year ended December 31, 2004. We have also incurred
and expect to continue to incur revenue enhancing capital expenditures such as tenant improvements and leasing commissions in connection with the leasing or re-leasing of retail space.

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

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

Historically,
we have satisfied our short-term liquidity requirements through our existing working capital and cash provided by our operations as well as with borrowings
under the Company's line of credit facility. We believe that our existing working capital and cash provided by operations should be sufficient to meet our short-term liquidity
requirements. Cash flows provided by operating activities decreased to $123.0 million for the year ended December 31, 2004 from $148.7 million for the year ended
December 31, 2003. The decrease in cash flows from operations is primarily attributable to the combined effect of a $15.6 million increase in accounts receivable due to the timing of
completion of the annual reconciliation process and a $10.9 million increase in prepaid and other assets, offset by a $4.0 million increase in net income.

There
are a number of factors that could adversely affect our cash flow. The continuation of an economic downturn in one or more of our markets may impede the ability of our tenants to
make lease payments and may impact our ability to renew leases or re-lease space as leases expire. In addition, an

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economic
downturn or recession could also lead to an increase in tenant bankruptcies, increases in our overall vacancy rates or declines in rents we can charge to re-lease properties upon
expiration of current leases. In all of these cases, our cash flow would be adversely affected.

As
of December 31, 2004, the Company had six tenants operating under bankruptcy protection, the largest of which is Rhodes Furniture. The leases directly impacted by these
bankruptcy filings totaled approximately 0.5% of our annualized base rent for all leases in which tenants were in occupancy at December 31, 2004. In addition, subsequent to December 31,
2004, one additional tenant, Winn-Dixie Stores Inc., representing 0.3% of our annualized base rent filed for bankruptcy protection.

On
April 1, 2003, Fleming filed for bankruptcy protection. As part of this bankruptcy, Fleming's motion to reject leases at three of our 13 Fleming store locations was allowed by
the Bankruptcy Court on that date. The three rejected leases aggregated approximately 178,000 square feet and represented approximately 0.6% of total annualized base rent for all leases in which
tenants were in occupancy on March 31, 2003.

In
June 2003, leases at four of our store locations aggregating 234,000 square feet were assumed by Fleming and assigned to Roundy's, Inc., as part of Roundy's acquisition
of Rainbow Foods. In December 2003, a fifth lease was assumed by Knowlan's Food. A motion filed with the Bankrupcty Court to permit three leases to be assumed by Fleming and assigned to a third
party independent grocer was allowed in September 2004. The two remaining leases, aggregating 95,000 square feet were rejected on March 25, 2004. During the fourth quarter of 2004, we
sold one of the remaining Fleming locations and leased two other Fleming locations to a national tenant. We are actively pursuing tenants to lease the two remaining locations.

Any
future bankruptcies of tenants in our portfolio, particularly major or anchor tenants, may have additional negative impact on our operating results and cash flows.

Long-Term Liquidity Requirements

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

Our
ability to incur additional debt is dependent upon a number of factors, including our degree of leverage, the value of our unencumbered assets, our credit rating and borrowing
restrictions imposed by
existing lenders. Currently, we have a credit rating from three major rating agenciesStandard & Poor's, which has given us a rating of BBB-, Moody's Investor Service,
which has given us a rating of Baa3, and Fitch, which has given us a rating of BBB-, all three have stated the outlook as stable. A downgrade in outlook or rating by a rating agency can
occur at any time if the agency perceives adverse change in our financial condition, results of operations or ability to service our debt.

In
addition, our existing unsecured line of credit matures on April 29, 2005. In February 2005, we obtained a commitment to establish a new three-year,
$350 million unsecured line of credit with Wachovia Bank, as agent. This new line of credit, which we expect to enter into shortly, will replace our existing unsecured credit facility. In the
event we are unable to enter into this new line of credit on or before April 29, 2005, we would seek an extension of our existing line of credit for up to one year. In

55

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addition,
in light of our investment grade credit ratings and prior capital markets activity, we believe there are sufficient alternative financing sources available to us to refinance our existing
line of credit, including through a combination of one or more short-term bridge loans, public or private offerings of common stock, preferred stock or debt securities or the incurrence of
additional indebtedness through secured or unsecured borrowings.

Based
on our internal evaluation of our properties, the estimated value of our properties exceeds the outstanding amount of mortgage debt encumbering those properties as of
December 31, 2004. Therefore, at this time, we believe that additional funds could be obtained, either in the form of mortgage debt or additional unsecured borrowings. In addition, we believe
that we could obtain additional financing without violating the financial covenants contained in our unsecured public notes.

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

Environmental Matters

We currently have approximately eighteen properties in our portfolio that are undergoing or have been identified as requiring some form of remediation (including
monitoring for compliance) to clean up contamination. In some cases, contamination has migrated into the groundwater beneath our properties from adjacent properties, such as service stations. In other
cases, contamination has resulted from on-site uses by current or former owners or tenants, such as gas stations or dry cleaners, which have released pollutants such as gasoline or
dry-cleaning solvents into soil and/or
groundwater. Based on our experience with properties in our portfolio, we believe the cost of remediation for contamination resulting from dry-cleaning pollutants will range from
approximately $15,000 to $450,000 per property, and the cost of remediation for contamination from gasoline pollutants will range from approximately $15,000 to $100,000 per property. Any failure to
properly remediate the contamination at our properties may result in liability to federal, state or local governments for damages to natural resources or liability to third parties for property damage
or personal injury and may adversely affect our ability to operate, lease or sell that property.

Of
the approximately eighteen properties cited above, half of those properties were contributed to us by Net Realty Holding Trust, our largest stockholder, upon our formation in
July 1999. These contributed properties (together with approximately ten other contributed properties for which no remediation is currently taking place) are the subject of an indemnity
arrangement under which Net Realty Holding Trust has agreed to indemnify us against environmental liabilities up to $50 million in the aggregate. Since our formation, we have been reimbursed by
Net Realty Holding Trust for approximately $2.1 million of environmental costs pursuant to this indemnity. Although we do not believe that the aggregate indemnity amount will be needed, we
believe that Net Realty Holding Trust has the ability to perform under its indemnity up to the aggregate amount. In addition, each of the properties for which we are actively pursuing remediation to
clean up contamination is covered by this indemnity.

With
respect to the remaining properties cited above not covered by the Net Realty Holding Trust indemnity, no clean-up activities are currently taking place and our
requisite on-going responsibilities are to monitor those properties for compliance and to determine if any remediation or other action may be required in the future. We believe that the
costs of monitoring these properties are not material, individually or in the aggregate, to our financial condition and we have established reserves for such costs.

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Contractual Obligations, Contingent Liabilities, and Off-Balance Sheet Arrangements

All of our indebtedness is disclosed in our consolidated financial statements, and the notes thereto, appearing elsewhere in this report. The following table
summarizes our repayment obligations under our indebtedness outstanding as of December 31, 2004 (in thousands):

Debt Analysis

|Property                                             |  | 2005 |         | 2006 |        | 2007 |        | 2008 |         | 2009 |         | Thereafter |         | Total
|---------------------------------------------------- |  | ---- | ------- | ---- | ------ | ---- | ------ | ---- | ------- | ---- | ------- | ---------- | ------- | -----
|
|Mortgage loans payable:                              |  |      |         |      |        |      |        |      |         |      |         |            |         |      
|Franklin Square                                      |  | $    | 13,583  |      |       |      |       |      |        |      |        |            |        |      
|Williamson Square                                    |  |      | 10,830  |      |       |      |       |      |        |      |        |            |        |      
|Riverchase Village Shopping Center                   |  |      | 9,764   |      |       |      |       |      |        |      |        |            |        |      
|Meridian Village Plaza(1)                            |  |      | 292     |      | 4,841  |      |       |      |        |      |        |            |        |      
|Spring Mall                                          |  |      | 120     |      | 8,021  |      |       |      |        |      |        |            |        |      
|Southport Centre                                     |  |      | 160     |      | 171    |      | 9,593  |      |        |      |        |            |        |      
|Long Meadow Commons(1)(2)                            |  |      | 317     |      | 344    |      | 8,717  |      |        |      |        |            |        |      
|Innes Street Market                                  |  |      | 352     |      | 380    |      | 12,098 |      |        |      |        |            |        |      
|Southgate Shopping Center                            |  |      | 110     |      | 119    |      | 2,166  |      |        |      |        |            |        |      
|Salem Consumer Square                                |  |      | 456     |      | 505    |      | 560    |      | 8,763   |      |        |            |        |      
|St. Francis Plaza                                    |  |      | 191     |      | 207    |      | 225    |      | 243     |      |        |            |        |      
|Burlington Square(1)                                 |  |      | 192     |      | 209    |      | 227    |      | 224     |      | 12,743  |            |        |      
|Buckingham Place(1)                                  |  |      | 63      |      | 69     |      | 74     |      | 79      |      | 5,054   |            |        |      
|County Line Plaza(1)                                 |  |      | 205     |      | 222    |      | 240    |      | 256     |      | 16,002  |            |        |      
|Trinity Commons(1)                                   |  |      | 171     |      | 185    |      | 200    |      | 214     |      | 13,776  |            |        |      
|8 shopping centers, cross collateralized             |  |      | 1,705   |      | 1,843  |      | 1,993  |      | 2,154   |      | 72,132  |            |        |      
|Montgomery Commons(1)                                |  |      | 79      |      | 86     |      | 94     |      | 100     |      | 102     |            | 7,334   |      
|Warminster Towne Center(1)                           |  |      | 260     |      | 283    |      | 307    |      | 329     |      | 362     |            | 18,294  |      
|Clocktower Place(1)                                  |  |      | 121     |      | 132    |      | 144    |      | 154     |      | 171     |            | 11,838  |      
|545 Boylston Street and William J. McCarthy Building |  |      | 655     |      | 711    |      | 772    |      | 838     |      | 910     |            | 30,896  |      
|29 shopping centers, cross collateralized            |  |      | 2,520   |      | 2,728  |      | 2,955  |      | 3,147   |      | 3,461   |            | 220,654 |      
|The Market of Wolf Creek III(1)                      |  |      | 91      |      | 99     |      | 107    |      | 114     |      | 126     |            | 8,168   |      
|Spradlin Farm(1)                                     |  |      | 189     |      | 203    |      | 219    |      | 232     |      | 253     |            | 16,187  |      
|The Market of Wolf Creek I(1)                        |  |      | 151     |      | 163    |      | 176    |      | 188     |      | 206     |            | 9,327   |      
|Berkshire Crossing                                   |  |      | 439     |      | 459    |      | 479    |      | 499     |      | 522     |            | 12,125  |      
|Grand Traverse Crossing                              |  |      | 366     |      | 394    |      | 424    |      | 457     |      | 492     |            | 11,151  |      
|Salmon Run Plaza(1)                                  |  |      | 319     |      | 349    |      | 381    |      | 417     |      | 456     |            | 2,736   |      
|Elk Park Center                                      |  |      | 297     |      | 321    |      | 346    |      | 374     |      | 403     |            | 6,503   |      
|Grand Traverse CrossingWal-Mart                     |  |      | 165     |      | 179    |      | 193    |      | 208     |      | 225     |            | 4,190   |      
|The Market of Wolf Creek II(1)                       |  |      | 96      |      | 103    |      | 111    |      | 120     |      | 129     |            | 1,428   |      
|Montgomery Towne Center                              |  |      | 382     |      | 393    |      | 307    |      | 335     |      | 364     |            | 5,262   |      
|Bedford GroveWal-Mart                               |  |      | 152     |      | 164    |      | 178    |      | 191     |      | 207     |            | 3,175   |      
|Berkshire CrossingHome Depot/Wal-Mart               |  |      | 239     |      | 258    |      | 278    |      | 300     |      | 324     |            | 5,218   |      
|                                                     |  |      |         |      |        |      |        |      |         |      |         |            |         |      
|Total mortgage loans payable                         |  | $    | 45,032  |      | 24,141 |      | 43,564 |      | 19,936  |      | 128,420 |            | 374,486 |      
|                                                     |  |      |         |      |        |      |        |      |         |      |         |            |         |      
|Unsecured notes payable(3)                           |  |      |        |      | 1,490  |      |       |      | 100,000 |      | 150,000 |            | 200,000 |      
|Line of credit facility                              |  |      | 196,000 |      |       |      |       |      |        |      |        |            |        |      
|                                                     |  |      |         |      |        |      |        |      |         |      |         |            |         |      
|Total indebtedness                                   |  | $    | 241,032 |      | 25,631 |      | 43,564 |      | 119,936 |      | 278,420 |            | 574,486 |      
|                                                     |  |      |         |      |        |      |        |      |         |      |         |            |         |      

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The indebtedness described in the table above, including our line of credit, will require principal amortization and balloon payments, of
$241 million in 2005. It is likely that we will not have sufficient funds on hand to repay these balloon amounts at maturity. We currently expect to refinance this debt by obtaining a new line
of credit, through unsecured private or public debt offerings, through additional debt financings secured by individual properties or groups of properties or through additional equity offerings. We
may also refinance future balloon payments through borrowings under our unsecured credit facility.

As
of December 31, 2004, we have future contractual payment obligations relating to construction contracts, ground leases, and leases for the rental of office space as follows (in
thousands):

|                                                      |  | 2005 |        | 2006 |   | 2007  |  | 2008 |       | 2009 |   | Thereafter |  | Total
|----------------------------------------------------- |  | ---- | ------ | ---- | - | ----- |  | ---- | ----- | ---- | - | ---------- |  | -----
|Construction contracts/tenant improvement obligations |  | $    | 13,828 |      | $ |      |  | $    |      |      | $ |           |  | $    
|Ground leases                                         |  |      | 1,328  |      |   | 1,355 |  |      | 1,445 |      |   | 1,453      |  |      
|Office leases                                         |  |      | 1,029  |      |   | 1,144 |  |      | 1,146 |      |   | 1,149      |  |      
|                                                      |  |      |        |      |   |       |  |      |       |      |   |            |  |      
|Total                                                 |  | $    | 16,185 |      | $ | 2,499 |  | $    | 2,591 |      | $ | 2,602      |  | $    
|                                                      |  |      |        |      |   |       |  |      |       |      |   |            |  |      

We have various existing service contracts with vendors and utility contracts related to our property management. We enter into these contracts in
the ordinary course of business, which vary based on usage and may extend beyond one year. These contracts are generally for one year or less and include terms that provide for termination with
insignificant or no cancellation penalties.

We
have entered into one off-balance sheet arrangement. During the second quarter of 2004, we entered into a joint venture agreement with a third party for the development and
construction of a shopping center. Under the joint venture agreement, at any time subsequent to the second anniversary of the completion of the shopping center, which is estimated to occur in the
spring of 2006, we may be required to purchase the third party's joint venture interest. The purchase price for this interest would be at the estimated fair market value. This contingent obligation is
not reflected in the table above.

The
repayment obligations reflected in the above table do not reflect interest payments on debt. In addition, we have obligations under a retirement benefit plan, which are more fully
described in Note 13 of the "Notes to Consolidated Financial Statements" included under Item 8 of this Annual Report, and which are not included in the above table. Funding requirements for
retirement benefits after 2004 cannot be estimated due to the significant variability in the assumptions required to project the timing of future cash payments.

We
have fully guaranteed the repayment of a $22 million construction loan obtained by the joint venture from Key Bank, National Association. The Key Bank loan matures in
November 2006 (subject to extension). As of December 31, 2004, $13.0 million is outstanding under the construction loan. Such amount is recorded on the books and records of the
joint venture. In the event we are obligated to repay all or a portion of the construction loan pursuant to the guarantee, we (i) may remove the manager of the joint venture for cause and
terminate all agreements with the manager, (ii) would receive a promissory note from the joint venture for the amount paid by us together with a first priority mortgage on the shopping center,
and (iii) may prohibit all distributions from the joint venture or payment of fees by the joint venture until the principal and accrued interest on the loan is repaid. The estimated fair value
of the guarantee as of December 31, 2004 is not material to our financial position. Accordingly, no liability or additional investment has been recorded related to the fair value of the
guarantee.

Existing Line of Credit

On April 29, 2002, the Company entered into a three-year $350 million unsecured line of credit with a group of lenders and Fleet
National Bank, as agent. Our two operating partnerships are the

58

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borrowers
under the line of credit and we, and certain of our other subsidiaries, have guaranteed this line of credit. This line of credit is being used principally to fund growth opportunities and
for working capital purposes. At December 31, 2004, $196 million was outstanding under the line of credit.

Our
ability to borrow under this line of credit is subject to our ongoing compliance with a number of financial and other covenants. This line of credit, except under some circumstances,
limits our ability to make distributions in excess of 90% of our annual funds from operations. In addition, this line of credit bears interest at either the lender's base rate or a floating rate based
on a spread over LIBOR ranging from 80 basis points to 135 basis points, depending upon our debt rating. In addition, this line of credit has a facility fee based on the amount committed ranging from
15 to 25 basis points, depending upon our debt rating, and requires quarterly payments. The variable rate in effect at December 31, 2004, including the lender's margin of 105 basis points and
borrowings outstanding at the base rate was 3.55%.

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

New Line of Credit

In February 2005, we obtained a commitment to establish a three-year, $350 million unsecured line of credit with Wachovia Bank, as
agent. Wachovia has agreed to use its "best efforts" to syndicate this line of credit. This new line of credit, which we expect to enter into shortly, will replace our existing unsecured credit
facility, which matures on April 29, 2005. We intend to use this new line of credit principally to fund growth opportunities and for working capital purposes. This new line of credit will bear
interest at a floating rate based on a spread over LIBOR ranging from 62.5 basis points to 115 basis points, including a facility fee, depending upon our debt rating. Based on our current debt
rating, we anticipate this new line of credit will bear interest at a floating rate over LIBOR of 100 basis points, including the facility fee.

Our
ability to enter into this new line of credit is subject to final approval and satisfactory completion by the lender of its due diligence and preparation and execution of an
acceptable credit agreement. We cannot assure you that we will enter into this new line of credit or that Wachovia will be successful in syndicating this line of credit up to $350 million. In
the event we are unable to enter into this new line of credit on or before April 29, 2005, we would seek an extension of our existing line of credit for up to one year. In addition, in light of
our investment grade credit ratings and prior capital markets activity, we believe there are sufficient alternative financing sources available to us to refinance our existing line of credit,
including through a combination of one or more short-term bridge loans, public or private offerings of common stock, preferred stock or debt securities or the incurrence of additional
indebtedness through secured or unsecured borrowings.

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Debt Offerings

Heritage Notes

We have outstanding two series of unsecured notes. These notes were issued pursuant to the terms of two separate but substantially identical indentures we entered
into with LaSalle National Bank, as trustee. These indentures contain various covenants, including covenants that restrict the amount of indebtedness that may be incurred by us and our subsidiaries.
Specifically, for as long as the debt securities issued under these indentures are outstanding:



These
debt securities have been guaranteed by our two operating partnerships, Heritage OP and Bradley OP.

Notes due 2009.On October 15, 2004, we completed the issuance and sale of $150 million principal amount of
4.50% notes due 2009, or 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 in
part, at a redemption price equal to the sum of (1) the principal amount of the notes being redeemed plus accrued interest on the notes to the redemption date and (2) a
make-whole amount, if any, with respect to the notes that is designed to provide yield maintenance protection to the holders of these notes.

In
August 2004, in anticipation of completing an unsecured debt financing, we entered into forward starting interest rate swaps with a total notional amount of
$146.6 million. The purpose of these forward swaps was to mitigate the risk of changes in interest rates prior to the pricing of our debt offering. These forward swaps terminated subsequent to
the pricing of the debt offering and we made a payment to the counterparties of $1.7 million in connection with the termination of these swaps.

Notes due 2014.On April 1, 2004, we completed the issuance and sale of $200 million principal amount of 5.125%
notes due 2014, or the 2014 Notes. The 2014 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 the notes being redeemed plus accrued interest on the notes to the redemption date and (2) a make-whole
amount, if any, with respect to the notes that is designed to provide yield maintenance protection to the holders of these notes.

In
March 2004, in anticipation of completing an unsecured debt financing, we entered into forward starting interest rate swaps with a total notional amount of
$192.5 million. The purpose of these forward swaps was to mitigate the risk of changes in interest rates prior to the pricing of our debt offering. These forward swaps terminated subsequent to
the pricing of the debt offering and we received a payment from the counterparties of $1.2 million in connection with the termination of these swaps.

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We
believe we are in compliance with all applicable covenants.

Bradley Notes

Prior to our acquisition of Bradley Real Estate, Inc. ("Bradley"), Bradley OP completed the sale of three series of senior, unsecured debt securities. We
repaid in full one of these series of Bradley OP debt securities upon maturity in November 2004. These debt securities were issued pursuant to the terms of an indenture and three supplemental
indentures entered into by Bradley OP with LaSalle National Bank, as trustee, beginning in 1997. The indenture and two supplemental indentures contain various covenants, including covenants which
restrict the amount of indebtedness that may be incurred by Bradley OP and those of our subsidiaries which are owned directly or indirectly by Bradley OP. Specifically, for as long as these debt
securities are outstanding:



For
purposes of these covenants, any indebtedness incurred by Heritage, Heritage OP or any of the Company's subsidiaries that are owned directly or indirectly by Heritage OP is not
included as indebtedness of Bradley OP.

Notes due 2006.In March 2000, Bradley OP completed the offering of $75 million aggregate principal amount of
its 8.875% Notes due 2006, or the 2006 Notes. The 2006 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, in whole or in part, at a redemption price equal to the sum of (1) the principal amount of the 2006 Notes being redeemed plus accrued interest on the 2006 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 maintenance protection to the holders of these notes. In connection with the
Bradley acquisition, we repurchased approximately $73.5 million of the 2006 Notes at a purchase price equal to the principal and accrued interest on the 2006 Notes as of the date of purchase,
so that approximately $1.5 million of the 2006 Notes were outstanding as of December 31, 2004.

Notes due 2008.In January 1998, Bradley OP completed the offering of $100 million aggregate principal amount
of its 7.2% Notes due 2008, or the 2008 Notes. The 2008 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, in whole or in part, at a redemption price equal to the sum of (1) the principal amount of the 2008 Notes being redeemed plus accrued interest on the 2008 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 maintenance protection to the holders of these notes.

We
believe Bradley OP is in compliance with all applicable covenants.

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Equity Financings

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

In
December 2003, we completed a secondary public offering of our common stock and sold a total of 3,932,736 shares at a net price of $28.27 per share, resulting in net proceeds
to us of $111 million. We used the net proceeds of this offering to repay outstanding indebtedness.

Funds From Operations

We calculate Funds from Operations in accordance with the best practices described in the April 2002 National Policy Bulletin of the National Association
of Real Estate Investment Trusts, referred to as NAREIT, and NAREIT's 1995 White Paper on Funds from Operations. The White Paper defines Funds From Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from extraordinary items and sales of property, plus real estate related depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Given the nature of our business as a real estate owner and operator, we believe that FFO is helpful to investors as a starting point in measuring our operational
performance because it excludes various items included in net income that do not relate to, or are not indicative of, our operating performance, such as gains (or losses) from sales of real estate
investments and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. However, FFO (i) should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indicator of our financial performance, (ii) is not an alternative to cash flow from operating activities (determined in accordance with
GAAP) as a measure of our liquidity, and (iii) is not indicative of funds available to fund our cash needs, including our ability to make distributions. Our computation of FFO may differ from
the methodology utilized by other equity REITs to calculate FFO and, therefore, may not be comparable to other REITs.

The
following table reflects the calculation of Funds from Operations and a reconciliation of Funds from Operations to net income, the most directly comparable GAAP measure, for the
periods indicated (in thousands):

|                      |                                                             | Year Ended December 31,                                     |        
|--------------------- | ----------------------------------------------------------- | ----------------------------------------------------------- | -------
|
|Net income            |                                                             | $                                                           | 44,708 
|Add (deduct):         |                                                             |                                                             |        
|                      | Depreciation and amortization (real-estate related)         |                                                             |        
|                      |                                                             | Continuing operations                                       |        
|                      |                                                             | Discontinued operations                                     |        
|                      |                                                             | Pro-rata share of unconsolidated joint venture depreciation |        
|                      | Net gains on sales of real estate investments and equipment |                                                             |        
|                      | Preferred stock distributions                               |                                                             |        
|                      | Accretion of redeemable equity                              |                                                             |        
|                      |                                                             |                                                             |        
|Funds from Operations |                                                             | $                                                           | 128,918
|                      |                                                             |                                                             |        

---

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Related Party Transactions

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

The TJX Companies

In July 1999, Bernard Cammarata became a member of our board of directors. Mr. Cammarata is Chairman of the Board of TJX Companies, Inc., our
largest tenant, and was President and Chief Executive Officer of TJX until June 1999. We received annualized base rent from the TJX Companies of $14.0 million in 2004, which represented
approximately 5.5% of our total annualized base rent for all leases in which tenants were in occupancy at December 31, 2004. TJX pays us rent in accordance with 51 written leases at our
properties.

Ahold USA

In July 1999, William M. Vaughn, III became a member of our board of directors. Mr. Vaughn is Senior Vice President, Labor Relations of Ahold
USA, Inc., the parent company of Giant Foods, Bi-Lo, Bruno's and Stop & Shop. Mr. Vaughn is also a member of the Board of Trustees of our largest stockholder, Net
Realty Holding Trust. We received annualized base rent from Ahold and its subsidiary companies of $2.3 million in 2004, which represented approximately 0.9% of our total annualized base rent
for all leases in which tenants were in occupancy at December 31, 2004. Ahold USA and its subsidiary companies pay us rent in accordance with 5 written leases at our properties. Subsequent to
December 31, 2004, Ahold USA sold Bi-Lo and Bruno's representing $0.9 million of annualized base rent in 2004.

Equity Offering

In December 2003, we completed a secondary public offering of our common stock and sold a total of 3,932,736 shares. Net Realty Holding Trust exercised its
contractual preemptive right and purchased approximately 40% of the shares we sold in the offering on the same terms as third parties purchased shares.

131 Dartmouth Street Joint Venture

In November 1999, we entered into a joint venture with NETT for the acquisition and development of a 365,000 square foot commercial office building at 131
Dartmouth Street, Boston, Massachusetts. This joint venture is owned 94% by NETT and 6% by us. We were issued this interest as part of a management arrangement with the joint venture pursuant to which
we will manage the building. We have no ongoing capital contribution requirements with respect to this office building, which was
completed in January 2003. The first tenants began occupying this office building in January 2004. We account for our interest in this joint venture using the cost method and we have not
expended any amounts on the office building through December 31, 2004.

In
February 2004, we entered into an eleven-year lease with our joint venture with NETT for the lease of approximately 31,000 square feet of space and we moved our
corporate headquarters to this space during the first quarter of 2004. Under the terms of this lease, which were negotiated on an arms-length basis, we began paying rent to the joint
venture in February 2005. We pay $1.1 million per year in minimum rent through 2009 and $1.2 million per year from 2010 through 2014.

Boston Office Lease

In 1974, NETT and Net Realty Holding Trust entered into an agreement providing for the lease by NETT of 14,400 square feet of space in an office building at 535
Boylston Street for its Boston offices. Net Realty Holding Trust assigned this lease to us as part of our formation. The current term of this

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lease
expires on March 31, 2005 and under this lease, NETT pays us $648,000 per year in minimum rent. NETT has informed us that they are not renewing this lease.

Contingencies

Legal and Other Claims

We are subject to legal and other claims incurred in the normal course of business. Based on our review and consultation with counsel of those matters known to
exist, including those matters described on page 41, we do not believe that the ultimate outcome of these claims would materially affect our financial position or results of operations.

Recourse Loan Guarantees

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

Non-Recourse Loan Guarantees

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

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

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

Inflation

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

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New Accounting Standards

In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 123R, Share-Based
Compensation("SFAS No. 123R"). SFAS No. 123R supersedes APB Opinion No. 25,Accounting
for Stock Issued to Employees, 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 based on their fair values. The grant-date fair value of employee share options and similar
instruments will be estimated using an option-pricing model adjusted for any unique characteristics of a particular instrument. If an equity award is modified after the grant date, incremental
compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The Company
does not expect the adoption of SFAS No. 123R to have a material impact on the Company's results of operations, financial position, or liquidity.

In
December 2004, the FASB issued SFAS No. 153,Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29, ("SFAS
No. 153"). The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured on the fair value of assets exchanged. SFAS
No. 153 eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a broader exception for exchanges of nonmonetary assets that do not have commercial
substance. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not expect the adoption of SFAS No. 153
to have a material impact on the Company's 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 common shareholders (the most directly comparable
GAAP financial measure), plus accretion of redeemable equity, preferred stock distributions, income allocated to minority interests in Bradley OP, net derivative losses (gains), losses from prepayment
of debt, general and administrative expense, depreciation and amortization, and interest expense, less income from discontinued operations, gains (losses) on sales of real estate investments and
marketable securities, interest and other income, preferred stock distributions and accretion of redeemable equity.

We
use NOI internally, and believe NOI provides useful information to investors, as a performance measure in evaluating the operating performance of our real estate assets. This is
because NOI reflects only those income and expense items that are incurred at the property level and excludes certain components from net income in order to provide results that are more closely
related to a property's results of operations. Our presentation of NOI may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to obtain a clear
understanding of our operating results, NOI should be examined in conjunction with net income as presented in our consolidated financial statements. NOI should not be considered as an alternative to
net income as an indication of our performance or to cash flows as a measure of liquidity or ability to make distributions.

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The
following sets forth a reconciliation of NOI to net income available to common shareholders for the fiscal years 2000 through 2004 (dollars in thousands).

|                     |                                                            | Years ended December 31, |        
|-------------------- | ---------------------------------------------------------- | ------------------------ | -------
|
|Net operating income |                                                            | $                        | 231,020
|Add:                 |                                                            |                          |        
|                     | Interest and other                                         |                          |        
|                     | Gain on sale of marketable securities                      |                          |        
|                     | Gains on sales of real estate investments                  |                          |        
|                     | Income from discontinued operations                        |                          |        
|                     | Gains on sales of discontinued operations                  |                          |        
|                     | Net derivative gains                                       |                          |        
|Deduct:              |                                                            |                          |        
|                     | Depreciation and amortization                              |                          |        
|                     | Interest                                                   |                          |        
|                     | General and administrative                                 |                          |        
|                     | Loss on prepayment of debt                                 |                          |        
|                     | Income allocated to exchangeable limited partnership units |                          |        
|                     | Income allocated to Series B and C Preferred Units         |                          |        
|                     | Net derivative losses                                      |                          |        
|                     |                                                            |                          |        
|Net income           |                                                            |                          | 44,708 
|Deduct:              |                                                            |                          |        
|                     | Preferred stock distributions                              |                          |        
|                     | Accretion of redeemable equity                             |                          |        
|                     |                                                            |                          |        
|                     | Net income (loss) attributable to common shareholders      |                          | $      
|                     |                                                            |                          |        

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

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

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

|                |               | 2005 |   | 2006    |  | 2007 |        | 2008 |   | 2009   |  | 2010+ |         | Total |   | Estimated
Fair Value |  | Weighted
Average
Interest
Rate |        
|--------------- | ------------- | ---- | - | ------- |  | ---- | ------ | ---- | - | ------ |  | ----- | ------- | ----- | - | -------------------- |  | ------------------------------ | -------
|Secured Debt:   |               |      |   |         |  |      |        |      |   |        |  |       |         |       |   |                      |  |                                |        
|                | Fixed rate    |      | $ | 44,593  |  | $    | 23,682 |      | $ | 43,085 |  | $     | 19,437  |       | $ | 127,898              |  | $                              | 362,361
|                | Variable rate |      |   | 439     |  |      | 459    |      |   | 479    |  |       | 499     |       |   | 522                  |  |                                | 12,125 
|Unsecured Debt: |               |      |   |         |  |      |        |      |   |        |  |       |         |       |   |                      |  |                                |        
|                | Fixed rate    |      |   |        |  |      | 1,490  |      |   |       |  |       | 100,000 |       |   | 150,000              |  |                                | 200,000
|                | Variable rate |      |   | 196,000 |  |      |       |      |   |       |  |       |        |       |   |                     |  |                                |       
|                |               |      |   |         |  |      |        |      |   |        |  |       |         |       |   |                      |  |                                |        
|                | Total         |      | $ | 241,032 |  | $    | 25,631 |      | $ | 43,564 |  | $     | 119,936 |       | $ | 278,420              |  | $                              | 574,486
|                |               |      |   |         |  |      |        |      |   |        |  |       |         |       |   |                      |  |                                |        

If market rates of interest on our variable rate debt outstanding at December 31, 2004 increase by 10%, or 36 basis points, the increase in
interest expense would decrease future earnings and cash flows by $0.8 million annually.

We
were not a party to any hedging agreements with respect to our floating rate debt as of December 31, 2004. We have, in the past, used derivative financial instruments to
manage, or hedge, interest rate risks related to our borrowings, from lines of credit to medium-and long-term financings. We require that hedging derivative instruments be effective in
reducing the interest rate risk exposure that they are designed to hedge. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions
based on their credit rating and other factors. We do not believe that the interest rate risk represented by our floating rate debt is material as of December 31, 2004 in relation to total
assets and our total market capitalization.

Item 8: Financial Statements

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

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

None.

Item 9A: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out by the Company's management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

No change in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred
during the fourth quarter of our fiscal year ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting

Management's Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set forth in
Part II, Item 8 of this Annual Report on Form 10-K.

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Item 9B: Other Information

None.

PART III

Item 10: Directors and Executive Officers of the Registrant

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

Item 11: Executive Compensation

The information contained in the sections captioned "Proposal One: Election of Directors" and "Executive Compensation" of the Proxy Statement is incorporated
herein by reference.

Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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

The
following table summarizes the equity compensation plans under which common stock may be issued as of December 31, 2004:

|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     |  | 2,724,418                                                                               | (1) | $25.60                                                                      | (2) | 1,668,313                                                                               
|Equity compensation plans not approved by stockholders |  |                                                                                        |     |                                                                            |     |                                                                                        
|                                                       |  |                                                                                         |     |                                                                             |     |                                                                                         
|Total                                                  |  | 2,724,418                                                                               |     | $25.60                                                                      |     | 1,668,313                                                                               
|                                                       |  |                                                                                         |     |                                                                             |     |                                                                                         

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Item 13: Certain Relationships and Related Transactions

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

Item 14: Principal Accounting Fees and Services

The information contained in the section captioned "Principal Accounting Fees and Services" of the Proxy Statement is incorporated herein by reference.

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PART IV

Item 15: Exhibits and Financial Statement Schedules

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

Financial Statement Schedule.

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

Exhibits.

|3.1  |  | Articles of Amendment and Restatement (Third) of Heritage Property Investment Trust, Inc.(1)                                                                                                                                                                                                                      
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2  |  | Amended and Restated Bylaws of Heritage Property Investment Trust, Inc.(1)                                                                                                                                                                                                                                        
|4.1  |  | Form of Common Stock Certificate of Heritage Property Investment Trust, Inc.(1)                                                                                                                                                                                                                                   
|4.2  |  | Indenture, dated as of November 24, 1997, by and between Bradley Operating Limited Partnership and LaSalle National Bank relating to the Senior Debt Securities of Bradley Operating Limited Partnership(1)                                                                                                       
|4.3  |  | (Intentionally omitted)                                                                                                                                                                                                                                                                                           
|4.4  |  | Supplemental Indenture No. 2, dated as of January 28, 1998, between Bradley Operating Limited Partnership and LaSalle National Bank(1)                                                                                                                                                                            
|4.5  |  | Supplemental Indenture No. 3, dated as of March 10, 2000, between Bradley Operating Limited Partnership and LaSalle National Bank(1)                                                                                                                                                                              
|4.6  |  | Supplemental Indenture No. 4, dated as of May , 2004, between Bradley Operating Limited Partnership and LaSalle National Bank(8)                                                                                                                                                                                  
|4.7  |  | 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 National Bank relating to 5.125% Notes due
2014 of Heritage Property Investment Trust, Inc.(8)                 
|4.8  |  | Form of 5.125% Note due 2014 (Included in Exhibit 4.7)(8)                                                                                                                                                                                                                                                         
|4.9  |  | Guarantee of 5.125% Notes due 2014, dated as of April 1, 2004, by Heritage Property Investment Limited Partnership(8)                                                                                                                                                                                             
|4.10 |  | Guarantee of 5.125% Notes due 2014, dated as of April 1, 2004, by Bradley Operating Limited Partnership(8)                                                                                                                                                                                                        
|4.11 |  | 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)
|4.12 |  | 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 National Bank relating to 4.50% Notes due 2009
of Heritage Property Investment Trust, Inc.(10)              
|4.13 |  | Form of 4.50% Note due 2009 (Included in Exhibit 4.12)                                                                                                                                                                                                                                                            
|     |  |                                                                                                                                                                                                                                                                                                                   

69

---



|4.14   |  | Guarantee of 4.50% Notes due 2009, dated as of October 15, 2004, by Heritage Property Investment Limited Partnership(10)                                                                                                                                                                                            
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.15   |  | Guarantee of 4.50% Notes due 2009, dated as of October 15, 2004, by Bradley Operating Limited Partnership(10)                                                                                                                                                                                                       
|4.16   |  | 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, 2003(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   |  | (Intentionally omitted)                                                                                                                                                                                                                                                                                             
|10.4   |  | (Intentionally omitted)                                                                                                                                                                                                                                                                                             
|10.5   |  | (Intentionally omitted)                                                                                                                                                                                                                                                                                             
|10.6   |  | Amendment, dated as of September 18, 2000, to Second Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership(1)                                                                                                                                                                          
|10.7   |  | Amendment, dated as of April 29, 2002, to Second Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership(1)                                                                                                                                                                              
|10.8   |  | Amendment, dated as of May 17, 2002, to Second Restated Agreement of Limited Partnership of Bradley Operating Limited Partnership(2)                                                                                                                                                                                
|10.9  |  | Amended and Restated 2000 Equity Incentive Plan, as amended(7)                                                                                                                                                                                                                                                      
|10.10 |  | Form of restricted stock and stock option agreements(1)                                                                                                                                                                                                                                                             
|10.11 |  | Supplemental Executive Retirement Plan(1)                                                                                                                                                                                                                                                                           
|10.12  |  | Revolving Credit and Guaranty Agreement, dated as of April 29, 2002, among Heritage Property Investment Limited Partnership, Bradley Operating Limited Partnership, Heritage Property Investment Trust, Inc. and the lending institutions named
therein(2)                                                          
|10.13  |  | Loan Agreement, dated as of September 18, 2000, between Heritage SPE LLC and Prudential Mortgage Capital Company, LLC(1)                                                                                                                                                                                            
|10.14  |  | 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)                                                                                                               
|10.15  |  | Promissory Note, dated as of September 13, 2000, by Heritage Property Investment Limited Partnership in favor of The Variable Annuity Life Insurance Company(1)                                                                                                                                                     
|10.16 |  | Employment Agreement with Thomas C. Prendergast, President and Chief Executive Officer, as amended by the First Amendment, dated as of April 3, 2000(1)                                                                                                                                                             
|10.17 |  | Amendment, dated July 24, 2002, to Employment Agreement with Thomas C. Prendergast(3)                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                     

70

---



|10.18 |  | 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)
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.19  |  | PIMS Indemnification Letter, dated as of July 9, 1999, by and between Heritage Property Investment Trust, Inc. and Prudential Investment Management Services, LLC(1)                                                                                                                                                                                                                                                                                                                                                                
|10.20 |  | Separation Agreement dated as of June 16, 2003, between Heritage Property Investment Trust, Inc. and Gary Widett, former Senior Vice President and Chief Operating Officer(4)                                                                                                                                                                                                                                                                                                                                                       
|10.21  |  | 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)                                                                                                                                                                                                                                                                                                                                              
|10.22  |  | 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)                                                                                                                                                                                                                                                                                                                      
|10.23 |  | Separation Agreement dated as of April 28, 2004, between Heritage Property Investment Trust, Inc. and Mary Kate Herron, former Vice President, Lease Management(9)                                                                                                                                                                                                                                                                                                                                                                  
|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.                                                                                                                                                                                                                                                                                                                                                                                   

---

71

---



Reports on Form 8-K.

On October 1, 2004, the Company filed an amended Current Report on Form 8-K to correct certain clerical errors contained in a Current
Report on Form 8-K filed on September 15, 2004.

On
October 12, 2004, the Company filed a Current Report on Form 8-K with respect to severance agreements previously entered into by the Company with its senior
officers.

On
October 12, 2004, the Company filed a Current Report on Form 8-K to correct certain clerical errors contained in its Quarterly Report on
Form 10-Q for the quarter ended June 30, 2004.

On
October 13, 2004, the Company filed a Current Report on Form 8-K with respect to its execution of a purchase agreement to sell $150 million of its
unsecured Notes due 2009.

On
October 15, 2004, the Company filed a Current Report on Form 8-K with respect to the completion of its issuance and sale of $150 million unsecured
Notes due 2009.

On
November 2, 2004, the Company furnished to the Securities and Exchange Commission under Item 12 of Form 8-K a copy of the Company's Press Release, dated
November 2, 2004, as well as supplemental operating and financial data regarding the Company for the third quarter of 2004.

72

---





SIGNATURES

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

|                      |  | HERITAGE PROPERTY INVESTMENT TRUST, INC.
|--------------------- |  | ----------------------------------------
|                      |  | By:                                     
|Dated: March 10, 2005 |  |                                         

Pursuant
to the requirements of the Securities Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons in the capacities and on the
dates indicated:

|Signature                                     |  | Title                                                                                         |  | Date          
|--------------------------------------------- |  | --------------------------------------------------------------------------------------------- |  | --------------
|                                              |  |                                                                                               |  |               
|/s/THOMAS C. PRENDERGASTThomas C. Prendergast |  | President and Chief Executive Officer, Director (principal executive officer)                 |  | March 10, 2005
|/s/DAVID G. GAWDavid G. Gaw                   |  | Senior Vice President, Chief Financial Officer and Treasurer (principal financial officer)    |  | March 10, 2005
|/s/PATRICK H. O'SULLIVANPatrick H. O'Sullivan |  | Vice President, Finance and Accounting and Assistant Treasurer (principal accounting officer) |  | March 10, 2005
|/s/JOSEPH L. BARRYJoseph L. Barry             |  | Director                                                                                      |  | March 10, 2005
|/s/BERNARD CAMMARATABernard Cammarata         |  | Director                                                                                      |  | March 10, 2005
|/s/RICHARD C. GARRISONRichard C. Garrison     |  | Director                                                                                      |  | March 10, 2005
|                                              |  |                                                                                               |  |               

73

---



|/s/MICHAEL J. JOYCEMichael J. Joyce               |  | Director |  | March 10, 2005
|------------------------------------------------- |  | -------- |  | --------------
|/s/DAVID W. LAUGHTONDavid W. Laughton             |  | Director |  | March 10, 2005
|/s/KEVIN C. PHELANKevin C. Phelan                 |  | Director |  | March 10, 2005
|/s/KENNETH K. QUIGLEY, JR.Kenneth K. Quigley, Jr. |  | Director |  | March 10, 2005
|/s/RICH REARDONRich Reardon                       |  | Director |  | March 10, 2005
|/s/WILLIAM M. VAUGHNWilliam M. Vaughn             |  | Director |  | March 10, 2005
|/s/ROBERT J. WATSONRobert J. Watson               |  | Director |  | March 10, 2005

74

---





HERITAGE PROPERTY INVESTMENT TRUST, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

|                                                                                                                 |  | Financial Page
|---------------------------------------------------------------------------------------------------------------- |  | --------------
|Report of Management on Internal Control Over Financial Reporting                                                |  | F-2           
|Report of Independent Registered Public Accounting FirmFinancial Statements                                     |  | F-3           
|Report of Independent Registered Public Accounting FirmInternal Control over Financial Reporting                |  | F-4           
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                                     |  | F-5           
|Consolidated Statements of Operations for the years ended December 31, 2004, 2003, and 2002                      |  | F-6           
|Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2004, 2003 and 2002      |  | F-7           
|Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2004, 2003, and 2002 |  | F-8           
|Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003, and 2002                      |  | 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 in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.

F-1

---





REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Heritage Property Investment Trust, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting
as defined in Rules 13a-15(f) and 15d -15(f) under the Securities Exchange Act of 1934. Heritage Property Investment Trust, Inc.'s internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those written policies and procedures that:



Internal
control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified.

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

Management
assessed the effectiveness of Heritage Property Investment Trust, Inc.'s internal control over financial reporting as of December 31, 2004. Management based this
assessment on criteria for effective internal control over financial reporting described in "Internal ControlIntegrated Framework" issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Management's assessment included an evaluation of the design of Heritage Property Investment Trust, Inc.'s internal control over financial reporting and testing of the
operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.

Based
on its assessment, management determined that, as of December 31, 2004, Heritage Property Investment Trust, Inc. maintained effective internal control over financial
reporting.

KPMG
LLP, an independent registered public accounting firm that audited and reported on the consolidated financial statements of Heritage Property Investment Trust, Inc. included
in this report, has issued an attestation report on management's assessment of internal control over financial reporting. This attestation report appears on page F-4 of this report.

F-2

---



Report of Independent Registered Public Accounting Firm

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

We
have audited the accompanying consolidated balance sheets of Heritage Property Investment Trust and subsidiaries as of December 31, 2004 and 2003, and the related consolidated
statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the years in
the three-year period ended December 31, 2004. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule III listed in
the accompanying index to consolidated financial statements and financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

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

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2004 and
2003, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over
financial reporting as of December 31, 2004, based on criteria established inInternal ControlIntegrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 7, 2005 expressed an unqualified opinion on management's assessment of, and the effective
operation of, internal control over financial reporting.

/s/
KPMG LLP

Boston,
Massachusetts
March 7, 2005

F-3

---



Report of Independent Registered Public Accounting Firm

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

We
have audited management's assessment, included in the accompanying Report of Management on Internal Control over Financial Reporting, that Heritage Property Investment Trust, Inc. and
subsidiaries (the Company) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established inInternal
ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

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

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

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

In
our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material
respects, based on COSO. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on COSO.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of
December 31, 2004 and 2003, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 2004, and the financial statement schedule III listed in the index to the consolidated financial statements and financial statement schedule as of
December 31, 2004, and our report dated March 7, 2005 expressed an unqualified opinion on those consolidated financial statements and schedule.

/s/
KPMG LLP

Boston,
Massachusetts
March 7, 2005

F-4

---





HERITAGE PROPERTY INVESTMENT TRUST, INC.        Consolidated Balance Sheets        December 31, 2004 and 2003        (In thousands, except for share amounts)

|                                                                                                 |                                                                                                                                                                   | 2004 |                                            | 2003      |  
|------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------------------------------------ | --------- | -
|Assets                                                                                           |                                                                                                                                                                   |      |                                            |           |  
|Real estate investments, net                                                                     |                                                                                                                                                                   | $    | 2,222,638                                  |           | $
|Cash and cash equivalents                                                                        |                                                                                                                                                                   |      | 6,720                                      |           |  
|Accounts receivable, net of allowance for doubtful accounts of $9,583 in 2004 and $8,770 in 2003 |                                                                                                                                                                   |      | 41,148                                     |           |  
|Prepaids and other assets                                                                        |                                                                                                                                                                   |      | 24,488                                     |           |  
|Investment in unconsolidated joint venture                                                       |                                                                                                                                                                   |      | 3,406                                      |           |  
|Deferred financing and leasing costs                                                             |                                                                                                                                                                   |      | 54,150                                     |           |  
|                                                                                                 |                                                                                                                                                                   |      |                                            |           |  
|                                                                                                 |                                                                                                                                                                   |      | Total assets                               |           | $
|                                                                                                 |                                                                                                                                                                   |      |                                            |           |  
|Liabilities and Shareholders' Equity                                                             |                                                                                                                                                                   |      |                                            |           |  
|Liabilities:                                                                                     |                                                                                                                                                                   |      |                                            |           |  
|                                                                                                 | Mortgage loans payable                                                                                                                                            |      | $                                          | 649,040   |  
|                                                                                                 | Unsecured notes payable                                                                                                                                           |      |                                            | 449,763   |  
|                                                                                                 | Line of credit facility                                                                                                                                           |      |                                            | 196,000   |  
|                                                                                                 | Accrued expenses and other liabilities                                                                                                                            |      |                                            | 95,989    |  
|                                                                                                 | Accrued distributions                                                                                                                                             |      |                                            | 24,915    |  
|                                                                                                 |                                                                                                                                                                   |      |                                            |           |  
|                                                                                                 |                                                                                                                                                                   |      | Total liabilities                          |           |  
|                                                                                                 |                                                                                                                                                                   |      |                                            |           |  
|Commitments and contingencies                                                                    |                                                                                                                                                                   |      |                                           |           |  
|Series B Preferred Units                                                                         |                                                                                                                                                                   |      |                                           |           |  
|Series C Preferred Units                                                                         |                                                                                                                                                                   |      |                                           |           |  
|Exchangeable limited partnership units                                                           |                                                                                                                                                                   |      | 13,110                                     |           |  
|Other minority interest                                                                          |                                                                                                                                                                   |      | 2,425                                      |           |  
|                                                                                                 |                                                                                                                                                                   |      |                                            |           |  
|                                                                                                 |                                                                                                                                                                   |      | Total minority interests                   |           |  
|                                                                                                 |                                                                                                                                                                   |      |                                            |           |  
|Shareholders' equity:                                                                            |                                                                                                                                                                   |      |                                            |           |  
|                                                                                                 | Common stock, $.001 par value; 200,000,000 shares authorized; 46,934,285 and 46,208,574 shares issued and outstanding at December 31, 2004 and 2003, respectively |      |                                            | 47        |  
|                                                                                                 | Additional paid-in capital                                                                                                                                        |      |                                            | 1,154,360 |  
|                                                                                                 | Cumulative distributions in excess of net income                                                                                                                  |      |                                            | (229,818  | )
|                                                                                                 | Unearned compensation                                                                                                                                             |      |                                            | (2,775    | )
|                                                                                                 | Other comprehensive loss                                                                                                                                          |      |                                            | (506      | )
|                                                                                                 |                                                                                                                                                                   |      |                                            |           |  
|                                                                                                 |                                                                                                                                                                   |      | Total shareholders' equity                 |           |  
|                                                                                                 |                                                                                                                                                                   |      |                                            |           |  
|                                                                                                 |                                                                                                                                                                   |      | Total liabilities and shareholders' equity |           | $
|                                                                                                 |                                                                                                                                                                   |      |                                            |           |  

See
accompanying notes to consolidated financial statements.

F-5

---



HERITAGE PROPERTY INVESTMENT TRUST, INC.        Consolidated Statements of Operations        Years ended December 31, 2004, 2003 and 2002        (In thousands, except per-share
data)

|                                                           |                                                                                  | 2004                                                                                                     |        | 2003    |         | 2002   |        
|---------------------------------------------------------- | -------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ------ | ------- | ------- | ------ | -------
|Revenue:                                                   |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Rentals and recoveries                                                           |                                                                                                          | $      | 325,947 |         | $      | 297,666
|                                                           | Interest and other                                                               |                                                                                                          |        | 1,079   |         |        | 495    
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           |                                                                                  | Total revenue                                                                                            |        |         | 327,026 |        |        
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|Expenses:                                                  |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Property operating expenses                                                      |                                                                                                          |        | 45,954  |         |        | 43,102 
|                                                           | Real estate taxes                                                                |                                                                                                          |        | 48,973  |         |        | 43,322 
|                                                           | Depreciation and amortization                                                    |                                                                                                          |        | 88,678  |         |        | 78,548 
|                                                           | Interest                                                                         |                                                                                                          |        | 77,269  |         |        | 69,415 
|                                                           | General and administrative                                                       |                                                                                                          |        | 24,214  |         |        | 20,965 
|                                                           | Loss on prepayment of debt                                                       |                                                                                                          |        |        |         |        |       
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           |                                                                                  | Total expenses                                                                                           |        |         | 285,088 |        |        
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           |                                                                                  | Income before gain on sales of marketable securities, real estate investments, and net derivative losses |        |         | 41,938  |        |        
|Gain on sale of marketable securities                      |                                                                                  |                                                                                                          | 529    |         |         |       |        
|Gains on sales of real estate investments                  |                                                                                  |                                                                                                          | 28     |         |         |       |        
|Net derivative losses                                      |                                                                                  |                                                                                                          |       |         |         |       |        
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Income before allocation to minority interests                                   |                                                                                                          |        | 42,495  |         |        | 42,809 
|Income allocated to Series B and C Preferred Units         |                                                                                  |                                                                                                          | (2,176 | )       |         | (6,656 | )      
|Income allocated to exchangeable limited partnership units |                                                                                  |                                                                                                          | (265   | )       |         | (257   | )      
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Income before discontinued operations                                            |                                                                                                          |        | 40,054  |         |        | 35,896 
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|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                                                                       |                                                                                                          |        | 44,708  |         |        | 40,733 
|Preferred stock distributions                              |                                                                                  |                                                                                                          |       |         |         |       |        
|Accretion of redeemable equity                             |                                                                                  |                                                                                                          |       |         |         |       |        
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Net income (loss) attributable to common shareholders                            |                                                                                                          | $      | 44,708  |         | $      | 40,733 
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|Basic per-share data:                                      |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Income (loss) attributable to common shareholders before discontinued operations |                                                                                                          | $      | 0.86    |         | $      | 0.86   
|                                                           | Income from discontinued operations                                              |                                                                                                          |        | 0.10    |         |        | 0.11   
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Income (loss) attributable to common shareholders                                |                                                                                                          | $      | 0.96    |         | $      | 0.97   
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Weighted average common shares outstanding                                       |                                                                                                          |        | 46,686  |         |        | 41,963 
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|Diluted per-share data:                                    |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Income (loss) attributable to common shareholders before discontinued operations |                                                                                                          | $      | 0.85    |         | $      | 0.85   
|                                                           | Income from discontinued operations                                              |                                                                                                          |        | 0.10    |         |        | 0.11   
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Income (loss) attributable to common shareholders                                |                                                                                                          | $      | 0.95    |         | $      | 0.96   
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        
|                                                           | Weighted average common and common equivalent shares outstanding                 |                                                                                                          |        | 47,393  |         |        | 42,536 
|                                                           |                                                                                  |                                                                                                          |        |         |         |        |        

See accompanying notes to consolidated financial statements.

F-6

---





HERITAGE PROPERTY INVESTMENT TRUST, INC.        Consolidated Statements of Comprehensive Income (Loss)        Years ended December 31, 2004, 2003 and 2002        (In thousands)

|                                                      |                                    | 2004                                                                                        |                                         | 2003 |      | 2002   |  
|----------------------------------------------------- | ---------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------- | ---- | ---- | ------ | -
|Net income (loss) attributable to common shareholders |                                    | $                                                                                           | 44,708                                  |      | $    | 40,733 |  
|                                                      | Other comprehensive income (loss): |                                                                                             |                                         |      |      |        |  
|                                                      |                                    | Net realized loss from settlements of cash flow hedges                                      |                                         |      | (487 | )      |  
|                                                      |                                    | Unrealized gain on cash flow hedges                                                         |                                         |      |     |        |  
|                                                      |                                    | Reclassification adjustments for amortization of net realized loss of cash flow hedges      |                                         |      | (19  | )      |  
|                                                      |                                    | Reclassification adjustments for net realized loss from termination of interest rate collar |                                         |      |     |        |  
|                                                      |                                    | Unrealized holding gains on marketable securities                                           |                                         |      | 529  |        |  
|                                                      |                                    | Reclassification adjustment for realized gain from sale of marketable securities            |                                         |      | (529 | )      |  
|                                                      |                                    |                                                                                             |                                         |      |      |        |  
|                                                      |                                    |                                                                                             | Total other comprehensive income (loss) |      |      | (506   | )
|                                                      |                                    |                                                                                             |                                         |      |      |        |  
|Comprehensive income                                  |                                    | $                                                                                           | 44,202                                  |      | $    | 40,733 |  
|                                                      |                                    |                                                                                             |                                         |      |      |        |  

See
accompanying notes to consolidated financial statements.

F-7

---



HERITAGE PROPERTY INVESTMENT TRUST, INC.        Consolidated Statements of Changes in Shareholders' Equity        Years ended December 31, 2004, 2003 and 2002        (In
thousands, except per-share data)

|                             |                                                                                             | Series A
Cumulative
Convertible
Participating
Preferred
Stock                                    |    | Common
Stock |   | Additional
Paid-in
Capital |    | Cumulative
Distributions
in Excess of
Net Income |           | Unearned
Compensation |   | Accumulated
Other
Comprehensive
Income (Loss) |         | Total |       
|---------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | -- | ------------ | - | -------------------------- | -- | ------------------------------------------------ | --------- | --------------------- | - | --------------------------------------------- | ------- | ----- | ------
|Balance at December 31, 2001 |                                                                                             | $                                                                                                | 16 |              | $ | 6                          |    | $                                                | 553,726   |                       | $ | (55,435                                       | )       | $     | (2,103
|                             | Net income                                                                                  |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               | 14,443  |       |       
|                             | Other comprehensive income:                                                                 |                                                                                                  |    |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             | Unrealized derivative gains:                                                                |                                                                                                  |    |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             |                                                                                             | Effective portion of interest rate collar for the period from Jan. 1, 2002 - Apr. 29, 2002       |    |              |  |                            |    |                                                 |           |                       |  |                                               |         |      |       
|                             |                                                                                             | Reclassification adjustment to earnings for realized loss on termination of interest rate collar |    |              |  |                            |    |                                                 |           |                       |  |                                               |         |      |       
|                             |                                                                                             |                                                                                                  |    |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|                             | Issuance of common stock                                                                    |                                                                                                  |    |             |   |                            | 14 |                                                  |           | 352,000               |   |                                               |        |       |       
|                             | Equity issuance costs                                                                       |                                                                                                  |    |             |   |                            |   |                                                  |           | (29,527               | ) |                                               |        |       |       
|                             | Conversion of preferred stock to common stock                                               |                                                                                                  |    | (16          | ) |                            | 16 |                                                  |           |                      |   |                                               |        |       |       
|                             | Accretion of redeemable equity                                                              |                                                                                                  |    |             |   |                            |   |                                                  |           | (328                  | ) |                                               |        |       |       
|                             | Conversion of redeemable equity to common
stock                                             |                                                                                                  |    |             |   |                            | 6  |                                                  |           | 123,416               |   |                                               |        |       |       
|                             | Preferred stock distributions ($0.70 per share)                                             |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               | (14,302 | )     |       
|                             | Common stock distributions ($1.89 per share)                                                |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               | (71,509 | )     |       
|                             | Issuance of restricted stock                                                                |                                                                                                  |    |             |   |                            |   |                                                  |           | 6,379                 |   |                                               |        |       |       
|                             | Compensation expense associated with restricted stock plans                                 |                                                                                                  |    |             |   |                            |   |                                                  |           | 750                   |   |                                               |        |       |       
|                             |                                                                                             |                                                                                                  |    |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|Balance at December 31, 2002 |                                                                                             |                                                                                                  |   |              |   | 42                         |    |                                                  | 1,006,416 |                       |   | (126,803                                      | )       |       | (1,047
|                             | Net income                                                                                  |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               | 40,733  |       |       
|                             | Issuance of common stock                                                                    |                                                                                                  |    |             |   |                            | 4  |                                                  |           | 126,424               |   |                                               |        |       |       
|                             | Equity issuance costs                                                                       |                                                                                                  |    |             |   |                            |   |                                                  |           | (3,375                | ) |                                               |        |       |       
|                             | Common stock distributions ($2.10 per share)                                                |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               | (90,197 | )     |       
|                             | Amendment of warrants                                                                       |                                                                                                  |    |             |   |                            |   |                                                  |           | 86                    |   |                                               |        |       |       
|                             | Issuance of restricted stock                                                                |                                                                                                  |    |             |   |                            |   |                                                  |           | 6,183                 |   |                                               |        |       |       
|                             | Compensation expense associated with restricted stock plans                                 |                                                                                                  |    |             |   |                            |   |                                                  |           | 782                   |   |                                               |        |       |       
|                             |                                                                                             |                                                                                                  |    |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|Balance at December 31, 2003 |                                                                                             |                                                                                                  |   |              |   | 46                         |    |                                                  | 1,136,516 |                       |   | (176,267                                      | )       |       | (1,823
|                             | Net income                                                                                  |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               | 44,708  |       |       
|                             | Issuance of common stock                                                                    |                                                                                                  |    |             |   |                            | 1  |                                                  |           | 9,982                 |   |                                               |        |       |       
|                             | Equity issuance costs                                                                       |                                                                                                  |    |             |   |                            |   |                                                  |           | (114                  | ) |                                               |        |       |       
|                             | Repurchase of common stock                                                                  |                                                                                                  |    |             |   |                            |   |                                                  |           | (34                   | ) |                                               |        |       |       
|                             | Common stock distributions ($2.10 per share)                                                |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               | (98,259 | )     |       
|                             | Conversion of operating partnership units to common stock                                   |                                                                                                  |    |             |   |                            |   |                                                  |           | 171                   |   |                                               |        |       |       
|                             | Issuance of restricted stock                                                                |                                                                                                  |    |             |   |                            |   |                                                  |           | 6,556                 |   |                                               |        |       |       
|                             | Compensation expense associated with restricted stock plans                                 |                                                                                                  |    |             |   |                            |   |                                                  |           | 1,283                 |   |                                               |        |       |       
|                             | Realized loss from settlement of cash flow hedges, net                                      |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               |        |       |       
|                             | Net reclassification adjustments for amortization of realized loss of cash flow hedges, net |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               |        |       |       
|                             | Unrealized holding gains on marketable securities                                           |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               |        |       |       
|                             | Reclassification adjustment for realized gain from sale of marketable securities            |                                                                                                  |    |             |   |                            |   |                                                  |           |                      |   |                                               |        |       |       
|                             |                                                                                             |                                                                                                  |    |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       
|Balance at December 31, 2004 |                                                                                             | $                                                                                                |   |              | $ | 47                         |    | $                                                | 1,154,360 |                       | $ | (229,818                                      | )       | $     | (2,775
|                             |                                                                                             |                                                                                                  |    |              |   |                            |    |                                                  |           |                       |   |                                               |         |       |       

See accompanying notes to consolidated financial statements.

F-8

---





HERITAGE PROPERTY INVESTMENT TRUST, INC.        Consolidated Statements of Cash Flows        Years ended December 31, 2004, 2003 and 2002        (In thousands)

|                                                     |                                                                                   | 2004                                                                                               |                                                  | 2003     |         | 2002     |         
|---------------------------------------------------- | --------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------ | -------- | ------- | -------- | --------
|Cash flows from operating activities:                |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|                                                     | Net income                                                                        |                                                                                                    | $                                                | 44,708   |         | $        | 40,733  
|                                                     | Adjustments to reconcile net income to net cash provided by operating activities: |                                                                                                    |                                                  |          |         |          |         
|                                                     |                                                                                   | Depreciation and amortization                                                                      |                                                  |          | 88,992  |          |         
|                                                     |                                                                                   | Amortization of deferred debt financing costs                                                      |                                                  |          | 2,057   |          |         
|                                                     |                                                                                   | Amortization of debt premiums and discount                                                         |                                                  |          | (1,601  | )        |         
|                                                     |                                                                                   | Amortization of effective portion of interest rate swap                                            |                                                  |          | (19     | )        |         
|                                                     |                                                                                   | Compensation expense associated with stock plans, including acceleration of unvested stock options |                                                  |          | 6,632   |          |         
|                                                     |                                                                                   | Net gains on sales of real estate investments and equipment                                        |                                                  |          | (3,986  | )        |         
|                                                     |                                                                                   | Gain on sale of marketable securities                                                              |                                                  |          | (529    | )        |         
|                                                     |                                                                                   | Net derivative losses (gains)                                                                      |                                                  |          |        |          |         
|                                                     |                                                                                   | Loss on prepayment of debt                                                                         |                                                  |          |        |          |         
|                                                     |                                                                                   | Income allocated to Series B and C preferred units                                                 |                                                  |          | 2,176   |          |         
|                                                     |                                                                                   | Income allocated to minority interests                                                             |                                                  |          | 265     |          |         
|                                                     |                                                                                   | Changes in operating assets and liabilities                                                        |                                                  |          | (15,653 | )        |         
|                                                     |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|                                                     |                                                                                   |                                                                                                    | Net cash provided by operating activities        |          |         | 123,042  |         
|                                                     |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|Cash flows from investing activities:                |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|                                                     | Net cash used for acquisition of Bradley                                          |                                                                                                    |                                                  |         |         |          |        
|                                                     | Expenditures for investment in joint venture                                      |                                                                                                    |                                                  | (3,321   | )       |          |        
|                                                     | Investment in mortgage loan receivable                                            |                                                                                                    |                                                  | (9,188   | )       |          |        
|                                                     | Repayment of mortgage loan receivable                                             |                                                                                                    |                                                  | 9,188    |         |          |        
|                                                     | Acquisitions and additions to real estate investments                             |                                                                                                    |                                                  | (141,416 | )       |          | (174,931
|                                                     | Net proceeds from sales of real estate investments                                |                                                                                                    |                                                  | 29,848   |         |          | 15,528  
|                                                     | Proceeds from sale of marketable securities                                       |                                                                                                    |                                                  | 1,101    |         |          |        
|                                                     | Expenditures for capitalized leasing commissions                                  |                                                                                                    |                                                  | (6,403   | )       |          | (4,933  
|                                                     | Expenditures for furniture, fixtures and equipment                                |                                                                                                    |                                                  | (1,924   | )       |          | (795    
|                                                     |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|                                                     |                                                                                   |                                                                                                    | Net cash used by investing activities            |          |         | (122,115 | )       
|                                                     |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|Cash flows from financing activities:                |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|                                                     | Proceeds from mortgage loans payable                                              |                                                                                                    |                                                  |         |         |          |        
|                                                     | Repayments of mortgage loans payable                                              |                                                                                                    |                                                  | (31,098  | )       |          | (16,390 
|                                                     | Proceeds from unsecured notes payable                                             |                                                                                                    |                                                  | 348,138  |         |          |        
|                                                     | Repayments of unsecured notes payable                                             |                                                                                                    |                                                  | (100,000 | )       |          |        
|                                                     | Proceeds from draws under line of credit facility                                 |                                                                                                    |                                                  | 413,000  |         |          | 134,000 
|                                                     | Repayments of draws under line of credit facility                                 |                                                                                                    |                                                  | (460,000 | )       |          | (125,000
|                                                     | Proceeds from interest swap termination                                           |                                                                                                    |                                                  | 1,185    |         |          |        
|                                                     | Payment for interest swap termination                                             |                                                                                                    |                                                  | (1,672   | )       |          |        
|                                                     | Interest rate collar termination payment                                          |                                                                                                    |                                                  |         |         |          |        
|                                                     | Repayment of subordinated debt to related party                                   |                                                                                                    |                                                  |         |         |          |        
|                                                     | Distributions paid to exchangeable limited partnership unit holders               |                                                                                                    |                                                  | (807     | )       |          | (715    
|                                                     | Distributions paid to Series B and C preferred unit holders                       |                                                                                                    |                                                  | (2,176   | )       |          | (6,656  
|                                                     | Redemption of Series B and C Preferred Units                                      |                                                                                                    |                                                  | (75,000  | )       |          |        
|                                                     | Preferred stock distributions paid                                                |                                                                                                    |                                                  |         |         |          |        
|                                                     | Common stock distributions paid                                                   |                                                                                                    |                                                  | (97,784  | )       |          | (87,727 
|                                                     | Expenditures for debt financing costs                                             |                                                                                                    |                                                  | (3,205   | )       |          | (180    
|                                                     | Expenditures for issuance of common stock                                         |                                                                                                    |                                                  | (201     | )       |          | (3,320  
|                                                     | Proceeds from issuance of common stock                                            |                                                                                                    |                                                  | 9,983    |         |          | 126,428 
|                                                     | Repurchase of common stock                                                        |                                                                                                    |                                                  | (34      | )       |          |        
|                                                     |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|                                                     |                                                                                   |                                                                                                    | Net cash provided (used) by financing activities |          |         | 329      |         
|                                                     |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|Net (decrease) increase in cash and cash equivalents |                                                                                   |                                                                                                    | 1,256                                            |          |         | 3,997    |         
|Cash and cash equivalents:                           |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|                                                     | Beginning of year                                                                 |                                                                                                    |                                                  | 5,464    |         |          | 1,467   
|                                                     |                                                                                   |                                                                                                    |                                                  |          |         |          |         
|                                                     | End of year                                                                       |                                                                                                    | $                                                | 6,720    |         | $        | 5,464   
|                                                     |                                                                                   |                                                                                                    |                                                  |          |         |          |         

See accompanying notes to consolidated financial statements.

F-9

---





HERITAGE PROPERTY INVESTMENT TRUST, INC.        Notes to Consolidated Financial Statements        Years ended December 31, 2004, 2003 and 2002

1. Organization

Background

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

Heritage
is a fully-integrated, self-administered and self-managed REIT and is focused on the acquisition, ownership, management, leasing and redevelopment of
primarily grocer-anchored neighborhood and community shopping centers principally in the Eastern and Midwestern United States. In 2003, the Company expanded its operations to include the Southwestern
U.S. with its Trademark Portfolio Acquisition consisting of 8 properties. At December 31, 2004, the Company owned 164 shopping centers and three office buildings.

Heritage
Property Investment Limited Partnership ("Heritage OP") and Bradley Operating Limited Partnership ("Bradley OP") are subsidiaries through which the Company conducts
substantially all of its business and owns (either directly or through subsidiaries) substantially all of its assets. As of December 31, 2004, the Company owned directly or indirectly all of
the ownership interests in the Heritage OP and approximately 98.5% of the voting interests in the Bradley OP, and is the sole general partner of Heritage OP and through a wholly owned subsidiary, of
Bradley OP. This structure is commonly referred to as an umbrella partnership REIT or UPREIT.

Initial Public Offering

On April 29, 2002, the Company completed its initial public offering ("IPO") of its common stock and, when combined with the exercise of the Underwriter's
overallotment, sold a total of 14,080,556 shares of its common stock in the IPO at a price of $25.00 per share.

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

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

Issuance of Public Equity

In December 2003, the Company completed a secondary public offering of its common stock and sold a total of 3,932,736 shares, including the underwriter's
over-allotment of 432,736 shares, at a net price of $28.27 per share. The net proceeds of $111 million from this offering were used to repay indebtedness, including the
$60 million bridge loan incurred in connection with the Trademark Portfolio

F-10

---



Acquisition.
The Company's two largest stockholders at the time, Net Realty Holding Trust, a subsidiary of NETT, and Prudential, also took part in the offering. Prudential sold approximately
$61 million of stock in the offering, reducing its then ownership percentage to approximately 6.6%. In addition, NETT exercised its contractual preemptive right and purchased approximately 40%,
or $44 million, of the shares sold in the offering.

2. Summary of Significant Accounting Policies

Basis of Presentation

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

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

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

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

Real Estate Investments

Real estate investments contributed in July 1999 were recorded at the carry-over basis of the Company's predecessor, which was fair market
value of the assets in conformity with GAAP applicable to pension funds. Subsequent acquisitions of real estate investments, including those acquired in the

F-11

---



Bradley
acquisition in 2000 are recorded at cost. The cost of buildings and improvements includes the purchase price of property, legal fees and other acquisition costs.

Real
estate investments held for sale are carried at the lower of carrying amount or fair value less costs to sell. Depreciation and amortization are suspended during the period a
property is held for sale. There were no properties classified as held for sale at December 31, 2004 or 2003.

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

In
addition, SFAS No. 144 retains the basic provisions of Opinion No. 30,Reporting the Results of OperationsReporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for presenting discontinued operations in the statement of
operations but broadens that presentation to include a component of an entity (rather than a segment of a business). The Company adopted SFAS No. 144 on January 1, 2002 and accordingly,
the operating results of real estate sold during the years ended December 31, 2004 and 2003, have been reclassified and reported as discontinued operations for the years ended
December 31, 2004, 2003 and 2002.

The
Company applies Statement of Financial Accounting Standards No. 141,Business Combinations, to property acquisitions.
Accordingly, under the guidance provided by SFAS No. 141,Business Combinations, the fair value of the real estate acquired is allocated to the
acquired tangible assets and identified intangible assets and liabilities. Identified intangible assets and liabilities may consist of the value of above-market and below-market leases, other value of
in-place leases and value of tenant relationships, based in each case on their fair values.

The
fair value of the tangible assets of an acquired property 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 relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar
to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods
considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of
lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and
other related costs.

In
allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded
based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the
in-place leases and (ii) management's estimate 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 of rental income over the remaining non-cancelable terms of the
respective leases. The

F-12

---



capitalized
below-market lease values are amortized as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases.

The
aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the excess of (i) the purchase price
paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as if vacant, determined as set forth above.
This aggregate value is allocated between in-place lease values and tenant relationships, if any, based on management's evaluation of the specific characteristics of each tenant's lease;
however, the value of tenant relationships has not been separated from in-place lease value for the additional interests in real estate entities because such value and its consequence to
amortization expense is estimated to be immaterial for these particular acquisitions consummated to date. The value of in-place leases exclusive of the value of above-market and
below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective 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 the years ended December 31, 2004 and 2003, the Company recognized upon acquisition, additional intangible
assets and liabilities as follows:

2004

2003Assets:Acquired in-place lease value

$
25,607

$
9,955Acquired above market leases


1,548


Liabilities:Acquired below market leases

$
2,419





The
Company incurred amortization expense pertaining to acquired in-place lease intangibles of $2.5 million, $0.2 million and $0 during the years ended
December 31, 2004, 2003, and 2002, respectively. Amortization of $0.1 million, $0, and $0, pertaining to acquired above market leases was applied as a reduction of rental income during
the years ended December 31, 2004, 2003, and 2002, respectively. Amortization of $0.2 million, $0, and $0, pertaining to acquired below market leases was applied as an increase to rental
income during the years ended December 31, 2004, 2003, and 2002, respectively.

The
table below presents the expected amortization related to the acquired in-place lease value and acquired above and below market leases at December 31, 2004:

|                              |                               | 2005                            |   | 2006  |     | 2007 |       | 2008 |   | 2009  |    | Thereafter |      
|----------------------------- | ----------------------------- | ------------------------------- | - | ----- | --- | ---- | ----- | ---- | - | ----- | -- | ---------- | -----
|Amortization expense:         |                               |                                 |   |       |     |      |       |      |   |       |    |            |      
|                              | Acquired in-place lease value |                                 | $ | 5,346 |     | $    | 5,346 |      | $ | 5,293 |    | $          | 4,701
|Adjustments to rental income: |                               |                                 |   |       |     |      |       |      |   |       |    |            |      
|                              | Acquired above market leases  |                                 | $ | (146  | )   | $    | (146  | )    | $ | (146  | )  | $          | (144 
|                              | Acquired below market leases  |                                 |   | 344   |     |      | 323   |      |   | 222   |    |            | 183  
|                              |                               |                                 |   |       |     |      |       |      |   |       |    |            |      
|                              |                               | Net adjustment to rental income |   | $     | 198 |      | $     | 177  |   | $     | 76 |            | $    
|                              |                               |                                 |   |       |     |      |       |      |   |       |    |            |      

F-13

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Expenditures
for maintenance, repairs and betterments that do not materially extend the useful life of a real estate investment are charged to operations as incurred and amounted to
$6.6 million, $6.3 million and $6.0 million for the years ended December 31, 2004, 2003 and 2002, respectively. Expenditures that substantially extend the useful life of a
real estate investment are capitalized. Upon sale or other disposition of the real estate investment, the cost and related accumulated depreciation and amortization are removed and the resulting gain
or loss, if any, is reflected in income from discontinued operations. Interest on significant construction projects is capitalized as part of the cost of real estate investments. Interest capitalized
for the years ended December 31, 2004, 2003 and 2002 was $0.2 million, $0, and $0.2 million, respectively.

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

Land improvements

15 yearsBuildings and improvements

20 - 39 yearsTenant improvements

Shorter of useful life or term of related lease


The
Company recognizes gains from sales of real estate at the time of sale using the full accrual method, provided that various criteria related to the terms of the transactions are met
and no subsequent involvement is required. If the criteria are not met, or if subsequent involvement is required, the Company defers the gains and recognizes them when the criteria are met or
subsequent involvement is completed.

Cash and Cash Equivalents

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

Marketable Securities

The Company received shares of a publicly traded company during 2004 in settlement of the rejection of certain leases in connection with bankruptcy proceedings of
the publicly traded company. The Company accounts for investments in securities of publicly traded companies in accordance with Statement of Financial Accounting Standard ("SFAS") No. 115, Accounting for Certain
Investments in Debt and Equity Investments, and classified the securities as available-for-sale. The
Company recorded a gain on sale of approximately $0.5 million from the sale of all of these securities during the year ended December 31, 2004.

Deferred Leasing and Financing Costs and Other Assets

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

F-14

---



The
Company capitalizes internal leasing costs in accordance with SFAS No. 91,Nonrefundable Fees & Costs Associated with Originating or Acquiring
Loans and Initial Direct Costs of Leases. These costs amounted to $3.6 million and $2.9 million during the years ended December 31, 2004 and 2003,
respectively.

Investments in Unconsolidated Joint Venture

Upon entering into a joint venture agreement, the Company assesses whether the joint venture is considered a variable interest entity in accordance with FASB
Interpretation No. 46R,Consolidation of Variable Interest Entities("FIN 46R"). The Company has no interests in variable interest entities as of
December 31, 2004. The Company accounts for its investment in joint ventures that are not deemed to be variable interest entities 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, 2004, the Company accounts for its sole joint venture under the equity method of accounting because it exercises significant influence over, but does not
control, this entity. This investment was recorded initially at cost, as Investment in Unconsolidated Joint Ventures, and subsequently adjusted for an allocation of equity in earnings, plus cash
contributions, and less cash distributions. Under the equity method of accounting, the net equity investment of the Company is reflected on the consolidated balance sheets, and the Company's
allocation of net income or loss from the joint ventures is included on the consolidated statements of operations as other income. The Company's allocation of joint venture income or loss follows the
joint venture's distribution priorities.

In
accordance with the provisions of SOP No. 78-9, the Company recognizes fees and interest received from the joint ventures relating solely to the extent of the
outside partner's interest.

Revenue Recognition

Management has determined that all of the Company's leases with its various tenants are operating leases. Rental income from such leases with scheduled rent
increases is recognized using the straight-line method over the terms of the leases commencing when the tenant takes possession of the space. The aggregate excess of rental revenue
recognized on a straight-line basis over cash received under applicable lease provisions amounted to $21.1 million and $16.5 million at December 31, 2004 and 2003,
respectively, and is included in accounts receivable, net of allowance for doubtful accounts. Rental revenue recognized over cash received is included in revenue from rental and recoveries for the
years ended December 31, 2004, 2003 and 2002 and amounted to $5.2 million, $6.0 million and $4.2 million, respectively.

Leases
for both retail and office space generally contain provisions under which the tenants reimburse the Company for a portion of property operating expenses and real estate taxes
incurred by the Company. Such recoveries revenue is recorded based on management's estimate of its recovery of certain operating expenses and real estate tax expenses pursuant to the terms contained
in related leases. In addition, certain of the Company's operating leases for retail space contain contingent rent provisions under which tenants are required to pay a percentage of their sales in
excess of a specified amount as additional rent. The Company defers recognition of contingent rental income until such

F-15

---



specified
targets are met. Reimbursements for both operating expenses and real estate taxes as well as contingent rental income during the years ended December 31, 2004, 2003 and 2002 were
$79.3 million, $71.3 million and $68.1 million, respectively. These items are included in revenue from rentals and recoveries in the consolidated statements of operations.

The
Company makes estimates of the uncollectibility of its accounts receivable related to minimum rent, deferred rent, expense reimbursements and other revenue or income. The Company
specifically analyzes accounts receivable and historical bad debts, tenant concentrations, tenant creditworthiness, current economic trends and changes in tenant payment terms when evaluating the
adequacy of the allowance for doubtful accounts. These estimates have a direct impact on the Company's net income.

Allowances
for uncollectible receivables are charged against revenue from rentals and recoveries and amounted to $2.8 million, $4.8 million and $3.8 million for the
years ended December 31, 2004, 2003 and 2002, respectively.

Gain Recognition on Sale of Real Estate

The Company performs evaluations of each real estate sale to determine if full gain recognition is appropriate in accordance with SFAS No. 66, Accounting for
Sales of Real Estate. The application of SFAS No. 66 can be complex and requires the Company to make assumptions including an
assessment of whether the risks and rewards of ownership have been transferred, the extent of the purchaser's investment in the property being sold, whether the Company's receivables, if any, related
to the sale are collectible and are subject to subordination, and the degree of the Company's continuing involvement with the real estate asset after the sale. If full gain recognition is not
appropriate, the Company accounts for the sale under an appropriate deferral method.

Credit Risk

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

Fair Value of Financial Instruments

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

The
fair value of the Company's fixed rate mortgage loans and unsecured notes payable, which is based on estimates made by management for rates currently prevailing for comparable loans
and notes of comparable maturities, exceeds the aggregate carrying value by approximately $47 million and

F-16

---



$47 million
at December 31, 2004 and 2003, respectively. The Company's line of credit facility is at variable rates, resulting in a carrying value that approximates fair value at
December 31, 2004 and 2003.

Hedging Activities

From time to time, the Company uses derivative financial instruments to limit its exposure to changes in interest rates. The Company was not a party to any
hedging agreement with respect to its floating rate debt as of December 31, 2004 or 2003. The Company has in the past used derivative financial instruments to manage, or hedge, interest rate
risks related to its borrowings, from lines of credit to medium and long-term financings. The Company requires that hedging derivative instruments are effective in reducing the interest
rate risk exposure that they are designed to hedge. The Company does not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on
their credit rating and other factors.

If
interest rate assumptions and other factors used to estimate a derivative's fair value or methodologies used to determine hedge effectiveness were different, amounts reported in
earnings and other comprehensive income and losses expected to be reclassified into earnings in the future could be affected.

Stock-Based Compensation

The Company adopted the disclosure provisions of SFAS No. 148,Accounting for Stock-Based CompensationTransition and
Disclosure, during the year ended December 31, 2002. At December 31, 2004 and 2003, the Company had one stock-based employee compensation plan, which is described
more fully in Note 12. The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25,Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation cost related to stock option grants is reflected in the Company's reported results, as all options
granted under the plan have an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per
share as if the Company had applied the fair value

F-17

---



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

Year ended December 31,2004

2003

2002Net income (loss) attributable to common shareholders, as reported

$
44,708

$
40,733

$
(187
)Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards


744


619


403Pro forma net income (loss) attributable to common shareholders

$
43,964

$
40,114

$
(590
)Income (loss) per share:Basicas reported

$
0.96

$
0.97

$
(0.01
)Basicpro forma

$
0.94

$
0.96

$
(0.02
)Dilutedas reported

$
0.95

$
0.96

$
(0.01
)Dilutedpro forma

$
0.93

$
0.95

$
(0.02
)


Earnings Per Share

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

F-18

---





Income Taxes

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

Reclassifications

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

3. Real Estate Investments

Summary

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

2004

2003Land

$
360,643

$
345,618Land improvements


196,155


187,799Buildings and improvements


1,894,101


1,808,759Tenant improvements


64,241


46,972Improvements in process


25,701


10,8252,540,841


2,399,973Accumulated depreciation and amortization


(318,203
)

(242,741
)Net carrying value

$
2,222,638

$
2,157,232


Acquisitions

During the year ended December 31, 2004, the Company completed the acquisition of 4 shopping centers, 2 of which are grocer-anchored, aggregating
1.1 million square feet of gross leasable area ("GLA"), of which the Company acquired 0.9 million square feet of GLA. The aggregate acquisition price of the shopping centers, including
amounts allocated to acquired in-place lease value and above and below market leases, was $153.0 million, which was funded with borrowings under the Company's line of credit,
assumptions of mortgage loans payable at their estimated fair market value, and the issuance of exchangeable units of limited partnership interest in one of the Company's operating partnerships.

During
the year ended December 31, 2003, the Company completed the acquisition of eleven shopping centers, eight of which are grocer-anchored, aggregating 2.1 million
square feet of gross leasable area ("GLA"), of which the Company acquired 1.7 million square feet of GLA. The aggregate acquisition price of the shopping centers, including amounts allocated to
acquired in-place lease value and above and below market leases, was $224.2 million, which was funded with borrowings under the Company's line of credit, assumptions of mortgage loans payable
at their estimated fair market value, and a short-term bridge loan.

F-19

---



During
the year ended December 31, 2002, the Company completed the acquisition of ten shopping centers, nine of which are grocer-anchored, aggregating 3.1 million square
feet of GLA, of which the Company acquired 2.4 million square feet of GLA. The aggregate acquisition price of the shopping centers was $208.5 million, which was funded with borrowings
under the Company's line of credit, assumptions of mortgage loans payable at their estimated fair market value, and the issuance of exchangeable units of limited partnership interest in one of the
Company's operating partnerships. In addition, the Company completed the acquisition of two parcels at company-owned shopping centers aggregating 70,000 square feet GLA, for a total acquisition price
of $6.5 million, which was funded with borrowings under the Company's line of credit facility and cash provided by operations.

2004 Dispositions

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

In
December 2004, the Company completed the disposition of a parcel of land located at Madison Plaza located in Madison, Wisconsin for $3.5 million, which approximated the
Company's carrying value. The operations and cash flows for the assets sold could not be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the shopping
center. Accordingly, no amounts have been reclassified as discontinued operations in the accompanying financial statements.

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

In
September 2004, the Company completed the disposition of a parcel of land located at Cross Keys located in Turnersville, New Jersey for $7.0 million, which approximated
the Company's carrying value. The operations and cash flows for the assets sold could not be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the
shopping center. Accordingly, no amounts have been reclassified as discontinued operations in the accompanying financial statements.

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

2003 Dispositions

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

F-20

---



In
January and February 2003, the Company completed the sales of its 10 remaining single-tenant properties for $2.4 million, resulting in a total gain of
$0.8 million. These single-tenant properties were classified as held for sale at December 31, 2002.

2002 Dispositions

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

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

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

4. Investment in Joint Venture

In May 2004, the Company acquired a 50% interest in a joint venture for the development and construction of a 302,000 square foot shopping center, of which
the joint venture owns 210,000 square feet, to be located in a suburb of Grand Rapids, Michigan. The Company made an initial equity investment of $3.3 million, which has been accounted for
under the equity method of accounting, and provided a short-term bridge loan of approximately $9.2 million, which was repaid in November 2004. Interest earned on the loan, to
the extent attributable to the outside interest in the joint venture, has been recorded as Interest and Other. The operations of the joint venture, consisting of incidental activity related to
operating restaurants located on out parcels, are being reported on a 90-day lag basis. Accordingly, the operations for the period from May 17, 2004 (acquisition date) through
September 30, 2004 are included in the accompanying consolidated statement of operations and are classified as Interest and Other.

The
Company has fully guaranteed the repayment of a $22 million construction loan obtained by the joint venture from Key Bank, National Association. The Key Bank loan matures in
November 2006 (subject to extension). As of December 31, 2004, $13.0 million is outstanding under the construction loan. Such amount is recorded on the books and records of the
joint venture. In the event the Company is obligated to repay all or a portion of the construction loan pursuant to the guarantee, the Company (i) may remove the manager of the joint venture
for cause and terminate all agreements with the manager, (ii) would receive a promissory note from the joint venture for the amount paid by the Company together with a first priority mortgage
on the shopping center, and (iii) may prohibit all distributions from the joint venture or payment of fees by the joint venture until the principal and accrued interest on the loan is repaid.
The estimated fair value of the guarantee as of December 31,

F-21

---



2004
is not material to the Company's financial position. Accordingly, no liability or additional investment has been recorded related to the fair value of the guarantee.

5. Supplemental Cash Flow Information

During 2004, 2003 and 2002, interest paid was $74.6 million, $67.8 million, and $70.7 million, respectively, and state income and franchise
tax payments, net of refunds, were $1.2 million, $0.4 million, and $0.1 million, respectively.

During
2004, the Company assumed $48.9 million of existing debt in connection with the acquisition of 3 shopping centers. In addition, the Company issued exchangeable limited
partnership units with a fair value of $6.2 million in connection with the acquisition of a shopping center.

During
2004, 7,814 shares were issued in exchange for 7,814 exchangeable operating partnership units in the Bradley OP with a fair value of $0.2 million.

Included
in accrued expenses and other liabilities at December 31, 2004 are accrued expenditures for real estate investments of $8.0 million and accrued expenses of
$0.1 million related to debt issuance costs.

During
2003, the Company assumed $80.5 million of existing debt in connection with the acquisition of six shopping centers. Included in accrued expenses and other liabilities at
December 31, 2003 are accrued expenditures for real estate investments of $5.7 million and accrued expenses of $0.1 million for the issuance of common stock.

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

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

F-22

---



6. Operating Leases

Scheduled future minimum rental payments to be received under the Company's non-cancelable operating leases are as follows at December 31, 2004
(in thousands):

Year Ending December 31

Amount2005

$
249,0742006


229,0462007


202,5962008


168,5442009


137,825Thereafter


764,559Total minimum future receipts

$
1,751,644


The
Company has contractual commitments under non-cancelable operating leases, primarily ground leases expiring at various dates through 2087. Rental expense was $2,824,
$814, and $648 for the years ended December 31, 2004, 2003, and 2002, respectively. Committed amounts under non-cancelable operating leases in effect at December 31, 2004
were as follows:

Year Ending December 31

Amount2005

$
2,3572006


2,4992007


2,5912008


2,6022009


2,713Thereafter


47,468Total minimum future payments

$
60,230


7. Minority Interests

Series B and C Preferred Units

On September 7, 2004, the Company redeemed all 1,000,000 outstanding 8.875% Series C Cumulative Redeemable Perpetual Preferred Units of Bradley OP,
at a redemption price of $25.00 per unit, plus approximately $0.413 of accrued and unpaid distributions. There were no unamortized issuance costs associated with the Series C Preferred Units,
therefore, the Company did not incur a charge in connection with this redemption.

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

F-23

---



Exchangeable Limited Partnership Units

Exchangeable limited partnership units consist of 522,044 and 340,270 Bradley OP Units ("OP Units") at December 31, 2004 and 2003, respectively, not owned
by the Company. The holders of these Units may present such OP Units to Bradley OP for redemption at any time (subject to certain restrictions with particular holders). Upon presentation of an OP
Unit, the Bradley OP must redeem such OP Unit for cash equal to the then value of a share of common stock of the Company ("Common Stock"), except that the Company may, at its election, in lieu of a
cash redemption, acquire such OP Unit for one share of Common Stock. One share of Common Stock is generally the economic equivalent of the OP Unit, and the quarterly distribution that may be paid to
the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of Common Stock.

Other Minority Interest

The Company has a single investment acquired in its acquisition of Bradly in which a minority interest participates in earnings based on terms specified in its
partnership agreement. This minority interest amounted to $2.4 million at December 31, 2004 and 2003.

8. Debt

Mortgage Loans Payable

Mortgage loans consist of various non-recourse issuances collateralized by 65 and 67 real estate investments with an aggregate net carrying value of
$973.9 million and $957.3 million at December 31, 2004 and 2003, respectively. The loans require monthly payments of principal and interest under fixed and variable terms, through
2020 at interest rates ranging from 4.28% to 10.13% and have a weighted average effective interest rate of 7.36% at December 31, 2004. The loans are generally subject to prepayment penalties.

F-24

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

|Property                                             |  | Effective
Interest
Rate |   | Contractual
Interest
Rate |   | Maturity       |  | 2004(1) |         | 2003(2)
|---------------------------------------------------- |  | ----------------------- | - | ------------------------- | - | -------------- |  | ------- | ------- | -------
|Miracle Hills Park                                   |  | 8.28                    | % | 8.28                      | % | August 2004    |  | $       |        |        
|The Commons of Chacellor Park                        |  | 8.48                    | % | 8.48                      | % | November 2004  |  |         |        |        
|Franklin Square                                      |  | 9.00                    | % | 9.00                      | % | June 2005      |  |         | 13,583  |        
|Williamson Square                                    |  | 8.00                    | % | 8.00                      | % | August 2005    |  |         | 10,830  |        
|Riverchase Village Shopping Center                   |  | 7.62                    | % | 7.62                      | % | September 2005 |  |         | 9,764   |        
|Meridian Village Plaza                               |  | 5.05                    | % | 7.88                      | % | May 2006       |  |         | 5,348   |        
|Spring Mall                                          |  | 9.39                    | % | 9.39                      | % | October 2006   |  |         | 8,141   |        
|Southport Centre                                     |  | 6.94                    | % | 6.94                      | % | July 2007      |  |         | 9,924   |        
|Long Meadow Commons                                  |  | 5.11                    | % | 7.98                      | % | July 2007      |  |         | 10,028  |        
|Innes Street Market                                  |  | 7.63                    | % | 7.63                      | % | October 2007   |  |         | 12,830  |        
|Southgate Shopping Center                            |  | 8.38                    | % | 8.38                      | % | October 2007   |  |         | 2,395   |        
|Salem Consumer Square                                |  | 10.13                   | % | 10.13                     | % | September 2008 |  |         | 10,284  |        
|St. Francis Plaza                                    |  | 8.13                    | % | 8.13                      | % | December 2008  |  |         | 866     |        
|Burlington Square                                    |  | 5.31                    | % | 8.28                      | % | January 2009   |  |         | 15,051  |        
|Buckingham Place                                     |  | 5.89                    | % | 7.88                      | % | August 2009    |  |         | 5,773   |        
|County Line Plaza                                    |  | 5.64                    | % | 7.91                      | % | August 2009    |  |         | 18,506  |        
|Trinity Commons                                      |  | 5.64                    | % | 7.93                      | % | August 2009    |  |         | 15,916  |        
|8 shopping centers, cross collateralized             |  | 7.82                    | % | 7.82                      | % | December 2009  |  |         | 79,827  |        
|Montgomery Commons                                   |  | 6.38                    | % | 8.48                      | % | January 2010   |  |         | 8,506   |        
|Warminster Towne Center                              |  | 6.01                    | % | 8.24                      | % | February 2010  |  |         | 21,797  |        
|Clocktower Place                                     |  | 5.75                    | % | 8.56                      | % | April 2010     |  |         | 14,160  |        
|545 Boylston Street and William J. McCarthy Building |  | 8.26                    | % | 8.26                      | % | October 2010   |  |         | 34,782  |        
|29 shopping centers, cross collateralized            |  | 7.88                    | % | 7.88                      | % | October 2010   |  |         | 235,465 |        
|The Market of Wolf Creek III                         |  | 5.71                    | % | 7.88                      | % | February 2011  |  |         | 9,634   |        
|Spradlin Farm                                        |  | 6.53                    | % | 7.25                      | % | January 2012   |  |         | 18,003  |        
|Bedford Grove                                        |  | 7.86                    | % | 7.86                      | % | March 2012     |  |         |        |        
|The Market of Wolf Creek I                           |  | 5.71                    | % | 7.68                      | % | October 2012   |  |         | 11,475  |        
|Berkshire Crossing                                   |  | 4.28                    | % | 4.28                      | % | November 2012  |  |         | 14,523  |        
|Grand Traverse Crossing                              |  | 7.42                    | % | 7.42                      | % | January 2013   |  |         | 13,284  |        
|Salmon Run Plaza                                     |  | 8.10                    | % | 8.95                      | % | September 2013 |  |         | 4,938   |        
|Elk Park Center                                      |  | 7.64                    | % | 7.64                      | % | August 2016    |  |         | 8,244   |        
|Grand Traverse CrossingWal-Mart                     |  | 7.75                    | % | 7.75                      | % | October 2016   |  |         | 5,160   |        
|The Market of Wolf Creek II                          |  | 5.87                    | % | 7.50                      | % | July 2017      |  |         | 2,276   |        
|Montgomery Towne Center                              |  | 8.50                    | % | 8.50                      | % | March 2019     |  |         | 7,043   |        
|Bedford GroveWal-Mart                               |  | 7.63                    | % | 7.63                      | % | November 2019  |  |         | 4,067   |        
|Berkshire CrossingHome Depot/Wal-Mart               |  | 7.63                    | % | 7.63                      | % | March 2020     |  |         | 6,617   |        
|                                                     |  |                         |   |                           |   |                |  |         |         |        
|Total/Weighted average                               |  | 7.36                    | % | 7.89                      | % |                |  |         | 649,040 |        
|                                                     |  |                         |   |                           |   |                |  |         |         |        

---

F-25

---



Unsecured Notes Payable

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

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

In
addition, all notes described above have been guaranteed by the Company's two operating partnerships. The indenture contains various covenants, including covenants which restrict the
amount of indebtedness that may be incurred by the Company and its subsidiaries. The Company is in compliance with all applicable covenants as of December 31, 2004.

In
its acquisition of Bradley OP in September 2000, Heritage assumed unsecured notes payable consisting 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 by
Bradley OP. On November 15, 2004, the Company repaid all of the $100 million 7% fixed-rate issue maturing on that date. The amount of unsecured Bradley OP notes
payable outstanding at December 31, 2004 and 2003 was $101.5 million and $201.5 million, respectively.

Line of Credit Facility

On April 29, 2002, the Company entered into a $350 million unsecured line of credit with a group of lenders with Fleet National Bank, as agent. This
line of credit replaced the Company's prior $425 million senior unsecured credit facility, which was repaid with proceeds from the IPO. The Company's two operating partnerships are the
borrowers under this line of credit, and Heritage and certain of Heritage's other subsidiaries have guaranteed this line of credit. This line of credit is being used principally to fund growth
opportunities and for working capital purposes. At December 31, 2004 and 2003, $196 million and $243 million were outstanding under the line of credit, respectively. The line of
credit matures on April 29, 2005.

The
line of credit bears interest at either the lender's base rate or a floating rate based on a spread over LIBOR ranging from 80 basis points to 135 basis points, depending upon the
Company's

F-26

---



debt
rating, and requires monthly payments of interest. The variable rate in effect at December 31, 2004 and 2003, including the lender's margin of 105 basis points, and borrowings outstanding
at the base rate, was 3.55% and 2.22%, respectively. In addition, this line of credit has a facility fee based on the amount committed ranging from 15 basis points to 25 basis points, depending upon
the Company's debt rating, and requires quarterly payments.

This
line of credit requires the Company to maintain specific financial ratios and restricts the incurrence of indebtedness and the funding of investments. This line of credit also,
except under some circumstances, including as necessary to maintain the Company's status as a REIT, limits the Company's ability to make distributions in excess of 90% of annual funds from operations,
as defined. As of December 31, 2004, the Company was in compliance with all of the financial covenants under the line of credit facility.

Upon
entering into this line of credit and repayment of the prior senior unsecured credit facility, the Company wrote off unamortized deferred financing costs and recognized a loss of
$4.2 million on this transaction in 2002 which was reclassified to an operating expense from an extraordinary item upon the Company's adoption of SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections, on January 1, 2003.

In
February 2005, the Company obtained a commitment to establish a new three-year, $350 million unsecured line of credit with Wachovia Bank, as agent. Wachovia has
agreed to use its "best efforts" to syndicate this new line of credit. This new line of credit, which the Company expects to enter into shortly, will replace its existing unsecured credit facility. In
the event the Company is unable to enter into this new line of credit on or before April 29, 2005, the Company would seek an extension of its existing line of credit for up to one year. In
addition, in light of its investment grade credit ratings and prior capital markets activity, the Company believes there are sufficient alternative financing sources available to it to refinance its
existing line of credit, including through a combination of one or more short-term bridge loans, public or private offerings of common stock, preferred stock or debt securities or the
incurrence of additional indebtedness through secured or unsecured borrowings.

Subordinated Debt

In September 2000, Heritage entered into a $100 million term credit agreement (the "Subdebt"), which was subordinated in right of payment to its
line of credit. The Subdebt was scheduled to mature on March 18, 2004 and bore interest at a variable rate based on LIBOR. The Subdebt contained covenants that, among other things, required the
Company to maintain certain financial ratios. In addition, the Subdebt contained provisions that required repayment of the Subdebt upon full repayment of the line of credit or upon receipt of
aggregate equity proceeds in excess of $250,000.

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

The
Company used $100 million of the net proceeds from the IPO to repay in full the Subdebt outstanding. In connection with the full repayment, the Company wrote off unamortized
deferred

F-27

---



financing
costs and recognized a loss of $2.5 million which was reclassified to an operating expense from an extraordinary item upon the Company's adoption of SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections, on January 1, 2003.

Scheduled Principal Repayments

Scheduled principal repayments on aggregate outstanding debt at December 31, 2004 are as follows (in thousands):

Year Ending December 31

Amount2005

$
241,0322006


25,6312007


43,5642008


119,9362009


278,420Thereafter


574,486Total due(1)

$
1,283,069


---

F-28

---





9.    Related Party Transactions

Transactions with NETT

In connection with the formation of Heritage, environmental studies were not completed for all of the contributed properties. NETT has agreed to indemnify the
Company for environmental costs up to $50 million. The environmental costs include completing environmental studies and any required remediation. Since our formation in July 1999, the
Company has been reimbursed by NETT for approximately $2.1 million of environmental costs pursuant to this indemnity.

In
November 1999, the Company entered into a joint venture with NETT for the acquisition and development of a 365,000 square foot commercial office building at 131 Dartmouth
Street, Boston, Massachusetts. This joint venture is owned 94% by NETT and 6% by the Company. The Company was issued this interest as part of a management arrangement with the joint venture pursuant
to which the Company manages the building. The Company has no ongoing capital contribution requirements with respect to this office building, which was completed in January 2003. The first
tenants began occupying this office building in October 2003. The Company accounts for its interest in this joint venture using the cost method and has not expended any amounts on the office
building through December 31, 2004.

In
February 2004, the Company entered into an eleven-year lease with this joint venture for the lease of approximately 31,000 square feet of space and moved its
corporate headquarters to this space during the first quarter of 2004. Under the terms of this lease, which were negotiated on an arms-length basis, the Company will begin paying rent in
February 2005. The Company pays $1.1 million per year in minimum rent through 2009 and $1.2 million per year from 2010 through 2014.

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

Transactions with Prudential

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

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

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

F-29

---



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

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

The TJX Companies

In July 1999, the Chairman of the Board of TJX Companies, Inc., the Company's largest tenant, became a member of the Company's board of directors.
The Company received annualized base rent from the TJX Companies of $14.0 million in 2004, which represented approximately 5.5% of total annualized base rent for all leases in which tenants
were in occupancy at December 31, 2004. TJX pays rent in accordance with 51 written leases.

Ahold USA

In July 1999, the Senior Vice President, Labor Relations of Ahold USA, Inc., the parent company of Giant Foods, Bi-Lo, Bruno's and
Stop & Shop became a member of the Company's board of directors. The Company received annualized base rent from Ahold and its subsidiary companies of $2.3 million in 2004, which
represented approximately 0.9% of total annualized base rent for all leases in which tenants were in occupancy at December 31, 2004. Ahold USA and its subsidiary companies pay rent in
accordance with 5 written leases. Subsequent to December 31, 2004, Ahold USA sold Bi-Lo and Bruno's representing $0.9 million of annualized base rent in 2004.

10.    Segment Reporting

The Company predominantly operates in one industry segmentreal estate ownership and management of retail properties. As of December 31, 2004
and 2003, the Company owned 164 and 162 community and neighborhood shopping centers, respectively. Management reviews operating and financial data for each property separately and independently from
all other properties when making resource allocation decisions and measuring performance. The Company defines operating segments as individual properties with no segment representing more than 10% of
rental revenue.

11.    Earnings Per Share

Earnings per common share ("EPS") has been computed pursuant to the provisions of SFAS No. 128. The following table provides a reconciliation of both net
income and the number of common shares used in the computation of basic EPS, which utilizes the weighted average number of common

F-30

---



shares
outstanding without regard to the dilutive potential common shares, and diluted EPS, which includes all shares, as applicable (in thousands, except per-share data):

For the year ended December 31, 2004Income
(Numerator)

Shares
(Denominator)

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

$
44,708

46,686

$
0.96Effect of dilutive securities:Stock options




326


Anticipated stock compensation




32


Operating partnership units


265

349


0.76Diluted income per share:Net income attributable to common shareholders

$
44,973

47,393

$
0.95


For the year ended December 31, 2003Income
(Numerator)

Shares
(Denominator)

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

$
40,733

41,963

$
0.97Effect of dilutive securities:Stock options and warrants




211


Anticipated stock compensation




22


Operating partnership units


257

340


0.76Diluted income per share:Net income attributable to common shareholders

$
40,990

42,536

$
0.96


For the year ended December 31, 2002, preferred stock distributions of $14.3 million, and the effect of the assumed conversion of
convertible preferred stock and exchangeable minority interests outstanding into shares of common stock at the beginning of the year were not included in the computation of diluted loss per common
share because the impact on basic loss per common share was anti-dilutive. At December 31, 2002 options and warrants to purchase 2,415,527 shares of common stock at $25.00 per share
were outstanding but were not included in the computation of diluted loss per common share because their exercise price was not below the fair value of the common shares and would therefore not dilute
basic loss per common share.

F-31

---



12.    Stock-Based Compensation

Overview

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

The
Company's 2000 Equity Incentive Plan, as amended (the "Plan") authorizes options and other stock-based compensation awards to be granted to employees and directors for up to
5,700,000 shares of common stock. The Compensation Committee of the Board of Directors administers the Plan and is responsible for selecting persons eligible for awards and for determining the term
and duration of any award.

Stock Options

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

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

F-32

---



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

Shares

Weighted Average
Exercise price
per shareOutstanding at December 31, 2001

1,001,500

$
25.00Granted

1,096,352

$
24.99Cancelled

(46,125
)
$
25.00Exercised




Outstanding at December 31, 2002

2,051,727

$
24.99Granted

737,751

$
24.39Cancelled

(11,500
)
$
24.65Exercised

(487,655
)
$
24.90Outstanding at December 31, 2003

2,290,323

$
24.79Granted

539,654

$
28.48Cancelled

(12,666
)
$
24.90Exercised

(398,893
)
$
25.03Outstanding at December 31, 2004

2,418,418

$
25.60


The following table summarizes information about stock options outstanding at December 31, 2004:

Options Outstanding



Options ExercisableRange of
Exercise Prices

Number
Outstanding
at 12/31/04

Weighted-Average
Remaining
Contractual Life

Weighted-Average
Exercise Price

Number
Exercisable
at 12/31/04

Weighted-Average
Exercise Price$23.95-$28.65

2,418,418

7.35

$
25.60

1,304,702

$
24.90


For purposes of the pro forma amounts below, the Company recognizes compensation expense over the vesting period. The per-share
weighted-average fair value of the 539,654 options issued during the year ended December 31, 2004 was $1.98. The per-share fair value of each option granted is estimated on the date
of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Dividend

$
2.10Expected life of option


6 yearsRisk-free interest rate


3%Expected stock price volatility


20%


The compensation cost under SFAS 123 for the stock performance-based plan would have been $0.7 million, $0.6 million and
$0.4 million for the years ended December 31, 2004, 2003 and 2002. Had compensation cost for the Company's grants under stock-based compensation plans been determined consistent with
SFAS 123, the Company's net income (loss), and net income (loss) per common share

F-33

---



for
2004, 2003 and 2002 would approximate the pro forma amounts below (in thousands, except per-share data):

Year Ended December 31,2004

2003

2002Net income (loss) attributable to common shareholders

$
43,964

$
40,114

$
(590
)Net income (loss) per common sharebasic

$
0.94

$
0.96

$
(0.02
)Net income (loss) per common sharediluted

$
0.93

$
0.95

$
(0.02
)


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

Subsequent
to December 31, 2004, pursuant to the Plan, the Company granted 112,500 stock options at an exercise price of $30.90 per share, which appoximates the fair value of the
Company's common stock. The options vest at a rate of one-third per year on the anniversary of the grant date and have a duration of ten years.

Restricted Shares

In July 2002, the Board of Directors approved the issuance over five years of an aggregate of up to 775,000 shares of restricted stock with no exercise
price to members of senior management of the Company. The Company issued the first installment of 155,000 shares in July 2002 based on a fair market value per share of $23.65 on the grant date.
These shares were subject to risk of forfeiture and transfer restrictions, which terminated on March 1, 2003, based on the continued employment of these individuals with the Company through
that date. During the years ended December 31, 2003 and 2002, the Company recognized $1.1 million and $2.6 million of compensation expense related to these shares, respectively.

On
March 3, 2003, the Company issued the second installment 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 of these 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 the vesting of 20,000 shares issued to an
officer which were accelerated upon his departure from the Company in 2003.

On
March 1, 2004, the Company issued the third installment consisting of 135,000 shares (reduced from 155,000 to reflect the termination 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 transfer restrictions, which terminated on March 1, 2005, based on the continued employment of these
individuals with the Company through that date. During the year ended December 31, 2004, the Company recognized $3.3 million of compensation expense related to these shares, including
the vesting of 1,000 shares issued to an officer which were accelerated upon her departure from the Company. The unamortized compensation expense of $0.7 million is included as unearned
compensation on the accompanying balance sheet and will be amortized over the remaining vesting period.

F-34

---



On
March 4, 2005, the Company issued the fourth installment consisting of 134,000 shares (reduced from 155,000 to reflect the termination of employment of two of the participants)
based on a value of $30.90 per share. These shares are subject to risk of forfeiture and transfer restrictions, which terminate on March 1, 2006, based on the continued employment of these
individuals with the Company through that date.

Upon
completion of the IPO in the second quarter of 2002, all contractual restrictions on transfer and forfeiture provisions that existed on restricted shares previously granted to
members of senior management and other key employees terminated. As a result, in 2002, the Company incurred compensation expense, including the reimbursement of a portion of the taxes paid by two
employees, of $6.8 million on the restricted shares, which is comprised of $4.3 million of stock compensation expense and $2.5 million for the reimbursement of a portion of such
taxes.

During
the years ended December 31, 2004, 2003 and 2002, the Company recognized $0.8 million, $1.2 million and $1.1 million, respectively, of compensation
expense, including the reimbursement of a portion of the taxes to be paid by one employee, related to 119,500 shares of restricted stock that were issued by the Company on March 3, 2003 for
2002 performance. The Company recognizes compensation expense with respect to performance-based stock grants ratably over the performance and three-year vesting periods. The unamortized
compensation expense of $0.6 million is included as unearned compensation on the accompanying balance sheet and will be amortized over the remaining vesting period.

During
the years ended December 31, 2004 and 2003, the Company recognized $1.1 million and $1.1 million, respectively of compensation expense, including the
reimbursement of a portion of the taxes to be paid by one employee, related to 108,000 shares of restricted stock that were issued by the Company on February 17, 2004 for 2003 performance. The
Company recognizes compensation expense with respect to performance-based stock grants ratably over the performance and three-year vesting periods. The unamortized compensation expense of
$1.5 million is included as unearned compensation on the accompanying balance sheet and will be amortized over the remaining vesting period.

During
the year ended December 31, 2004, the Company accrued $1.5 million of compensation expense, including the reimbursement of a portion of the taxes to be paid by one
employee, related to approximately 143,800 shares of restricted stock that were issued by the Company on March 4, 2005. The Company recognizes compensation expense with respect to
performance-based stock grants ratably over the performance and three-year vesting periods.

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

2004

2003

2002Unvested shares outstanding at beginning of year

238,500

155,000

84,111Shares issued

243,000

276,500

263,565Shares forfeited





Shares vested

(175,500
)
(193,000
)
(192,676
)Unvested shares outstanding at end of year

306,000

238,500

155,000


F-35

---



13.    Commitments and Contingencies

Retirement Savings Plan

Effective in January 2000, the Company began to offer its employees a retirement savings plan qualified under Section 401(k) of the Internal Revenue
Code. Under the Plan, the Company provides matching contributions. These matching contributions are currently equal to 100% of the employee's contribution up to 3% of the employee's compensation, and
50% of the employee's contribution in excess of 3% and up to 5% of the employee's compensation. These employer contributions aggregated $0.5 million, $0.3 million, and
$0.3 million in 2004, 2003 and 2002, respectively, and vested immediately.

Effective
in January 2000, the Company adopted a non-qualified executive retirement plan ("SERP"). Benefits payable under the SERP are based upon a percentage of each
participant's average annual cash compensation, consisting of base salary and cash bonus, for the three calendar years of the last ten years of employment which produce the highest average amount.
Benefits earned under the SERP vest over varying periods ranging from eight to ten years. Participants may begin to receive payments under the SERP following either their 60th or 65th birthday
depending on the terms of their individual agreement. Benefits under the SERP will terminate upon the participant's death. The Company has accrued a liability pursuant to the SERP of
$5.9 million and $4.2 million, at December 31, 2004 and 2003, respectively, representing the Company's unfunded accumulated benefit obligation. Such amounts are classified in
other liabilities in the accompanying balance sheets. In addition, $1.2 million, representing a portion of unamortized prior service cost, has been recorded as an intangible asset in other
assets as of December 31, 2004. As of December 31, 2004, the Company does not expect to make benefit payments or contributions in the next five years.

The
following is a reconciliation of the accumulated post retirement obligation, assuming a salary increase rate of 5%, and a discount rate of 5.75% 6.0%, and 6.50% during the years
ended December 31, 2004, 2003, and 2002, respectively:

|                                                    |                   | 2004 |           | 2003    |   | 2002     
|--------------------------------------------------- | ----------------- | ---- | --------- | ------- | - | ---------
|Accumulated benefit obligation at beginning of year |                   | $    | 4,174,378 |         | $ | 2,899,301
|Net periodic benefit cost:                          |                   |      |           |         |   |          
|                                                    | Service cost      |      |           | 441,878 |   |          
|                                                    | Interest cost     |      |           | 325,155 |   |          
|                                                    | Past service cost |      |           | 357,935 |   |          
|                                                    | Actuarial loss    |      |           | (17,222 | ) |          
|                                                    |                   |      |           |         |   |          
|Net periodic benefit cost                           |                   |      | 1,107,746 |         |   | 1,275,077
|Settlement paid to SERP participant                 |                   |      | (576,000  | )       |   |         
|Recognition of additional minimum liability         |                   |      | 1,155,260 |         |   |         
|                                                    |                   |      |           |         |   |          
|Accumulated benefit obligation at end of year       |                   | $    | 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, representing the Company's full obligation to that participant pursuant to a contractual termination of the SERP.

F-36

---



Legal and Other Matters

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

On
November 29, 2002, the court granted the Company's motion to dismiss Mr. Donahue's claims. Mr. Donahue subsequently 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 decision dismissing
Mr. Donahue's claims. The Appellate Court's decision reverts the 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 and the Company intends to vigorously defend against these claims.

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

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

Construction Contracts

The Company has entered into construction contracts related to tenant improvements, out parcel development and re-development of various shopping
centers. Unexpended but committed amounts under construction contracts amounted to $13.8 million as of December 31, 2004.

14.    Derivative and Hedging Activities

Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging
Activities, as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. As required by SFAS 133, the Company records all derivatives on the balance sheet

F-37

---



at
fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to
changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. As of December 31, 2004, no
derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Company does not use derivatives for trading or speculative purposes and
currently does not have any derivatives that are not designated as hedges.

Derivatives
used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions which are utilized by the Company, are considered cash flow
hedges. The Company's objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks. To accomplish this
objective, the Company primarily uses interest rate swaps as part of its cash flow hedging strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate
amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. To date, such derivatives have been used to hedge the
variable cash flows associated with floating-rate debt and forecasted interest payments on forecasted issuances of debt.

For
derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive loss (a component of
shareholders' equity) and subsequently reclassified to earnings when the hedged transactions affect earnings, and the ineffective portion of changes in the fair value of the derivative is recognized
directly in earnings.

During
2004, the Company entered into forward-starting interest rate swaps to mitigate the risk of changes in forecasted interest payments on forecasted issuances of
long-term debt. In March 2004, the Company used such derivatives to hedge the variability in future cash flows related to $192.5 million of forecasted debt issuances. The Company
issued the hedged debt on March 29, 2004 and subsequently terminated the related forward-starting interest rate swaps at their fair value of $1.2 million. This amount was deferred in
other comprehensive loss and is being reclassified as a reduction in interest expense as the hedged interest payments affects earnings. Proceeds from the termination are included in cash flows from
financing activities in the accompanying statement of cash flows. In September 2004, the Company used such derivatives to hedge variability in future cash flows related to $146.6 million of
forecasted debt issuances. The Company issued the hedged debt on October 15, 2004 and subsequently terminated the related forward starting interest rate swaps at their current fair value of
($1.7) million. This amount was deferred in other comprehensive loss and is being reclassified as an increase in interest expense as the hedged interest payments affect earnings. Payments related to
this termination are included in cash flows from financing activities in the accompanying statement of cash flows.

For
the year ended December 31, 2004, the change in net realized losses for derivatives designated as cash flow hedges was $0.5 million and is separately disclosed in the
statement of changes in shareholders' equity. This change is entirely comprised of reclassification of the net realized gains and losses to earnings as the hedged interest payments affect earnings.

No
hedge ineffectiveness on cash flow hedges was recognized during 2004. Amounts reported in other comprehensive loss related to these swaps at December 31, 2004 will be
reclassified to interest expense as scheduled hedged interest payments are made. As of December 31, 2004, the Company

F-38

---



estimates
that $0.2 million will be reclassified from other comprehensive loss as an increase in interest expense during the next 12 months.

15.    Guarantees of Notes Payable

During 2004, the Company issued $350.0 million aggregate principal amount of its unsecured notes in two separate transactions (the "Existing Notes") to
certain initial purchasers, who then sold those notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The
Existing Notes were guaranteed (the "Existing Guarantees") by the Company's two operating partnerships, Heritage Property Investment Limited Partnership and Bradley Operating Limited Partnership (the
"Guarantors"). Each of the Existing Guarantees is full and unconditional and joint and several.

Because
these notes were sold pursuant to exemptions from registration under the Securities Act, the Existing Notes and Existing Guarantees were subject to transfer restrictions. In
connection with the issuance of the Existing Notes and Existing Guarantees, the Company and the Guarantors entered into a registration rights agreements with the initial purchasers in which the
Company and the Guarantors agreed to register with the Securities and Exchange Commission ("SEC") under the Securities Act new notes ("Registered Notes") and new guarantees ("Registered Guarantees")
to be exchanged for the Existing Notes and Existing Guarantees. Each of the Registered Guarantees is full and unconditional and joint and several.

This
footnote is being provided pursuant to Rule 3-10(f) of Regulation S-X in lieu of providing separate annual financial statements with respect to
Heritage Property Investment Limited Partnership, a wholly owned Guarantor. Financial statements with respect to Bradley Operating Limited Partnership, a non-wholly owned Guarantor, are
separately filed with the SEC.

The
following represents summarized condensed consolidating financial information as of December 31, 2004 and 2003 with respect to the financial position of the Company and for
the years ended December 31, 2004, 2003, and 2002 with respect to the results of operations and cash flows of the Company and its subsidiaries. The Parent Company column presents the financial
information of the Company, the primary obligor of the Registered Notes, under the equity method of accounting. The Guarantors' columns are segregated between Bradley Operating Limited Partnership,
which is 98.5% owned by the Company, and Heritage Property Investment Limited Partnership, a wholly-owned

F-39

---



subsidiary
of the Company. The Non-Guarantor Subsidiaries column presents the financial information of all non-guarantor subsidiaries, which consists primarily of subsidiaries
of the Guarantors.

Condensed Consolidating Balance Sheets

|                                                       |                                                              |   |         | Guarantors |   |           |           |   |         |        
|------------------------------------------------------ | ------------------------------------------------------------ | - | ------- | ---------- | - | --------- | --------- | - | ------- | -------
|
|
|Assets                                                 |                                                              |   |         |            |   |           |           |   |         |        
|Real estate investments, net                           |                                                              | $ |        |            | $ | 1,009,467 |           | $ | 289,352 |        
|Other assets                                           |                                                              |   | 381,367 |            |   | 106,532   |           |   | 14,051  |        
|Investment in subsidiaries                             |                                                              |   | 916,511 |            |   | 186,749   |           |   | 325,997 |        
|                                                       |                                                              |   |         |            |   |           |           |   |         |        
|                                                       | Total assets                                                 |   | $       | 1,297,878  |   | $         | 1,302,748 |   | $       | 629,400
|                                                       |                                                              |   |         |            |   |           |           |   |         |        
|Liabilities and Shareholders' Equity/Partners' Capital |                                                              |   |         |            |   |           |           |   |         |        
|Liabilities:                                           |                                                              |   |         |            |   |           |           |   |         |        
|Indebtedness                                           |                                                              |   | 348,273 |            |   | 689,230   |           |   | 219,900 |        
|Other liabilities                                      |                                                              |   | 28,297  |            |   | 59,957    |           |   | 33,440  |        
|                                                       |                                                              |   |         |            |   |           |           |   |         |        
|                                                       | Total liabilities                                            |   |         | 376,570    |   |           | 749,187   |   |         | 253,340
|Minority interests/redeemable equity                   |                                                              |   |        |            |   | 16,752    |           |   |        |        
|Shareholders' equity/partners' capital                 |                                                              |   | 921,308 |            |   | 536,809   |           |   | 376,060 |        
|                                                       |                                                              |   |         |            |   |           |           |   |         |        
|                                                       | Total liabilities and shareholders' equity/partners' capital |   | $       | 1,297,878  |   | $         | 1,302,748 |   | $       | 629,400
|                                                       |                                                              |   |         |            |   |           |           |   |         |        

F-40

---



|                                                       |                                                              |   |         | Guarantors |   |           |           |   |         |        
|------------------------------------------------------ | ------------------------------------------------------------ | - | ------- | ---------- | - | --------- | --------- | - | ------- | -------
|
|
|Assets                                                 |                                                              |   |         |            |   |           |           |   |         |        
|Real estate investments, net                           |                                                              | $ |        |            | $ | 1,026,975 |           | $ | 299,794 |        
|Other assets                                           |                                                              |   | 24,259  |            |   | 22,483    |           |   | 8,269   |        
|Investment in subsidiaries                             |                                                              |   | 958,472 |            |   | 150,421   |           |   | 267,683 |        
|                                                       |                                                              |   |         |            |   |           |           |   |         |        
|                                                       | Total assets                                                 |   | $       | 982,731    |   | $         | 1,199,879 |   | $       | 575,746
|                                                       |                                                              |   |         |            |   |           |           |   |         |        
|Liabilities and Shareholders' Equity/Partners' Capital |                                                              |   |         |            |   |           |           |   |         |        
|Liabilities:                                           |                                                              |   |         |            |   |           |           |   |         |        
|Indebtedness                                           |                                                              |   |        |            |   | 480,842   |           |   | 170,075 |        
|Other liabilities                                      |                                                              |   | 24,259  |            |   | 51,698    |           |   | 31,868  |        
|                                                       |                                                              |   |         |            |   |           |           |   |         |        
|                                                       | Total liabilities                                            |   |         | 24,259     |   |           | 532,540   |   |         | 201,943
|Minority interest/redeemable equity                    |                                                              |   |        |            |   | 84,681    |           |   |        |        
|Total shareholders' equity/partners' capital           |                                                              |   | 958,472 |            |   | 582,658   |           |   | 373,803 |        
|                                                       |                                                              |   |         |            |   |           |           |   |         |        
|                                                       | Total liabilities and shareholders' equity/partners' capital |   | $       | 982,731    |   | $         | 1,199,879 |   | $       | 575,746
|                                                       |                                                              |   |         |            |   |           |           |   |         |        

F-41

---



Condensed Consolidating Statements of Operations

|                                                                                       |                                               |                |        | Guarantors |       |         |        |         |        |        |       
|-------------------------------------------------------------------------------------- | --------------------------------------------- | -------------- | ------ | ---------- | ----- | ------- | ------ | ------- | ------ | ------ | ------
|
|
|Revenue                                                                                |                                               | $              | 9,087  |            | $     | 153,559 |        | $       | 45,760 |        | $     
|                                                                                       |                                               |                |        |            |       |         |        |         |        |        |       
|Expenses:                                                                              |                                               |                |        |            |       |         |        |         |        |        |       
|                                                                                       | Operating expenses                            |                |        |           |       |         | 48,858 |         |        | 10,480 |       
|                                                                                       | Depreciation and amortization                 |                |        |           |       |         | 41,182 |         |        | 12,667 |       
|                                                                                       | Interest                                      |                |        | 9,447      |       |         | 32,152 |         |        | 13,350 |       
|                                                                                       | General and administrative                    |                |        | 100        |       |         | 14,264 |         |        | 6,095  |       
|                                                                                       |                                               |                |        |            |       |         |        |         |        |        |       
|                                                                                       |                                               | Total expenses |        |            | 9,547 |         |        | 136,456 |        |        | 42,592
|                                                                                       |                                               |                |        |            |       |         |        |         |        |        |       
|Income (loss) before gain on sale of real estate investments and marketable securities |                                               |                | (460   | )          |       | 17,103  |        |         | 3,168  |        |       
|                                                                                       |                                               |                |        |            |       |         |        |         |        |        |       
|Gain on sale of market securities                                                      |                                               |                |       |            |       |        |        |         | 245    |        |       
|Gain on sale of real estate investment                                                 |                                               |                |       |            |       | 28      |        |         |       |        |       
|                                                                                       |                                               |                |        |            |       |         |        |         |        |        |       
|Income (loss) before allocation to minority interests                                  |                                               |                | (460   | )          |       | 17,131  |        |         | 3,413  |        |       
|Income allocated to exchangeable partnership units                                     |                                               |                | (265   | )          |       |        |        |         |       |        |       
|Income allocated to Series B & C Preferred Units                                       |                                               |                |       |            |       | (2,176  | )      |         |       |        |       
|Subsidiary earnings                                                                    |                                               |                | 45,433 |            |       | 10,364  |        |         | 12,047 |        |       
|                                                                                       |                                               |                |        |            |       |         |        |         |        |        |       
|                                                                                       | Income before discontinued operations         |                |        | 44,708     |       |         | 25,319 |         |        | 15,460 |       
|Discontinued operations:                                                               |                                               |                |        |            |       |         |        |         |        |        |       
|                                                                                       | Operating income from discontinued operations |                |        |           |       |         | 532    |         |        | 164    |       
|                                                                                       | Gain on sale of discontinued operations       |                |        |           |       |         | 970    |         |        | 2,988  |       
|                                                                                       |                                               |                |        |            |       |         |        |         |        |        |       
|                                                                                       | Income from discontinued operations           |                |        |           |       |         | 1,502  |         |        | 3,152  |       
|                                                                                       |                                               |                |        |            |       |         |        |         |        |        |       
|Net income attributable to common shareholders                                         |                                               | $              | 44,708 |            | $     | 26,821  |        | $       | 18,612 |        | $     
|                                                                                       |                                               |                |        |            |       |         |        |         |        |        |       

F-42

---



|                                                   |                                               |                                                       |        | Guarantors |        |         |        |         |        |        |       
|-------------------------------------------------- | --------------------------------------------- | ----------------------------------------------------- | ------ | ---------- | ------ | ------- | ------ | ------- | ------ | ------ | ------
|
|
|Revenue                                            |                                               | $                                                     |       |            | $      | 152,107 |        | $       | 43,863 |        | $     
|                                                   |                                               |                                                       |        |            |        |         |        |         |        |        |       
|Expenses:                                          |                                               |                                                       |        |            |        |         |        |         |        |        |       
|                                                   | Operating Expenses                            |                                                       |        |           |        |         | 47,938 |         |        | 10,321 |       
|                                                   | Depreciation and amortization                 |                                                       |        |           |        |         | 39,152 |         |        | 12,416 |       
|                                                   | Interest                                      |                                                       |        |           |        |         | 25,813 |         |        | 14,205 |       
|                                                   | General and administrative                    |                                                       |        | 955        |        |         | 11,775 |         |        | 6,177  |       
|                                                   |                                               |                                                       |        |            |        |         |        |         |        |        |       
|                                                   |                                               | Total expenses                                        |        |            | 955    |         |        | 124,678 |        |        | 43,119
|                                                   |                                               |                                                       |        |            |        |         |        |         |        |        |       
|                                                   |                                               | Income (loss) before allocation to minority interests |        |            | (955   | )       |        | 27,429  |        |        | 744   
|                                                   |                                               |                                                       |        |            |        |         |        |         |        |        |       
|Income allocated to exchangeable partnership units |                                               |                                                       | (257   | )          |        |        |        |         |       |        |       
|Income allocated to Series B & C Preferred Units   |                                               |                                                       |       |            |        | (6,656  | )      |         |       |        |       
|Subsidiary earnings                                |                                               |                                                       | 41,945 |            |        | 9,778   |        |         | 5,813  |        |       
|                                                   |                                               |                                                       |        |            |        |         |        |         |        |        |       
|                                                   | Income before discontinued operations         |                                                       |        | 40,733     |        |         | 30,551 |         |        | 6,557  |       
|                                                   |                                               |                                                       |        |            |        |         |        |         |        |        |       
|Discontinued operations:                           |                                               |                                                       |        |            |        |         |        |         |        |        |       
|                                                   | Operating income from discontinued operations |                                                       |        |           |        |         | 615    |         |        | 1,539  |       
|                                                   | Gain on sale of discontinued operations       |                                                       |        |           |        |         |       |         |        | 2,683  |       
|                                                   |                                               |                                                       |        |            |        |         |        |         |        |        |       
|                                                   | Income from discontinued operations           |                                                       |        |           |        |         | 615    |         |        | 4,222  |       
|                                                   |                                               |                                                       |        |            |        |         |        |         |        |        |       
|                                                   |                                               | Net income attributable to common shareholders        |        | $          | 40,733 |         | $      | 31,166  |        | $      | 10,779
|                                                   |                                               |                                                       |        |            |        |         |        |         |        |        |       

F-43

---



|                                                            |                                               |                                                       |         | Guarantors |        |         |        |         |        |        |       
|----------------------------------------------------------- | --------------------------------------------- | ----------------------------------------------------- | ------- | ---------- | ------ | ------- | ------ | ------- | ------ | ------ | ------
|
|
|Revenue                                                     |                                               | $                                                     |        |            | $      | 145,528 |        | $       | 41,022 |        | $     
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|Expenses:                                                   |                                               |                                                       |         |            |        |         |        |         |        |        |       
|                                                            | Operating expenses                            |                                                       |         |           |        |         | 45,509 |         |        | 9,844  |       
|                                                            | Depreciation and amortization                 |                                                       |         |           |        |         | 36,773 |         |        | 11,146 |       
|                                                            | Interest                                      |                                                       |         | 2,712      |        |         | 31,196 |         |        | 13,568 |       
|                                                            | General and administrative                    |                                                       |         | 808        |        |         | 15,324 |         |        | 4,484  |       
|                                                            | Loss on prepayment of debt                    |                                                       |         | 2,534      |        |         | 4,215  |         |        |       |       
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|                                                            |                                               | Total expenses                                        |         |            | 6,054  |         |        | 133,017 |        |        | 39,042
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|                                                            |                                               | Income before net gains                               |         |            | (6,054 | )       |        | 12,511  |        |        | 1,980 
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|Net gains on sales of real estate investments and equipment |                                               |                                                       |        |            |        |        |        |         | 1,372  |        |       
|Net derivative gains                                        |                                               |                                                       |        |            |        | (7,766  | )      |         |       |        |       
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|                                                            |                                               | Income before allocation to minority interests        |         |            | (6,054 | )       |        | 4,745   |        |        | 3,352 
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|Income allocated to exchangeable partnership units          |                                               |                                                       | (216    | )          |        |         |        |         |        |        |       
|Income allocated to Series B & C Preferred Units            |                                               |                                                       |        |            |        | (6,656  | )      |         |       |        |       
|Subsidiary earnings                                         |                                               |                                                       | 20,713  |            |        | 8,336   |        |         | 7,680  |        |       
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|                                                            |                                               | Income before discontinued operations                 |         |            | 14,443 |         |        | 6,425   |        |        | 11,032
|Discontinued operations:                                    |                                               |                                                       |         |            |        |         |        |         |        |        |       
|                                                            | Operating income from discontinued operations |                                                       |         |           |        |         | 755    |         |        | 2,117  |       
|                                                            | Gain on sale of discontinued operations       |                                                       |         |           |        |         |       |         |        | 384    |       
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|                                                            |                                               | Income from discontinued operations                   |         |            |       |         |        | 755     |        |        | 2,501 
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|                                                            |                                               | Net income                                            |         |            | 14,443 |         |        | 7,180   |        |        | 13,533
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|Preferred stock distributions                               |                                               |                                                       | (14,302 | )          |        |        |        |         |       |        |       
|Accretion of redeemable equity                              |                                               |                                                       | (328    | )          |        |        |        |         |       |        |       
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       
|                                                            |                                               | Net (loss) income attributable to common shareholders |         | $          | (187   | )       | $      | 7,180   |        | $      | 13,533
|                                                            |                                               |                                                       |         |            |        |         |        |         |        |        |       

F-44

---



Condensed Consolidating Statements of Cash Flows

|                                     |                     |   |         | Guarantors |   |         |       |   |         |       |  
|------------------------------------ | ------------------- | - | ------- | ---------- | - | ------- | ----- | - | ------- | ----- | -
|
|
|Cash flows from operating activities |                     | $ | 93,590  |            | $ | 56,696  |       | $ | 26,547  |       | $
|Cash flows from investing activities |                     |   |        |            |   | (16,449 | )     |   | 1,696   |       |  
|Cash flows from financing activities |                     |   | (93,590 | )          |   | (37,814 | )     |   | (28,423 | )     |  
|                                     |                     |   |         |            |   |         |       |   |         |       |  
|Change in cash and cash equivalents  |                     |   |        |            |   | 2,433   |       |   | (180    | )     |  
|                                     | Beginning of period |   |         |           |   |         | 1,292 |   |         | 1,139 |  
|                                     |                     |   |         |            |   |         |       |   |         |       |  
|                                     | End of period       |   | $       |           |   | $       | 3,725 |   | $       | 959   |  
|                                     |                     |   |         |            |   |         |       |   |         |       |  

|                                     |                     |   |         | Guarantors |   |         |       |   |          |       |  
|------------------------------------ | ------------------- | - | ------- | ---------- | - | ------- | ----- | - | -------- | ----- | -
|
|
|Cash flows from operating activities |                     | $ | 87,727  |            | $ | 82,919  |       | $ | 43,103   |       | $
|Cash flows from investing activities |                     |   |        |            |   | (15,769 | )     |   | (133,119 | )     |  
|Cash flows from financing activities |                     |   | (87,727 | )          |   | (66,199 | )     |   | 91,855   |       |  
|                                     |                     |   |         |            |   |         |       |   |          |       |  
|Change in cash and cash equivalents  |                     |   |        |            |   | 951     |       |   | 1,839    |       |  
|                                     | Beginning of period |   |         |           |   |         | 341   |   |          | (700  | )
|                                     |                     |   |         |            |   |         |       |   |          |       |  
|                                     | End of period       |   | $       |           |   | $       | 1,292 |   | $        | 1,139 |  
|                                     |                     |   |         |            |   |         |       |   |          |       |  

|                                     |                     |   |         | Guarantors |   |          |       |   |         |      |  
|------------------------------------ | ------------------- | - | ------- | ---------- | - | -------- | ----- | - | ------- | ---- | -
|
|
|Cash flows from operating activities |                     | $ | 80,330  |            | $ | 57,927   |       | $ | 42,428  |      | $
|Cash flows from investing activities |                     |   | (220    | )          |   | (114,658 | )     |   | (10,822 | )    |  
|Cash flows from financing activities |                     |   | (80,110 | )          |   | 53,515   |       |   | (31,600 | )    |  
|                                     |                     |   |         |            |   |          |       |   |         |      |  
|Change in cash and cash equivalents  |                     |   |        |            |   | (3,216   | )     |   | 6       |      |  
|                                     | Beginning of period |   |         |           |   |          | 3,557 |   |         | (706 | )
|                                     |                     |   |         |            |   |          |       |   |         |      |  
|                                     | End of period       |   | $       |           |   | $        | 341   |   | $       | (700 | )
|                                     |                     |   |         |            |   |          |       |   |         |      |  

F-45

---



16.    Supplementary Quarterly Data (unaudited)

The tables below reflect the Company's selected quarterly information for the years ended December 31, 2004, and 2003. Certain prior quarter amounts have
been reclassified to conform to the current presentation of discontinued operations (in thousands, except per-share data):

|                                               |  | Quarter ended
|---------------------------------------------- |  | -------------
|
|2004                                           |  |              
|Revenue from rentals and recoveries            |  | $            
|Net income                                     |  | $            
|Net income attributable to common shareholders |  | $            
|Basic and diluted net income per common share* |  | $            

|                                               |  | Quarter ended
|---------------------------------------------- |  | -------------
|
|2003                                           |  |              
|Revenue from rentals and recoveries            |  | $            
|Net income                                     |  | $            
|Net income attributable to common shareholders |  | $            
|Basic and diluted net income per common share* |  | $            

---

17.    Newly Issued Accounting Standards

In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 123R, Share-Based
Compensation("SFAS No. 123R"). SFAS No. 123R supersedes APB Opinion No. 25,Accounting
for Stock Issued to Employees, 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 based on their fair values. The grant-date fair value of employee share options and similar
instruments will be estimated using an option-pricing model adjusted for any unique characteristics of a particular instrument. If an equity award is modified after the grant date, incremental
compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The Company
does not expect the adoption of SFAS No. 123R to have a material impact on the Company's results of operations, financial position, or liquidity.

In
December 2004, the FASB issued SFAS No. 153,Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29, ("SFAS
No. 153"). The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured on the fair value of assets exchanged. SFAS
No. 153 eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a broader exception for exchanges of nonmonetary assets that do not have commercial
substance. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not expect the adoption of SFAS No. 153
to have a material impact on the Company's results of operations, financial position, or liquidity.

F-46

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                                 |  |   |         | Initial Cost to the Company |   |       |  | Gross Amount Carried at December 31, 2004 |        |  |   |      
|------------------------------------------------ |  | - | ------- | --------------------------- | - | ----- |  | ----------------------------------------- | ------ |  | - | -----
|
|RETAIL SHOPPING CENTERS                          |  |   |         |                             |   |       |  |                                           |        |  |   |      
|ALABAMA                                          |  |   |         |                             |   |       |  |                                           |        |  |   |      
|Montgomery Commons
Montgomery, AL                |  | $ | 8,506   |                             | $ | 2,527 |  | $                                         | 8,459  |  | $ | 3    
|Mongtomery Towne Center
Montgomery, AL           |  |   | 7,043   |                             |   | 4,307 |  |                                           | 14,421 |  |   | 7    
|Riverchase Village Shopping Center
Hoover, AL    |  |   | 9,764   |                             |   | 4,094 |  |                                           | 13,718 |  |   | 1,451
|CONNECTICUT                                      |  |   |         |                             |   |       |  |                                           |        |  |   |      
|Torrington Plaza
Torrington, CT                  |  |   | 235,465 | (1)                         |   | 2,548 |  |                                           | 8,538  |  |   | 320  
|FLORIDA                                          |  |   |         |                             |   |       |  |                                           |        |  |   |      
|Barton Commons
Rockledge, FL                     |  |   |         | (1)                         |   | 1,652 |  |                                           | 5,546  |  |   | 444  
|Naples Shopping Center
Naples, FL                |  |   | 79,827  | (2)                         |   | 4,783 |  |                                           | 16,029 |  |   | 335  
|Park Shore Shopping Center
Naples, FL            |  |   |         | (1)                         |   | 3,099 |  |                                           | 10,391 |  |   | 1,773
|Shoppers Haven Shopping Center
Pompano Beach, FL |  |   |        |                             |   | 3,286 |  |                                           | 10,933 |  |   | 3,146

S-III-1

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                                   |  |   |     | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |       |  |       
|-------------------------------------------------- |  | - | --- | --------------------------- |  | ------ |  | ----------------------------------------- |  | ----- |  | ------
|
|Venetian Isle Shopping Center
Lighthouse Point, FL |  |   | (1) | 3,605                       |  | 12,084 |  | 851                                       |  | 3,606 |  | 12,934
|GEORGIA                                            |  |   |     |                             |  |        |  |                                           |  |       |  |       
|Shenandoah Plaza
Newnan, GA                        |  |  |     | 1,352                       |  | 4,530  |  | 81                                        |  | 1,353 |  | 4,610 
|ILLINOIS                                           |  |   |     |                             |  |        |  |                                           |  |       |  |       
|Bartonville Square
Bartonville, IL                 |  |  |     | 572                         |  | 1,914  |  | 227                                       |  | 572   |  | 2,141 
|Butterfield Square
Libertyville, IL                |  |  |     | 3,328                       |  | 11,139 |  | 164                                       |  | 3,344 |  | 11,287
|The Commons of Chicago Ridge
Chicago Ridge, IL     |  |  |     | 9,254                       |  | 30,982 |  | 2,330                                     |  | 9,273 |  | 33,293
|The Commons of Crystal Lake
Crystal Lake, IL       |  |  |     | 7,193                       |  | 24,079 |  | 699                                       |  | 7,356 |  | 24,615
|Crossroads Centre
Fairview Heights, IL             |  |  |     | 3,614                       |  | 12,099 |  | 711                                       |  | 3,762 |  | 12,662
|Fairhills Shopping Center
Springfield, IL          |  |  |     | 1,369                       |  | 4,583  |  | 257                                       |  | 1,369 |  | 4,840 
|Heritage Square
Naperville, IL                     |  |  |     | 5,554                       |  | 18,593 |  | 560                                       |  | 5,554 |  | 19,153
|High Point Centre
Lombard, IL                      |  |  |     | 5,621                       |  | 18,817 |  | 922                                       |  | 5,659 |  | 19,701

S-III-2

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                      |  |        |  | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |   |        |  |       
|------------------------------------- |  | ------ |  | --------------------------- |  | ------ |  | ----------------------------------------- | - | ------ |  | ------
|
|Long Meadow Commons
Mundelein, IL     |  | 10,028 |  | 3,507                       |  | 11,741 |  |                                          |   | 3,507  |  | 11,741
|Parkway Pointe
Springfield, IL        |  |       |  | 1,059                       |  | 3,546  |  | (1                                        | ) | 1,059  |  | 3,545 
|Rivercrest
Crestwood, IL              |  |       |  | 10,043                      |  | 33,620 |  | 740                                       |   | 10,042 |  | 34,361
|Rollins Crossing
Round Lake Beach, IL |  |       |  | 3,839                       |  | 12,852 |  | 121                                       |   | 3,839  |  | 12,973
|Sangamon Center North
Springfield, IL |  |       |  | 2,450                       |  | 8,204  |  | 132                                       |   | 2,450  |  | 8,336 
|Sheridan Village
Peoria, IL           |  |       |  | 5,293                       |  | 17,716 |  | 1,712                                     |   | 5,585  |  | 19,136
|Sterling Bazaar
Peoria, IL            |  |       |  | 1,619                       |  | 5,419  |  | 206                                       |   | 1,750  |  | 5,494 
|Twin Oaks Centre
Silvis, IL           |  |       |  | 1,832                       |  | 6,131  |  | 295                                       |   | 1,841  |  | 6,417 
|Wardcliffe Shopping Center
Peoria, IL |  |       |  | 503                         |  | 1,682  |  | 244                                       |   | 566    |  | 1,863 
|Westview Center
Hanover Park, IL      |  |       |  | 6,527                       |  | 21,852 |  | 732                                       |   | 6,844  |  | 22,267

S-III-3

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                           |  |       |  | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |        |  |       
|------------------------------------------ |  | ----- |  | --------------------------- |  | ------ |  | ----------------------------------------- |  | ------ |  | ------
|
|INDIANA                                    |  |       |  |                             |  |        |  |                                           |  |        |  |       
|Apple Glen Crossing
Fort Wayne, IN         |  |      |  | 4,337                       |  | 14,518 |  | 88                                        |  | 4,337  |  | 14,606
|County Line Mall
Indianapolis, IN          |  |      |  | 4,616                       |  | 15,451 |  | 2,435                                     |  | 4,615  |  | 17,887
|Double Tree Plaza
Winfield, IN             |  |      |  | 1,404                       |  | 4,703  |  | 55                                        |  | 1,420  |  | 4,742 
|Germantown Shopping Center
Jasper, IN      |  |      |  | 1,829                       |  | 6,124  |  | 1,717                                     |  | 1,904  |  | 7,766 
|King's Plaza
Richmond, IN                  |  |      |  | 983                         |  | 3,290  |  | 498                                       |  | 1,111  |  | 3,660 
|Lincoln Plaza
New Haven, IN                |  |      |  | 1,241                       |  | 4,155  |  | 256                                       |  | 1,241  |  | 4,411 
|Martin's Bittersweet Plaza
Mishawaka, IN   |  |      |  | 1,110                       |  | 3,717  |  | 71                                        |  | 1,110  |  | 3,788 
|Meridian Village
Carmel, IN                |  | 5,348 |  | 3,120                       |  | 10,446 |  | 17                                        |  | 3,120  |  | 10,463
|Rivergate Shopping Center
Shelbyville, IN  |  |      |  | 1,299                       |  | 4,350  |  | 383                                       |  | 1,299  |  | 4,733 
|Sagamore Park Centre
West Lafayette, IN    |  |      |  | 1,768                       |  | 5,919  |  | 771                                       |  | 1,768  |  | 6,690 
|Speedway SuperCenter
Indianapolis, IN      |  |      |  | 11,446                      |  | 38,322 |  | 3,992                                     |  | 11,545 |  | 42,215
|The Village
Gary, IN                       |  |      |  | 2,649                       |  | 8,871  |  | 4,002                                     |  | 2,678  |  | 12,844
|Washington Lawndale Commons
Evansville, IN |  |      |  | 4,757                       |  | 15,924 |  | 1,984                                     |  | 5,447  |  | 17,218

S-III-4

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                         |  |       |  | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |       |  |       
|---------------------------------------- |  | ----- |  | --------------------------- |  | ------ |  | ----------------------------------------- |  | ----- |  | ------
|
|IOWA                                     |  |       |  |                             |  |        |  |                                           |  |       |  |       
|Burlington Plaza West
Burlington, IA     |  |      |  | 1,409                       |  | 4,719  |  | 187                                       |  | 1,519 |  | 4,796 
|Davenport Retail Center
Davenport, IA    |  |      |  | 1,355                       |  | 4,539  |  | 1                                         |  | 1,356 |  | 4,539 
|Kimberly West
Davenport, IA              |  |      |  | 1,380                       |  | 4,623  |  | 125                                       |  | 1,400 |  | 4,728 
|Parkwood Plaza
Urbandale, IA             |  |      |  | 1,950                       |  | 6,527  |  | 148                                       |  | 1,950 |  | 6,675 
|Southgate Shopping Center
Des Moines, IA |  | 2,395 |  | 994                         |  | 3,327  |  | 378                                       |  | 1,200 |  | 3,499 
|Spring Village
Davenport, IA             |  |      |  | 673                         |  | 2,255  |  | 546                                       |  | 780   |  | 2,694 
|Warren Plaza
Dubuque, IA                 |  |      |  | 1,439                       |  | 4,818  |  | 166                                       |  | 1,590 |  | 4,833 
|KANSAS                                   |  |       |  |                             |  |        |  |                                           |  |       |  |       
|Mid State Plaza
Salina, KS               |  |      |  | 1,718                       |  | 5,752  |  | 1,707                                     |  | 2,343 |  | 6,834 
|Santa Fe Square
Olathe, KS               |  |      |  | 2,465                       |  | 8,252  |  | 721                                       |  | 2,680 |  | 8,758 
|Shawnee Parkway Plaza
Shawnee, KS        |  |      |  | 1,176                       |  | 3,936  |  | 325                                       |  | 1,298 |  | 4,139 
|Village Plaza
Manhattan, KS              |  |      |  | 497                         |  | 1,664  |  | 16                                        |  | 499   |  | 1,678 
|Westchester Square
Lenexa, KS            |  |      |  | 3,128                       |  | 10,473 |  | 511                                       |  | 3,280 |  | 10,832
|West Loop Shopping Center
Manhattan, KS  |  |      |  | 3,285                       |  | 10,997 |  | 298                                       |  | 3,494 |  | 11,086

S-III-5

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                        |  |        |     | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |       |  |       
|--------------------------------------- |  | ------ | --- | --------------------------- |  | ------ |  | ----------------------------------------- |  | ----- |  | ------
|
|KENTUCKY                                |  |        |     |                             |  |        |  |                                           |  |       |  |       
|Dixie Plaza
Louisville, KY              |  |       |     | 719                         |  | 2,406  |  | 19                                        |  | 719   |  | 2,425 
|Midtown Mall
Ashland, KY                |  |       |     | 1,924                       |  | 6,444  |  | 492                                       |  | 1,925 |  | 6,935 
|Plainview Village Center
Louisville, KY |  |       |     | 2,701                       |  | 9,044  |  | 925                                       |  | 2,738 |  | 9,932 
|Stony Brook
Louisville, KY              |  |       |     | 3,319                       |  | 11,110 |  | 477                                       |  | 3,405 |  | 11,501
|MAINE                                   |  |        |     |                             |  |        |  |                                           |  |       |  |       
|Pine Tree Shopping Center
Portland, ME  |  |        | (1) | 2,390                       |  | 8,018  |  | 1,540                                     |  | 2,401 |  | 9,547 
|MASSACHUSETTS                           |  |        |     |                             |  |        |  |                                           |  |       |  |       
|Berkshire Crossing
Pittsfield, MA       |  | 21,140 |     | 6,964                       |  | 23,313 |  | 1,137                                     |  | 6,966 |  | 24,448
|Burlington Square
Burlington, MA        |  | 15,051 |     | 5,930                       |  | 19,853 |  |                                          |  | 5,930 |  | 19,853
|Lynn Market Place
Lynn, MA              |  |        | (1) | 1,340                       |  | 4,490  |  | 441                                       |  | 1,340 |  | 4,931 
|Watertower Plaza
Leominster, MA         |  |        | (1) | 6,669                       |  | 22,350 |  | 4,959                                     |  | 6,673 |  | 27,305
|Westgate Plaza
Westfield, MA            |  |        | (1) | 2,062                       |  | 6,911  |  | 198                                       |  | 2,079 |  | 7,092 

S-III-6

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                          |  |        |  | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |        |  |       
|----------------------------------------- |  | ------ |  | --------------------------- |  | ------ |  | ----------------------------------------- |  | ------ |  | ------
|
|MICHIGAN                                  |  |        |  |                             |  |        |  |                                           |  |        |  |       
|Cherry Hill Marketplace
Westland, MI      |  |       |  | 2,639                       |  | 4,113  |  | 6,351                                     |  | 2,640  |  | 10,463
|Grand Traverse Crossing
Traverse City, MI |  | 18,444 |  | 5,375                       |  | 17,993 |  | 357                                       |  | 5,452  |  | 18,273
|The Courtyard
Burton, MI                  |  |       |  | 2,039                       |  | 6,831  |  | 294                                       |  | 2,040  |  | 7,124 
|Redford Plaza
Redford, MI                 |  |       |  | 5,520                       |  | 18,482 |  | 745                                       |  | 5,521  |  | 19,226
|MINNESOTA                                 |  |        |  |                             |  |        |  |                                           |  |        |  |       
|Austin Town Center
Austin, MN             |  |       |  | 2,096                       |  | 7,015  |  | 126                                       |  | 2,095  |  | 7,142 
|Brookdale Square
Brooklyn Center, MN      |  |       |  | 2,191                       |  | 7,335  |  | 501                                       |  | 2,220  |  | 7,807 
|Burning Tree Plaza
Duluth, MN             |  |       |  | 3,355                       |  | 11,230 |  | 1,363                                     |  | 3,462  |  | 12,486
|Central Valu Center
Columbia Heights, MN  |  |       |  | 2,144                       |  | 7,176  |  | 57                                        |  | 2,193  |  | 7,184 
|Division Place
St. Cloud, MN              |  |       |  | 2,614                       |  | 8,751  |  | 248                                       |  | 2,638  |  | 8,975 
|Elk Park Center
Elk River, MN             |  | 8,244  |  | 4,440                       |  | 14,866 |  | 302                                       |  | 4,446  |  | 15,162
|Har Mar Mall
Roseville, MN                |  |       |  | 10,281                      |  | 34,418 |  | 4,460                                     |  | 10,322 |  | 38,837
|Hub West/Richfield Hub
Richfield, MN      |  |       |  | 3,269                       |  | 10,948 |  | 1,149                                     |  | 3,270  |  | 12,096

S-III-7

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                     |  |        |  | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |       |  |       
|------------------------------------ |  | ------ |  | --------------------------- |  | ------ |  | ----------------------------------------- |  | ----- |  | ------
|
|Marketplace at 42
Savage, MN         |  |       |  | 5,070                       |  | 16,973 |  | 502                                       |  | 5,094 |  | 17,451
|Roseville Center
Roseville, MN       |  |       |  | 1,571                       |  | 5,257  |  | 1,164                                     |  | 1,570 |  | 6,422 
|Southport Centre
Apple Valley, MN    |  | 9,924  |  | 3,915                       |  | 13,106 |  | 205                                       |  | 3,945 |  | 13,281
|Sun Ray Shopping Center
St. Paul, MN |  |       |  | 4,669                       |  | 15,628 |  | 5,937                                     |  | 4,725 |  | 21,509
|Ten Acres Center
West St. Paul, MN   |  |       |  | 2,368                       |  | 7,930  |  | 585                                       |  | 2,344 |  | 8,539 
|Terrace Mall
Robbinsdale, MN         |  |       |  | 2,030                       |  | 6,799  |  | 678                                       |  | 2,031 |  | 7,476 
|Westwind Plaza
Minnetonka, MN        |  |       |  | 2,511                       |  | 8,409  |  | 1,329                                     |  | 2,676 |  | 9,573 
|White Bear Hills
White Bear Lake, MN |  |       |  | 1,412                       |  | 4,732  |  | 110                                       |  | 1,413 |  | 4,841 
|MISSISSIPPI                          |  |        |  |                             |  |        |  |                                           |  |       |  |       
|County Line Plaza
Jackson, MS        |  | 18,506 |  | 6,731                       |  | 22,535 |  |                                          |  | 6,731 |  | 22,535
|MISSOURI                             |  |        |  |                             |  |        |  |                                           |  |       |  |       
|Clocktower Place
Florissant, MO      |  | 14,160 |  | 5,559                       |  | 18,612 |  | 141                                       |  | 5,559 |  | 18,753
|Ellisville Square
Ellisville, MO     |  |       |  | 2,577                       |  | 8,627  |  | 875                                       |  | 2,827 |  | 9,252 
|Grandview Plaza
Florissant, MO       |  |       |  | 3,555                       |  | 11,902 |  | 1,462                                     |  | 3,850 |  | 13,069

S-III-8

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                             |  |   |  | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |       |  |       
|-------------------------------------------- |  | - |  | --------------------------- |  | ------ |  | ----------------------------------------- |  | ----- |  | ------
|
|Hub Shopping Center
Independence, MO         |  |  |  | 1,578                       |  | 5,281  |  | 669                                       |  | 1,709 |  | 5,819 
|Liberty Corners
Liberty, MO                  |  |  |  | 1,904                       |  | 6,375  |  | 673                                       |  | 2,000 |  | 6,952 
|Maplewood Square
Maplewood, MO               |  |  |  | 1,080                       |  | 3,616  |  | 67                                        |  | 1,080 |  | 3,683 
|Marketplace at Independence
Independence, MO |  |  |  | 4,612                       |  | 15,441 |  | 286                                       |  | 4,663 |  | 15,676
|Prospect Plaza
Gladstone, MO                 |  |  |  | 3,479                       |  | 11,647 |  | 462                                       |  | 3,479 |  | 12,109
|Watts Mill Plaza
Kansas City, MO             |  |  |  | 3,180                       |  | 10,645 |  | 270                                       |  | 3,348 |  | 10,747
|NEBRASKA                                     |  |   |  |                             |  |        |  |                                           |  |       |  |       
|Bishop Heights
Lincoln, NE                   |  |  |  | 318                         |  | 1,062  |  | 61                                        |  | 370   |  | 1,071 
|Cornhusker Plaza
South Sioux City, NE        |  |  |  | 1,122                       |  | 3,754  |  | 98                                        |  | 1,190 |  | 3,784 
|Eastville Plaza
Fremont, NE                  |  |  |  | 1,137                       |  | 3,805  |  | 76                                        |  | 1,162 |  | 3,856 
|Edgewood Shopping Center
Lincoln, NE         |  |  |  | 2,890                       |  | 9,674  |  | 1,367                                     |  | 2,930 |  | 11,001
|The Meadows
Lincoln, NE                      |  |  |  | 1,037                       |  | 3,471  |  | 41                                        |  | 1,037 |  | 3,512 
|Miracle Hills Park
Omaha, NE                 |  |  |  | 1,739                       |  | 5,824  |  | 477                                       |  | 1,761 |  | 6,279 
|Stockyards Plaza
Omaha, NE                   |  |  |  | 2,122                       |  | 7,102  |  | 214                                       |  | 2,180 |  | 7,258 

S-III-9

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SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                            |  |       |     | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |       |  |       
|------------------------------------------- |  | ----- | --- | --------------------------- |  | ------ |  | ----------------------------------------- |  | ----- |  | ------
|
|NEW HAMPSHIRE                               |  |       |     |                             |  |        |  |                                           |  |       |  |       
|Bedford Mall
Bedford, NH                    |  |      |     | 4,686                       |  | 15,708 |  | 644                                       |  | 4,604 |  | 16,434
|Bedford Grove
Bedford, NH                   |  | 4,067 |     | 3,595                       |  | 12,037 |  | 124                                       |  | 3,602 |  | 12,154
|Capitol Shopping Center
Concord, NH         |  |       | (2) | 2,300                       |  | 7,713  |  | 1,761                                     |  | 2,353 |  | 9,421 
|Tri City Plaza
Somersworth, NH              |  |       | (2) | 1,875                       |  | 6,287  |  | 363                                       |  | 2,143 |  | 6,382 
|NEW JERSEY                                  |  |       |     |                             |  |        |  |                                           |  |       |  |       
|Cross Keys Commons
Washington Township, NJ  |  |      |     | 6,150                       |  | 20,589 |  | 3,416                                     |  | 5,800 |  | 24,355
|Morris Hills Shopping Center
Parsippany, NJ |  |       | (1) | 4,646                       |  | 15,565 |  | 706                                       |  | 4,646 |  | 16,271
|NEW MEXICO                                  |  |       |     |                             |  |        |  |                                           |  |       |  |       
|St. Francis Plaza
Santa Fe, NM              |  | 866   |     | 891                         |  | 2,989  |  | 55                                        |  | 946   |  | 2,989 
|NEW YORK                                    |  |       |     |                             |  |        |  |                                           |  |       |  |       
|College Plaza
Selden, NY                    |  |       | (1) | 3,093                       |  | 10,367 |  | 190                                       |  | 3,093 |  | 10,557
|Dalewood I Shopping Center
Hartsdale, NY    |  |       | (1) | 1,767                       |  | 5,918  |  | 90                                        |  | 1,767 |  | 6,008 
|Dalewood II Shopping Center
Hartsdale, NY   |  |       | (1) | 3,780                       |  | 12,661 |  | 4                                         |  | 3,784 |  | 12,661
|Dalewood III Shopping Center
Hartsdale, NY  |  |       | (1) | 2,646                       |  | 8,861  |  | 73                                        |  | 2,646 |  | 8,934 
|Falcaro's Plaza
Lawrence, NY                |  |       | (1) | 1,881                       |  | 6,301  |  | 109                                       |  | 1,881 |  | 6,410 

S-III-10

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                                      |  |        |     | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |       |  |       
|----------------------------------------------------- |  | ------ | --- | --------------------------- |  | ------ |  | ----------------------------------------- |  | ----- |  | ------
|
|Kings Park Shopping Center
Kings Park, NY             |  |        | (1) | 1,839                       |  | 6,160  |  | 379                                       |  | 1,839 |  | 6,539 
|Nesconset Shopping Center
Port Jefferson Station, NY  |  |        | (1) | 2,622                       |  | 8,787  |  | 771                                       |  | 2,859 |  | 9,321 
|Parkway Plaza
Carle Place, NY                         |  |        | (1) | 3,786                       |  | 12,678 |  | 437                                       |  | 3,786 |  | 13,115
|Roanoke Plaza
Riverhead, NY                           |  |        | (2) | 1,653                       |  | 5,541  |  | 349                                       |  | 1,653 |  | 5,890 
|Rockville Centre Shopping Center
Rockville Centre, NY |  |        | (1) | 897                         |  | 3,006  |  | 1,252                                     |  | 897   |  | 4,258 
|Salmon Run Plaza
Watertown, NY                        |  | 4,938  |     | 2,096                       |  | 7,015  |  | 172                                       |  | 2,103 |  | 7,180 
|Suffolk Plaza
East Setauket, NY                       |  |        | (1) | 1,182                       |  | 4,042  |  | 471                                       |  | 1,182 |  | 4,513 
|Three Village Plaza
East Setauket, NY                 |  |        | (1) | 1,763                       |  | 5,909  |  | 160                                       |  | 1,763 |  | 6,069 
|Turnpike Plaza
Huntington Station, NY                 |  |        | (2) | 908                         |  | 3,044  |  | 107                                       |  | 908   |  | 3,151 
|NORTH CAROLINA                                        |  |        |     |                             |  |        |  |                                           |  |       |  |       
|The Commons at Chancellor Park
Charlotte, NC          |  |       |     | 4,922                       |  | 16,502 |  | 2,099                                     |  | 4,922 |  | 18,601
|Crown Point Shopping Center
Charlotte, NC             |  |        | (1) | 2,096                       |  | 7,026  |  | 67                                        |  | 2,162 |  | 7,027 
|Franklin Square
Gastonia, NC                          |  | 13,583 |     | 6,084                       |  | 20,369 |  | 474                                       |  | 6,235 |  | 20,692

S-III-11

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                             |  |        |     | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |        |  |       
|-------------------------------------------- |  | ------ | --- | --------------------------- |  | ------ |  | ----------------------------------------- |  | ------ |  | ------
|
|Innes Street Market
Salisbury, NC            |  | 12,830 |     | 6,158                       |  | 20,615 |  | 4,790                                     |  | 6,019  |  | 25,544
|McMullen Creek Shopping Center
Charlotte, NC |  |        | (1) | 6,580                       |  | 22,047 |  | 856                                       |  | 6,580  |  | 22,903
|New Centre Market
Wilmington, NC             |  |        | (2) | 3,904                       |  | 13,070 |  | 226                                       |  | 3,904  |  | 13,296
|Tarrymore Square
Raleigh, NC                 |  |        | (1) | 4,891                       |  | 16,392 |  | 1,065                                     |  | 5,016  |  | 17,332
|University Commons
Wilmington, NC            |  |        | (1) | 4,370                       |  | 14,646 |  | 3,121                                     |  | 4,370  |  | 17,767
|University Commons Greenville
Greenville, NC |  |        | (2) | 5,976                       |  | 20,009 |  | 61                                        |  | 5,977  |  | 20,069
|Wendover Place
Greensboro, NC                |  |        | (2) | 8,309                       |  | 27,819 |  | 8,473                                     |  | 10,085 |  | 34,516
|OHIO                                         |  |        |     |                             |  |        |  |                                           |  |        |  |       
|30th Street Plaza
Canton, OH                 |  |       |     | 3,071                       |  | 10,279 |  | 34                                        |  | 3,070  |  | 10,314
|Clock Tower Plaza
Lima, OH                   |  |       |     | 3,409                       |  | 11,409 |  | 348                                       |  | 3,552  |  | 11,614
|Salem Consumer Square
Trotwood, OH           |  | 10,284 |     | 5,964                       |  | 19,965 |  | 373                                       |  | 6,053  |  | 20,249
|PENNSYLVANIA                                 |  |        |     |                             |  |        |  |                                           |  |        |  |       
|Boyertown Plaza
Boyertown, PA                |  |        | (1) | 675                         |  | 2,265  |  | 1,167                                     |  | 675    |  | 3,432 
|Colonial Commons
Harrisburg, PA              |  |       |     | 11,703                      |  | 40,266 |  |                                          |  | 11,703 |  | 40,266
|Lehigh Shopping Center
Bethlehem, PA         |  |        | (1) | 4,125                       |  | 13,831 |  | 3,359                                     |  | 4,125  |  | 17,190
|Warminster Towne Center
Warminster, PA       |  | 21,797 |     | 7,677                       |  | 25,703 |  | 266                                       |  | 7,677  |  | 25,969

S-III-12

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                         |  |        |     | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |       |  |       
|---------------------------------------- |  | ------ | --- | --------------------------- |  | ------ |  | ----------------------------------------- |  | ----- |  | ------
|
|SOUTH DAKOTA                             |  |        |     |                             |  |        |  |                                           |  |       |  |       
|Baken Park
Rapid City, SD                |  |       |     | 3,119                       |  | 10,440 |  | 745                                       |  | 3,119 |  | 11,185
|TENNESSEE                                |  |        |     |                             |  |        |  |                                           |  |       |  |       
|Oakwood Commons
Hermitage, TN            |  |        | (1) | 3,740                       |  | 12,542 |  | 3,578                                     |  | 3,761 |  | 16,099
|Watson Glen Shopping Center
Franklin, TN |  |        | (1) | 3,381                       |  | 11,336 |  | 455                                       |  | 3,381 |  | 11,791
|Williamson Square
Franklin, TN           |  | 10,830 |     | 4,779                       |  | 15,994 |  | 2,147                                     |  | 4,777 |  | 18,143
|The Market of Wolfcreek
Memphis, TN      |  | 23,385 |     | 8,365                       |  | 28,006 |  |                                          |  | 8,365 |  | 28,006
|TEXAS                                    |  |        |     |                             |  |        |  |                                           |  |       |  |       
|Buckingham Place
Richardson, TX          |  | 5,773  |     | 2,283                       |  | 7,584  |  | 30                                        |  | 2,283 |  | 7,614 
|The Crossing
North Richland Hills, TX    |  |       |     | 4,916                       |  | 16,458 |  | 356                                       |  | 4,916 |  | 16,814
|Las Colinas Village
Irving, TX           |  |       |     | 4,415                       |  | 14,817 |  | 1,157                                     |  | 4,646 |  | 15,743
|Randall's Bay Area
Webster, TX           |  |       |     | 1,635                       |  | 5,474  |  |                                          |  | 1,635 |  | 5,474 
|Randall's Fairmont
Pasadena, TX          |  |       |     | 2,590                       |  | 8,671  |  | 35                                        |  | 2,590 |  | 8,706 
|Royal Oaks Village
Houston, TX           |  |       |     | 7,318                       |  | 24,498 |  | 222                                       |  | 7,318 |  | 24,720
|Trinity Commons
Fort Worth, TX           |  | 15,916 |     | 2,156                       |  | 20,752 |  | 19                                        |  | 2,156 |  | 20,771

S-III-13

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                      |  |        |     | Initial Cost to the Company |  |        |  | Gross Amount Carried at December 31, 2004 |  |       |  |       
|------------------------------------- |  | ------ | --- | --------------------------- |  | ------ |  | ----------------------------------------- |  | ----- |  | ------
|
|VIRGINIA                              |  |        |     |                             |  |        |  |                                           |  |       |  |       
|Spradlin Farm
Christianburg, VA       |  | 18,003 |     | 5,456                       |  | 18,267 |  | 40                                        |  | 5,456 |  | 18,307
|VERMONT                               |  |        |     |                             |  |        |  |                                           |  |       |  |       
|Rutland Plaza
Rutland, VT             |  |        | (1) | 4,037                       |  | 13,530 |  | 219                                       |  | 4,037 |  | 13,749
|WISCONSIN                             |  |        |     |                             |  |        |  |                                           |  |       |  |       
|Fairacres Shopping Center
Oshkosh, WI |  |       |     | 1,563                       |  | 5,230  |  | 56                                        |  | 1,612 |  | 5,237 
|Fitchburg Ridge
Madison, WI           |  |       |     | 481                         |  | 1,611  |  | 866                                       |  | 481   |  | 2,477 
|Fox River Plaza
Burlington, WI        |  |       |     | 1,654                       |  | 5,536  |  | 156                                       |  | 1,654 |  | 5,692 
|Madison Plaza
Madison, WI             |  |       |     | 904                         |  | 3,026  |  | 328                                       |  | 904   |  | 3,354 
|Mequon Pavilions
Mequon, WI           |  |       |     | 6,296                       |  | 21,075 |  | 2,626                                     |  | 6,443 |  | 23,554
|Moorland Square
New Berlin, WI        |  |       |     | 1,881                       |  | 6,299  |  | 67                                        |  | 1,912 |  | 6,335 
|Oak Creek Centre
Oak Creek, WI        |  |       |     | 1,357                       |  | 4,546  |  | 180                                       |  | 1,380 |  | 4,703 
|Park Plaza
Manitowoc, WI              |  |       |     | 1,586                       |  | 5,305  |  | 296                                       |  | 1,693 |  | 5,494 
|Spring Mall
Greenfield, WI            |  | 8,141  |     | 3,136                       |  | 10,499 |  | 4,296                                     |  | 3,176 |  | 14,755
|Taylor Heights
Sheboygan, WI          |  |       |     | 1,976                       |  | 6,618  |  | 38                                        |  | 1,976 |  | 6,656 

S-III-14

---



SCHEDULE III

HERITAGE PROPERTY INVESTMENT TRUST, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2004
(In thousands)

The following table sets forth detail with respect to the properties, and related encumbrances, owned by the Company at December 31, 2004.

|                                         |  |   |         | Initial Cost to the Company |   |         |  | Gross Amount Carried at December 31, 2004 |           |  |   |        
|---------------------------------------- |  | - | ------- | --------------------------- | - | ------- |  | ----------------------------------------- | --------- |  | - | -------
|
|OFFICE BUILDINGS                         |  |   |         |                             |   |         |  |                                           |           |  |   |        
|MASSACHUSETTS                            |  |   |         |                             |   |         |  |                                           |           |  |   |        
|William J. McCarthy
Boston, MA           |  |   | 34,782  | (3)                         |   | 4,700   |  |                                           | 18,807    |  |   | 2,355  
|545 Boylston Street
Boston, MA           |  |   |         | (3)                         |   | 4,300   |  |                                           | 17,206    |  |   | 1,248  
|NEW YORK                                 |  |   |         |                             |   |         |  |                                           |           |  |   |        
|Executive Office Building
Great Neck, NY |  |   |        |                             |   | 834     |  |                                           | 3,338     |  |   | 281    
|                                         |  |   |         |                             |   |         |  |                                           |           |  |   |        
|TOTAL                                    |  | $ | 649,040 |                             | $ | 547,433 |  | $                                         | 1,849,450 |  | $ | 143,958
|                                         |  |   |         |                             |   |         |  |                                           |           |  |   |        

---

S-III-15

---



|                                        |  | Years ended December 31, |          
|--------------------------------------- |  | ------------------------ | ---------
|
|Cost:                                   |  |                          |          
|Balance, beginning of year              |  | $                        | 2,399,973
|Acquisitions and other additions        |  |                          | 178,482  
|Sale of properties and other deductions |  |                          | (37,614  
|                                        |  |                          |          
|Balance, end of year                    |  | $                        | 2,540,841
|                                        |  |                          |          
|Accumulated Depreciation:               |  |                          |          
|Balance, beginning of year              |  | $                        | 242,741  
|Depreciation provided                   |  |                          | 81,420   
|Sale of properties and other deductions |  |                          | (5,958   
|                                        |  |                          |          
|Balance, end of year                    |  | $                        | 318,203  
|                                        |  |                          |          

S-III-16

---



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