| x | ANNUAL REPORT PURSUANT TO SECTION      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934 |
|---|--------------------------------------------------------------------------------------------|

| o | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|----------------------------------------------------------------------------------------------------|

| Delaware                                                            |   | 13-3949418                                |
|---------------------------------------------------------------------|--------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) |   | (I.R.S.      Employer Identification No.) |
|                                                                |   |                                      |
| 625      Madison Avenue, New York, New York                         |   | 10022                                     |
| (Address      of principal executive offices)                       |   | (Zip      Code)                           |

| Securities      registered pursuant to Section 12(b) of the Act: |
|------------------------------------------------------------------|
| None                                                             |

----

|          |          |                                                                                                                                              |   | Page   |
|---------------|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| PART      I   |          |                                                                                                                                              |   |   |
|          | Item      1.  | Business                                                                                                                                          |   | 1      |
|          | Item      1A. | Risk      Factors                                                                                                                                 |   | 7      |
|          | Item      1B. | Unresolved      Staff Comments                                                                                                                    |   | 21     |
|          | Item      2.  | Properties                                                                                                                                        |   | 21     |
|          | Item      3.  | Legal      Proceedings                                                                                                                            |   | 21     |
|          | Item      4.  | Submission      of Matters to a Vote of Security Holders                                                                                          |   | 23     |
|          |          |                                                                                                                                              |   |   |
| PART      II  |          |                                                                                                                                              |   |   |
|          | Item      5.  | Market      for Registrant’s Common Equity, Related Stockholder Matters and Issuer      Purchases of Equity Securities                      |   | 24     |
|          | Item      6.  | Selected      Financial Data                                                                                                                      |   | 26     |
|          | Item      7.  | Management’s      Discussion and Analysis of Financial Condition and Results of Operations      (see Table of Contents at front of section) |   | 27     |
|          | Item      7A. | Quantitative      and Qualitative Disclosures about Market Risks                                                                                  |   | 74     |
|          | Item      8.  | Financial      Statements and Supplementary Data                                                                                                  |   | 77     |
|          | Item      9.  | Changes      in and Disagreements with Accountants on Accounting and Financial      Disclosure                                                    |   | 161    |
|          | Item      9A. | Controls      and Procedures                                                                                                                      |   | 161    |
|          | Item      9B. | Other      Information                                                                                                                            |   | 161    |
|          |          |                                                                                                                                              |   |   |
| PART      III |          |                                                                                                                                              |   |   |
|          | Item      10. | Directors,      Executive Officers and Corporate Governance                                                                                       |   | 162    |
|          | Item      11. | Executive      Compensation                                                                                                                       |   | 162    |
|          | Item      12. | Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters                                          |   | 162    |
|          | Item      13. | Certain      Relationships and Related Transactions, and Director      Independence                                                               |   | 162    |
|          | Item      14. | Principal      Accounting Fees and Services                                                                                                       |   | 162    |
|          |          |                                                                                                                                              |   |   |
| PART      IV  |          |                                                                                                                                              |   |   |
|          | Item      15. | Exhibits      and Financial Statement Schedules                                                                                                   |   | 163    |
|          |          |                                                                                                                                              |   |   |
| SIGNATURES    |          |                                                                                                                                              | 171    |

----

| ·   | business      limitations caused by adverse changes in real estate and credit markets      and general economic and businessconditions; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | risks      related to the form and structure of our financing      arrangements; |
|--------------------|----------------------------------------------------------------------------------|

| ·   | our      ability to generate new income sources, raise capital for investment funds      and maintain business relationships with providers and users of      capital; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes      in applicable laws and regulations; |
|--------------------|--------------------------------------------------|

| ·   | our      tax treatment, the tax treatment of our subsidiaries and the tax treatment      of our investments; |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | competition      with other companies; |
|--------------------|----------------------------------------|

| ·   | risk      of loss from direct and indirect investments in commercial mortgage-backed      securities (“CMBS”) and collateralized debt obligations (“CDOs”) and      mortgage revenue bonds; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | risk      of loss under mortgage banking loss sharing agreements;  and |
|--------------------|------------------------------------------------------------------------|

| ·   | risks      associated with providing credit intermediation;  and |
|--------------------|------------------------------------------------------------------|

|                  ● | risks      associated with enforcement by our creditors of any rights or remedies      which they may possess. |
|---------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|

----

PART I

| (in      millions)                                                                                                                                      |   | 2008   |      |   | 2007   |   |      | 2006   |   |   | CompoundAnnualGrowth      Rate(2006-2008) |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-------------------------------------------|--------|
|  Commercial      Real Estate                                                                                                                       |   |   |      |   |   |   |      |   |   |   |                                      |   |
| CMBS      Funds                                                                                                                                         |   | $      | 1,475.4   |   |   | $      | 1,475.4   |   |   | $      | 890.1                                     |   |   |   | 28.7 | % |
| High-Yield      Debt Investment Entities                                                                                                                |   |   | 535.7     |   |   |   | 556.6     |   |   |   | 442.1                                     |   |   |   | 10.1 |   |
| Joint      Venture Equity Funds                                                                                                                         |   |   | 179.4     |   |   |   | 225.6     |   |   |   | 76.9                                      |   |   |   | 52.7 |   |
| CDO      Collateral Management                                                                                                                          |   |   | 1,451.7   |   |   |   | --        |   |   |   | --                                        |   |   |   | 100.0 |   |
| Third      Party Commercial Loan Portfolio                                                                                                              |   |   | 550.7     |   |   |   | --        |   |   |   | --                                        |   |   |   | 100.0 |   |
| Affordable      Housing                                                                                                                                 |   |   |      |   |   |   |      |   |   |   |                                      |   |   |   |   |   |
| Tax      Credit Funds                                                                                                                                   |   |   | 9,856.9   |   |   |   | 9,694.4   |   |   |   | 8,525.9                                   |   |   |   | 7.5 |   |
| Total      assets under management                                                                                                                      |   | $      | 14,049.8  |   |   | $      | 11,952.0  |   |   | $      | 9,935.0                                   |   |   |   | 18.9 | % |
|                                                                                                                                                    |   |   |      |   |   |   |      |   |   |   |                                      |   |   |   |   |   |
| Servicing      portfolio(1)                                                                                                                             |   | $      | 21,564.0  |   |   | $      | 30,220.1  |   |   | $      | 21,331.6                                  |   |   |   | 0.5 | % |
| Named      special servicer                                                                                                                             |   |   | 113,823.2 |   |   |   | 116,915.9 |   |   |   | 66,772.3                                  |   |   |   | 30.6 |   |
| Total      servicing portfolio                                                                                                                          |   | $      | 135,387.2 |   |   | $      | 147,136.0 |   |   | $      | 88,103.9                                  |   |   |   | 24.0 | % |
|  (1)        Includes agency, pre-securitization, private label loans and      conduit and other (excludes those held on our ownaccount). |   |

----

|   | · | investment      management fees such as acquisition fees and allowances to cover      origination and underwriting costs, paid at closing and recognized as      properties are acquired within thefund; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | partnership      management fees for administrative services, paid at closing and generally      recognized over five years; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | asset      management fees and expense reimbursements, paid and recognized over the      life of the fund as earned provided that collection is reasonably      assured. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | (i) | $8.8      billion of loans serviced on behalf of our Commercial Real Estate group      for Fannie Mae, Freddie Mac and otheragencies; |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|  |        (ii) | $6.3      billion of interim servicing, which is short-term servicing of commercial      mortgage loans on behalf of third parties prior to      securitization; |
|--|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | $1.4      billion of “private label” servicing for third parties;  and |
|--------|-------|------------------------------------------------------------------------------------|

|   | (iv) | $5.5      billion of loans within our managed investment funds, on behalf of third      parties and their funds or for our ownaccount. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | funds      our Affordable Housing group originates and manages (“Tax Credit Fund      Partnerships”); |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

----

|   | · | property      level partnerships for which our Affordable Housing group has assumed the      role of general partner or for which we had foreclosed upon the property      (“Tax Credit PropertyPartnerships”); |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | funds      our Commercial Real Estate businesses manage, which invest in CMBS and      associated re-securitization trusts (“CMBS Fund Partnerships”);      and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | CRESS,      the high-yield debt partnership our Commercial Real Estate business      manages (“High-Yield Debt FundPartnership”). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | for      asset-backed financing (such as we use to fund mortgage originations in      our Commercial Real Estate and Affordable Housing groups), our financing      facilities have remained constant which could limit our flexibility should      origination activity increase beyond current levels.  In      addition, we anticipate increased costs of funds upon renewal of      facilities in the future; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our      share price and the general environment for equity offerings have made      obtaining equity capital extremely difficult.  Additionally, the      11.0% Cumulative Convertible Preferred Shares (“11.0% Preferred Shares”)      that we issued in January 2008 (see Note 19 to the consolidated financial      statements) have dividend requirements at a significantly higher rate than      we historically paid; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | for      our Term Loan and Revolving Credit Facility (see Note 14 to the      consolidated financial statements), the terms include a higher rate of      interest and more stringent covenants (including restrictions on funding      new business opportunities without lender approval) than had been the norm      in prior periods. In addition, with the exception of dividends related to      our Centerline Equity Issuer Trust I subsidiary (“Equity Issuer”) and      distributions from our REIT subsidiary, our Term Loan and Revolving Credit      Facility, prohibit us from paying common and preferred dividends (see also      Item 1A.  Risk      Factors – Risks Related to Investing in Our Company);      and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | constriction      in credit markets has made it difficult to expand our Commercial Real      Estate fund management business especially at leverage levels achieved in      prior years.  The market also has fewer    investors. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      Affordable Housing group competes directly with other Tax Credit      syndicators seeking to raise capital for tax advantaged funds, some of      which offer credit intermediation for their funds.  We also      compete with regional and national banks that directly acquire Tax Credit      property investments; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      Commercial Real Estate group competes with other real estate fund      management companies that directly acquire CMBS debt instruments and joint      venture equity.  In addition, with respect to mortgage      origination we are in competition with other licensed DUS lenders which      originate multifamily mortgages on behalf of Fannie Mae, other Freddie Mac      Program Plus lenders, other companies that participate in the DUI program      as well as numerous banks, finance companies and others that originate      mortgages for investment or resale;and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      Portfolio Management group competes with other primary and special loan      servicers. |
|--------|--------|--------------------------------------------------------------------------------------------------|

----

|   | · | our      on-going relationships with developers and  borrowers; |
|--------|--------|-----------------------------------------------------------------|

|   | · | our      diversified product platform; and |
|--------|--------|--------------------------------------------|

|   | · | our      performance track record of operating a highly rated servicing and special      servicing platform. |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | (1) | Audit; |
|--------|-----|--------|

|   | (2) | Compensation; |
|--------|-----|---------------|

|   | (3) | Nominating/Governance;      and |
|--------|-----|---------------------------------|

|   | (4) | Finance      (formerly the Capital Markets and Investment  committees). |
|--------|-----|-------------------------------------------------------------------------|

----

|   | · | our      annual report on Form 10-K; |
|--------|--------|--------------------------------------|

|   | · | our      quarterly reports on Form 10-Q; |
|--------|--------|------------------------------------------|

|   | · | our      current reports on Form 8-K; |
|--------|--------|---------------------------------------|

|   | · | our      proxy filings; and |
|--------|--------|-----------------------------|

|   | · | amendments      to those reports filed or furnished pursuant to Section 13(a) or 15(d) of      the Exchange Act. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | 1. | General      Risks Related to Our Business |
|--------|----|--------------------------------------------|

|   | 2. | Risks      Related to Our Affordable HousingGroup |
|--------|----|---------------------------------------------------|

|   | 3. | Risks      Related to Our Commercial Real EstateGroup |
|--------|----|-------------------------------------------------------|

|   | 4. | Risks      Related to Our Portfolio ManagementGroup |
|--------|----|-----------------------------------------------------|

|   | 5. | Risks      Related to Our Credit Risk ProductsGroup |
|--------|----|-----------------------------------------------------|

|   | 6. | Risks      Related to Application of Tax Laws |
|--------|----|-----------------------------------------------|

|   | 7. | Risks      Related to Investing in Our Company |
|--------|----|------------------------------------------------|

|   | · | our      vulnerability to downturns in our business is increased, requiring us to      reduce expenditures we need to expand our  businesses; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      cash flow from operations may be insufficient to make required payments of      principal and interest; |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | we      may be unable to refinance existing indebtedness;  and |
|--------|--------|----------------------------------------------------------------|

|   | · | the      terms of any refinancing may be less favorable than the terms of existing      indebtedness. |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | incurring      additional unsecured indebtedness without lender  approval; |
|--------|--------|----------------------------------------------------------------------------|

|   | · | declaring      and paying dividends, as described further in “We are currently restricted      from paying dividends and non-payment of dividends could result in the      addition of members to our board” under Risks Related to Investing in      Our Company below; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | new      business investment without lender approval;and |
|--------|--------|----------------------------------------------------------|

|   | · | conducting      transactions with our affiliates. |
|--------|--------|---------------------------------------------------|

----

|   | · | severe      and continued declines to the market values of the investment portfolios      of Consolidated Partnerships, leading to significant other-than-temporary      impairments; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      general decline in business activity caused by stagnation in the many      markets in which we operate; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | · | curtailment      of our liquidity as described in “We may be unable to raise      capital or access financing on favorable terms, or at all, and we may also      be unable to repay or refinance our debt obligations”      above. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | five      key investors provided approximately 91.9% of the equity capital raised by      tax credit syndication funds we sponsored (JP Morgan Chase & Co. and      HSBC Bank USA, N.A. each provided over 10.0% of the equity raised).      Although Fannie Mae and Freddie Mac were not investors of equity capital      in these funds during 2008, they were significant investors in such funds      in prior years, having contributed 13.3% of the equity capital raised in      2007; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | five      key developers provided approximately 65.8% of the tax credit properties      for which we arranged equity financing (Penrose Properties, Inc. and      Related Apartment Preservation LLC. each provided over 10.0%)      ; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Fannie      Mae and Freddie Mac were the purchasers of 99.0% of the loans originated      by our Commercial Real Estate and Affordable Housing groups in 2008;      and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Freddie      Mac is the counterparty to the re-securitization of our mortgage revenue      bond portfolio. |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | by      the origination of new investment funds;and |
|--------|--------|-----------------------------------------------------|

|   | · | upon      investment of the capital raised in an investment  fund. |
|--------|--------|--------------------------------------------------------------------|

|   | · | originating      and managing funds that provide equity to tax credit property      partnerships; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | originating      and managing funds that originate or acquire direct mortgage loans,      high-yield CMBS or joint ventureequity; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | · | investing      in mortgage revenue bonds; and |
|--------|--------|-----------------------------------------------|

|   | · | originating      and servicing mortgages. |
|--------|--------|-------------------------------------------|

----

|   | · | the      properties might not generate sufficient income to meet their operating      expenses and payments on the related debt and/or operating expenses may      escalate leading to the sameresult; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | economic      conditions may limit the amount of rent that can be charged at the      properties, the timeliness of rent payments or a reduction in occupancy      levels; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | there      may be rent limitations for certain properties that could limit our      ability to generate the funds necessary to maintain the properties in      proper condition; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | if      an investment defaults, the fair market value of the property securing      such investment may be less than the principal amount of the      investment; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | there      are certain types of losses which are either uninsurable or not      economically insurable; as a result, the owners of the real estate      securing our investments could be required to pay for such costs;      and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      guarantor may be unable to fulfill its  obligations. |
|--------|--------|-------------------------------------------------------------|

|   | · | a      property owner may be unable to meet its obligations to us as holder of      its debt; |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | a      property owner may default on a mortgage for which we have a loss-sharing      obligation; |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | a      fund may not be able to pay ourfees; |
|--------|--------|---------------------------------------------|

|   | · | a      fund may not generate the return that we have committed to provide and we      may be called upon to satisfy the promised  return; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      incentive fees from fund management may be subject to recapture if the      funds do not reach overall investment hurdles;  and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we      could lose our invested capital and/or anticipated future      revenue. |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | reduce      the fair value of our investments or the investments of funds we manage      and residual interests in securitization  transactions; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | decrease      the amount we could realize on the sale or financing of those      investments; |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | reduce      the income and incentive fees from funds that we  manage; |
|--------|--------|-----------------------------------------------------------------------|

|   | · | reduce      the number of properties economically feasible to  finance; |
|--------|--------|-------------------------------------------------------------------------|

|   | · | reduce      the demand for financing, which could limit our ability to originate loans      or to structure transactions, thereby reducing fees and interest we      receive; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increase      our borrowing costs; |
|--------|--------|------------------------------------|

|   | · | restrict      our access to capital; and |
|--------|--------|------------------------------------------|

|   | · | cause      investors to find alternative investments that are more attractive than      the equity funds we sponsor. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------|

|   | · | the      potential inability to refinance variable-rate debt at terms we find      acceptable; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | lack      of availability of alternate sources of fixed-rate or lower cost      financing; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | default      by interest rate swap counterparties on their obligations to      us; |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | our      inability to match the duration or reset periods of assets and liabilities      that we want to mitigate the effect of changing rates;  and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | other      efforts to manage risks related to changes in interest rates that may not      be successful. |
|--------|--------|----------------------------------------------------------------------------------------------------------|

----

|   | · | reductions      in the rate of fees we earn from originating and managing      funds; |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | reductions      in the rate of interest we earn oninvestments; |
|--------|--------|----------------------------------------------------------------|

|   | · | reductions      in the rates of origination and servicing fees for mortgages;      and |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | lower      levels of discounts at which high-yield investments may be      purchased. |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | the      risk that borrowers may not be able to make payments, resulting in us, as      the holder of the residual interests, receiving principal and interest      payments that are less than expected or no payment at all;    and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      risk that the holders of the senior interests may control the ability to      enforce remedies, limiting our ability to take actions that might protect      our interests. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | 4%      credits – for new buildings and existing buildings financed with mortgage      revenue bonds that receive an allocation of the volume cap, or for new and      existing buildings financed with below-market federal financing that      receive an allocation of federal LIHTCs from state agencies;      and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | 9%      credits – for new buildings that receive an allocation of federal LIHTCs      from state agencies. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

----

----

----

|   | · | 20%      of the units must be rented to individuals or families whose income is      less than 50% of the area median gross income (the “20/50 test”);      or |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 40%      of the units must be rented to individuals or families whose income is      less than 60% of the area median gross income (the “40/60      test”); |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | which      is 15 years after 50% of the units areoccupied; |
|--------|-----|------------------------------------------------------------|

|   | (ii) | on      which all the bonds have been retired;or |
|--------|------|--------------------------------------------------|

|   | (iii) | on      which any assistance provided under Section 8 of the U.S. Housing Act of      1937 terminates. |
|--------|-------|--------------------------------------------------------------------------------------------------------|

----

|   | 1. | 85%      of its ordinary income for thatyear, |
|--------|----|-----------------------------------------------|

|   | 2. | 95%      of its capital gain net income for that year;  and |
|--------|----|-------------------------------------------------------------|

|   | 3. | 100%      of its undistributed ordinary income and capital gain net income from      prior years. |
|--------|----|---------------------------------------------------------------------------------------------------|

|   | 1. | distribute      amounts that represent a return ofcapital; |
|--------|----|------------------------------------------------------------|

|   | 2. | distribute      amounts that would otherwise be spent on capital expenditures or repayment      of debt; or |
|--------|----|-------------------------------------------------------------------------------------------------------------|

|   | 3. | distribute      amounts that may be treated as excess inclusion income and accordingly,      unrelated business taxable income in the hands of certain not-for-profit      stockholders. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1. | at      least 75% of Centerline REIT’s assets must consist of real estate assets,      cash and cash items, and certain government securities, to ensure that the      bulk of Centerline REIT’s investments are either equity or mortgage      interests in real property; and |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 2. | Centerline      REIT will not be able to acquire securities (other than securities that      are treated as an interest in real property or interests in a taxable REIT      subsidiary) of any single issuer that would represent either more than 5%      of the total value of its assets or 10% of the voting securities of such      issuer, to ensure a diversification of Centerline REIT’s non-real-property      investments. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | holders      of SCUs issued by our Centerline Capital Company LLC (“CCC”) subsidiary      are entitled to receive preferential distributions with respect to the      earnings of CCC and its subsidiaries;and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | holders      of SCIs issued by our Centerline Investors I LLC (“Centerline Investors”)      subsidiary are entitled to receive preferential distributions with respect      to the earnings of CenterlineInvestors. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Convertible      Community Reinvestment Act PreferredShares; |
|--------|--------|--------------------------------------------------------------|

|   | · | Series      A Convertible Community Reinvestment Act Preferred  Shares; |
|--------|--------|-------------------------------------------------------------------------|

|   | · | 4.4%      Cumulative Perpetual Convertible Community Reinvestment Act Preferred      Shares; and |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | 11.0%      Preferred Shares. |
|--------|--------|------------------------------|

|   | ·  | TRCLP      and its owners indirectly held 10.2 million of the outstanding SCUs and      1.1 million common shares which, subject to some exceptions, are not      subject to a lock-up agreement; |
|--------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ·  | An      affiliate of TRCLP also holds 10.8 million of our 11.0% Preferred Shares;      and |
|--------|--------------|--------------------------------------------------------------------------------------------|

|   | ·  | Former      executives of our Company held 1.9 million of the outstanding SCUs and the      0.3 million outstanding SCIs.  These SCUs and SCIs are not      subject to lock-up agreements and may be converted to common shares at any      time. |
|--------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | providing      credit intermediation on debt products secured by “80/20” multifamily      housing properties; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | · | providing      mezzanine financing to multifamily housing properties other than so-called      “tax credit properties.” |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | San      Rafael, CA – an office facility; the lease expires in  2010 |
|--------|--------|----------------------------------------------------------------------------|

|   | · | Dallas,      TX – an office facility; the lease expires in  2010 |
|--------|--------|------------------------------------------------------------------------|

|   | · | Irvine,      CA – an office facility; the lease expires in  2011 |
|--------|--------|------------------------------------------------------------------------|

|   | · | Overland      Park, KS – an office facility; the lease expires in  2012 |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | San      Francisco, CA – an office facility; the lease expires in    2012 |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | Vienna,      VA – an office facility; the lease expires in  2012 |
|--------|--------|------------------------------------------------------------------------|

|   | · | Chicago,      IL – an office facility; the lease expires in  2014 |
|--------|--------|-------------------------------------------------------------------------|

|   | · | Irving,      TX – an office facility; the leases expires in  2018 |
|--------|--------|-------------------------------------------------------------------------|

----

|   | · | On      January 18, 2008, Kramer v. Ross, et al., Index. No. 100861-08, was filed      against us and our board of trustees, in New York County Supreme      Court; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      January 25, 2008, Carfagno v. Schnitzer, et al., No. 08 CV 00912, was      filed against us and our board of trustees in the United States District      Court for the Southern District of NewYork; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      January 30, 2008, Ciszerk v. Ross, et al., CA No. 3511, was filed against      us, our board of trustees and The Related Companies, L.P. in the Delaware      Court of Chancery; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      February 22, 2008, Kanter v. Ross, et al., 08 Civ. 01827, was filed      against us, our board of trustees and The Related Companies, L.P. in the      United States District Court for the Southern District of New      York; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      February 27, 2008, Broy v. Centerline Holding Company et al., No. 08 CV      01971, was filed against us and certain of our officers and trustees in      the United States District Court for the Southern District of New      York; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      April 10, 2008, Kastner v. Schnitzer et al, Index No. 601043-08, was filed      against us and our board of trustees, in New York Supreme Court;      and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      April 10, 2008, Kostecka v. Schnitzer et al, Index No. 601044-08, was      filed against us and our board of trustees, in New York Supreme      Court. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Item      5. | Market for      Registrant’s Common Equity, Related Stockholder Matters and Issuer      Purchases of EquitySecurities. |
|--------------|------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                  |   | 2008 |   | 2007   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------|--------|--------|--------|
| Quarter      Ended                                                                                                                                    |   | Low  |   | High   |   | Low |   | High |   |
|  March      31                                                                                                                                   |   | $    | 3.68   |   | $      | 7.60 |   | $ | 18.50 |   | $ | 21.87 |   |
| June      30                                                                                                                                          |   | $    | 1.10   | (1)    | $      | 4.26 |   | $ | 16.75 |   | $ | 19.95 |   |
| September      30                                                                                                                                     |   | $    | 0.86   |   | $      | 3.46 |   | $ | 10.35 |   | $ | 18.47 |   |
| December      31                                                                                                                                      |   | $    | 0.10   |   | $      | 1.99 |   | $ | 6.28 |   | $ | 16.02 |   |
|  (1)         During the second quarter of 2008, there was an erroneous trade of      $0.39 which is excluded from the abovetable. |

| Cash      Distribution for Quarter Ended |   | DatePaid |   | PerShare |   | Total      AmountDistributed(In      thousands) |   |
|------------------------------------------|--------|----------|--------|----------|--------|-------------------------------------------------|--------|
|  March      31, 2008                |   | 5/15/08  |   | $        | 0.15   |                                            | $      | 8,237 |   |
| June      30, 2008                       |   | 8/15/08  |   |     | 0.075  |                                            |   | 4,158 |   |
| September      30, 2008                  |   | N/A      |   |     | --     |                                            |   | -- |   |
| December      31, 2008                   |   | N/A      |   |     | --     |                                            |   | -- |   |
|  Total      for 2008                |   |     |   | $        | 0.225  |                                            | $      | 12,395 |   |
|  March      31, 2007                |   | 5/15/07  |   | $        | 0.42   |                                            | $      | 25,327 |   |
| June      30, 2007                       |   | 8/14/07  |   |     | 0.42   |                                            |   | 24,747 |   |
| September      30, 2007                  |   | 11/14/07 |   |     | 0.42   |                                            |   | 24,796 |   |
| December      31, 2007                   |   | 2/14/08  |   |     | 0.42   |                                            |   | 24,879 |   |
|  Total      for 2007                |   |     |   | $        | 1.68   |                                            | $      | 99,749 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                       |   | (a)                                                                                                   |   | (b)                                                                                  |   | (c)                                                                                                                                                                                   |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                       |   | Number      of securities to be issued upon exercise of outstanding options, warrants      and rights |   | Weighted-averageexercise      price of outstanding options, warrants      and rights |   |  Number      of securities remaining      available      for future      issuance under equity compensation plans      (excluding securities reflected      in column      a)(1) |      |
|  Equity      compensation plans approved by security holders                                                                                                                                                                                                                                                                                                          |   | 2,386,888                                                                                             |   | $                                                                                    | 20.51  |                                                                                                                                                                                  | 4,608,632 |   |
| Equity      compensation plans not approved by security holders                                                                                                                                                                                                                                                                                                            |   | --                                                                                                    |   |                                                                                 | --     |                                                                                                                                                                                  | --        |   |
|  Totals                                                                                                                                                                                                                                                                                                                                                               |   | 2,386,888                                                                                             |   | $                                                                                    | 20.51  |                                                                                                                                                                                  | 4,608,632 |   |
|  (1)           Our 2007 Incentive Share Plan (see Note 23 to the consolidated      financial statements) authorizes us to issue options or other share-based      compensation equal to 10% of the total shares outstanding (as defined in      the plan) as of December 31 of the year preceding the issuance of new      grants oroptions. |

| Securities purchased      by us |
|---------------------------------|

| Period                                                                                                                                                                                                                                                                                                  |   | Totalnumber      ofsharespurchased(1) |   | Averageprice      paidper      share |   | Total      numberof      sharespurchased      aspart      of publiclyannouncedprogram |   | Maximumnumber      ofshares      that mayyet      be purchasedunder      the plansor      program |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|---------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|---------|
|  October      1 – 31, 2008                                                                                                                                                                                                                                                                   |   | 849                                   |   | $                                    | 1.67   |                                                                                  | --     |                                                                                              |    |   |
| November      1 – 30, 2008                                                                                                                                                                                                                                                                        |   | 41,772                                |   |                                 | 0.49   |                                                                                  | --     |                                                                                              |    |   |
| December      1 – 31, 2008                                                                                                                                                                                                                                                                        |   | 38,293                                |   |                                 | 0.15   |                                                                                  | --     |                                                                                              |    |   |
|  Total                                                                                                                                                                                                                                                                                             |   | 80,914                                |   | $                                    | 0.34   |                                                                                  | --     |                                                                                              | 303,854 |   |
|  (1)           These repurchases were in connection with tax withholding      obligations incurred by holders of newly vested restricted shares, were      outside of our share repurchase program and not subject to the debt      covenant restriction described above. |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | Years      Ended December 31, |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2008(1)                       |   | 2007(2) |   | 2006(3) |   | 2005(4) |   | 2004 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                             | 511,575 |   | $ | 572,927 |   | $ | 387,259 |   | $ | 295,097 |   | $ | 232,432 |
| Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                             | 1,127,420 |   | $ | 653,244 |   | $ | 460,647 |   | $ | 351,658 |   | $ | 234,214 |
| (Loss)      income before income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $                             | (228,335 | ) | $ | (55,621 | ) | $ | 47,786 |   | $ | 30,437 |   | $ | 48,120 |
| Net      (loss) income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $                             | (232,158 | ) | $ | (60,128 | ) | $ | 41,294 |   | $ | 59,014 |   | $ | 65,363 |
| Net      (loss) income available to shareholders(5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                             | (269,421 | ) | $ | (68,275 | ) | $ | 36,542 |   | $ | 56,994 |   | $ | 65,363 |
|  Net      (loss) income per share(5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                             | (5.18 | ) | $ | (1.19 | ) | $ | 0.63 |   | $ | 0.98 |   | $ | 1.19 |
| Diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                             | (5.18 | ) | $ | (1.19 | ) | $ | 0.62 |   | $ | 0.98 |   | $ | 1.19 |
|  Financial position                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Total      assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                             | 7,382,007 |   | $ | 9,490,202 |   | $ | 9,687,971 |   | $ | 6,965,305 |   | $ | 5,737,768 |
| Notes      payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | $                             | 358,061 |   | $ | 505,888 |   | $ | 591,165 |   | $ | 304,888 |   | $ | 174,454 |
| Financing      arrangements and secured financing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                             | 411,413 |   | $ | 562,502 |   | $ | 1,801,170 |   | $ | 1,429,692 |   | $ | 1,068,428 |
| Preferred      shares of subsidiary:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subject      to mandatory repurchase                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $                             | 273,500 |   | $ | 273,500 |   | $ | 273,500 |   | $ | 273,500 |   | $ | 273,500 |
| Not      subject to mandatory repurchase                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                             | 104,000 |   | $ | 104,000 |   | $ | 104,000 |   | $ | 104,000 |   | $ | 104,000 |
|  Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Dividends      declared per share(6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                             | 0.225 |   | $ | 1.68 |   | $ | 1.68 |   | $ | 1.65 |   | $ | 1.57 |
|  (1)        During 2008, we recorded pre-tax asset impairment charges of $201.7      million (see Notes 11 and 22 to the consolidated financial      statements).(2)        In December 2007, the re-securitization of most of our mortgage      revenue bonds resulted in a loss of $77.9 million before minority interest      allocations ($55.2 million after tax) (see Note 7 to the consolidated      financial statements).(3)        Includes Centerline Investors beginning in August 2006, and      includes $29.2 million of expense (or $0.50 per basic and diluted share)      related to a valuation allowance recorded against deferred tax      assets.(4)        Includes a $22.6 million non-cash pre-tax charge ($12.3 million      after tax, or $0.21 per basic and diluted share) related to the write-off      of the “Related Capital Company” trade-name intangible asset.(5)        Includes common shareholders and Convertible CRA      shareholders.(6)        Distributions per share are the same for both common shares and      Convertible CRA shares. |

----

| Significant      components of the MD&A section include:                                                                                                                                                                                                                                                                                                                                                                         |   | Page     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |
| SECTION 1 – OverviewThe      overview section provides a summary of Centerline and our reportable      business groups (as more fully discussed in Note 1 to the consolidated      financial statements).  We also include a discussion of factors      affecting our consolidated results of operations as well as items specific      to each business group.                                                      |   | 28       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |
| SECTION 2 – Consolidated Results of      OperationsThe      consolidated results of operations section provides an analysis of our      results on a consolidated basis for the year ended December 31, 2008,      against the comparable prior year periods.  Significant      subsections within this section are as follows:                                                                                      |   | 28       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |
| Adjusted      Net Income                                                                                                                                                                                                                                                                                                                                                                                                             |   | 28       |
| Comparability      of Results                                                                                                                                                                                                                                                                                                                                                                                                        |   | 29       |
| Summary      Consolidated Results                                                                                                                                                                                                                                                                                                                                                                                                    |   | 31       |
| Revenues                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 31       |
| Expenses                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 32       |
| Other      Items                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 36       |
| Income      Taxes                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 38       |
| Accounting      Changes                                                                                                                                                                                                                                                                                                                                                                                                              |   | 39       |
| Inflation                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 39       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |
| SECTION 3 – Results by      GroupThe      results by group section provides an analysis of our results on a      reportable group basis for the year ended December 31, 2008, against the      comparable prior year periods.  We provide certain statistical      information by group and discuss known trends and      uncertainties.  Significant subsections within this section are      as follows: |   | 39       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |
| Affordable      Housing                                                                                                                                                                                                                                                                                                                                                                                                              |   | 41       |
| Commercial      Real Estate                                                                                                                                                                                                                                                                                                                                                                                                          |   | 47       |
| Portfolio      Management                                                                                                                                                                                                                                                                                                                                                                                                            |   | 52       |
| Credit      Risk Products                                                                                                                                                                                                                                                                                                                                                                                                            |   | 54       |
| Corporate                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 57       |
| Consolidated      Partnerships                                                                                                                                                                                                                                                                                                                                                                                                       |   | 58       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |
| SECTION 4 – Liquidity and Capital      ResourcesThe      liquidity and capital resources section provides discussion of our ability      to generate adequate amounts of cash to meet our current and future      needs.  Significant subsections within this section are as      follows:                                                                                                                           |   | 60       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |
| Liquidity                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 60       |
| Cash      Flows                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 61       |
| Liquidity      Requirements after December 31, 2008                                                                                                                                                                                                                                                                                                                                                                                  |   |     |
| Fair      Value Disclosures                                                                                                                                                                                                                                                                                                                                                                                                          |   | 62       |
| Capital      Resources                                                                                                                                                                                                                                                                                                                                                                                                               |   | 65       |
| Commitments      and Contingencies                                                                                                                                                                                                                                                                                                                                                                                                   |   | 68       |
|  SECTION 5 – Application of Critical      Accounting Policies and Estimates                                                                                                                                                                                                                                                                                                                                               |   |  70 |
|  SECTION      6 – Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                              |   |  72 |
|  SECTION      7 – Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                        |   |  72 |
| SECTION      8 – Forward Looking Statements                                                                                                                                                                                                                                                                                                                                                                                    |   |  73 |

----

----

| (dollars      in thousands, except per share amounts)                                                                                                                                                                                                                                                                                                                                                                     |   | 2008   |     | 2007   |   | 2006    |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|---------|--------|
|  Net      (loss) income                                                                                                                                                                                                                                                                                                                                                                                              |   | $      | (232,158 | )      | $      | (60,128 | )      | $ | 41,294 |   |
| Amortization      or write-off of acquired intangible assets, net of minority      interests                                                                                                                                                                                                                                                                                                                              |   |   | 120,540  |   |   | 15,806  |   |   | 12,042 |   |
| Amortization      of acquisition-related, share-based compensation, net of minority      interests                                                                                                                                                                                                                                                                                                                        |   |   | 1,938    |   |   | 11,265  |   |   | 6,613 |   |
| Adjusted      net (loss) income                                                                                                                                                                                                                                                                                                                                                                                           |   | $      | (109,680 | )      | $      | (33,057 | )      | $ | 59,949 |   |
|  Adjusted      EPS(1)                                                                                                                                                                                                                                                                                                                                                                                                |   | $      | (2.83    | )      | $      | (0.72   | )      | $ | 0.94 |   |
|  (1)           Adjusted EPS in 2008 includes a higher level of preferred dividends      following our issuance of 11.0% Preferred Shares in January 2008. The 2008      and 2007 calculations also include adjustments associated with converting      certain of our outstanding shares to redeemable securities (see Notes 19,      20 and 26 to the consolidated financial  statements). |

| (dollars      in thousands)                                                                                                                                                                                           |   | 2008   |    | 2007   |   | 2006    |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
|                                                                                                                                                                                                                  |   |   |    |   |   |    |   |   |   |   |
| (Reduction)/increase      to net (loss) income:                                                                                                                                                                       |   |   |    |   |   |    |   |   |   |   |
| Asset      impairments (excluding AMAC):                                                                                                                                                                              |   |   |    |   |   |    |   |   |   |   |
| Goodwill                                                                                                                                                                                                              |   | $      | (92,748 | )      | $      | --      |   | $ | (997 | ) |
| Finite      lived intangible assets                                                                                                                                                                                   |   |   | (55,190 | )      |   | --      |   |   | (1,647 | ) |
| Indefinite      lived intangible assets                                                                                                                                                                               |   |   | (1,975  | )      |   | --      |   |   | -- |   |
| Mortgage      revenue bonds                                                                                                                                                                                           |   |   | (10,928 | )      |   | (19,933 | )      |   | (4,676 | ) |
| Series      B Freddie Mac Certificates                                                                                                                                                                                |   |   | (7,968  | )      |   | --      |   |   | -- |   |
| Retained      CMBS Certificates                                                                                                                                                                                       |   |   | (10,736 | )      |   | --      |   |   | -- |   |
| Syndicated      corporate debt, including loss on sale                                                                                                                                                                |   |   | (4,196  | )      |   | (75     | )      |   | -- |   |
| Leasehold      improvements                                                                                                                                                                                           |   |   | (15,892 | )      |   | --      |   |   | -- |   |
| AMAC:                                                                                                                                                                                                                 |   |   |    |   |   |    |   |   |   |   |
| Equity      loss                                                                                                                                                                                                      |   |   | (3,277  | )      |   | (4,012  | )      |   | -- |   |
| Impairment      of loan to AMAC and our preferred investment (included in equity and other      loss on Consolidated Statements of Operations)                                                                        |   |   | (74,779 | )      |   | --      |   |   | -- |   |
| Intangible      asset impairment                                                                                                                                                                                      |   |   | (2,879  | )      |   | (7,226  | )      |   | -- |   |
| Other      items:                                                                                                                                                                                                     |   |   |    |   |   |    |   |   |   |   |
| Equity      income reduction due to fund-level asset impairments                                                                                                                                                      |   |   | (17,486 | )      |   | (2,835  | )      |   | -- |   |
| Fair      value adjustments and terminations of free-standing derivatives(1)                                                                                                                                          |   |   | 492     |   |   | (19,284 | )      |   | (1,007 | ) |
| Severance      costs                                                                                                                                                                                                  |   |   | (2,846  | )      |   | (3,774  | )      |   | (2,491 | ) |
|                                                                                                                                                                                                                  |   |   |    |   |   |    |   |   |   |   |
| Loss      as a result of December 2007 re-securitization transaction                                                                                                                                                  |   |   | --      |   |   | (77,903 | )      |   | -- |   |
| Gain      on termination of Capri Capital Advisors LLC Loan                                                                                                                                                           |   |   | --      |   |   | --      |   |   | 6,916 |   |
|  (1)          Includes impact of the adoption of Statement of Financial      Accounting Standard (“SFAS”) No. 157, Fair Value Measurements      (“SFAS 157”) in 2008 |

----

|   | · | General      economic conditions which reduced margins in several of our business and      resulted in decreased year-to-date volumes in most of the products we      originate. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A      reduction in the value of the Series B Freddie Mac Certificates we      retained as part of the December 2007 re-securitization      transaction.  The reduction was a result of revised estimates as      to the timing of payments from the residual cash flows with respect to      assumed defaults.  While the revised estimates did not reduce      the gross expected losses, in accordance with GAAP, we reflected the      reduction in fair value as an impairment charge of $8.0 million during      2008; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A      decrease in mortgage origination volume and overall reduced margins due to      spread compression in the markets related to tax credit fund origination      fees and mortgage banking fees, which impacts both our Commercial Real      Estate and Affordable Housing groups.  Mortgage originations      were $1.0 billion during 2008, as compared to $1.8 billion in 2007 and      $1.5 billion in 2006. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      acquisition of Centerline Investors in August 2006 resulting in a full      year of operations in 2007 and 2008 for this business as compared to only      4.5 months of operations included in 2006. Additionally, there were      subsequent non-cash costs stemming from this acquisition, such as      amortization of restricted shares awarded in connection with the      transaction and amortization of intangible assets acquired.  For      additional information see the Commercial Real Estate and Portfolio      Management groups under SECTION 3 – RESULTS BY      GROUP; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      2006 period included non-recurring costs of $12.2 million relating to      corporate initiatives primarily related to the launch of Centerline      Financial, further discussed in SECTION 3 – RESULTS BY      GROUP; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A      higher level of preferred dividends as a result of the issuance of 11.0%      Preferred Shares in the first quarter of 2008 (see notes 19 and 26 to the      consolidated financial statements). |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (in      thousands)                    |   | 2008   |      | %      ofRevenues |   | 2007   |   | %      ofRevenues |   | 2006  |   | %      ofRevenues |    | %      Change2008      vs.2007 |   | %      Change2007      vs.2006 |   |
|----------------------------------------|--------|--------|-----------|-------------------|--------|--------|--------|-------------------|--------|-------|--------|-------------------|---------|--------------------------------|--------|--------------------------------|--------|
|  Revenues                         |   | $      | 511,575   |              | 100.0  | %      | $      | 572,927           |   | 100.0 | %      | $                 | 387,259 |                           | 100.0  | %                              | (10.7  | )% | 47.9 | % |
| Expenses                               |   |   | 1,127,420 |              | 220.4  |   |   | 653,244           |   | 110.4 |   |              | 460,647 |                           | 119.0  |                           | 72.6   |   | 41.8 |   |
| Other      items                       |   |   | 387,510   |              | 75.7   |   |   | 24,696            |   | 4.3   |   |              | 121,174 |                           | 31.3   |                           | N/M    |   | (79.6 | ) |
| (Loss)      income before income taxes |   |   | (228,335  | )                 | (44.6  | )      |   | (55,621           | )      | (9.7  | )      |              | 47,786  |                           | 12.3   |                           | (310.5 | ) | (216.4 | ) |
| Income      tax provision              |   |   | (3,823    | )                 | (0.7   | )      |   | (4,507            | )      | (0.8  | )      |              | (6,492  | )                              | (1.7   | )                              | 15.2   |   | 30.6 |   |
| Net      (loss) income                 |   | $      | (232,158  | )                 | (45.4  | )      | $      | (60,128           | )      | (10.5 | )      | $                 | 41,294  |                           | 10.7   |                           | (286.1 | ) | (245.6 | ) |

| (in      thousands)                                         |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |    |
|-------------------------------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|---------|
|  Operating      Groups                                 |   |   |    |   |   |                           |   |   |   |                           |    |   |   |   |
| Interest      income                                        |   | $      | 98,677  |   | $      | 209,597                        |   | (52.9  | )%     | $                              | 190,659 |   | 9.9 | % |
| Fee      income                                             |   |   | 65,877  |   |   | 94,290                         |   | (30.1  | )      |                           | 90,946  |   | 3.7 |   |
| Other                                                       |   |   | 7,062   |   |   | 11,019                         |   | (35.9  | )      |                           | 15,998  |   | (31.1 | ) |
| Subtotal                                                    |   |   | 171,616 |   |   | 314,906                        |   | (45.5  | )      |                           | 297,603 |   | 5.8 |   |
|  Consolidated      Partnerships                        |   |   |    |   |   |                           |   |   |   |                           |    |   |   |   |
| Revenues      of Tax Credit Fund and Property Partnerships  |   |   | 86,738  |   |   | 76,645                         |   | 13.2   |   |                           | 48,338  |   | 58.6 |   |
| Revenues      of CMBS and High-Yield Debt Fund Partnerships |   |   | 253,221 |   |   | 181,376                        |   | 39.6   |   |                           | 41,318  |   | 339.0 |   |
|  Total      revenues                                   |   | $      | 511,575 |   | $      | 572,927                        |   | (10.7  | )%     | $                              | 387,259 |   | 47.9 | % |

----

|   | · | Growth      in revenues of Consolidated Partnerships of $168.4 million in 2007,      reflective of the increases in assets under management for both our      Affordable Housing group and Commercial Real Estate  group; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Increase      in revenues of our operating groups due to acquisition of Centerline      Investors of $40.8; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | · | Increase      in interest income from investments, cash collateral balances and cash      escrows in our Commercial Real Estate and Portfolio Management groups,      largely in part due to the acquisition of Centerline      Investors. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars      in thousands)                                                                                                  |   | 2008   |      | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |    |
|------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|---------|
|  Operating      GroupsGeneral      and administrative:Salaries      and benefits                                        |   | $      | 87,322    |   | $      | 116,764                        |   | (25.2  | )%     | $                              | 94,916  |   | 23.0 | % |
| Other                                                                                                                        |   |   | 77,706    |   |   | 65,720                         |   | 18.2   |   |                           | 65,870  |   | (0.2 | ) |
| Total      G&A                                                                                                           |   |   | 165,028   |   |   | 182,484                        |   | (9.6   | )      |                           | 160,786 |   | 13.5 |   |
|                                                                                                                         |   |   |      |   |   |                           |   |   |   |                           |    |   |   |   |
| Interest      expense:                                                                                                       |   |   |      |   |   |                           |   |   |   |                           |    |   |   |   |
| Borrowings      and financings                                                                                               |   |   | 74,611    |   |   | 145,236                        |   | (48.6  | )      |                           | 97,853  |   | 48.4 |   |
| Preferred      shares of subsidiary                                                                                          |   |   | 18,898    |   |   | 18,898                         |   | --     |   |                           | 18,898  |   | -- |   |
|  Depreciation      and amortization                                                                                     |   |   | 46,030    |   |   | 45,099                         |   | 2.1    |   |                           | 45,395  |   | (0.7 | ) |
| Write-off      of goodwill and intangible assets                                                                             |   |   | 152,792   |   |   | 7,226                          |   | N/M    |   |                           | 2,644   |   | 173.3 |   |
| Loss      on impairment of assets                                                                                            |   |   | 48,935    |   |   | 20,008                         |   | 144.6  |   |                           | 5,003   |   | 299.9 |   |
| Expenses      – operating groups                                                                                       |   |   | 506,294   |   |   | 418,951                        |   | 20.8   |   |                           | 330,579 |   | 26.7 |   |
|  Consolidated      PartnershipsInterest      expense:Interest      expense of Tax Credit Fund and Property Partnerships |   |   | 15,300    |   |   | 19,245                         |   | (20.5  | )      |                           | 25,989  |   | (25.9 | ) |
| Interest      expense of CMBS Fund and High-Yield Debt Fund Partnerships                                                     |   |   | 149,722   |   |   | 81,076                         |   | 84.7   |   |                           | 21,937  |   | 269.6 |   |
|                                                                                                                         |   |   | 165,022   |   |   | 100,321                        |   | 64.5   |   |                           | 47,926  |   | 109.3 |   |
|                                                                                                                         |   |   |      |   |   |                           |   |   |   |                           |    |   |   |   |
| Loss      on impairment of assets                                                                                            |   |   | 317,264   |   |   | 20,941                         |   | N/M    |   |                           | --      |   | 100.0 |   |
|                                                                                                                         |   |   |      |   |   |                           |   |   |   |                           |    |   |   |   |
| Other      expenses:Other      expenses of Tax Credit Fund and Property Partnerships                                         |   |   | 128,385   |   |   | 106,360                        |   | 20.7   |   |                           | 81,704  |   | 30.2 |   |
| Other      expenses of CMBS Fund and High-Yield Debt FundPartnerships                                                        |   |   | 10,455    |   |   | 6,671                          |   | 56.7   |   |                           | 438     |   | N/M |   |
|                                                                                                                         |   |   | 138,840   |   |   | 113,031                        |   | 22.8   |   |                           | 82,142  |   | 37.6 |   |
| Expenses      – consolidated partnerships                                                                              |   |   | 621,126   |   |   | 234,293                        |   | 165.1  |   |                           | 130,068 |   | 80.1 |   |
|  Total      expenses                                                                                                    |   | $      | 1,127,420 |   | $      | 653,244                        |   | 72.6   | %      | $                              | 460,647 |   | 41.8 | % |

----

|   | · | $17.8      million of reduced bonus expense associated with the reduction in      profits; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | reduced      salaries and benefits expense from a reduction in personnel in April and      November 2008; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

|   | · | lower      share-based compensation expense for shares issued in connection with our      acquisition of Centerline Investors in August 2006 as the shares vest or      are forfeited (the 2008 period included $2.6 million relating to      amortization of these shares compared to amortization of $15.7 million in      2007). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      increase in salaries and benefits in 2007 compared to 2006 is mostly      attributable to the acquisition of Centerline Investors in August 2006 and      the resultant increase in salary costs, share-based compensation and      deferred incentive based compensation as further discussed below under      SECTION 3 – RESULTS BY      GROUP -Commercial Real      Estate. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An      increase of $8.6 million in rentexpense; |
|--------|--------|--------------------------------------------------|

|   | · | An      increase of $2.6 million related to increased professional      fees; |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | $1.6      million in reserves against certain AMAC  receivables; |
|--------|--------|------------------------------------------------------------------|

|   | · | $2.5      million charge related to vacated lease space;  and |
|--------|--------|---------------------------------------------------------------|

|   | · | Increase      in general legal costs of $0.5 million associated with litigation (see      Note 30 to the consolidated financial  statements). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | ·   | expenses      incurred in 2006 from the launch of what now comprises our Credit Risk      Products group; |
|--------|--------------------|-----------------------------------------------------------------------------------------------------------|

|   | ·   | higher      professional fees in 2006 due in part to costs related to Sarbanes-Oxley      implementation costs at Centerline Investors following its acquisition;      and |
|--------|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | higher      legal costs in 2006 related to protecting our interests in certain      properties (see Note 30 to the consolidated financial      statements). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (dollars      in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2008   |    | 2007   |   | 2006      |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|-----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |    |   |   |      |   |   |   |   |
| Borrowings      and financings:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |    |   |   |      |   |   |   |   |
| Revolver      and term loan interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $      | 18,776  |   | $      | 33,598    |   | $ | 10,893 |   |
| Asset      backed (warehouse) lines                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 7,692   |   |   | 11,407    |   |   | 15,196 |   |
| Secured      financing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 30,503  |   |   | 82,519    |   |   | 72,253 |   |
| Cash      interest payments (receipts) for derivatives, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   | 15,231  |   |   | (3,488    | )      |   | (2,262 | ) |
| Non-cash      impact of derivatives(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | (492    | )      |   | 19,284    |   |   | 1,007 |   |
| Other      interest expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   | 2,901   |   |   | 1,916     |   |   | 766 |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 74,611  |   | $      | 145,236   |   | $ | 97,853 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |    |   |   |      |   |   |   |   |
| Average      borrowing rate(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   | 6.47    | %      |   | 4.95      | %      |   | 4.68 | % |
| Average      borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $      | 934,917 |   | $      | 2,492,982 |   | $ | 1,992,862 |   |
| Average      SIFMA rate(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   | 2.25    | %      |   | 3.62      | %      |   | 3.45 | % |
| Average      LIBOR rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | 2.67    | %      |   | 5.25      | %      |   | 5.13 | % |
|  (1)       Represents      the change in fair value of free-standing derivatives and the gain/loss on      swap terminations (see Note 27 to the consolidated financial      statements).(2)            Includes impact of interest rate swaps, as applicable.(3)          Subsequent to the re-securitization of most of our mortgage revenue      bonds, our borrowings based on the Securities Industry and Financial      Markets Association Municipal Swap Index (“SIFMA”) rate are      minimal. |

----

|   | · | $55.2      million write-down of transactional relationships associated with Freddie      Mac and Fannie Mae; |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

|   | · | $2.9      million write-off of partnership service contracts associated with      managing AMAC; and |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | $2.0      million write-down of mortgage bankinglicenses. |
|--------|--------|-----------------------------------------------------------|

|   | · | $10.9      million primarily related to two mortgage revenue bonds we sold and three      bonds financing two properties experiencing substandard performance      ; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $8.0      million related to our Series B Freddie Mac  Certificates; |
|--------|--------|----------------------------------------------------------------------|

|   | · | $2.8      million related to other-than-temporary impairments on syndicated      corporate debt investments we sold; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------|

|   | · | $10.7      million related to retained CMBS certificates;  and |
|--------|--------|----------------------------------------------------------------|

|   | · | $15.9      million related to leasehold improvements related to the lease of office      space we no longer plan to occupy. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

----

| (dollars      in thousands)                                                                                                                                                                                                                                                                                                                       |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|---------|
|  Equity      and other (loss) income:                                                                                                                                                                                                                                                                                                        |   |   |    |   |   |                           |   |   |   |                           |    |   |   |   |
| Consolidated      Partnerships                                                                                                                                                                                                                                                                                                                    |   | $      | 7,823   |   | $      | 22,575                         |   | (65.3  | )%     | $                              | 15,012  |   | 50.4 | % |
| AMAC                                                                                                                                                                                                                                                                                                                                              |   |   | (78,056 | )      |   | (4,012                         | )      | N/M    |   |                           | --      |   | (100.0 | ) |
| Other                                                                                                                                                                                                                                                                                                                                             |   |   | (1,093  | )      |   | (1,153                         | )      | 5.2    |   |                           | 1,978   |   | (158.3 | ) |
| Total      equity and other (loss) income                                                                                                                                                                                                                                                                                                         |   |   | (71,326 | )      |   | 17,410                         |   | (509.7 | )      |                           | 16,990  |   | 2.5 |   |
| Eliminations(1)                                                                                                                                                                                                                                                                                                                                   |   |   | (7,823  | )      |   | (22,575                        | )      | 65.3   |   |                           | (15,012 | ) | (50.4 | ) |
| Equity      and other (loss) income – as      reported                                                                                                                                                                                                                                                                                      |   | $      | (79,149 | )      | $      | (5,165                         | )      | N/M    |   | $                              | 1,978   |   | (361.1 | )% |
|  (1)           Given the minority economic interest we have in consolidated      partnerships, for internal purposes we treat consolidated partnerships,      particularly the CMBS Fund and High-Yield Debt Fund Partnerships, as      equity interests in evaluating our results.N/M      – not meaningful. |

| Consolidated      Partnerships |
|--------------------------------|

| AMAC |
|------|

| Other |
|-------|

----

| (dollars      in thousands)                                    |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|  Sale      of:                                            |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |
| Mortgage      loans                                            |   | $      | 9,850  |   | $      | 10,089                         |   | (2.4   | )%     | $                              | 10,295 |   | (2.0 | )% |
| Mortgage      revenue bonds and other                          |   |   | (6,744 | )      |   | 1,062                          |   | (735.0 | )      |                           | 8,075  |   | (86.8 | ) |
|  Gain      from repayment or sale of investments, net     |   | $      | 3,106  |   | $      | 11,151                         |   | (72.1  | )%     | $                              | 18,370 |   | (39.3 | )% |
|  Loss      on re-securitization of mortgage revenue bonds |   | $      | --     |   | $      | (77,903                        | )      | 100.0  | %      | $                              | --     |   | (100.0 | )% |

|   | · | incremental      losses in 2008 (primarily recorded in the first quarter) associated with      the December 2007 re-securitization transaction.  These losses      primarily resulted from valuation adjustments for the stabilization escrow      maintained for certain bonds (see Note 10 to the consolidated financial      statements).  Upon the final deposit of funds to the escrow, the      difference between the cash deposit and its present value was recognized      as a loss.  Similar to previous losses recognized with respect      to the net present value adjustments to the escrow and the retained      residual interests, offsets will be recognized over the lives of the      instruments through accretion of the net present value      adjustments; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $4.7      million of gains associated with bonds included in the re-securitization      transaction, but for which guarantees we issued prevented initial      recognition as a sale.  As these guarantees lapsed, we recorded      sales of the assets and recognized the related gains (see Note 7 to the      consolidated financial statements); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      $2.5 million loss relating to five mortgage revenue bonds we sold (see      Note 8 to the consolidated financial  statements); |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      loss of $1.5 million related to the sale of syndicated corporate debt      investments (see Note 8 to the consolidated financial statements);      and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      write off of certain receivable balances associated with mortgage revenue      bonds that we deemed uncollectible. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

----

| (dollars      in thousands)                              |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |    |
|----------------------------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|---------|
|  Preferred      shareholders of subsidiary          |   | $      | (6,225) |   | $      | (6,225                         | )      | --     | %      | $                              | (6,225  | ) | -- | % |
|  SCUs                                               |   | $      | 92,685  |   | $      | 23,852                         |   | 288.6  | %      | $                              | (16,131 | ) | 247.9 | % |
| SCI’s                                              |   |   | 1,269   |   |   | 313                            |   | 305.4  |   |                           | (80     | ) | 491.3 |   |
| SMUs                                                     |   |   | --      |   |   | 296                            |   | (100.0 | )      |                           | (102    | ) | 390.2 |   |
| Other      minority interests                            |   |   | 363     |   |   | (350                           | )      | 203.7  |   |                           | 219     |   | (259.8 | ) |
| Minority      interests in subsidiaries, net             |   | $      | 94,317  |   | $      | 24,111                         |   | 291.2  | %      | $                              | (16,094 | ) | 249.8 | % |
|  Limited      partners of consolidated partnerships |   | $      | 659,228 |   | $      | 398,893                        |   | 65.3   | %      | $                              | 401,377 |   | (0.6 | )% |

| (dollars      in thousands)                                             |   | 2008   |     | 2007 |   | %      Change2008      vs.2007 |   | 2006   |     | %      Change2007      vs.2006 |    |
|-------------------------------------------------------------------------|--------|--------|----------|------|--------|--------------------------------|--------|--------|----------|--------------------------------|---------|
|  Loss      subject to tax                                          |   | $      | (183,866 | )    | $      |  (19,284                  | )      | (853.5 | )        | $                              | (31,555 | ) | 38.9 | % |
| (Loss)      income not subject to tax                                   |   |   | (44,469  | )    |   | (36,337                        | )      | (22.4  | )      % |                           | 79,341  |   | (145.8 | ) |
|  (Loss)      income before income taxes                            |   | $      | (228,335 | )    | $      | (55,621                        | )      | (310.5 | )%       | $                              | 47,786  |   | (216.4 | )% |
|  Income      tax provision                                         |   | $      | (3,823   | )    | $      | (4,507                         | )      | 15.2   | %        | $                              | (6,492  | ) | 30.6 | % |
|  Effective      tax rate – consolidated basis                |   |   | (1.7     | )%   |   | (8.1                           | )%     |   |     |                           | 13.6    | % |   |   |
|  Effective      tax rate for corporate subsidiaries subject to tax |   |   | (2.1     | )%   |   | (23.4                          | )%     |   |     |                           | (20.6   | ) |   |   |

----

----

| (dollars      in thousands)                           |   | 2008   |      | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |     |
|-------------------------------------------------------|--------|--------|-----------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|----------|
|  Revenues:                                       |   |   |      |   |   |                           |   |   |   |                           |     |   |   |   |
| Affordable      Housing                               |   | $      | 161,900   |   | $      | 293,944                        |   | (44.9  | )%     | $                              | 287,686  |   | 2.2 | % |
| Commercial      Real Estate                           |   |   | 66,152    |   |   | 69,488                         |   | (4.8   | )      |                           | 55,062   |   | 26.2 |   |
| Portfolio      Management                             |   |   | 41,463    |   |   | 60,774                         |   | (31.8  | )      |                           | 35,372   |   | 71.8 |   |
| Credit      Risk Products                             |   |   | 8,615     |   |   | 15,859                         |   | (45.7  | )      |                           | 3,644    |   | 335.2 |   |
| Corporate                                             |   |   | 28,022    |   |   | 22,337                         |   | 25.5   |   |                           | 23,940   |   | (6.7 | ) |
| Consolidated      Partnerships                        |   |   | 339,959   |   |   | 258,021                        |   | 31.8   |   |                           | 89,656   |   | 187.8 |   |
| Eliminations                                          |   |   | (134,536  | )      |   | (147,496                       | )      | 8.8    |   |                           | (108,101 | ) | (36.4 | ) |
| Total      revenues                                   |   | $      | 511,575   |   | $      | 572,927                        |   | (10.7  | )%     | $                              | 387,259  |   | 47.9 | % |
|  Expenses:                                       |   |   |      |   |   |                           |   |   |   |                           |     |   |   |   |
| Affordable      Housing                               |   | $      | 142,339   |   | $      | 197,080                        |   | (27.8  | )%     | $                              | 179,668  |   | 9.7 | % |
| Commercial      Real Estate                           |   |   | 57,600    |   |   | 111,458                        |   | (48.3  | )      |                           | 86,115   |   | 29.4 |   |
| Portfolio      Management                             |   |   | 32,980    |   |   | 38,966                         |   | (15.4  | )      |                           | 18,330   |   | 112.6 |   |
| Credit      Risk Products                             |   |   | 15,457    |   |   | 16,419                         |   | (5.9   | )      |                           | 9,508    |   | 73.5 |   |
| Corporate                                             |   |   | 306,910   |   |   | 127,260                        |   | 141.2  |   |                           | 81,186   |   | 55.8 |   |
| Consolidated      Partnerships                        |   |   | 707,597   |   |   | 314,173                        |   | 125.2  |   |                           | 197,789  |   | 58.8 |   |
| Eliminations                                          |   |   | (135,463  | )      |   | (152,112                       | )      | 10.9   |   |                           | (111,949 | ) | (35.2 | ) |
| Total      expenses                                   |   | $      | 1,127,420 |   | $      | 653,244                        |   | 72.6   | %      | $                              | 460,647  |   | 41.8 | % |
|  Other      income (loss)(1):                    |   |   |      |   |   |                           |   |   |   |                           |     |   |   |   |
| Affordable      Housing                               |   | $      | (3,847    | )      | $      | (76,598                        | )      | 95.0   | %      | $                              | (540     | ) | N/M |   |
| Commercial      Real Estate(2)                        |   |   | (62,075   | )      |   | 25,656                         |   | (342.0 | )      |                           | 35,605   |   | (27.9 | )% |
| Portfolio      Management                             |   |   | --        |   |   | 1,664                          |   | (100.0 | )      |                           | --       |   | -- |   |
| Credit      Risk Products                             |   |   | (1,348    | )      |   | --                             |   | (100.0 | )      |                           | --       |   | -- |   |
| Corporate                                             |   |   | (27       | )      |   | --                             |   | (100.0 | )      |                           | 568      |   | -- |   |
| Consolidated      Partnerships(1)                     |   |   | 375,461   |   |   | 78,727                         |   | 376.9  |   |                           | 123,145  |   | (36.1 | ) |
| Eliminations                                          |   |   | (8,746    | )      |   | (22,639                        | )      | 61.4   |   |                           | (15,285  | ) | (48.1 | ) |
| Total      other income                               |   |   | 299,418   |   |   | 6,810                          |   | N/M    | %      | $                              | 143,493  |   | (95.3 | )% |
|  Income      (loss) before other allocations(1): |   |   |      |   |   |                           |   |   |   |                           |     |   |   |   |
| Affordable      Housing                               |   | $      | 15,714    |   | $      | 20,266                         |   | (22.5  | )%     | $                              | 107,478  |   | (81.1 | )% |
| Commercial      Real Estate                           |   |   | (53,523   | )      |   | (16,314                        | )      | (228.1 | )      |                           | 4,552    |   | (458.4 | ) |
| Portfolio      Management                             |   |   | 8,483     |   |   | 23,472                         |   | (63.9  | )      |                           | 17,042   |   | 37.7 |   |
| Credit      Risk Products                             |   |   | (8,190    | )      |   | (560                           | )      | N/M    |   |                           | (5,864   | ) | 90.5 |   |
| Corporate                                             |   |   | (278,915  | )      |   | (104,923                       | )      | (165.8 | )      |                           | (56,678  | ) | 83.8 |   |
| Consolidated      Partnerships                        |   |   | 7,823     |   |   | 22,575                         |   | (65.3  | )      |                           | 15,012   |   | 50.4 |   |
| Eliminations                                          |   |   | (7,819    | )      |   | (18,023                        | )      | 56.6   |   |                           | (11,437  | ) | (63.8 | ) |
| Total      (loss) income before other allocations     |   | $      | (316,427  | )      | $      | (73,507                        | )      | (330.5 | )%     | $                              | 70,105   |   | (204.8 | )% |
|  Adjusted      Net Income (Loss):                |   |   |      |   |   |                           |   |   |   |                           |     |   |   |   |
| Affordable      Housing                               |   | $      | 9,072     |   | $      | 13,786                         |   | (34.2  | )%     | $                              | 99,689   |   | (86.2 | )% |
| Commercial      Real Estate                           |   |   | (53,070   | )      |   | (10,296                        | )      | (415.4 | )      |                           | 7,895    |   | (230.4 | ) |
| Portfolio      Management                             |   |   | 10,582    |   |   | 26,314                         |   | (59.8  | )      |                           | 18,941   |   | 38.9 |   |
| Credit      Risk Products                             |   |   | (7,970    | )      |   | (910                           | )      | (775.8 | )      |                           | (5,645   | ) | 83.9 |   |
| Corporate                                             |   |   | (68,298   | )      |   | (66,503                        | )      | (2.7   | )      |                           | (64,506  | ) | (1.9 | ) |
| Consolidated      Partnerships                        |   |   | 7,823     |   |   | 22,575                         |   | (65.3  | )      |                           | 15,012   |   | 50.4 |   |
| Eliminations                                          |   |   | (7,819    | )      |   | (18,023                        | )      | 56.6   |   |                           | (11,437  | ) | (63.8 | ) |
|                                                  |   | $      | (109,680  | )      | $      | (33,057                        | )      | (231.8 | )%     | $                              | 59,949   |   | (155.1 | )% |

| (1) | Includes      losses allocated to limited partners of consolidated      partnerships. |
|-----|---------------------------------------------------------------------------------------|

| (2) | Includes      equity income of CMBS Fund and High-Yield Debt Fund Partnerships as more      fully described below. |
|-----|--------------------------------------------------------------------------------------------------------------------|

----

|   | · | The      investor base for our Affordable Housing group has changed such that      traditional investors (e.g., Fannie Mae, Freddie Mac, commercial banks)      have reduced their demand for tax credits, which has resulted in fewer tax      credit fund originations during 2008 as compared to prior      periods.  During 2008 we raised $162.5 million of gross equity      as compared to $1.2 billion in 2007 and $1.2 billion in    2006. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | With      respect to mortgage revenue bonds, beginning in late 2007 and continuing      through 2008 funding costs have increased significantly and liquidity      declined resulting in a reduction in our ability to acquire new mortgage      revenue bonds.  We acquired and/or funded $28.1 million in      mortgage revenue bonds in 2008, compared to $226.4 million and $419.9      million of acquisitions and fundings in the 2007 and 2006,      respectively. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In      December 2007, our overall bond portfolio significantly declined as      compared to 2006 as a result of the re-securitization of $2.8 billion of      bonds with Freddie Mac in December 2007 (“the December 2007      re-securitization transaction”) (see Note 7 to the consolidated financial      statements).  We believe this materially improved our risk      profile by reducing the funding and interest rate risk inherent in our      liability structure. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Beginning      in 2008, we reorganized such that functions associated with the      origination, underwriting and servicing of mortgage loans for affordable      housing properties via the same agency programs utilized by our Commercial      Real Estate group is now performed within the Affordable Housing      group.  Consistent with the Commercial Real Estate group, the      Affordable Housing group has subserviced certain functions to the      Portfolio Management group.  Comparable information is presented      for the 2007 period but is not available for  2006. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars      in thousands)                |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |    |
|--------------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|---------|
|  Interest      income:                |   |   |    |   |   |                           |   |   |   |                           |    |   |   |   |
| Mortgage      revenue bond interest income |   | $      | 44,333  |   | $      | 176,261                        |   | (74.8  | )%     | $                              | 167,699 |   | 5.1 | % |
| Other      interest income                 |   |   | 46,781  |   |   | 3,931                          |   | N/M    |   |                           | 1,447   |   | 171.7 |   |
| Fee      income:                           |   |   |    |   |   |                           |   |   |   |                           |    |   |   |   |
| Fund      sponsorship                      |   |   | 63,030  |   |   | 103,915                        |   | (39.3  | )      |                           | 108,119 |   | (3.9 | ) |
| Mortgage      origination fees             |   |   | 843     |   |   | 852                            |   | (1.1   | )      |                           | --      |   | 100.0 |   |
| Mortgage      servicing fees               |   |   | 751     |   |   | 159                            |   | 372.3  |   |                           | --      |   | 100.0 |   |
| Other:                                     |   |   |    |   |   |                           |   |   |   |                           |    |   |   |   |
| Expense      reimbursements                |   |   | 4,163   |   |   | 6,009                          |   | (30.7  | )      |                           | 7,112   |   | (15.5 | ) |
| Miscellaneous                              |   |   | 1,999   |   |   | 2,817                          |   | (29.0  | )      |                           | 3,309   |   | (14.9 | ) |
|  Total      revenues                  |   | $      | 161,900 |   | $      | 293,944                        |   | (44.9  | )%     | $                              | 287,686 |   | 2.2 | % |

----

| (dollars      in thousands)                                     |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |      |
|-----------------------------------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|-----------|
|                                                            |   |   |    |   |   |                           |   |   |   |                           |      |   |   |   |
| Total      acquisition and funding activity                     |   | $      | 28,116  |   | $      | 226,393                        |   | (87.6  | )%     | $                              | 419,940   |   | (46.1 | )% |
| Mortgage      revenue bonds repaid or sold                      |   | $      | 330,579 |   | $      | 21,751                         |   | N/M    | %      | $                              | 83,746    |   | (74.0 | )% |
| Mortgage      revenue bonds re-securitized with Freddie Mac     |   | $      | --      |   | $      | 2,800,560                      |   | --     | %      | $                              | --        |   | -- | % |
| Average      portfolio balance (fair value)                     |   | $      | 680,541 |   | $      | 2,806,180                      |   | (75.8  | )%     | $                              | 2,560,099 |   | 9.6 | % |
| Weighted      average permanent interest rate of bonds acquired |   |   | 5.78    | %      |   | 5.81                           | %      |   |   |                           | 5.99      | % |   |   |
| Weighted      average yield of portfolio                        |   |   | 6.40    | %      |   | 6.19                           | %      |   |   |                           | 6.72      | % |   |   |

----

| (dollars      in thousands)                                 |   | 2008   |      | 2007   |   | %      Change2008      vs.2007 |   | 2006   |    | %      Change2007      vs.2006 |      |
|-------------------------------------------------------------|--------|--------|-----------|--------|--------|--------------------------------|--------|--------|---------|--------------------------------|-----------|
|  Fees based on equity    invested                      |   |   |      |   |   |                           |   |   |    |                           |      |   |   |   |
| Property      acquisition fees                              |   | $      | 12,611    |   | $      | 30,281                         |   | (58.4  | )%      | $                              | 35,705    |   | (15.2 | )% |
| Organization,      offering and acquisition allowance fees  |   |   | 6,078     |   |   | 14,434                         |   | (57.9  | )       |                           | 19,552    |   | (26.2 | ) |
|  Fees based on management of sponsored      funds      |   |   |      |   |   |                           |   |   |    |                           |      |   |   |   |
| Partnership      management fees                            |   |   | 11,190    |   |   | 9,238                          |   | 21.1   |    |                           | 6,927     |   | 33.4 |   |
| Asset      management fees                                  |   |   | 25,728    |   |   | 31,082                         |   | (17.2  | )       |                           | 27,022    |   | 15.0 |   |
|  Other      fee income                                 |   |   | 7,423     |   |   | 18,880                         |   | (60.7  | )       |                           | 18,913    |   | (0.2 | ) |
|  Total      fee income                                 |   | $      | 63,030    |   | $      | 103,915                        |   | (39.3  | )%      | $                              | 108,119   |   | (3.9 | )% |
|                                                        |
|  Assets      under management – tax credit funds |   | $      | 9,856,900 |   | $      | 9,694,430                      |   | 1.7    |  % | $                              | 8,525,903 |   | 13.7 | % |
| Equity      raised by tax credit funds                      |   | $      | 162,470   |   | $      | 1,168,527                      |   | (86.1  | )%      | $                              | 1,184,321 |   | (1.3 | )% |
| Equity      invested by tax credit funds(1)                 |   | $      | 472,978   |   | $      | 1,200,693                      |   | (60.6  | )%      | $                              | 1,113,289 |   | 7.9 | % |

| (1) | Excludes      warehoused properties that have not yet closed into an investment      fund. |
|-----|--------------------------------------------------------------------------------------------|

|   | · | $1.2      million decrease in these fees, as a result of fund asset dispositions      that occurred since December 31, 2007, resulting in lower invested assets      on which the fees are based; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $1.6      million decrease related to a reduction in the cash reserve balances of      certain funds, causing an uncertainty as to the collectability of fees for      these funds; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $1.1      million decrease related to fees charged to an affiliate during 2007 for      services we no longer provided in2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | the      higher level of assets under management as we added to the population of      funds sponsored (with 15 added in 2007 and 10 added in 2006);      and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      improvement of the cash position of certain investment funds allowing us      to collect management fees in 2008 which we had not previously recognized      until collectability was reasonably assured.  Some of these      funds are now in the disposition stage and were able to pay these fees      from the proceeds of assetdispositions. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars      in thousands) |   | 2008   |    |   |            | 2007   |   | %      Change2008      vs. 2007 |   |
|-----------------------------|--------|--------|---------|--------|-----------------|--------|--------|---------------------------------|--------|
|                        |   |   |    |   |            |   |   |                            |   |   |   |
| Mortgage      originations  |   | $      | 104,309 |   |            |   | $      | 134,296                         |   | (22.3 | )% |
|                        |   |   |    |   |            |   |   |                            |   |   |   |
|                        |   |   |    |   | %      of Total |   |   |                            |   | %      of Total |   |
|  Fannie      Mae       |   | $      | 28,070  |   | 26.9            | %      | $      | 7,381                           |   | 5.5 | % |
| Freddie      Mac            |   |   | 76,239  |   | 73.1            |   |   | 118,715                         |   | 88.4 |   |
| Centerline      Direct      |   |   | --      |   | --              |   |   | 8,200                           |   | 6.1 |   |
|  Total                 |   | $      | 104,309 |   | 100.0           | %      | $      | 134,296                         |   | 100.0 | % |

| (dollars      in thousands)                     |   | 2008   |    | 2007   |   | %      Change2008      vs. 2007 |   |
|-------------------------------------------------|--------|--------|---------|--------|--------|---------------------------------|--------|
|                                            |   |   |    |   |   |                            |   |   |   |   |
| Primary      servicing portfolio at December 31 |   | $      | 307,792 |   | $      | 124,869                         |   |   | 146.5 | % |
| Carrying      value of MSRs                     |   |   | 3,240   |   |   | 1,494                           |   |   | 116.9 |   |

----

| (dollars      in thousands)                                                                                                                           |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|---------|
|                                                                                                                                                  |   |   |    |   |   |                           |   |   |   |                           |    |   |   |   |
| General      and administrative                                                                                                                       |   | $      | 47,144  |   | $      | 48,860                         |   | (3.5   | )%     | $                              | 61,938  |   | (21.1 | )% |
| Interest:                                                                                                                                             |   |   |    |   |   |                           |   |   |   |                           |    |   |   |   |
| Borrowings      and financings                                                                                                                        |   |   | 55,693  |   |   | 108,481                        |   | (48.7  | )      |                           | 87,391  |   | 24.1 |   |
| Preferred      shares of subsidiary                                                                                                                   |   |   | 18,898  |   |   | 18,898                         |   | --     |   |                           | 18,898  |   | -- |   |
| Depreciation      and amortization                                                                                                                    |   |   | 1,128   |   |   | 908                            |   | 24.2   |   |                           | 6,438   |   | (85.9 | ) |
| Impairment      of assets                                                                                                                             |   |   | 19,476  |   |   | 19,933                         |   | (2.3   | )      |                           | 5,003   |   | 298.4 |   |
|  Total      expenses                                                                                                                             |   | $      | 142,339 |   | $      | 197,080                        |   | (27.8  | )%     | $                              | 179,668 |   | 9.7 | % |
|  Average      borrowing rate(1)                                                                                                                  |   |   | 6.10    | %      |   | 4.79                           | %      |   |   |                           | 4.17    | % |   |   |
| Average      SIFMA rate                                                                                                                               |   |   | 2.25    | %      |   | 3.62                           | %      |   |   |                           | 3.45    | % |   |   |
|  (1)         Includes effect of swaps and in 2006, incremental costs related to      restructuring of our securitizationprograms. |

|   | · | $2.9      million reduction of bonus compensation year over  year; |
|--------|--------|--------------------------------------------------------------------|

|   | · | $3.9      million decrease in tax credit investment acquisition costs year over      year, which is consistent with the decreases in associated revenue as      discussed above; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $4.4      million decrease in asset management and loan servicing fees year over      year to our Portfolio Management group. This decrease is due to the lower      Affordable Housing mortgage revenue bond portfolio following the December      2007 re-securitization transaction (on which part of this fee is      based).  In addition, beginning in 2008, the Affordable Housing      group performs its own asset management services and thus no further fees,      which were averaging $0.9 million per month during 2008, will be paid to      our Portfolio Management group for these  services. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (dollars      in thousands)                             |   | 2008   |   | 2007   |   | %      Change 2008 vs. 2007 |   | 2006   |   | %      Change 2007 vs. 2006 |   |
|---------------------------------------------------------|--------|--------|--------|--------|--------|-----------------------------|--------|--------|--------|-----------------------------|--------|
|                                                    |   |   |   |   |   |                        |   |   |   |                        |   |   |   |   |
|                                                    |   |   |   |   |   |                        |   |   |   |                        |   |   |   |   |
| Equity      and other loss                              |   | $      | (389   | )      | $      | (1,016                      | )      | 61.7   | %      | $                           | (1,588 | ) | (36.0 | )% |
| (Loss)      gain from repayment or sales of investments |   |   | (3,458 | )      |   | (75,582                     | )      | 95.4   |   |                        | 1,048  |   | N/M |   |
|  Total      other loss                             |   | $      | (3,847 | )      | $      | (76,598                     | )      | 95.0   | %      | $                           | (540   | ) | N/M |   |

----

| (dollars      in thousands)          |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                 |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| Income      before other allocations |   | $      | 15,714 |   | $      | 20,266                         |   |   | (22.5  | )%                             | $      | 107,478 |   |   | (81.1 | )% |
| Adjusted      Net Income             |   |   | 9,072  |   |   | 13,786                         |   |   | (34.2  | )                              |   | 99,689 |   |   | (86.2 | ) |

| ·   | The      declining performance of AMAC (resulting from the disruption in mortgage      and credit markets) significantly impacted our 2008      earnings.  This was realized through a reduction in revenues, as      a result of AMAC suspending most of its activity beginning in late 2007,      and through an increase in equity losses we recognized, directly      attributable to losses on asset sales and impairment charges AMAC      recognized.  In October 2008, AMAC determined that it would be      unable to refinance its repurchase lines, causing it to dispose of a      significant amount of its remaining assets.  As such, we      re-evaluated amounts carried on our balance sheet associated with our      investment in AMAC.  This evaluation resulted in a pre-tax      impairment charge of $74.8 million included in “equity and other (loss)      income” consisting of $4.5 million to write off the remaining balance of      our investment in AMAC preferred shares and a $70.3 million reserve      related to the collectability of the loan we provided to      AMAC.  The reserve reduces the carrying basis of the AMAC loan      to the amount we estimate that we can recover ($9.6    million). |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our      CMBS investments, whether held by our funds or for our own account, have      experienced a significant decline in value.  We continue to      believe that such declines are principally due to market dislocation and      are not necessarily reflective of the credit quality of the underlying      assets (see Fair Value Disclosures discussion in SECTION 4 – Liquidity and      Capital Resources beginning on page 62).  In addition,      our strategy with CMBS investments is long-term in nature and we have the      intent and ability to hold these assets until market conditions improve      allowing time for the asset values torecover. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      launch of our third high-yield CMBS Fund in August 2007 with committed      capital of $585.3 million as of December 31, 2008; and increased capital      commitments of $178.6 million in December 2007 in our High-Yield Debt Fund      Partnership, increasing the base management income we  earn. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our      proportionate share of impairment charges recognized from the CMBS Fund      and High-Yield Debt Fund Partnerships in 2008 was $17.5 million and $2.8      million in 2007.  There was no comparable amount in the 2006      period. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      have originated no commercial mortgage loans for AMAC or CRESS in 2008 and      have seen a significant decline in originations for conduit      originations.  We continue to believe in the long-term viability      of commercial loan originations and, during 2008, strengthened our      capabilities in this area by hiring a 14 member team formerly of Nomura      Credit and Capital, Inc. (“Nomura”).  As part of an agreement      with Nomura, we began to act as collateral manager for two commercial real      estate CDOs previously managed by Nomura and manage a portfolio of assets      that Nomura holds for its ownaccount. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Beginning      in 2008, we reorganized such that functions associated with the      origination, underwriting and servicing of mortgage loans for affordable      housing properties via the same agency programs utilized by our Commercial      Real Estate group is now performed within the Affordable Housing group      lowering the origination volume and expected revenues of the Commercial      Real Estate group.  Information prior to 2007 was not readily      available and therefore 2006 information below includes the origination,      underwriting and servicing of mortgage loans for affordable housing      properties. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (dollars      in thousands)                   |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                          |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |
| Interest      income                          |   | $      | 26,575 |   | $      | 27,371                         |   | (2.9   | )%     | $                              | 12,891 |   | 112.3 | % |
| Fee      income:                              |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |
| Mortgage      origination fees                |   |   | 4,406  |   |   | 6,728                          |   | (34.5  | )      |                           | 8,799  |   | (23.5 | ) |
| Mortgage      servicing fees                  |   |   | 18,998 |   |   | 18,318                         |   | 3.7    |   |                           | 19,355 |   | (5.4 | ) |
| Other      fees                               |   |   | 13,533 |   |   | 6,423                          |   | 110.7  |   |                           | 3,986  |   | 61.1 |   |
| Other:                                        |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |
| Prepayment      penalties                     |   |   | 1,252  |   |   | 3,022                          |   | (58.6  | )      |                           | 5,194  |   | (41.8 | ) |
| Expense      reimbursements and miscellaneous |   |   | 1,388  |   |   | 7,626                          |   | (81.8  | )      |                           | 4,837  |   | 57.7 |   |
|  Total      revenues                     |   | $      | 66,152 |   | $      | 69,488                         |   | (4.8   | )%     | $                              | 55,062 |   | 26.2 | % |

| (dollars      in thousands) |   | 2008   |    |   |            | 2007   |   | %      Change2008      vs. 2007 |   | 2006            |   | %      Change2007      vs. 2006 |      |
|-----------------------------|--------|--------|---------|--------|-----------------|--------|--------|---------------------------------|--------|-----------------|--------|---------------------------------|-----------|
|                        |   |   |    |   |            |   |   |                            |   |            |   |                            |      |   |   |   |
| Mortgage      originations  |   | $      | 907,546 |   |            |   | $      | 1,664,787                       |   | (45.5           | )%     | $                               | 1,541,797 |   | 6.7 | % |
|                        |   |   |    |   |            |   |   |                            |   |            |   |                            |      |   |   |   |
|                        |   |   |    |   | %      of Total |   |   |                            |   | %      of Total |   |                            |      |   | %      of Total |   |
|  Fannie      Mae       |   | $      | 672,517 |   | 74.1            | %      | $      | 474,213                         |   | 28.5            | %      | $                               | 620,583   |   | 40.3 | % |
| Freddie      Mac            |   |   | 224,029 |   | 24.7            |   |   | 361,337                         |   | 21.7            |   |                            | 280,093   |   | 18.2 |   |
| Centerline      Direct      |   |   | --      |   | --              |   |   | 700,561                         |   | 42.1            |   |                            | 535,554   |   | 34.7 |   |
| Conduit      and other      |   |   | 11,000  |   | 1.2             |   |   | 128,676                         |   | 7.7             |   |                            | 105,567   |   | 6.8 |   |
|  Total                 |   | $      | 907,546 |   | 100.0           | %      | $      | 1,664,787                       |   | 100.0           | %      | $                               | 1,541,797 |   | 100.0 | % |

|   | · | a      decrease in the level of originations (we originated no mortgages under      our lending program for AMAC and CRESS (“Centerline Direct”) and there was      a decline in conduit originations as a result of market conditions;      and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | a      portion of the origination volume for which we received lower than average      origination fees, or for which we did not earn origination fees, but      instead earned premiums recognized on the subsequent sale of these loans      (see Other (Loss) Income below). |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars      in thousands)                         |   | 2008   |      | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |      |
|-----------------------------------------------------|--------|--------|-----------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|-----------|
|                                                |   |   |      |   |   |                           |   |   |   |                           |      |   |   |   |
| Primary      servicing portfolio atDecember      31 |   | $      | 8,475,191 |   | $      | 8,420,499                      |   | 0.6    | %      | $                              | 8,360,889 |   | 0.7 | % |
| Carrying      value of MSRs                         |   |   | 46,212    |   |   | 50,850                         |   | (9.1   | )      |                           | 56,562    |   | (10.1 | ) |

----

| (in      millions)                                                                  |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|-------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                                                                |   |   |    |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| CMBS      funds                                                                     |   | $      | 1,475.4 |   | $      | 1,475.4                        |   |   | --     | %                              | $      | 890.1 |   |   | 65.8 | % |
| High-yield      debt investment entities(1)                                         |   |   | 535.7   |   |   | 556.6                          |   |   | (3.8   | )                              |   | 442.1 |   |   | 25.9 |   |
| Joint      venture equity funds(1)                                                  |   |   | 179.4   |   |   | 225.6                          |   |   | (20.5  | )                              |   | 76.9 |   |   | 193.4 |   |
| CDO      collateral management                                                      |   |   | 1,451.7 |   |   | --                             |   |   | 100.0  |                           |   | -- |   |   | -- |   |
| Third-Party      commercial loan portfolio                                          |   |   | 550.7   |   |   | --                             |   |   | 100.0  |                           |   | -- |   |   | -- |   |
|  Total                                                                         |   | $      | 4,192.9 |   | $      | 2,257.6                        |   |   | 85.7   | %                              | $      | 1,409.1 |   |   | 60.2 | % |
|  (1)         Figures represent equity of the managed  entities. |

| (dollars      in thousands)        |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|------------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                               |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| General      and administrative    |   | $      | 42,309 |   | $      | 70,215                         |   |   | (39.7  | )%                             | $      | 60,539 |   |   | 16 | % |
| Interest,      net                 |   |   | (7,552 | )      |   | 25,317                         |   |   | (129.8 | )                              |   | 7,518 |   |   | 236.8 |   |
| Depreciation      and amortization |   |   | 12,107 |   |   | 15,926                         |   |   | (24.0  | )                              |   | 18,058 |   |   | (11.8 | ) |
| Impairment      of assets          |   |   | 10,736 |   |   | --                             |   |   | 100.0  |                           |   | -- |   |   | -- |   |
| Total      expenses                |   | $      | 57,600 |   | $      | 111,458                        |   |   | (48.3  | )%                             | $      | 86,115 |   |   | 29.4 | % |

|   | · | employees      added upon acquisition in August2006; |
|--------|--------|------------------------------------------------------|

|   | · | incremental      non-cash compensation costs of $4.8 million in 2007 (over the 2006 period)      related to shares issued in connection with the    acquisition; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increased      infrastructure costs; and |
|--------|--------|------------------------------------------|

|   | · | increased      compliance costs related to Sarbanes-Oxley principally due to Centerline      Investors previous status as a privatecompany. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | a      decrease in LIBOR rates from the prioryear; |
|--------|--------|----------------------------------------------------|

|   | · | a      decrease in the average debt outstanding year over year at our Centerline      Investors subsidiary associated with the varying levels of investments in      CMBS securities for our own account.  In May 2007, we acquired      investments with a face amount of $336.5 million, the majority of which we      sold in August 2007 to the new CMBS Fund Partnership we      originated.  Additionally, we had been repaying a credit line      and we refinanced it in the fourth quarter of 2008;  and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      decrease related to derivative impacts.  During 2007, interest      expense includes $13.5 million of non-cash loss representing the change in      the fair value of derivatives, which were incurred on behalf of one of the      CMBS Fund Partnerships.  Centerline Investors charged this cost      to the fund in 2008 (see further detail in SECTION 2 – CONSOLIDATED      RESULTS OF OPERATIONS – Interest Expense  above). |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars      in thousands)             |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|-----------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                    |   |   |    |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| Equity      and other (loss) income     |   |   |    |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| AMAC                                    |   | $      | (78,056 | )      | $      | (4,012                         | )      |   | N/A    |                           | $      | -- |   |   | (100.0 | )% |
| Consolidated      Partnerships          |   |   | 7,695   |   |   | 22,547                         |   |   | (65.9  | )%                             |   | 15,300 |   |   | 47.4 |   |
| Other                                   |   |   | 408     |   |   | (143                           | )      |   | 385.3  |                           |   | 2,983 |   |   | (104.8 | ) |
| Gain      on sale or repayment of loans |   |   | 7,878   |   |   | 7,264                          |   |   | 8.5    |                           |   | 10,406 |   |   | (30.2 | ) |
| Gain      on termination of loan        |   |   | --      |   |   | --                             |   |   | --     |                           |   | 6,916 |   |   | -- |   |
| Total      other income (loss)          |   | $      | (62,075 | )      | $      | 25,656                         |   |   | (342.0 | )%                             | $      | 35,605 |   |   | (27.9 | )% |

----

| (dollars      in thousands)                 |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|---------------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                        |   |   |    |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| (Loss)      income before other allocations |   | $      | (53,523 | )      | $      | (16,314                        | )      |   | (228.1 | )%                             | $      | 4,552 |   |   | (458.4 | )% |
| Adjusted      Net (Loss) Income             |   |   | (53,070 | )      |   | (10,296                        | )      |   | (415.4 | )                              |   | 7,895 |   |   | (230.4 | ) |

|   | · | Our      2008 total primary loan servicing portfolio decreased to $22.0 billion, as      compared to $30.7 billion at December 31, 2007, due principally to      declining pre-securitization servicing that has been affected by the      disruption in credit markets. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our      2008 special servicing portfolio increased to $2.1 billion, as compared to      $926.7 million at December 31,2007. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

----

| (dollars      in thousands)                     |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|-------------------------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                            |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| Interest      income                            |   | $      | 6,935  |   | $      | 23,666                         |   |   | (70.7  | )%                             | $      | 13,707 |   |   | 72.7 | % |
| Fee      income:Asset      management/servicing |   |   | 23,857 |   |   | 27,186                         |   |   | (12.2  | )                              |   | 17,878 |   |   | 52.1 |   |
| Other      fee income                           |   |   | 9,406  |   |   | 9,086                          |   |   | 3.5    |                           |   | 3,751 |   |   | 142.2 |   |
| Other                                           |   |   | 1,265  |   |   | 836                            |   |   | 51.3   |                           |   | 36 |   |   | N/M |   |
|  Total      revenues                       |   | $      | 41,463 |   | $      | 60,774                         |   |   | (31.8  | )%                             | $      | 35,372 |   |   | 71.8 | % |

| (dollars      in millions)                                                                                                        |   | 2008   |     | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                                                                                                              |   |   |     |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| Primary      Servicing Portfolio(1)                                                                                               |   | $      | 22,000.2 |   | $      | 30,668.2                       |   |   | (28.3  | )%                             | $      | 21,331.6 |   |   | 43.8 | % |
| Special      Servicing Portfolio                                                                                                  |   |   | 2,120.4  |   |   | 926.7                          |   |   | 128.8  |                           |   | 201.2 |   |   | 360.6 |   |
|                                                                                                                              |   |   |     |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| Carrying      value of MSRs                                                                                                       |   |   | 3,031    |   |   | 6,195                          |   |   | (51.1  | )                              |   | 12,223 |   |   | (49.3 | ) |
|                                                                                                                              |   |   |     |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| (1)         Includes sub-servicing of the Commercial Real Estate and Affordable      Housing servicing portfolios. |

----

| (dollars      in thousands)        |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|------------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                               |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| General      and administrative    |   | $      | 28,211 |   | $      | 32,065                         |   |   | (12.0  | )%                             | $      | 18,223 |   |   | 76.0 | % |
| Interest                           |   |   | 581    |   |   | 82                             |   |   | 608.5  |                           |   | -- |   |   | 100.0 |   |
| Depreciation      and amortization |   |   | 4,188  |   |   | 6,819                          |   |   | (38.6  | )                              |   | 107 |   |   | N/M |   |
|  Total      expenses          |   | $      | 32,980 |   | $      | 38,966                         |   |   | (15.4  | )%                             | $      | 18,330 |   |   | 112.6 | % |

| (dollars      in thousands)          |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                 |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| Income      before other allocations |   | $      | 8,483  |   | $      | 23,472                         |   |   | (63.9  | )%                             | $      | 17,042 |   |   | 37.7 | % |
| Adjusted      Net Income             |   |   | 10,582 |   |   | 26,314                         |   |   | (59.8  | )                              |   | 18,941 |   |   | 38.9 |   |

|   | · | Beginning      in the fourth quarter of 2007, we began purchasing syndicated debt in      anticipation of a future collateralized loan obligation      transaction.  Principally as a result of market conditions, we      did not purchase any additional syndicated corporate debt during 2008 and      instead liquidated our positions.  Substantially all of the      assets were sold at a loss by December 31,2008. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (dollars      in thousands)     |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|---------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                            |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |
| Interest      income            |   | $      | 3,230  |   | $      | 3,714                          |   | (13.0  | )%     | $                              | 969    |   | 283.3 | % |
| Credit      intermediation fees |   |   | 4,664  |   |   | 11,894                         |   | (60.8  | )      |                           | 2,471  |   | 381.3 |   |
| Other                           |   |   | 721    |   |   | 251                            |   | 187.3  |   |                           | 204    |   | 23.0 |   |
|  Total      revenues       |   | $      | 8,615  |   | $      | 15,859                         |   | (45.7  | )%     | $                              | 3,644  |   | 335.2 | % |

| (dollars      in thousands)                |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|--------------------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                       |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| General      and administrative            |   | $      | 10,495 |   | $      | 11,600                         |   |   | (9.5   | )%                             | $      | 9,046 |   |   | 28.2 | % |
| Interest:                                  |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| Borrowings                                 |   |   | 1,763  |   |   | 1,228                          |   |   | 43.6   |                           |   | 462 |   |   | 165.8 |   |
| Derivatives      – fair value change |   |   | (1,303 | )      |   | 3,431                          |   |   | (138.0 | )                              |   | -- |   |   | 100.0 |   |
| Depreciation      and amortization         |   |   | 1,654  |   |   | 85                             |   |   | N/M    |                           |   | -- |   |   | 100.0 |   |
| Impairment      of assets                  |   |   | 2,848  |   |   | 75                             |   |   | N/M    |                           |   | -- |   |   | 100.0 |   |
|  Total      expenses                  |   | $      | 15,457 |   | $      | 16,419                         |   |   | (5.9   | )%                             | $      | 9,508 |   |   | 73.5 | % |

----

| (dollars      in thousands) |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|-----------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                        |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| Loss      on sale of assets |   | $      | (1,348 | )      | $      | --                             |   |   | (100.0 | )%                             | $      | -- |   |   | -- | % |

| (dollars      in thousands)            |   | 2008   |   | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                   |   |   |   |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| Loss      before other allocations     |   | $      | (8,190 | )      | $      | (560                           | )      |   | N/M    | %                              | $      | (5,864 | ) |   | 90.5 | % |
| Adjusted      Net Loss                 |   |   | (7,970 | )      |   | (910                           | )      |   | (775.8 | )                              |   | (5,645 | ) |   | 83.9 |   |
|  N/M      – Not meaningful. |

----

| (dollars      in thousands)         |   | 2008   |    | 2007   |   | %      Change2008      vs.2007 |   | 2006   |   | %      Change2007      vs.2006 |   |
|-------------------------------------|--------|--------|---------|--------|--------|--------------------------------|--------|--------|--------|--------------------------------|--------|
|                                |   |   |    |   |   |                           |   |   |   |                           |   |   |   |   |   |   |
| General      and administrative     |   | $      | 61,681  |   | $      | 50,057                         |   |   | 23.2   | %                              | $      | 36,944 |   |   | 35.5 | % |
| Interest                            |   |   | 49,592  |   |   | 48,616                         |   |   | 2.0    |                           |   | 20,806 |   |   | 130.0 |   |
| Depreciation      and amortization  |   |   | 26,953  |   |   | 21,361                         |   |   | 26.2   |                           |   | 20,792 |   |   | 2.7 |   |
| Write-off      of goodwill          |   |   | 92,748  |   |   | --                             |   |   | 100.0  |                           |   | 997 |   |   | (100.0 | ) |
| Write-off      of intangible assets |   |   | 60,044  |   |   | 7,226                          |   |   | 730.9  |                           |   | 1,647 |   |   | 338.7 |   |
| Loss      on impairment of assets   |   |   | 15,892  |   |   | --                             |   |   | 100.0  |                           |   | -- |   |   | -- |   |
|  Total      expenses           |   | $      | 306,910 |   | $      | 127,260                        |   |   | 141.2  | %                              | $      | 81,186 |   |   | 55.8 | % |

| · | an      increase of $10.1 million in rent expense for office space;      and |
|--------|------------------------------------------------------------------------------|

| · | an      increase in general legal costs of $0.5 million associated with litigation      (see Note 30 to the consolidated financial  statements). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | expansion      of certain corporate departments in connection with the Centerline      Investors acquisition; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| ·   | $2.4      million of severance costs related to the departure of      executives; |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | systems      and consulting costs related to process redesign projects;    and |
|--------------------|--------------------------------------------------------------------------------|

| ·   | higher      audit costs associated with the growth of the company and the      re-securitization transaction. |
|--------------------|---------------------------------------------------------------------------------------------------------------|

----

|   | · | $55.2      million reduction in transactional relationships associated with Freddie      Mac and Fannie Mae; |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | $2.9      million reduction in transactional relationships associated with managing      AMAC (we had recorded a $7.2 million write-down of this asset in 2007 when      AMAC suspended most of its investment activity);  and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $2.0      million write-down of mortgage bankinglicenses. |
|--------|--------|-----------------------------------------------------------|

----

|                                                  |   | Years      Ended December 31,                  |     |
|-------------------------------------------------------|--------|------------------------------------------------|----------|
|                                                  |   |  2008                                     |     | 2007 |   | 2006 |   |
| (in      thousands)                                   |   | Tax      Credit Fund and Property Partnerships |     |  CMBS      and High-Yield Debt Fund Partnerships |   | Total |   | Tax      Credit Fund and Property Partnerships |   |  CMBS      and High-Yield Debt Fund Partnerships |   | Total |   | Tax      Credit Fund and Property Partnerships |   |  CMBS      and High-Yield Debt Fund Partnerships(1) |   | Total |   |
|  Revenues                                        |   | $                                              | 86,738   |   | $ | 253,221 |   | $ | 339,959 |   | $ | 76,645 |   | $ | 181,376 |   | $ | 258,021 |   | $ | 48,338 |   | $ | 41,318 |   | $ | 89,656 |   |
| Interest      expense                                 |   |                                           | (15,300  | ) |   | (149,722 | ) |   | (165,022 | ) |   | (19,245 | ) |   | (81,076 | ) |   | (100,321 | ) |   | (25,989 | ) |   | (21,937 | ) |   | (47,926 | ) |
| Loss      on impairment of assets                     |   |                                           | --       |   |   | (317,264 | ) |   | (317,264 | ) |   | -- |   |   | (20,941 | ) |   | (20,941 | ) |   | -- |   |   | -- |   |   | -- |   |
| Other      expenses                                   |   |                                           | (128,385 | ) |   | (10,455 | ) |   | (138,840 | ) |   | (106,360 | ) |   | (6,671 | ) |   | (113,031 | ) |   | (81,704 | ) |   | (438 | ) |   | (82,142 | ) |
| Partnership      expenses eliminated in consolidation |   |                                           | (82,906  | ) |   | (3,565 | ) |   | (86,471 | ) |   | (79,651 | ) |   | (229 | ) |   | (79,880 | ) |   | (67,721 | ) |   | -- |   |   | (67,721 | ) |
| Income      (loss) on investments                     |   |                                           | (279,062 | ) |   | (4,705 | ) |   | (283,767 | ) |   | (321,798 | ) |   | 1,632 |   |   | (320,166 | ) |   | (273,892 | ) |   | (4,340 | ) |   | (278,232 | ) |
| Allocations      to limited partners                  |   |                                           | 419,043  |   |   | 240,185 |   |   | 659,228 |   |   | 450,437 |   |   | (51,544 | ) |   | 398,893 |   |   | 400,680 |   |   | 697 |   |   | 401,377 |   |
|  Net      impact                                 |   | $                                              | 128      |   |   | 7,695 |   | $ | 7,823 |   | $ | 28 |   | $ | 22,547 |   | $ | 22,575 |   | $ | (288 | ) | $ | 15,300 |   | $ | 15,012 |   |

| (1) | Represents      period from date of Centerline Investor’s acquisition in August      2006. |
|-----|--------------------------------------------------------------------------------------------------|

|                                  |   | December      31, |   |
|---------------------------------------|--------|-------------------|--------|
|                                  |   | 2008              |   | 2007 |   | 2006 |   |
|                                  |   |              |   |   |   |   |   |
| Tax      Credit Fund Partnerships     |   | 135               |   | 132 |   | 113 |   |
| Tax      Credit Property Partnerships |   | 55                |   | 54 |   | 55 |   |
| CMBS      Fund Partnerships           |   | 3                 |   |  3 |   |  2 |   |
| High-Yield      Debt Fund Partnership |   | 1                 |   |  1 |   |  1 |   |

----

|   | · | for      asset-backed financing (such as we use to fund mortgage originations in      our Commercial Real Estate and Affordable Housing groups), our financing      facilities have remained constant with no increase in capacity despite the      increase in our origination business.  In addition, we      anticipate increased cost of funds and lower capacity upon renewal of the      line in the second quarter of 2009; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      share price and the general environment for equity offerings have made      obtaining equity capital extremely difficult.  Additionally, the      11.0% Preferred Shares that we issued in January 2008 (see Note 19 to the      consolidated financial statements) have dividend requirements at a      significantly higher rate than we historically  paid; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | for      our Term Loan and Revolving Credit Facility (see Note 14 to the      consolidated financial statements), the terms include a higher rate of      interest and more stringent covenants (including restrictions on funding      new business opportunities without lender approval) than had been the norm      in prior periods. In addition, with the exception of dividends related to      our Equity Issuer subsidiary and distributions from our REIT subsidiary,      our Term Loan and Revolving Credit Facility, prohibit us from paying      common and preferred dividends (see also Item 1A.  Risk      Factors – Risks Related to Investing in Our Company);      and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | constriction      in credit markets has made it difficult to expand our Commercial Real      Estate fund management business especially at leverage levels achieved in      prior years.  The market also has fewer    investors. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | utilizing      financing alternatives for investments that are not pledged as security      for asset-based borrowings (which is subject to lender      approval); |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | instituting      measures to reduce general and administrative expenses, including salaries      and other costs; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | · | continuing      to sell investments that do not meet our long term investment      criteria. |
|--------|--------|----------------------------------------------------------------------------------------------|

----

|                                 |   | Centerline      Holding Company Rating |   | Centerline      Financial LLC Rating |   | Equity      Issuer Rating |   |
|--------------------------------------|--------|----------------------------------------|--------|--------------------------------------|--------|---------------------------|--------|
|                                 |   |                                   |   |                                 |   |                      |   |
| Moody’s      Investor Services |   |                                   |   |                                 |   |                      |   |
| Corporate      credit                |   | B2                                     |   | --                                   |   | --                        |   |
| Senior      debt                     |   | B2                                     |   | Aaa                                  |   | --                        |   |
|                                 |   |                                   |   |                                 |   |                      |   |
| Standard      & Poor’s     |   |                                   |   |                                 |   |                      |   |
| Corporate      credit                |   | B+                                     |   | AAA                                  |   |                      |   |
| Senior      debt                     |   | B+                                     |   | AAA                                  |   | --                        |   |
| Preferred      shares                |   | --                                     |   | --                                   |   | Aaa                       |   |

| (in      thousands)                          |   | 2008   |    | 2007   |   | 2006       |   |
|----------------------------------------------|--------|--------|---------|--------|--------|------------|--------|
|                                         |   |   |    |   |   |       |   |   |   |   |
| Net      cash flow from operating activities |   | $      | (1,088  | )      | $      | 259,884    |   | $ | 103,309 |   |
| Net      cash flow from investing activities |   |   | 14,133  |   |   | 1,218,354  |   |   | (540,583 | ) |
| Net      cash flow from financing activities |   |   | (46,277 | )      |   | (1,519,940 | )      |   | 454,792 |   |
| Net      change in cash                      |   | $      | (33,232 | )      | $      | (41,702    | )      | $ | 17,518 |   |

----

|                                      |   | (In      thousands) |   |
|-------------------------------------------|--------|---------------------|--------|
|  Equity      Issuer Preferred shares |   | $                   | 4,187  |   |

----

|   | · | uncertainty      resulting from a drastic decline in market activity for certain of our      mortgage backed products, includingCMBS; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | · | significant      increase in dependence on model-related assumptions and/or unobservable      inputs; |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | doubts      about the quality of the market information utilized as      inputs; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | market      uncertainty that may result in unduly conservative quotes from brokers;      and |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | in      certain cases, the downgrades of certain trusts in which we may hold      certificates. |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | a      3.0% constant default rate (“CDR”) with a 30% severity of loss on default;      and |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | a      100% yield to discount the cashflows. |
|--------|--------|----------------------------------------------|

|                                                                                              |   | Multiple      of BrokerQuotes      Assuming: |
|---------------------------------------------------------------------------------------------------|--------|----------------------------------------------|
| Yield      Percentage                                                                             |   | 1.0%      CDR                                |   | 3.0%      CDR |
|                                                                                              |   |                                         |   |   |   |   |   |
| 10                                                                                                | %      |                                         | 7.64 | x |   | 3.70 | x |
| 20                                                                                                | %      |                                         | 4.77 | x |   | 2.76 | x |
| 30                                                                                                | %      |                                         | 3.38 | x |   | 2.22 | x |
| 40                                                                                                | %      |                                         | 2.61 | x |   | 1.88 | x |
| 50                                                                                                | %      |                                         | 2.14 | x |   | 1.65 | x |
| 60                                                                                                | %      |                                         | 1.82 | x |   | 1.48 | x |
| 70                                                                                                | %      |                                         | 1.60 | x |   | 1.35 | x |
| 80                                                                                                | %      |                                         | 1.44 | x |   | 1.24 | x |
| 90                                                                                                | %      |                                         | 1.31 | x |   | 1.15 | x |
| 100                                                                                               | %      |                                         | 1.21 | x |   | 1.08 | x(1) |
|  (1)         Value approximates the third party broker quotes      available. |

----

| (in      thousands)                                                                 |   | December      31,2008 |    | December      31,2007 |   |
|-------------------------------------------------------------------------------------|--------|-----------------------|---------|-----------------------|--------|
|  Level      3 assets held for our own account:                                 |   |                  |    |                  |   |   |   |
| Series      A-1 Freddie Mac Certificates                                            |   | $                     | 335,047 |                  | $      | 288,672 |   |
| Series      B Freddie Mac Certificates                                              |   |                  | 123,122 |                  |   | 153,468 |   |
| Mortgage      revenue bonds                                                         |   |                  | 69,217  |                  |   | 376,432 |   |
| Retained      CMBS certificates                                                     |   |                  | 7,313   |                  |   | 75,328 |   |
| CMBS                                                                                |   |                  | 2,550   |                  |   | 13,361 |   |
| Mortgage      servicing rights(1)                                                   |   |                  | 52,483  |                  |   | 58,529 |   |
| Level      3 assets held by Consolidated Partnerships:                              |   |                  |    |                  |   |   |   |
| CMBS                                                                                |   |                  | 182,828 |                  |   | 1,235,059 |   |
| Retained      CMBS certificates                                                     |   |                  | 9,867   |                  |   | 482,424 |   |
| CDO      debt and equity                                                            |   |                  | 33,189  |                  |   | 65,060 |   |
| Total      Level 3 assets                                                           |   | $                     | 815,616 |                  | $      | 2,748,333 |   |
|  Level      3 assets as a percentage of total fair value assets                |   |                  | 94.0    | %                     |   | 94.0 | % |
|  (1)        Financial asset fair valued on a non-recurring    basis. |   |

|                                                                      |   | Years      Ended December 31, |    |
|---------------------------------------------------------------------------|--------|-------------------------------|---------|
| (in      thousands)                                                       |   | 2008                          |    | 2007 |   | 2006 |   |
|  Series      B Freddie Mac Certificates                              |   | $                             | 7,968   |   | $ | -- |   | $ | -- |   |
|  Mortgage      revenue bonds                                         |   |                          | 10,928  |   |   | 19,933 |   |   | 4,676 |   |
|  Retained      CMBS certificates                                     |   |                          | 10,736  |   |   | -- |   |   | -- |   |
|  Subtotal      (excluding Consolidated Partnerships)                 |   |                          | 29,632  |   |   | 19,933 |   |   | 4,676 |   |
|  CMBS      (held by Consolidated Partnerships)                       |   |                          | 95,976  |   |   | -- |   |   | -- |   |
|  Retained      CMBS certificates (held by Consolidated Partnerships) |   |                          | 27,016  |   |   | 20,941 |   |   | -- |   |
|  CDO      debt and equity (held by Consolidated Partnerships)        |   |                          | 101,027 |   |   | -- |   |   | -- |   |
|  Total                                                               |   | $                             | 253,651 |   | $ | 40,874 |   | $ | 4,676 |   |

----

|                                                 |   |                  |      |                  |   | December      31, 2008        |   |
|------------------------------------------------------|--------|-----------------------|-----------|-----------------------|--------|-------------------------------|--------|
| (in      thousands)                                  |   | December      31,2008 |      | December      31,2007 |   |  Available      toBorrow |   | MaximumCommitment |   |
|                                                 |   |                  |      |                  |   |                          |   |   |   |   |   |   |   |
| Credit      Facility:                                |   |                  |      |                  |   |                          |   |   |   |   |   |   |   |
| Term      loan                                       |   | $                     | 68,884    |                  | $      | 140,000                       |   | $ | -- |   | $ | 68,884 |   |
| Termed-out      portion of revolving credit facility |   |                  | 220,000   |                  |   | N/A                           |   |   | -- |   |   | 220,000 |   |
| Revolving      portion of revolving credit facility  |   |                  | 8,000     |                  |   | 210,000                       |   |   | 5,019 | (1) |   | 25,000 |   |
|  Other      Notes Payable:                      |   |                  |      |                  |   |                          |   |   |   |   |   |   |   |
| Mortgage      banking warehouse line                 |   |                  | 32,229    |                  |   | 32,302                        |   |   | N/A | (2) |   | 150,000 |   |
| Multifamily      ASAP plus facility                  |   |                  | 14,869    |                  |   | 58,413                        |   |   | N/A | (2) |   | N/A |   |
| Commercial      Real Estate lines                    |   |                  | 13,846    |                  |   | 56,912                        |   |   | -- | (3) |   | N/A |   |
| Syndicated      corporate debt warehouse Line(4)     |   |                  | --        |                  |   | 5,423                         |   |   | N/A |   |   | N/A |   |
| Other                                                |   |                  | 233       |                  |   | 2,838                         |   |   | N/A |   |   | N/A |   |
|  Financing      Arrangements:                   |   |                  |      |                  |   |                          |   |   |   |   |   |   |   |
| Bond      securitizations                            |   |                  | 62,424    |                  |   | 14,275                        |   |   | N/A |   |   | N/A |   |
| Subtotal                                             |   |                  | 420,485   |                  |   | 520,163                       |   |   | 5,019 |   |   | 463,884 |   |
|  Freddie      Mac Secured Financing(5)          |   |                  | 348,989   |                  |   | 548,227                       |   |   | N/A |   |   | N/A |   |
| Subtotal      (excluding Consolidated Partnerships)  |   |                  | 769,474   |                  |   | 1,068,390                     |   |   | 5,019 |   |   | 463,884 |   |
|  Consolidated      Partnerships                 |   |                  | 1,833,330 |                  |   | 1,997,332                     |   |   | N/A |   |   | N/A |   |
|  Total                                          |   | $                     | 2,602,804 |                  | $      | 3,065,722                     |   | $ | 5,019 |   | $ | 463,884 |   |

| (1) | Availability      reduced by outstanding letters ofcredit. |
|-----|------------------------------------------------------------|

| (2) | Borrowings      under these facilities are limited to assets that serve as      collateral. |
|-----|---------------------------------------------------------------------------------------------|

| (3) | In      November 2008, our existing repurchase line at Centerline Investors was      terminated and we entered into a term loan arrangement with Bank of      America whereby certain cash flows from the investments used to secure the      arrangement are applied to the outstanding principal balance until paid in      full. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | During      2008, the syndicated corporate debt warehouse line was      terminated. |
|-----|-------------------------------------------------------------------------------------|

| (5) | Related      to mortgage revenue bonds that we re-securitized but for which the      transaction was not recognized as a sale (see Notes 7 and 15 to the      consolidated financial statements). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | incurring      additional unsecured indebtedness without lender  approval; |
|--------|--------|----------------------------------------------------------------------------|

|   | · | declaring      and paying dividends (including distributions to minority      interests); |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | certain      new business investment without lender approval;  and |
|--------|--------|--------------------------------------------------------------------|

|   | · | conducting      transactions with our affiliates. |
|--------|--------|---------------------------------------------------|

----

|   | · | a      minimum level of consolidated networth; |
|--------|--------|------------------------------------------------|

|   | · | a      minimum ratio of consolidated EBITDA to fixed charges;  and |
|--------|--------|--------------------------------------------------------------------|

|   | · | a      minimum ratio of funded debt to consolidated  EBITDA. |
|--------|--------|--------------------------------------------------------------|

|   | · | four      CDO financing arrangements of the CMBS Fund  Partnerships; |
|--------|--------|----------------------------------------------------------------------|

|   | · | notes      payable by the Tax Credit Fund Partnerships collateralized either by the      funds’ limited partners’ equity subscriptions or by the underlying      investments of the funds; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | repurchase      agreements for High-Yield Debt Fund Partnership;  and |
|--------|--------|-----------------------------------------------------------------------|

|   | · | bridge      loans extended to a CMBS Fund Partnership by its investors (including      us). |
|--------|--------|---------------------------------------------------------------------------------------------|

| (in      thousands)                                                       |   | 2008   |    | 2007   |   |
|---------------------------------------------------------------------------|--------|--------|---------|--------|--------|
|  Mezzanine      equity:                                              |   |   |    |   |   |   |   |
| Minority      interests in subsidiaries                                   |   | $      | 75,080  |   | $      | 176,716 |   |
| Preferred      shares of subsidiary (not subject to mandatory repurchase) |   |   | 104,000 |   |   | 104,000 |   |
| Redeemable      CRA Shares                                                |   |   | 197,006 |   |   | 69,888 |   |
| 11.0%      Preferred shares                                               |   |   | 129,373 |   |   | -- |   |
|  Shareholders’      equity:                                    |   |   |    |   |   |   |   |
| CRA      Shares                                                           |   |   | 3,144   |   |   | 118,160 |   |

|   | · | the      net loss of $232.2 million; |
|--------|--------|--------------------------------------|

----

|   | · | the      reclassification of $127.1 million from equity to mezzanine equity in      connection with the execution of put option agreements for certain equity      shares, net of subsequent conversion to common shares for certain of these      shares (see Notes 19 and 20 to the consolidated financial statements);      and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | other      comprehensive losses of $1.0billion. |
|--------|--------|-------------------------------------------------|

----

|                                                                       |   | Payments      due by period |      |
|----------------------------------------------------------------------------|--------|-----------------------------|-----------|
| (in      thousands)                                                        |   | Total                       |      |  Less      than1      year |   | 1-3      years |   | 3-5      years |   | More      than5      years |   |
|                                                                       |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes      payable(1)(2):                                                  |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Credit      Facility:                                                      |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Term      Loan(3)                                                          |   | $                           | 68,884    |   | $ | 68,884 |   | $ | -- |   | $ | -- |   | $ | -- |   |
| Termed      out portion of Revolving Credit Facility (3)                   |   |                        | 220,000   |   |   | -- |   |   | 220,000 |   |   | -- |   |   | -- |   |
| Revolving      portion of Revolving Credit Facility (4)                    |   |                        | 8,000     |   |   | -- |   |   | 8,000 |   |   | -- |   |   | -- |   |
|                                                                       |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage      banking warehouse line(5)                                    |   |                        | 32,229    |   |   | 32,229 |   |   | -- |   |   | -- |   |   | -- |   |
| Multifamily      ASAP plus facility(5)                                     |   |                        | 14,869    |   |   | 14,869 |   |   | -- |   |   | -- |   |   | -- |   |
| Commercial      Real Estate term note(6)                                   |   |                        | 13,846    |   |   | 13,846 |   |   | -- |   |   | -- |   |   | -- |   |
| Other                                                                      |   |                        | 233       |   |   | 233 |   |   |   |   |   |   |   |   |   |   |
| Subtotal                                                                   |   |                        | 358,061   |   |   | 130,061 |   |   | 228,000 |   |   | -- |   |   | -- |   |
|                                                                       |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bond      securitizations(1)(2)                                            |   |                        | 62,424    |   |   | -- |   |   | -- |   |   | -- |   |   | 62,424 |   |
|                                                                       |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      lease obligations(7)                                        |   |                        | 274,023   |   |   | 21,008 |   |   | 42,766 |   |   | 39,821 |   |   | 170,428 |   |
| Subleases                                                                  |   |                        | (5,603    | ) |   | (1,318 | ) |   | (2,666 | ) |   | (1,619 | ) |   | -- |   |
| Preferred      shares of subsidiary (subject      to mandatory repurchase) |   |                        | 273,500   |   |   | -- |   |   | -- |   |   | -- |   |   | 273,500 |   |
|  Subtotal                                                             |   |                        | 935,405   |   |   | 149,751 |   |   | 268,100 |   |   | 38,202 |   |   | 506,352 |   |
|                                                                       |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Freddie      Mac secured financing(8)                                      |   |                        | 348,989   |   |   | 11,200 |   |   | 11,739 |   |   | -- |   |   | 326,050 |   |
| Unfunded      investment commitments(9)                                    |   |                        | 229,112   |   |   | 188,622 |   |   | 40,490 |   |   | -- |   |   | -- |   |
|  Subtotal      before Consolidated Partnerships                       |   |                        | 1,540,506 |   |   | 349,573 |   |   | 320,329 |   |   | 38,202 |   |   | 832,402 |   |
|  Notes      payable of consolidated partnerships(10)                  |   |                        | 672,730   |   |   | 198,958 |   |   | 319,510 |   |   | 153,719 |   |   | 543 |   |
| Financing      arrangements of consolidated partnerships                   |   |                        | 1,121,475 |   |   | 18,383 |   |   | 144,360 |   |   | 237,684 |   |   | 721,048 |   |
| Repurchase      agreements of consolidated partnerships                    |   |                        | 39,125    |   |   | -- |   |   | 39,125 |   |   | -- |   |   | -- |   |
| Consolidated      Partnership unfunded investment commitments(11)          |   |                        | 602,774   |   |   | 205,306 |   |   | 270,885 |   |   | 126,583 |   |   | -- |   |
|  Subtotal      of Consolidated Partnerships                           |   |                        | 2,436,104 |   |   | 422,647 |   |   | 773,880 |   |   | 517,986 |   |   | 721,591 |   |
|  Total                                                                |   | $                           | 3,976,611 |   | $ | 772,220 |   | $ | 1,094,209 |   | $ | 556,188 |   | $ | 1,553,993 |   |

| (1) | The      amounts included in each category reflect the current expiration, reset or      renewal date of each facility or security      certificate.  Management has the intent and believes it has the      ability to repay, renew, refinance or remarket the borrowings beyond their      current due dates.   |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Recourse      debt represents principal amount only.  The weighted average      interest rate at period end, including the impact of swaps, was      8.89%. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (3) | Amounts      are expected to be repaid from releases of stabilization escrow (see Note      10 to the consolidated financial statements), monetization of non-core      assets, specified cash flow streams, operating cash flows and other      anticipated cash receipts. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | To      the extent this portion of the facility is used to acquire equity      interests in tax credit partnerships (see Note 9 to the consolidated      financial statements) the amounts are repaid from proceeds upon sale of      those interests to a tax creditfund. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Represents      borrowings by our mortgage banking subsidiaries for which the associated      mortgage loans held for sale have firm sale commitments.  The      amounts borrowed are repaid upon sale of the  loans. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Amounts      are expected to be repaid using the cash interest income from the      collateral assets. |
|-----|--------------------------------------------------------------------------------------------------------|

| (7) | We      are currently in negotiations with the landlord regarding the subleasing      of space we planned to occupy as our new      headquarters.  Negotiations are ongoing and we cannot estimate      the outcome at this time. See also Note 30 to the consolidated financial      statements. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Represents      a liability established related to mortgage revenue bonds re-securitized      in December 2007 which were not accounted for as sold due to continuing      involvement with the underlying assets.  Amounts are based upon      the expected repayment dates of the underlying bonds.  As the      associated mortgage revenue bonds are repaid and/or receive sale      treatment, the associated liability will be reduced (see Note 7 to the      consolidated financial statements). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Of      this amount, $227.9 million represents mortgage loan origination      commitments with corresponding sale commitments.  The      origination commitments are funded using the Mortgage banking warehouse      line and/or the Multifamily ASAP plus facility.  See discussion      of those facilities above. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Of      the notes payable of consolidated partnerships, $214.7 million are      collateralized by equity subscriptions of certain equity partners of the      investment funds.  Under the partnership agreements, the equity      partners are also obligated to pay the principal and interest on the      notes.  Of the remaining balance, $163.0 million is      collateralized with the underlying properties of the consolidated      operating partnerships.  All of this debt is non-recourse to      us. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | To      be funded from capital of Consolidated Partnerships.  Payments      of investment commitments are based on property performance thresholds as      defined in the partnership agreements.  The estimated scheduled      payments can vary based on the actual performance of the      properties. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (in      thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Maximum      Exposure |      | Carrying      Amount |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|-----------|----------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                  |      |                 |   |   |   |
| Tax      Credit Fund credit intermediation(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                     | 1,587,685 |                 | $      | 31,380 |   |
| Mortgage      banking loss sharing agreements(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                  | 952,719   |                 |   | 13,116 |   |
| Credit      support to developers(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                  | 171,836   |                 |   | 261 |   |
| Centerline      Financial credit default swaps(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                  | 44,015    |                 |   | 1,097 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $                     | 2,756,255 |                 | $      | 45,854 |   |
|  (1)          We see these transactions as opportunities to expand our Affordable      Housing business by offering broad capital solutions to      customers.  To date, we have had minimal exposure to losses and      anticipate no material liquidity requirements in satisfaction of any      arrangement.  The carrying values disclosed above relate to the      fees we earn for the transactions, which we recognize as their fair      values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (2)           The loss sharing agreements with Fannie Mae and Freddie Mac are a      normal part of the DUS and DUI lender programs and afford a higher level      of fees than we earn for other comparable funding sources.  The      carrying value disclosed above is our estimate of potential exposure under      the guarantees, although any funding requirements for such exposure is      based on the contractual requirements of the underlying loans we sell to      Fannie Mae and Freddie Mac, which vary as to amount and duration, up to a      maximum of 30 years.  The carrying value disclosed above      represents the reserve we have recorded as a reduction of mortgage      servicing rights, which we recognize as the fair value of the      agreements.  In addition to the carrying amount above, we      recorded a $1.5 million charge in the second quarter of 2008 for specific      expected losses under our mortgage loan loss sharing agreement with Fannie      Mae. |

----

| (3)          Generally relate to business requirements for developers to obtain      construction financing.  As part of our role as co-developer of      certain properties, we issue these guarantees in order to secure      properties as assets for the funds we manage.  To date, we have      had minimal exposure to losses under these guarantees.  The      carrying values disclosed above relate to the fees we earn for the      transactions, which we recognize as their fair values. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)           To date, we have had minimal exposure to losses and anticipate no      material liquidity requirements in satisfaction of any      arrangement.  The carrying values disclosed above relate to the      fees we earn for the transactions, which we recognize as their fair      values.                                                                                                                                                                                                              |

|   | · | estimating      the default and prepayment rates of the mortgage revenue bonds in the      managed portfolio, which estimates are based on our historical experience      and industry studies related to properties comparable to those underlying      the bonds; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | applying      an appropriate discount rate, which we consider in comparison to      comparable residual interests secured by multifamily loans, along with      consideration of the tax free nature of the associated    income. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Determining      the fair value of the asset retained when the associated mortgage is sold      and in subsequent reporting periods, including such factors as costs to      service the loans, the estimated rate of prepayments, the estimated rate      of default and an appropriate discount rate to calculate the present value      of cash flows; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Estimating      the appropriate proportion and period for amortizing the      asset. |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | determination      of degree of control over an entity by its various equity      holders; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | structure      of the entity; |
|--------|--------|-------------------------------|

|   | · | relationships      between equity holders; |
|--------|--------|--------------------------------------------|

|   | · | determination      of primary beneficiary; and |
|--------|--------|------------------------------------------------|

|   | · | ability      to replace general partners, amongothers. |
|--------|--------|--------------------------------------------------------|

----

----

| ·   | business      limitations caused by adverse changes in real estate and credit markets      and general economic and businessconditions; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | risks      related to the form and structure of our financing      arrangements; |
|--------------------|----------------------------------------------------------------------------------|

| ·   | our      ability to generate new income sources, raise capital for investment funds      and maintain business relationships with providers and users of      capital; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes      in applicable laws and regulations; |
|--------------------|--------------------------------------------------|

| ·   | our      tax treatment, the tax treatment of our subsidiaries and the tax treatment      of our investments; |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | competition      with other companies; |
|--------------------|----------------------------------------|

| ·   | risk      of loss from direct and indirect investments in CMBS and CDOs and mortgage      revenue bonds; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | risk      of loss under mortgage banking loss sharing  agreements; |
|--------------------|--------------------------------------------------------------------|

| ·   | risks      associated with providing credit intermediation;  and |
|--------------------|------------------------------------------------------------------|

|                  · | risks      associated with enforcement by our creditors of any rights or remedies      which they may possess. |
|--------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|

----

----

| /s/ Marc D. Schnitzer        |   | /s/ Robert L. Levy           |
|------------------------------|--------|------------------------------|
| Marc      D. Schnitzer       |   | Robert      L. Levy          |
| Chief      Executive Officer |   | Chief      Financial Officer |
| March      10, 2009          |   | March      10, 2009          |

----

----

| Item      8. |   | Financial Statements and Supplementary      Data.                                                                    |   |   |
|--------------|--------|----------------------------------------------------------------------------------------------------------------------|--------|--------|
|         |   |                                                                                                                 |   | Page   |
| (a)      1.  |   | Financial      Statements                                                                                            |   |   |
|         |   |                                                                                                                 |   |   |
|         |   | Report      of Independent Registered Public Accounting Firm                                                         |   | 78     |
|         |   |                                                                                                                 |   |   |
|         |   | Consolidated      Balance Sheets as of December 31, 2008 and 2007                                                    |   | 79     |
|         |   |                                                                                                                 |   |   |
|         |   | Consolidated      Statements of Operations for the years ended December 31, 2008, 2007 and      2006                 |   | 80     |
|         |   |                                                                                                                 |   |   |
|         |   | Consolidated      Statements of Shareholders’ Equity for the years ended December 31, 2008,      2007 and 2006 |   | 81     |
|         |   |                                                                                                                 |   |   |
|         |   | Consolidated      Statements of Cash Flows for the years ended December 31, 2008, 2007 and      2006                 |   | 84     |
|         |   |                                                                                                                 |   |   |
|         |   | Notes      to Consolidated Financial Statements                                                                      |   |   |
|         |   |                                                                                                                 |   |   |
|         |   | Note      1 – Description of Business and Basis of Presentation                                                |   | 84     |
|         |   | Note      2 – Summary of Significant Accounting Policies                                                       |   | 86     |
|         |   | Note      3 – Accounting Pronouncements to be Adopted                                                          |   | 94     |
|         |   | Note      4 – Market Conditions and Liquidity                                                                  |   | 95     |
|         |   | Note      5 – Assets Pledged as Collateral                                                                     |   | 96     |
|         |   | Note      6 – Fair Value of Financial Instruments                                                              |   | 96     |
|         |   | Note      7 – Re-securitization of Mortgage Revenue Bond Portfolio                                             |   | 100    |
|         |   | Note      8 – Available-for-Sale Investments                                                                   |   | 101    |
|         |   | Note      9 – Equity Method Investments                                                                        |   | 108    |
|         |   | Note      10 – Other Investments                                                                               |   | 108    |
|         |   | Note      11 – Goodwill and Intangible Assets, Net                                                             |   | 109    |
|         |   | Note      12 – Deferred Costs and Other Assets, Net                                                            |   | 115    |
|         |   | Note      13 – Assets of Consolidated Partnerships                                                             |   | 116    |
|         |   | Note      14 – Notes Payable                                                                                   |   | 123    |
|         |   | Note      15 – Financing Arrangements and Secured Financing                                                    |   | 126    |
|         |   | Note      16 – Accounts Payable, Accrued Expenses and Other    Liabilities                                     |   | 127    |
|         |   | Note      17 – Liabilities of Consolidated Partnerships                                                        |   | 127    |
|         |   | Note      18 – Subsidiary Equity                                                                               |   | 130    |
|         |   | Note      19 – Redeemable Securities                                                                           |   | 134    |
|         |   | Note      20 – Shareholders’ Equity                                                                      |   | 135    |
|         |   | Note      21 – General and Administrative Expenses                                                             |   | 138    |
|         |   | Note      22 – Loss on Impairment of Assets                                                                    |   | 139    |
|         |   | Note      23 – Share-Based Compensation                                                                        |   | 139    |
|         |   | Note      24 – Revenues and Expenses of Consolidated Partnerships                                              |   | 143    |
|         |   | Note      25 – Income Taxes                                                                                    |   | 143    |
|         |   | Note      26 – Earnings per Share                                                                              |   | 146    |
|         |   | Note      27 – Financial Risk Management and Derivatives                                                       |   | 147    |
|         |   | Note      28 – Related Party Transactions                                                                      |   | 150    |
|         |   | Note      29 – Business Segments                                                                               |   | 152    |
|         |   | Note      30 – Commitments and Contingencies                                                                   |   | 154    |
|         |   | Note      31 – Selected Quarterly Financial Data (Unaudited)                                                   |   | 160    |

----

----

CENTERLINE HOLDING COMPANY

|                                                                                                                                                                 |   | December      31, |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|------------|
|                                                                                                                                                                 |   | 2008              |       | 2007 |   |
|  ASSETS                                                                                                                                                         |
|  Cash      and cash equivalents                                                                                                                                 |   | $                 | 103,879    |   | $ | 137,111 |   |
| Restricted      cash                                                                                                                                                 |   |              | 10,852     |   |   | 32,548 |   |
| Investments:                                                                                                                                                         |   |              |       |   |   |   |   |
| Available-for-sale      (Note 8)                                                                                                                                     |   |              | 539,213    |   |   | 936,191 |   |
| Equity      method (Note 9)                                                                                                                                          |   |              | 31,367     |   |   | 38,761 |   |
| Other      (Note 10)                                                                                                                                                 |   |              | 134,227    |   |   | 184,464 |   |
| Investments      in and loans to affiliates, net (Note 28)                                                                                                           |   |              | 19,222     |   |   | 107,175 |   |
| Goodwill      and intangible assets, net (Note 11)                                                                                                                   |   |              | 338,650    |   |   | 504,273 |   |
| Deferred      costs and other assets, net (Note 12)                                                                                                                  |   |              | 135,679    |   |   | 141,438 |   |
| Consolidated      partnerships (Note 13):                                                                                                                            |   |              |       |   |   |   |   |
| Investments:                                                                                                                                                         |   |              |       |   |   |   |   |
| Available-for-sale                                                                                                                                                   |   |              | 225,884    |   |   | 1,782,543 |   |
| Held-to-maturity                                                                                                                                                     |   |              | 288,960    |   |   | -- |   |
| Equity      method                                                                                                                                                   |   |              | 4,234,251  |   |   | 4,178,206 |   |
| Other                                                                                                                                                                |   |              | 248,469    |   |   | 414,377 |   |
| Land,      buildings and improvements, net                                                                                                                           |   |              | 697,422    |   |   | 661,380 |   |
| Other      assets                                                                                                                                                    |   |              | 373,932    |   |   | 371,735 |   |
|  Total      assets                                                                                                                                              |   | $                 | 7,382,007  |   | $ | 9,490,202 |   |
|  LIABILITIES      AND EQUITY                                                                                                                                    |
|  Liabilities:                                                                                                                                                   |   |              |       |   |   |   |   |
| Notes      payable (Note 14)                                                                                                                                         |   | $                 | 358,061    |   | $ | 505,888 |   |
| Financing      arrangements and secured financing  (Note 15)                                                                                               |   |              | 411,413    |   |   | 562,502 |   |
| Accounts      payable, accrued expenses and other liabilities (Note 16)                                                                                              |   |              | 205,464    |   |   | 313,250 |   |
| Preferred      shares of subsidiary (subject to mandatory repurchase) (Note      18)                                                                                 |   |              | 273,500    |   |   | 273,500 |   |
| Consolidated      partnerships (Note 17):                                                                                                                            |   |              |       |   |   |   |   |
| Financing      arrangements                                                                                                                                          |   |              | 1,121,475  |   |   | 1,122,906 |   |
| Notes      payable                                                                                                                                                   |   |              | 672,730    |   |   | 458,367 |   |
| Repurchase      agreements                                                                                                                                           |   |              | 39,125     |   |   | 416,059 |   |
| Due      to property partnerships                                                                                                                                    |   |              | 577,160    |   |   | 970,602 |   |
| Other      liabilities                                                                                                                                               |   |              | 208,664    |   |   | 193,020 |   |
|  Total      liabilities                                                                                                                                         |   |              | 3,867,592  |   |   | 4,816,094 |   |
|  Minority      interests in subsidiaries (Note 18)                                                                                                              |   |              | 75,080     |   |   | 176,716 |   |
| Preferred      shares of subsidiary (not subject to mandatory repurchase) (Note      18)                                                                             |   |              | 104,000    |   |   | 104,000 |   |
| Redeemable      securities (Note 19)                                                                                                                                 |   |              | 326,379    |   |   | 69,888 |   |
| Limited      partners’ interests in consolidated partnerships                                                                                                  |   |              | 3,876,467  |   |   | 3,782,912 |   |
|  Commitments      and contingencies (Note 30)                                                                                                                   |   |              |       |   |   |   |   |
|  Shareholders’      (deficit) equity (Note 20):                                                                                                           |   |              |       |   |   |   |   |
| Beneficial      owners’ equity:                                                                                                                                |   |              |       |   |   |   |   |
| 4.4%      Convertible CRA preferred shares; no par value; no shares issued and      outstanding in 2008 and 1,060 shares issued and outstanding in      2007         |   |              | --         |   |   | 51,281 |   |
| Convertible      CRA shares; no par value; 519 shares issued and outstanding in 2008 and      5,306 shares issued and outstanding in 2007                            |   |              | 3,144      |   |   | 66,879 |   |
| Special      preferred voting shares; no par value; 13,131 shares issued and      outstanding in 2008 and 14,298 shares issued and outstanding in      2007          |   |              | 131        |   |   | 143 |   |
| Common      shares; no par value; 160,000 shares authorized; 56,662 issued and 52,970      outstanding in 2008 and 53,943 issued and 50,567 outstanding in      2007 |   |              | 338,619    |   |   | 592,505 |   |
| Treasury      shares of beneficial interest – common, at cost; 3,692 shares in 2008 and      3,376 shares in 2007                                              |   |              | (65,283    | ) |   | (64,312 | ) |
| Accumulated      other comprehensive loss                                                                                                                            |   |              | (1,144,122 | ) |   | (105,904 | ) |
| Total      shareholders’ (deficit) equity                                                                                                                      |   |              | (867,511   | ) |   | 540,592 |   |
|  Total      liabilities and equity                                                                                                                              |   | $                 | 7,382,007  |   | $ | 9,490,202 |   |

----

|                                                                                         |   | Years      Ended December 31, |      |
|----------------------------------------------------------------------------------------------|--------|-------------------------------|-----------|
|                                                                                         |   | 2008                          |      | 2007 |   | 2006 |   |
|  Revenues:                                                                              |   |                          |      |   |   |   |   |   |   |   |
| Interest      income                                                                         |   | $                             | 98,677    |   | $ | 209,597 |   | $ | 190,659 |   |
| Fee      income                                                                              |   |                          | 65,877    |   |   | 94,290 |   |   | 90,946 |   |
| Other                                                                                        |   |                          | 7,062     |   |   | 11,019 |   |   | 15,998 |   |
| Consolidated      partnerships (Note 24):                                                    |   |                          |      |   |   |   |   |   |   |   |
| Interest      income                                                                         |   |                          | 262,997   |   |   | 195,203 |   |   | 51,728 |   |
| Rental      income                                                                           |   |                          | 68,357    |   |   | 55,541 |   |   | 30,701 |   |
| Other                                                                                        |   |                          | 8,605     |   |   | 7,277 |   |   | 7,227 |   |
| Total      revenues                                                                          |   |                          | 511,575   |   |   | 572,927 |   |   | 387,259 |   |
|  Expenses:                                                                              |   |                          |      |   |   |   |   |   |   |   |
| General      and administrative (Note 21)                                                    |   |                          | 165,028   |   |   | 182,484 |   |   | 160,786 |   |
| Interest                                                                                     |   |                          | 74,611    |   |   | 145,236 |   |   | 97,853 |   |
| Interest      – distributions to preferred shareholders of subsidiary                  |   |                          | 18,898    |   |   | 18,898 |   |   | 18,898 |   |
| Depreciation      and amortization                                                           |   |                          | 46,030    |   |   | 45,099 |   |   | 45,395 |   |
| Write-off      of goodwill and intangible assets (Note 11)                                   |   |                          | 152,792   |   |   | 7,226 |   |   | 2,644 |   |
| Loss      on impairment of assets (Note 22)                                                  |   |                          | 48,935    |   |   | 20,008 |   |   | 5,003 |   |
| Consolidated      Partnerships (Note 24):                                                    |   |                          |      |   |   |   |   |   |   |   |
| Interest                                                                                     |   |                          | 165,022   |   |   | 100,321 |   |   | 47,926 |   |
| Loss      on impairment of assets                                                            |   |                          | 317,264   |   |   | 20,941 |   |   | -- |   |
| Other      expenses                                                                          |   |                          | 138,840   |   |   | 113,031 |   |   | 82,142 |   |
| Total      expenses                                                                          |   |                          | 1,127,420 |   |   | 653,244 |   |   | 460,647 |   |
|  Loss      before other income                                                          |   |                          | (615,845  | ) |   | (80,317 | ) |   | (73,388 | ) |
|                                                                                         |   |                          |      |   |   |   |   |   |   |   |
| Other      (loss) income:                                                                    |   |                          |      |   |   |   |   |   |   |   |
| Equity      and other (loss) income                                                          |   |                          | (79,149   | ) |   | (5,165 | ) |   | 1,978 |   |
| Gain      from repayment or sale of investments, net                                         |   |                          | 3,106     |   |   | 11,151 |   |   | 18,370 |   |
| Loss      on re-securitization of mortgage revenue bonds (Note 7)                            |   |                          | --        |   |   | (77,903 | ) |   | -- |   |
| Other      losses from consolidated partnerships, net                                        |   |                          | (283,767  | ) |   | (320,166 | ) |   | (278,232 | ) |
|  Loss      before allocations                                                           |   |                          | (975,655  | ) |   | (472,400 | ) |   | (331,272 | ) |
|                                                                                         |   |                          |      |   |   |   |   |   |   |   |
| (Income)      loss allocations:                                                              |   |                          |      |   |   |   |   |   |   |   |
| Preferred      shares of subsidiary                                                          |   |                          | (6,225    | ) |   | (6,225 | ) |   | (6,225 | ) |
| Minority      interests in subsidiaries, net of tax (Note 18)                                |   |                          | 94,317    |   |   | 24,111 |   |   | (16,094 | ) |
| Limited      partners of consolidated partnerships, net                                      |   |                          | 659,228   |   |   | 398,893 |   |   | 401,377 |   |
|  (Loss)      income before income taxes                                                 |   |                          | (228,335  | ) |   | (55,621 | ) |   | 47,786 |   |
| Income      tax provision (Note 25)                                                          |   |                          | (3,823    | ) |   | (4,507 | ) |   | (6,492 | ) |
|  Net      (loss) income                                                                 |   |                          | (232,158  | ) |   | (60,128 | ) |   | 41,294 |   |
|                                                                                         |   |                          |      |   |   |   |   |   |   |   |
| Dividends      for preferred and redeemable securities (including dividends in      arrears) |   |                          | (20,351   | ) |   | (4,757 | ) |   | (4,752 | ) |
| Effect      of redeemable share conversions                                                  |   |                          | (16,912   | ) |   | (3,390 | ) |   | -- |   |
| Net      (loss) income for earnings per share calculations                                   |   | $                             | (269,421  | ) | $ | (68,275 | ) | $ | 36,542 |   |
|  Net      (loss) income per share (Note 26):                                            |   |                          |      |   |   |   |   |   |   |   |
| Basic                                                                                        |   | $                             | (5.18     | ) | $ | (1.19 | ) | $ | 0.63 |   |
| Diluted                                                                                      |   | $                             | (5.18     | ) | $ | (1.19 | ) | $ | 0.62 |   |
|  Weighted      average shares outstanding (Note 26):                                    |   |                          |      |   |   |   |   |   |   |   |
| Basic                                                                                        |   |                          | 51,997    |   |   | 57,175 |   |   | 58,154 |   |
| Diluted                                                                                      |   |                          | 51,997    |   |   | 57,175 |   |   | 58,711 |   |
|  Dividends      declared per common share                                               |   | $                             | 0.225     |   | $ | 1.68 |   | $ | 1.68 |   |

----

|                                           |   | 4.4%ConvertibleCRA      preferred |    |   | ConvertibleCRA      Shares |   |    | SpecialPreferredVoting      Shares |   |   | Common      Shares |   |   | Treasury      Shares |   |   | AccumulatedOtherComprehensiveIncome/(loss) |   |     | Total  |   |   | ComprehensiveIncome/(loss) |   |
|------------------------------------------------|--------|-----------------------------------|---------|--------|----------------------------|--------|---------|------------------------------------|--------|--------|--------------------|--------|--------|----------------------|--------|--------|--------------------------------------------|--------|----------|--------|--------|--------|----------------------------|--------|
|                                           |   |                              |    |   |                       |   |    |                               |   |   | Shares             |   |   |                 |   |   |                                       |   |     |   |   |   |                       |   |   |   |   |
|                                           |   |                              |    |   |                       |   |    |                               |   |   |               |   |   |                 |   |   |                                       |   |     |   |   |   |                       |   |   |   |   |
| January      1, 2006                           |   | $                                 | 104,498 |   |                       |   | 105,473 |                               |   |   | 150                |   |   |                 | 51,988 |   |                                       |   | 746,745  |   |   |   | (7,135                     | )      |   |   | 100,104 |   |   |   | 1,049,835 |   |   |   |   |
| Net      income                                |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | --     |   |                                       |   | 41,294   |   |   |   | --                         |   |   |   | -- |   |   |   | 41,294 |   |   | $ | 41,294 |   |
| Allocation      of earnings                    |   |                              | 4,752   |   |                       |   | 4,137   |                               |   |   | --                 |   |   |                 | --     |   |                                       |   | (8,889   | )      |   |   | --                         |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Unrealized      losses                         |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | --     |   |                                       |   | --       |   |   |   | --                         |   |   |   | (33,241 | ) |   |   | (33,241 | ) |   |   | (33,241 | ) |
| Share-based      compensation                  |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | 417    |   |                                       |   | 15,848   |   |   |   | --                         |   |   |   | -- |   |   |   | 15,848 |   |   |   | -- |   |
| Conversions      or redemptions                |   |                              | --      |   |                       |   | --      |                               |   |   | (2                 | )      |   |                 | 20     |   |                                       |   | 1,954    |   |   |   | --                         |   |   |   | -- |   |   |   | 1,952 |   |   |   | -- |   |
| Treasury      shares                           |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | (1,082 | )      |                                       |   | --       |   |   |   | (20,883                    | )      |   |   | -- |   |   |   | (20,883 | ) |   |   | -- |   |
| Distributions                                  |   |                              | (4,752  | )      |                       |   | (11,007 | )                                  |   |   | --                 |   |   |                 | --     |   |                                       |   | (88,914  | )      |   |   | --                         |   |   |   | -- |   |   |   | (104,673 | ) |   |   | -- |   |
| December      31, 2006                         |   |                              | 104,498 |   |                       |   | 98,603  |                               |   |   | 148                |   |   |                 | 51,343 |   |                                       |   | 708,038  |   |   |   | (28,018                    | )      |   |   | 66,863 |   |   |   | 950,132 |   |   | $ | 8,053 |   |
|                                           |   |                              |    |   |                       |   |    |                               |   |   |               |   |   |                 |   |   |                                       |   |     |   |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                  |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | --     |   |                                       |   | (60,128  | )      |   |   | --                         |   |   |   | -- |   |   |   | (60,128 | ) |   | $ | (60,128 | ) |
| Allocation      of earnings                    |   |                              | 4,757   |   |                       |   | (7,436  | )                                  |   |   | --                 |   |   |                 | --     |   |                                       |   | 2,679    |   |   |   | --                         |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Unrealized      losses                         |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | --     |   |                                       |   | --       |   |   |   | --                         |   |   |   | (172,767 | ) |   |   | (172,767 | ) |   |   | (172,767 | ) |
| Share-based      compensation                  |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | 918    |   |                                       |   | 29,999   |   |   |   | --                         |   |   |   | -- |   |   |   | 29,999 |   |   |   | -- |   |
| Adoption      of FIN 48                        |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | --     |   |                                       |   | (1,161   | )      |   |   | --                         |   |   |   | -- |   |   |   | (1,161 | ) |   |   | -- |   |
| Conversions      or redemptions                |   |                              | --      |   |                       |   | --      |                               |   |   | (5                 | )      |   |                 | 278    |   |                                       |   | 5,139    |   |   |   | --                         |   |   |   | -- |   |   |   | 5,134 |   |   |   | -- |   |
| Reclassification      to redeemable securities |   |                              | (53,217 | )      |                       |   | (13,281 | )                                  |   |   | --                 |   |   |                 | --     |   |                                       |   | (3,390   | )      |   |   | --                         |   |   |   | -- |   |   |   | (69,888 | ) |   |   | -- |   |
| Treasury      shares                           |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | (1,972 | )      |                                       |   | --       |   |   |   | (36,294                    | )      |   |   | -- |   |   |   | (36,294 | ) |   |   | -- |   |
| Distributions                                  |   |                              | (4,757  | )      |                       |   | (11,007 | )                                  |   |   | --                 |   |   |                 | --     |   |                                       |   | (88,671  | )      |   |   | --                         |   |   |   | -- |   |   |   | (104,435 | ) |   |   | -- |   |
| December      31, 2007                         |   |                              | 51,281  |   |                       |   | 66,879  |                               |   |   | 143                |   |   |                 | 50,567 |   |                                       |   | 592,505  |   |   |   | (64,312                    | )      |   |   | (105,904 | ) |   |   | 540,592 |   |   | $ | (232,895 | ) |
|                                           |   |                              |    |   |                       |   |    |                               |   |   |               |   |   |                 |   |   |                                       |   |     |   |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                  |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | --     |   |                                       |   | (232,158 | )      |   |   | --                         |   |   |   | -- |   |   |   | (232,158 | ) |   | $ | (232,158 | ) |
| Allocation      of earnings                    |   |                              | 38      |   |                       |   | (3,550  | )                                  |   |   | --                 |   |   |                 | --     |   |                                       |   | (11,786  | )      |   |   | --                         |   |   |   | -- |   |   |   | (15,298 | ) |   |   | -- |   |
| Unrealized      losses                         |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | --     |   |                                       |   | --       |   |   |   | --                         |   |   |   | (1,038,218 | ) |   |   | (1,038,218 | ) |   |   | (1,038,218 | ) |
| Share-based      compensation                  |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | 1,470  |   |                                       |   | 12,945   |   |   |   | --                         |   |   |   | -- |   |   |   | 12,945 |   |   |   | -- |   |
| Conversions      or redemptions                |   |                              | --      |   |                       |   | --      |                               |   |   | (12                | )      |   |                 | 1,249  |   |                                       |   | 5,383    |   |   |   | --                         |   |   |   | -- |   |   |   | 5,371 |   |   |   | -- |   |
| Reclassification      to redeemable securities |   |                              | (51,281 | )      |                       |   | (59,977 | )                                  |   |   | --                 |   |   |                 | --     |   |                                       |   | (10,797  | )      |   |   | --                         |   |   |   | -- |   |   |   | (122,055 | ) |   |   | -- |   |
| Fair      value accretion                      |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | --     |   |                                       |   | (6,115   | )      |   |   | --                         |   |   |   | -- |   |   |   | (6,115 | ) |   |   | -- |   |
| Treasury      shares                           |   |                              | --      |   |                       |   | --      |                               |   |   | --                 |   |   |                 | (316   | )      |                                       |   | --       |   |   |   | (971                       | )      |   |   | -- |   |   |   | (971 | ) |   |   | -- |   |
| Distributions                                  |   |                              | (38     | )      |                       |   | (208    | )                                  |   |   | --                 |   |   |                 | --     |   |                                       |   | (11,358  | )      |   |   | --                         |   |   |   | -- |   |   |   | (11,604 | ) |   |   | -- |   |
| December      31, 2008                         |   | $                                 | --      |   |                       | $      | 3,144   |                               |   | $      | 131                |   |   |                 | 52,970 |   |                                       | $      | 338,619  |   |   |   | (65,283                    | )      |   | $ | (1,144,122 | ) |   | $ | (867,511 | ) |   | $ | (1,270,376 | ) |

----

|                                                                                |   | Years      Ended December 31, |     |
|-------------------------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                                                |   | 2008                          |     | 2007 |   | 2006 |   |
|                                                                                |   |                          |     |   |   |   |   |   |   |   |
| Cash      flows from operating activities:                                          |   |                          |     |   |   |   |   |   |   |   |
| Net      (loss) income                                                              |   | $                             | (232,158 | ) | $ | (60,128 | ) | $ | 41,294 |   |
| Reconciling      items:                                                             |   |                          |     |   |   |   |   |   |   |   |
| Gain      from repayment or sale of investments                                     |   |                          | (3,106   | ) |   | (803 | ) |   | (1,055 | ) |
| Impairment      of investments and other assets                                     |   |                          | 48,935   |   |   | 20,008 |   |   | 5,003 |   |
| Loss      on re-securitization of mortgage revenue bonds                            |   |                          | --       |   |   | 77,903 |   |   | -- |   |
| Write-off      of goodwill and intangible assets                                    |   |                          | 152,792  |   |   | 7,226 |   |   | 2,644 |   |
| Depreciation      and amortization                                                  |   |                          | 46,030   |   |   | 45,099 |   |   | 45,395 |   |
| Equity      in losses (gains) of unconsolidated entities, net                       |   |                          | 79,149   |   |   | 5,165 |   |   | (1,979 | ) |
| Distributions      received from equity investees                                   |   |                          | --       |   |   | 149 |   |   | 4,469 |   |
| Income      allocated to preferred shares of subsidiary                             |   |                          | 6,225    |   |   | 6,225 |   |   | 6,225 |   |
| Income      (loss) allocated to minority interests in subsidiaries                  |   |                          | (94,317  | ) |   | (24,111 | ) |   | 16,094 |   |
| Share-based      compensation expense                                               |   |                          | 12,945   |   |   | 29,019 |   |   | 15,425 |   |
| Non-cash      interest income and expense, net                                      |   |                          | (1,531   | ) |   | 9,406 |   |   | 4,137 |   |
| Other      non-cash expense, net                                                    |   |                          | (1,410   | ) |   | (10,617 | ) |   | (12,119 | ) |
| Deferred      taxes                                                                 |   |                          | (941     | ) |   | 3,147 |   |   | 2,423 |   |
| Reserves      for bad debts, net of reversals                                       |   |                          | 2,682    |   |   | 4,052 |   |   | 6,961 |   |
| Change      in fair value of interest rate derivatives                              |   |                          | (8,753   | ) |   | 34,740 |   |   | (203 | ) |
| Changes      in operating assets and liabilities, net of acquisitions:              |   |                          |     |   |   |   |   |   |   |   |
| Mortgage      loans held for sale                                                   |   |                          | 46,929   |   |   | 27,079 |   |   | 31,288 |   |
| Deferred      revenues                                                              |   |                          | (30,295  | ) |   | 8,046 |   |   | 24,167 |   |
| Receivables                                                                         |   |                          | 5,075    |   |   | 50,456 |   |   | (82,731 | ) |
| Other      assets                                                                   |   |                          | (6,747   | ) |   | (3,490 | ) |   | (8,335 | ) |
| Accounts      payable, accrued expenses and other liabilities                       |   |                          | (22,592  | ) |   | 31,313 |   |   | 4,206 |   |
|  Net      cash flow from operating activities                                  |   |                          | (1,088   | ) |   | 259,884 |   |   | 103,309 |   |
|                                                                                |   |                          |     |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                          |   |                          |     |   |   |   |   |   |   |   |
| Sale      and repayments of  available-for-sale securities                |   |                          | 78,206   |   |   | 1,935,293 |   |   | 115,600 |   |
| Purchases      of available-for-sale securities                                     |   |                          | (50,830  | ) |   | (532,013 | ) |   | (420,049 | ) |
| Acquisition      of mortgage loans held for investment                              |   |                          | (246,685 | ) |   | (256,156 | ) |   | 7,473 |   |
| Sale      and repayments of mortgage loans held for investment                      |   |                          | 250,705  |   |   | 299,892 |   |   | 48,939 |   |
| Acquisitions,      net of cash acquired                                             |   |                          | --       |   |   | -- |   |   | (262,659 | ) |
| Advances      to partnerships                                                       |   |                          | (53,679  | ) |   | (223,155 | ) |   | (207,990 | ) |
| Collection      of advances to partnerships                                         |   |                          | 70,127   |   |   | 221,895 |   |   | 188,711 |   |
| Deferred      investment acquisition costs                                          |   |                          | (2,927   | ) |   | (2,040 | ) |   | (1,474 | ) |
| Decrease      (increase) in restricted cash, escrows and other cash      collateral |   |                          | 14,994   |   |   | (135,144 | ) |   | 19,244 |   |
| Return      of capital from equity investees                                        |   |                          | 460      |   |   | 90 |   |   | 16,667 |   |
| Acquisition      of furniture, fixture and leasehold improvements                   |   |                          | (6,744   | ) |   | -- |   |   | -- |   |
| Acquisition      of asset management contract                                       |   |                          | (7,505   | ) |   | -- |   |   | -- |   |
| Acquisition      of AMAC common and preferred shares                                |   |                          | --       |   |   | (12,285 | ) |   | -- |   |
| Loan      to AMAC                                                                   |   |                          | (2,192   | ) |   | (62,685 | ) |   | (15,000 | ) |
| Equity      investments and other investing activities                              |   |                          | (29,797  | ) |   | (15,338 | ) |   | (30,045 | ) |
|  Net      cash flow from investing activities                                  |   |                          | 14,133   |   |   | 1,218,354 |   |   | (540,583 | ) |

----

|                                                                      |   | Years      Ended December 31, |     |
|---------------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                                      |   | 2008                          |     | 2007 |   | 2006 |   |
| Cash      flows from financing activities:                                |   |                          |     |   |   |   |   |   |   |   |
| Repayments      of financing arrangements                                 |   |                          | (14,275  | ) |   | (2,000,273 | ) |   | (1,028,533 | ) |
| Proceeds      from financing arrangements and secured financing           |   |                          | 62,757   |   |   | 761,605 |   |   | 1,409,098 |   |
| Distributions      to shareholders                                        |   |                          | (41,863  | ) |   | (104,436 | ) |   | (104,168 | ) |
| Distributions      to preferred shareholders of subsidiary                |   |                          | (6,225   | ) |   | (6,225 | ) |   | (6,225 | ) |
| Distributions      to minority interests in consolidated subsidiaries     |   |                          | (28,884  | ) |   | (37,617 | ) |   | (35,589 | ) |
| Repayment      of term loan                                               |   |                          | (81,116  | ) |   | (249,375 | ) |   | (625 | ) |
| Proceeds      from term loan                                              |   |                          | 10,000   |   |   | 140,000 |   |   | 250,000 |   |
| (Decrease)      increase in other notes payable                           |   |                          | (75,142  | ) |   | 24,098 |   |   | (4,696 | ) |
| Minority      interest contribution                                       |   |                          | 1,900    |   |   | 3,100 |   |   | 5,250 |   |
| Proceeds      from 11.0% Preferred shares                                 |   |                          | 131,235  |   |   | -- |   |   | -- |   |
| Proceeds      from 11.0% Preferred shares rights offering                 |   |                          | 4,365    |   |   | -- |   |   | -- |   |
| Proceeds      from stock options exercised                                |   |                          | --       |   |   | 678 |   |   | 756 |   |
| Retirement      of minority interests and special preferred voting shares |   |                          | --       |   |   | (3,111 | ) |   | (724 | ) |
| Treasury      stock purchases                                             |   |                          | (4,365   | ) |   | (36,294 | ) |   | (20,447 | ) |
| Deferred      financing costs                                             |   |                          | (4,664   | ) |   | (12,090 | ) |   | (9,305 | ) |
|                                                                      |   |                          |     |   |   |   |   |   |   |   |
| Net      cash flow from financing activities                              |   |                          | (46,277  | ) |   | (1,519,940 | ) |   | 454,792 |   |
|                                                                      |   |                          |     |   |   |   |   |   |   |   |
| Net      (decrease) increase in cash and cash equivalents                 |   |                          | (33,232  | ) |   | (41,702 | ) |   | 17,518 |   |
| Cash      and cash equivalents at the beginning of the year               |   |                          | 137,111  |   |   | 178,813 |   |   | 161,295 |   |
|                                                                      |   |                          |     |   |   |   |   |   |   |   |
| Cash      and cash equivalents at the end of the year                     |   | $                             | 103,879  |   | $ | 137,111 |   | $ | 178,813 |   |
|                                                                      |   |                          |     |   |   |   |   |   |   |   |
| Supplemental      information:                                            |   |                          |     |   |   |   |   |   |   |   |
|                                                                      |   |                          |     |   |   |   |   |   |   |   |
| Interest      paid                                                        |   | $                             | 251,134  |   | $ | 268,400 |   | $ | 94,713 |   |
| Taxes      paid                                                           |   | $                             | 3,717    |   | $ | 2,924 |   | $ | 1,204 |   |
|                                                                      |   |                          |     |   |   |   |   |   |   |   |
| Non-cash      investing and financing activities:                         |   |                          |     |   |   |   |   |   |   |   |
| Recognized      sale of re-securitized mortgage revenue bonds:            |   |                          |     |   |   |   |   |   |   |   |
| Reductions      in secured financing liability                            |   | $                             | (227,285 | ) | $ | -- |   | $ | -- |   |
| Reduction      in mortgage revenue bonds                                  |   | $                             | 273,494  |   | $ | -- |   | $ | -- |   |
| Increase      in Series A Freddie Mac Certificates                        |   | $                             | (33,508  | ) | $ | -- |   | $ | -- |   |
| Increase      in Series B Freddie Mac Certificates                        |   | $                             | (23,101  | ) | $ | -- |   | $ | -- |   |
| Increase      in mortgage servicing rights                                |   | $                             | 8,885    |   | $ | -- |   | $ | -- |   |
| Exchange      of mortgage revenue bonds for Freddie Mac certificates      |   | $                             | --       |   | $ | 442,140 |   | $ | -- |   |
| Share      grants issued                                                  |   | $                             | 7,882    |   | $ | 28,445 |   | $ | 41,767 |   |
| Conversion      of minority interests to common shares                    |   | $                             | 20,897   |   | $ | 5,161 |   | $ | 1,954 |   |
| Treasury      stock purchases via employee withholding                    |   | $                             | 972      |   | $ | 2,953 |   | $ | 436 |   |
| Cancellation      of acquisition – related SMUs                     |   | $                             | --       |   | $ | -- |   | $ | (4,076 | ) |
|  Acquisition activity:                                               |   |                          |     |   |   |   |   |   |   |   |
| Conversion      of existing assets                                        |   | $                             | --       |   | $ | -- |   | $ | 14,221 |   |
| Issuance      of subsidiary equity                                        |   |                          | --       |   |   | -- |   |   | 4,859 |   |
| Assets      acquired                                                      |   |                          | --       |   |   | -- |   |   | (341,248 | ) |
| Liabilities      assumed                                                  |   |                          | --       |   |   | -- |   |   | 59,509 |   |
| Net      cash paid for acquisitions                                       |   | $                             | --       |   | $ | -- |   | $ | (262,659 | ) |

 

----

|   | · | determination      of degree of control over an entity by its various equity      holders; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | design      of the entity; |
|--------|--------|----------------------------|

|   | · | relationships      between equity holders; |
|--------|--------|--------------------------------------------|

|   | · | determination      of primary beneficiary; and |
|--------|--------|------------------------------------------------|

|   | · | the      ability to replace general partners, among  others. |
|--------|--------|--------------------------------------------------------------|

----

| ·   | acting      as general partner; |
|--------------------|---------------------------------|

| ·   | managing      and servicing their assets; |
|--------------------|-------------------------------------------|

| ·   | warehousing      investments and selling them to thefund; |
|--------------------|-----------------------------------------------------------|

| ·   | originating      loans that are then sold to the fund;and |
|--------------------|-----------------------------------------------------------|

| ·   | in      certain cases, investing in thefunds. |
|--------------------|-----------------------------------------------|

| (in      thousands)                                     |   | December      31,2008 |    |
|---------------------------------------------------------|--------|-----------------------|---------|
|                                                    |   |                  |    |   |
|                                                    |   |                  |    |   |
| Held      for our own account                           |   | $                     | 2,550   |   |
| Held      by CMBS and High-Yield Debt Fund Partnerships |   |                  | 182,828 |   |
|  Total      at fair value                          |   | $                     | 185,378 |   |

----

|   | · | estimating      the default and prepayment rates of the mortgage revenue bonds in the      managed portfolio, which estimates are based on our historical experience      and industry studies related to properties comparable to those underlying      the bonds; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | applying      an appropriate discount rate, which we consider in comparison to      comparable residual interests secured by multifamily loans, along with      consideration of the tax free nature of the associated    income. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | · | the      present value of expected future cash flows discounted at the loan’s      effective interest rate; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | the      loan’s observable market price; or |
|--------|--------|---------------------------------------------------|

|   | · | the      fair value of the collateral if the loan is      collateral-dependent. |
|--------|--------|---------------------------------------------------------------------------------|

----

|   | · | determining      the fair value of the asset retained when the associated mortgage is sold      and in subsequent reporting periods, including such factors as costs to      service the loans, the estimated rate of prepayments, the estimated rate      of default and an appropriate discount rate to calculate the present value      of cash flows; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | estimating      the appropriate proportion and period for amortizing the      asset. |
|--------|--------|--------------------------------------------------------------------------------------|

----

----

----

|   | (i.) | Organization, offering and      acquisition allowance fees are for reimbursement of costs we incur      for organizing tax credit investment funds and for providing assistance in      acquiring the properties to be included in the funds.  We      recognize the organization, offering and acquisition allowance fee when      the investment funds acquire properties.  The related expenses      are included in general and administrative  expenses. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii.) | Property acquisition      fees are for services we perform for the tax credit investment      funds to acquire interests in property partnerships.  We      recognize these fees when the investor equity is invested and as the      properties’ limited partnership interests are acquired by the investment      fund. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii.) | Partnership management      fees are for maintaining the books and records of tax credit      investment funds, including requisite investor reporting.  We      recognize these fees over the five year contractual service period      following the initial closing of thefund. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv.) | Construction service fees      from borrowers for      servicing mortgage revenue bonds during the construction period are      deferred and amortized into other income over the estimated construction      period. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v.) | Administration fees      charged to the property partnerships or to other entities we manage      are recorded as the payments are received due to the uncertainty of      collectability. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vi.) | Asset management fees      from tax credit investment funds, based on a percentage of each      investment fund’s invested assets are earned for monitoring the acquired      property interests and to ensure that their development, leasing and      operations comply with Low-Income Housing Tax Credit (“LIHTC”) or other      tax credit requirements. |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vii.) | Bond acquisition fees      are paid by borrowers when we acquire mortgage revenue      bonds.  These fees are recognized as yield adjustments in      mortgage revenue bond interest income if we retain the bond or recognized      immediately if we were to sell thebond |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

NOTE 3 – Accounting Pronouncements to beAdopted

----

|   | · | for      asset-backed financing (such as we use to fund mortgage originations in      our Commercial Real Estate and Affordable Housing groups), our financing      facilities have remained constant with no increase in capacity despite the      increase in our origination business.  In addition, we      anticipate increased cost of funds and lower capacity upon renewal of the      line in the second quarter of 2009; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our      share price and the general environment for equity offerings have made      obtaining equity capital extremely difficult.  Additionally, the      11.0% Preferred Shares that we issued in January 2008 have dividend      requirements at a significantly higher rate than we historically      paid; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | for      our Term Loan and Revolving Credit Facility, the terms include a higher      rate of interest and more stringent covenants (including restrictions on      funding new business opportunities without lender approval) than had been      the norm in prior periods. In addition, with the exception of dividends      related to our Equity Issuer subsidiary and distributions from our REIT      subsidiary, our Term Loan and Revolving Credit Facility, prohibit us from      paying common and preferred dividends;and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | constriction      in credit markets has made it difficult to expand our Commercial Real      Estate fund management business especially at leverage levels achieved in      prior years.  The market also has fewer    investors. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | utilizing      financing alternatives for investments that are not pledged as security      for asset-based borrowings (which is subject to lender      approval); |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | instituting      measures to reduce general and administrative expenses, including salaries      and other costs; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | · | continuing      to sell investments that do not meet our long term investment      criteria. |
|--------|--------|----------------------------------------------------------------------------------------------|

----

| Collateral                                                                      |   | Balance      Sheet Classification                                                                     |   | CarryingAmount      ofCollateral      atDecember      31,2008(in      thousands) |    | Associated      Debt Facility/Liability |
|---------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|---------|-----------------------------------------|
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| Cash                                                                            |   | Restricted      cash                                                                                  |   | $                                                                                | 10,352  |                                    | Mortgage      loan loss sharing agreements (Note 30) |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| Series      A-1 Freddie Mac certificates                                        |   | Investments      – available-for-sale – Freddie Mac certificates (Note 8)                 |   | $                                                                                | 335,047 |                                    | Preferred      shares of subsidiary (Note 18) |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| Mortgage      revenue bonds                                                     |   | Investments      – available-for-sale – Mortgage revenue bonds (Note 8)                   |   | $                                                                                | 49,642  |                                    | Financing      arrangements and secured financing (Note 15) |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| CMBS      and retained CMBS certificates                                        |   | Investments      – available-for-sale – CMBS and retained CMBS certificates (Note      8) |   | $                                                                                | 9,863   |                                    | Commercial      real estate lines (Note 14) |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| Stabilization      escrow                                                       |   | Other      investments – stabilization escrow (Note 10)                                         |   | $                                                                                | 72,397  |                                    | December      2007 re-securitization |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| Mortgage      loans                                                             |   | Other      investments – mortgage loans held for sale (Note 10)                                 |   | $                                                                                | 46,912  |                                    | Mortgage      Banking warehouse line/Multifamily ASAP plus facility (Note      14) |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| Mortgage      servicing rights                                                  |   | Goodwill      and intangible assets – mortgage servicing rights (Note11)                        |   | $                                                                                | 730     |                                    | Debt      facilities of third party for which Centerline provides loan      servicing |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| Cash      deposits                                                              |   | Deferred      costs and other assets (Note 12)                                                        |   | $                                                                                | 67,200  |                                    | Yield      guarantees (Note 30) |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| Cash      deposits                                                              |   | Deferred      costs and other assets (Note 12)                                                        |   | $                                                                                | 8,667   |                                    | Financing      arrangements and secured financing (Note 15) |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| CMBS      and retained CMBS certificates held by Consolidated      Partnerships |   | Consolidated      partnerships – investments – available-for-sale (Note 13)               |   | $                                                                                | 381,236 |                                    | Consolidated      partnerships – financing arrangements (Note 17)(1) |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| CMBS      held by Consolidated Partnerships                                     |   | Consolidated      partnerships – investments – available-for-sale (Note 13)               |   | $                                                                                | 73,926  |                                    | Consolidated      partnerships – repurchase agreements (Note 17)(2) |
|                                                                            |   |                                                                                                  |   |                                                                             |    |                                    |   |
| Land,      building and improvements held by ConsolidatedPartnerships           |   | Consolidated      partnerships – land, buildings and improvements, net (Note    13)             |   | $                                                                                | 697,422 |                                    | Consolidated      partnerships – notes payable(Note      17)(2) |

| (1) | Included      in a collateralized debt obligation and assets are restricted solely to      satisfy those obligations.  Debt is non-recourse to the      Consolidated Partnership and theCompany. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Assets      are restricted solely to satisfy the debt obligations. Debt is      non-recourse to the Company. |
|-----|--------------------------------------------------------------------------------------------------------------|

----

|   | · | Level      1 inputs utilize quoted prices (unadjusted) in active markets for      identical assets or liabilities that we have the ability to      access. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level      2 inputs utilize other-than-quoted prices that are observable, either      directly or indirectly.  Level 2 inputs include quoted prices      for similar assets and liabilities in active markets, and inputs such as      interest rates and yield curves that are observable at commonly quoted      intervals. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level      3 inputs are unobservable and are typically based on our own assumptions,      including situations where there is little, if any, market      activity. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (in      thousands)                                |   | Level      1 |   |  Level      2 |   |  Level      3 |   | Balanceas      ofDecember      31,2008 |    |
|----------------------------------------------------|--------|--------------|--------|--------------------|--------|--------------------|--------|----------------------------------------|---------|
|                                               |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Measured      on a recurring basis:                |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
|  Assets                                       |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Available-for-sale      investments:               |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Freddie      Mac Certificates:                     |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Series      A-1                                    |   | $            | --     |               | $      | --                 |   | $                                      | 335,047 |   | $ | 335,047 |   |
| Series      B                                      |   |         | --     |               |   | --                 |   |                                   | 123,122 |   |   | 123,122 |   |
| Mortgage      revenue bonds                        |   |         | --     |               |   | --                 |   |                                   | 69,217  |   |   | 69,217 |   |
| Retained      CMBS Certificates                    |   |         | --     |               |   | --                 |   |                                   | 7,313   |   |   | 7,313 |   |
| CMBS                                               |   |         | --     |               |   | --                 |   |                                   | 2,550   |   |   | 2,550 |   |
| Syndicated      corporate debt                     |   |         | 1,964  |               |   | --                 |   |                                   | --      |   |   | 1,964 |   |
| Total      available-for-sale investments          |   | $            | 1,964  |               | $      | --                 |   | $                                      | 537,249 |   | $ | 539,213 |   |
|                                               |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Derivatives                                        |   | $            | --     |               | $      | 1,307              |   | $                                      | --      |   | $ | 1,307 |   |
|  Liabilities                                  |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Derivatives                                        |   | $            | --     |               | $      | 40,525             |   | $                                      | --      |   | $ | 40,525 |   |
|                                               |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Measured      on a non-recurring basis:            |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
|  Assets                                       |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Mortgage      loans held-for-sale                  |   | $            | --     |               | $      | 46,912             |   | $                                      | --      |   | $ | 46,912 |   |
| Mortgage      loans held for investment - impaired |   |         | --     |               |   | 1,794              |   |                                   | --      |   |   | 1,794 |   |
| Mortgage      servicing rights                     |   |         | --     |               |   | --                 |   |                                   | 52,483  |   |   | 52,483 |   |

----

|                                                                                                                                                                                                |   | Years      Ended December 31, 2008                |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|---------|
| in      thousands)                                                                                                                                                                                  |   |  Series      A-1Freddie      MacCertificates |    | Series      BFreddie      MacCertificates |   | Mortgagerevenuebonds |   | RetainedCMBScertificates |   | CMBS |   | Total |   |
|                                                                                                                                                                                                |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2008                                                                                                                                                                     |   | $                                                 | --      |   | $ | 153,468 |   | $ | 376,432 |   | $ | 75,328 |   | $ | 13,361 |   | $ | 618,589 |   |
| Total      realized and unrealized gains or (losses):                                                                                                                                               |   |                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Included      in earnings                                                                                                                                                                           |   |                                              | --      |   |   | (7,968 | ) |   | (10,928 | ) |   | (10,736 | ) |   | -- |   |   | (29,632 | ) |
| Included      in other comprehensive loss                                                                                                                                                           |   |                                              | 17,801  |   |   | (37,526 | ) |   | (10,047 | ) |   | (54,050 | ) |   | (14,519 | ) |   | (98,341 | ) |
| Amortization      or accretion                                                                                                                                                                      |   |                                              | --      |   |   | (6,632 | ) |   | 276 |   |   | (3,229 | ) |   | 44 |   |   | (9,541 | ) |
| Purchases,      issuances, settlements and other adjustments                                                                                                                                        |   |                                              | 28,574  |   |   | 21,780 |   |   | (286,516 | ) |   | -- |   |   | 3,664 |   |   | (232,498 | ) |
| Net      transfers in and/or out of Level 3(1)                                                                                                                                                      |   |                                              | 288,672 |   |   | -- |   |   | -- |   |   | -- |   |   | -- |   |   | 288,672 |   |
| Balance      at December 31, 2008                                                                                                                                                                   |   | $                                                 | 335,047 |   | $ | 123,122 |   | $ | 69,217 |   | $ | 7,313 |   | $ | 2,550 |   | $ | 537,249 |   |
|  Amount of total gains (losses)      for the period included in earnings attributable to the change in      unrealized gains or losses relating to assets still held at December,      2008(2) |   | $                                                 | --      |   | $ | (7,968 | ) | $ | (3,700 | ) | $ | (10,736 | ) | $ | -- |   | $ | (22,404 | ) |

| (1) | During      2008, management evaluated the number of transactions conducted with      instruments similar to the Series A-1 Freddie Mac Certificates and      concluded that due to the unique terms of the certificates, such      population was too limited to continue a Level 2 designation as determined      upon adoption of SFAS 157 and as a result, were reclassified as Level 3      assets. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Recorded      in “Losses on Impairment of Assets” in the Consolidated Statement of      Operations (see also Note 22). |
|-----|------------------------------------------------------------------------------------------------------------------------------------|

| (in      thousands)                                         |   | Level      1 |   |  Level      2 |   |  Level      3 |   | Balanceas      ofDecember      31,2008 |    |
|-------------------------------------------------------------|--------|--------------|--------|--------------------|--------|--------------------|--------|----------------------------------------|---------|
|                                                        |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Measured      on a recurring basis:                         |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
|                                                        |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Assets                                                      |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| Available-for-sale      investments:                        |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
| CMBS                                                        |   | $            | --     |               | $      | --                 |   | $                                      | 182,828 |   | $ | 182,828 |   |
| Retained      CMBS certificates, available-for-sale         |   |         | --     |               |   | --                 |   |                                   | 9,867   |   |   | 9,867 |   |
| CDO      debt and equity                                    |   |         | --     |               |   | --                 |   |                                   | 33,189  |   |   | 33,189 |   |
| Total      available-for-sale investments                   |   | $            | --     |               | $      | --                 |   | $                                      | 225,884 |   | $ | 225,884 |   |
|  Measured      on a non-recurring basis:               |   |         |   |               |   |               |   |                                   |    |   |   |   |   |
|                                                        |   |         |   |               |   |               |   |                                   |    |   |   |   |
| Assets                                                      |   |         |   |               |   |               |   |                                   |    |   |   |   |
| Mortgage      loans held for investment – impaired(1) |   | $            | --     |               | $      | 14,137             |   | $                                      | --      | $ | 14,137 |   |

| (1) | We      recorded impairment charges for seven loans during 2008 recorded in “loss      on impairment of assets of consolidated partnerships” in the Consolidated      Statement of Operations (see Note24). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                    |   | Year      Ended December 31, 2008 |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|
| (in      thousands)                                                                                                                                                                     |   | CMBS                              |       |  RetainedCMBScertificates(available-for-sale) |   | CDO      debt andequity |   | Total |   |
|                                                                                                                                                                                    |   |                              |       |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2008                                                                                                                                                         |   | $                                 | 1,235,059  |   | $ | 482,424 |   | $ | 65,060 |   | $ | 1,782,543 |   |
| Total      realized and unrealized gains (losses):                                                                                                                                      |   |                              |       |   |   |   |   |   |   |   |   |   |   |
| Included      in earnings                                                                                                                                                               |   |                              | (95,976    | ) |   | (27,016 | ) |   | (101,027 | ) |   | (224,019 | ) |
| Included      in other comprehensive loss                                                                                                                                               |   |                              | (1,001,861 | ) |   | (164,338 | ) |   | (74,526 | ) |   | (1,240,725 | ) |
| Amortization      or accretion                                                                                                                                                          |   |                              | (1,934     | ) |   | 1,792 |   |   | 1,554 |   |   | 1,412 |   |
| Purchases,      issuances, settlements and other adjustments                                                                                                                            |   |                              | 47,540     |   |   | -- |   |   | 142,128 |   |   | 189,668 |   |
| Net      transfers in and/or out of Level 3(1)                                                                                                                                          |   |                              | --         |   |   | (282,995 | ) |   | -- |   |   | (282,995 | ) |
| Balance      at December 31, 2008                                                                                                                                                       |   | $                                 | 182,828    |   | $ | 9,867 |   | $ | 33,189 |   | $ | 225,884 |   |
|  Amount      of total gains (losses) included in earnings attributable to the change in      unrealized gains or losses relating to assets still held at December 31,      2008(2) |   | $                                 | (95,976    | ) | $ | (27,016 | ) | $ | (101,027 | ) | $ | (224,019 | ) |

| (1) | During      2008, management elected to reclassify certain investments from      available-for-sale to held-to-maturity (see Notes 2 and    13). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Included      in “loss on impairment of assets of consolidated partnerships” in the      Consolidated Statement of Operations (see Note  24). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (in      thousands)                |   | Accounted      for      as Sold |      | Accounted      for      as Financed |   | Total   |   |
|------------------------------------|--------|---------------------------------|-----------|-------------------------------------|--------|---------|--------|
|                               |   |                            |      |                                |   |    |   |   |   |   |
| Outstanding      principal balance |   | $                               | 2,129,977 |                                | $      | 670,583 |   | $ | 2,800,560 |   |

|   | · | guarantees      we had provided with respect to payment of debt service on certain of the      bonds; or |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | existing      situations where a consolidated subsidiary controlled the property      partnership that is the borrower of thebond. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | cash      (part of which was placed in escrow – see Stabilization Escrow in      Note 10), |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | MSRs      related to our role as primary servicer for the mortgage revenue bonds      (see Note 11) and |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | Series      A-1 and Series B Freddie Mac Certificates (see Freddie Mac      Certificates in Note 8).  The Series A-1 Freddie Mac      Certificates are fixed rate securities, whereas the Series B Freddie Mac      Certificates are residual interests of the re-securitization      trust. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | December      31, |    |
|---------------------------------|--------|-------------------|---------|
| (in      thousands)             |   | 2008              |    | 2007 |   |
|                            |   |              |    |   |   |   |   |
| Freddie      Mac Certificates:  |   |              |    |   |   |   |   |
| Series      A-1                 |   | $                 | 335,047 |   | $ | 288,672 |   |
| Series      B                   |   |              | 123,122 |   |   | 153,468 |   |
| Mortgage      revenue bonds     |   |              | 69,217  |   |   | 376,432 |   |
| Retained      CMBS certificates |   |              | 7,313   |   |   | 75,328 |   |
| CMBS                            |   |              | 2,550   |   |   | 13,361 |   |
| Syndicated      corporate debt  |   |              | 1,964   |   |   | 27,749 |   |
| Marketable      securities      |   |              | --      |   |   | 1,181 |   |
|  Total                     |   | $                 | 539,213 |   | $ | 936,191 |   |

----

|                                                                                                                                                                                           |   | December      31, |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|
| (in      thousands)                                                                                                                                                                            |   | 2008              |    | 2007 |   |
|  Fair      value                                                                                                                                                                          |   | $                 | 400,026 |   | $ | 377,500 |   |
| Less:      eliminations(1)                                                                                                                                                                     |   |              | (64,979 | ) |   | (88,828 | ) |
|  Consolidated      fair value                                                                                                                                                             |   | $                 | 335,047 |   | $ | 288,672 |   |
|  (1)         A portion of the Series A-1 Freddie Mac Certificates related to      re-securitized mortgage revenue bonds that were not reflected as sold (see      Note 7). |   |

|                                                                                                                                                                      |   | December      31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|
| (in      thousands)                                                                                                                                                       |   | 2008              |    | 2007 |   |
|  Face      amount                                                                                                                                                    |   | $                 | 140,028 |   | $ | 140,028 |   |
| Interest      receivable                                                                                                                                                  |   |              | 1,481   |   |   | -- |   |
| Gross      unrealized gains                                                                                                                                               |   |              | 5,215   |   |   | 72,873 |   |
| Subtotal/fair      value                                                                                                                                                  |   |              | 146,724 |   |   | 212,901 |   |
| Less:      eliminations(1)                                                                                                                                                |   |              | (23,602 | ) |   | (59,433 | ) |
|  Consolidated      fair value                                                                                                                                        |   | $                 | 123,122 |   | $ | 153,468 |   |
|  (1)A      portion of the Series B Freddie Mac Certificates related to re-securitized      mortgage revenue bonds that were not reflected as sold (see Note      7). |   |

|                                |   | December      31, |        |
|-------------------------------------|--------|-------------------|-------------|
|                                |   | 2008              |        | 2007 |   |
|                                |   |              |        |   |   |
| Weighted      average discount rate |   | 16.5              | %           | 11.0 | % |
| Constant      prepayment rate       |   | 90.0              | %           | 90.0 | % |
| Weighted      average life          |   | 10.9              |  years | 11.6 |  years |
| Constant      default rate          |   | 2.0               | %           | 2.0 | % |

----

|                                                               |   | December      31, |    |
|--------------------------------------------------------------------|--------|-------------------|---------|
| (in      thousands)                                                |   | 2008              |    | 2007 |   |
|  Fair      value of Freddie Mac B Certificates at December 31 |   | $                 | 123,122 |   | $ | 153,468 |   |
|                                                               |   |              |    |   |   |   |   |
| Constant      prepayment rate:                                     |   |              |    |   |   |   |   |
| Fair      value after impact of 5% increase                        |   |              | 122,784 |   |   | 153,016 |   |
| Fair      value after impact of 10% increase                       |   |              | 121,689 |   |   | 151,533 |   |
|                                                               |   |              |    |   |   |   |   |
| Discount      rate:                                                |   |              |    |   |   |   |   |
| Fair      value after impact of 1% increase                        |   |              | 117,508 |   |   | 145,556 |   |
| Fair      value after impact of 2% increase                        |   |              | 112,330 |   |   | 138,304 |   |
|                                                               |   |              |    |   |   |   |   |
| Constant      default rate:                                        |   |              |    |   |   |   |   |
| Fair      value after impact of 1% increase                        |   |              | 112,919 |   |   | 143,470 |   |
| Fair      value after impact of 2% increase                        |   |              | 103,314 |   |   | 134,200 |   |

|                                                                                            |   | December      31, |     |
|-------------------------------------------------------------------------------------------------|--------|-------------------|----------|
| (in      thousands)                                                                             |   | 2008              |     | 2007 |   |
|                                                                                            |   |              |     |   |   |   |   |
| Securitized:                                                                                    |   |              |     |   |   |   |   |
| Included      in December 2007 re-securitization transaction and accounted for as      financed |   | $                 | 432,092  |   | $ | 670,583 |   |
| Included      in other securitizations                                                          |   |              | 49,642   |   |   | 14,663 |   |
| Subtotal                                                                                        |   |              | 481,734  |   |   | 685,246 |   |
| Not      securitized                                                                            |   |              | 9,525    |   |   | 88,074 |   |
| Eliminations                                                                                    |   |              | (422,042 | ) |   | (396,889 | ) |
|  Total      at fair value                                                                  |   | $                 | 69,217   |   | $ | 376,432 |   |

----

|                          |   |                |   | Face      Amount of Bond(1) |     | Fair      Value atDecember      31, 2008 |   |   |   |
|-------------------------------|--------|---------------------|--------|-----------------------------|----------|------------------------------------------|--------|--------|--------|
| (dollars      in thousands)   |   | Number      ofBonds |   | Amount                      |     | %      of Total                          |   | Amount |   | %      of Total |   | CurrentStatedInterest      Rate |   |
|                          |   |                |   |                        |     |                                     |   |   |   |   |   |   |   |   |   |
| By Property Status: |   |                |   |                        |     |                                     |   |   |   |   |   |   |   |   |   |
| Stabilized                    |   | 15                  |   | $                           | 63,260   |                                     | 12.0   | %      | $      | 51,711 |   | 10.5 | % | 6.9 | % |
| Lease-up                      |   | 46                  |   |                        | 408,132  |                                     | 77.1   |   |   | 393,951 |   | 80.2 |   | 6.4 |   |
| Construction                  |   | 2                   |   |                        | 28,596   |                                     | 5.4    |   |   | 22,746 |   | 4.6 |   | 5.8 |   |
| Rehab                         |   | 10                  |   |                        | 29,327   |                                     | 5.5    |   |   | 22,851 |   | 4.7 |   | 5.9 |   |
| Subtotal                      |   | 73                  |   |                        | 529,315  |                                     | 100.0  | %      |   | 491,259 |   | 100.0 | % | 6.4 | % |
| Eliminations(2)               |   | (49                 | )      |                        | (439,557 | )                                        |   |   |   | (422,042 | ) |   |   |   |   |
| 2008 Total               |   | 24                  |   | $                           | 89,758   |                                     |   |   | $      | 69,217 |   |   |   |   |   |
| 2007 Total               |   | 52                  |   | $                           | 416,638  |                                     |   |   | $      | 376,432 |   |   |   |   |   |
|                          |   |                |   |                        |     |                                     |   |   |   |   |   |   |   |   |   |
| By State:(3)             |   |                |   |                        |     |                                     |   |   |   |   |   |   |   |   |   |
| Texas                         |   | 4                   |   | $                           | 30,940   |                                     | 5.8    | %      | $      | 29,143 |   | 5.9 | % | 7.2 | % |
| Georgia                       |   | 16                  |   |                        | 220,375  |                                     | 41.6   |   |   | 218,756 |   | 44.5 |   | 6.3 |   |
| Mississippi                   |   | 4                   |   |                        | 34,605   |                                     | 6.5    |   |   | 34,218 |   | 7.0 |   | 6.6 |   |
| Iowa                          |   | 4                   |   |                        | 33,480   |                                     | 6.3    |   |   | 32,294 |   | 6.6 |   | 6.6 |   |
| Arkansas                      |   | 6                   |   |                        | 31,415   |                                     | 5.9    |   |   | 25,228 |   | 5.1 |   | 6.3 |   |
| All Others               |   | 39                  |   |                        | 178,500  |                                     | 33.9   |   |   | 151,620 |   | 30.9 |   | 6.4 |   |
| Subtotal                      |   | 73                  |   |                        | 529,315  |                                     | 100.0  | %      |   | 491,259 |   | 100.0 | % | 6.4 | % |
| Eliminations(2)               |   | (49                 | )      |                        | (439,557 | )                                        |   |   |   | (422,042 | ) |   |   |   |   |
| 2008 Total               |   | 24                  |   | $                           | 89,758   |                                     |   |   | $      | 69,217 |   |   |   |   |   |
| 2007 Total               |   | 52                  |   | $                           | 416,638  |                                     |   |   | $      | 376,432 |   |   |   |   |   |
|                          |   |                |   |                        |     |                                     |   |   |   |   |   |   |   |   |   |
| By Maturity Date:   |   |                |   |                        |     |                                     |   |   |   |   |   |   |   |   |   |
| 2008-2010                     |   | 3                   |   | $                           | 2,097    |                                     | 0.4    | %      | $      | 1,124 |   | 0.2 | % | 6.0 | % |
| 2011-2015                     |   | 4                   |   |                        | 1,785    |                                     | 0.3    |   |   | 1,477 |   | 0.3 |   | 6.4 |   |
| 2016-2020                     |   | 7                   |   |                        | 13,268   |                                     | 2.5    |   |   | 11,088 |   | 2.3 |   | 6.8 |   |
| 2021-2025                     |   | 3                   |   |                        | 5,195    |                                     | 1.0    |   |   | 4,593 |   | 0.9 |   | 8.7 |   |
| 2026-2030                     |   | 5                   |   |                        | 7,681    |                                     | 1.5    |   |   | 6,231 |   | 1.3 |   | 5.7 |   |
| 2031-2035                     |   | 1                   |   |                        | 8,700    |                                     | 1.6    |   |   | 8,645 |   | 1.8 |   | 6.8 |   |
| 2036-2040                     |   | 10                  |   |                        | 59,936   |                                     | 11.3   |   |   | 44,861 |   | 9.1 |   | 6.7 |   |
| 2041-2045                     |   | 25                  |   |                        | 254,911  |                                     | 48.2   |   |   | 246,287 |   | 50.1 |   | 6.6 |   |
| 2046 and After      |   | 15                  |   |                        | 175,742  |                                     | 33.2   |   |   | 166,953 |   | 34.0 |   | 6.0 |   |
| Subtotal                      |   | 73                  |   |                        | 529,315  |                                     | 100.0  | %      |   | 491,259 |   | 100.0 | % | 6.4 | % |
| Eliminations(2)               |   | (49                 | )      |                        | (439,557 | )                                        |   |   |   | (422,042 | ) |   |   |   |   |
| 2008 Total               |   | 24                  |   | $                           | 89,758   |                                     |   |   | $      | 69,217 |   |   |   |   |   |
| 2007 Total               |   | 52                  |   | $                           | 416,638  |                                     |   |   | $      | 376,432 |   |   |   |   |   |

| (1) | Original      principal amount at issuance. |
|-----|---------------------------------------------|

| (2) | Certain      bonds are recorded as liabilities on the balance sheets of consolidated      partnerships and therefore eliminated in consolidation (see also Note      7). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Certain      properties collateralize multiple mortgage revenue bonds; only one bond is      included to avoid duplication. |
|-----|-----------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                            |   | December      31, |     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|----------|
| (in      thousands)                                                                                                                                                                             |   | 2008              |     | 2007 |   |
|                                                                                                                                                                                            |   |              |     |   |   |   |   |
| Amortized      cost basis                                                                                                                                                                       |   | $                 | 502,579  |   | $ | 774,594 |   |
| Gross      unrealized gains                                                                                                                                                                     |   |              | 3,260    |   |   | 2,351 |   |
| Gross      unrealized losses                                                                                                                                                                    |   |              | (14,580  | ) |   | (3,624 | ) |
| Subtotal/fair      value                                                                                                                                                                        |   |              | 491,259  |   |   | 773,321 |   |
| Less:      eliminations(1)                                                                                                                                                                      |   |              | (422,042 | ) |   | (396,889 | ) |
|  Consolidated      fair value                                                                                                                                                              |   | $                 | 69,217   |   | $ | 376,432 |   |
|  (1)         Certain bonds are recorded as liabilities on the balance sheets of      consolidated partnerships and therefore eliminated in consolidation (see      Note 7). |   |

| (dollars      in thousands) |   | Less      than12      Months |    | 12      Monthsor      More |   | Total   |   |
|-----------------------------|--------|------------------------------|---------|----------------------------|--------|---------|--------|
|                        |   |                         |    |                       |   |    |   |
| December 31, 2008           |   |                         |    |                       |   |    |   |
|                        |   |                         |    |                       |   |    |   |   |   |   |
| Number                      |   |                         | 17      |                       |   | 12      |   |   | 29 |   |
| Fair      value             |   | $                            | 50,596  |                       | $      | 158,733 |   | $ | 209,329 |   |
| Gross      unrealized loss  |   | $                            | 12,315  |                       | $      | 2,265   |   | $ | 14,580 |   |
|                        |   |                         |    |                       |   |    |   |   |   |   |
| December 31, 2007           |   |                         |    |                       |   |    |   |   |   |   |
|                        |   |                         |    |                       |   |    |   |   |   |   |
| Number                      |   |                         | 18      |                       |   | 3       |   |   | 21 |   |
| Fair      value             |   | $                            | 234,248 |                       | $      | 36,559  |   | $ | 270,807 |   |
| Gross      unrealized loss  |   | $                            | 3,244   |                       | $      | 380     |   | $ | 3,624 |   |

----

| (dollars      in thousands)  |   | FaceAmount |          | PurchaseCost |   | AccretedCost(1) |   | UnrealizedGain |         | UnrealizedLoss(1) |   | Fair      Value |   | Percentageof      FairValue |          |
|------------------------------|--------|------------|---------------|--------------|--------|-----------------|--------|----------------|--------------|-------------------|--------|-----------------|--------|-----------------------------|---------------|
|  Security      rating:  |   |       |          |         |   |            |   |           |         |              |   |            |   |                        |          |   |   |   |   |   |   |
| AAA      interest only       |   | $          | --            |         | $      | 24,612          |   | $              | 2,328        |              | $      | --              |   | $                           | --            |   | $ | 2,328 |   | 31.8 | % |
| CCC-                         |   |       |  119,671 |         |   | 40,466          |   |           |  40,565 |              |   | --              |   |                        | (36,024       | ) |   |  4,541 |   | 62.1 |   |
| D                            |   |       |  15,240  |         |   | 1,126           |   |           | --           |              |   |  152       |   |                        | --            |   |   |  152 |   | 2.1 |   |
| Non-rated                    |   |       |  29,147  |         |   | 8,639           |   |           |  1,477  |              |   | --              |   |                        | (1,185        | ) |   |  292 |   | 4.0 |   |
| Non-rated      interest only |   |       | --            |         |   | 581             |   |           | --           |              |   | --              |   |                        | --            |   |   | -- |   | -- |   |
|  Total                  |   | $          | 164,058       |         | $      | 75,424          |   | $              | 44,370       |              | $      | 152             |   | $                           |  (37,209 | ) | $ | 7,313 |   | 100.0 | % |

| (1) | Unrealized      losses do not include $10.7 million related to the AAA interest only and      non-rated interest only certificates which have experienced losses related      to the underlying assets and for which we realized an impairment loss in      the year ended December 31, 2008 (see Note 22).  Accreted cost      is shown net of this amount. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars      in thousands) |   | Less      than12      Months |   | 12      Monthsor      More |   | Total  |   |
|-----------------------------|--------|------------------------------|--------|----------------------------|--------|--------|--------|
|  December 31, 2008     |   |                         |   |                       |   |   |   |   |   |   |
|  Number                |   |                         | 10     |                       |   | 9      |   |   | 19 |   |
| Fair      Value             |   | $                            | 4,093  |                       | $      | 3,220  |   | $ | 7,313 |   |
| Gross      Unrealized loss  |   | $                            | 25,218 |                       | $      | 11,991 |   | $ | 37,209 |   |

----

|                              |   |                           |   |                                                   |   | ExpectedCredit      Loss |   | Discount      RateApplied      to Cash Flows |   |
|-----------------------------------|--------|--------------------------------|--------|--------------------------------------------------------|--------|--------------------------|--------|----------------------------------------------|--------|
|  (dollars      in thousands) |   | WeightedAverageLife      (yrs) |   |  Discount      Rateapplied      toCash      Flows |   |  1.0%CDR(1)         |   |  2.0%CDR(1)                             |   | 1.0%AdverseChange |   | 2.0%AdverseChange |   |
|                              |   |                           |   |                                                   |   |                     |   |                                         |   |   |   |   |   |   |   |   |   |
| Security      rating:             |   |                           |   |                                                   |   |                     |   |                                         |   |   |   |   |   |   |   |   |   |
| AAA      interest only            |   | 4.64                           |   | 259.28                                                 | %      | $                        | 2,328  |                                         | $      | 2,328 |   | $ | 2,322 |   | $ | 2,315 |   |
| CCC-                              |   | 9.52                           |   | 144.86                                                 |   |                     | 4,505  |                                         |   | 4,481 |   |   | 4,469 |   |   | 4,435 |   |
| D                                 |   | --                             |   | 44.62                                                  |   |                     | 152    |                                         |   | 152 |   |   | 152 |   |   | 152 |   |
| Non-rated                         |   | --                             |   | 594.26                                                 |   |                     | 290    |                                         |   | 289 |   |   | 290 |   |   | 290 |   |
| Non-rated      interest only      |   | N/A                            |   | 42.20                                                  |   |                     | --     |                                         |   | -- |   |   | -- |   |   | -- |   |

| (1) | Constant      Default Rate |
|-----|----------------------------|

| (dollars      in thousands) |   | FaceAmount |         | PurchaseCost |   | AccretedCost |   | UnrealizedGain |        | UnrealizedLoss |   | Fair      Value |   | Percentageof      FairValue |          |
|-----------------------------|--------|------------|--------------|--------------|--------|--------------|--------|----------------|-------------|----------------|--------|-----------------|--------|-----------------------------|---------------|
|  Security      rating: |   |       |         |         |   |         |   |           |        |           |   |            |   |                        |          |   |   |   |   |   |   |
| BB+                         |   | $          | 3,898        |         | $      | 2,244        |   | $              | 2,336       |           | $      | --              |   | $                           |  (2,063  | ) | $ | 273 |   | 10.7 | % |
| BB                          |   |       |  3,898  |         |   | 2,097        |   |           |  2,191 |           |   | --              |   |                        | (1,918        | ) |   |  273 |   | 10.7 |   |
| BB-                         |   |       |  3,898  |         |   | 1,959        |   |           |  2,056 |           |   | --              |   |                        | (1,783        | ) |   |  273 |   | 10.7 |   |
| B+                          |   |       |  10,395 |         |   | 4,308        |   |           |  4,365 |           |   | --              |   |                        | (3,846        | ) |   |  519 |   | 20.4 |   |
| B                           |   |       |  2,599  |         |   | 542          |   |           |  520   |           |   | --              |   |                        | (390          | ) |   |  130 |   | 5.1 |   |
| B-                          |   |       |  6,698  |         |   | 1,375        |   |           |  1,321 |           |   | --              |   |                        | (1,014        | ) |   |  307 |   | 12.0 |   |
| Non-rated                   |   |       |  25,819 |         |   | 5,269        |   |           |  4,968 |           |   | --              |   |                        | (4,193        | ) |   | 775 |   | 30.4 |   |
|  Total                 |   | $          | 57,205       |         | $      | 17,794       |   | $              | 17,757      |           | $      | --              |   | $                           |  (15,207 | ) | $ | 2,550 |   | 100.0 | % |

----

|                                             |   | December      31, |   |
|--------------------------------------------------|--------|-------------------|--------|
| (in      thousands)                              |   | 2008              |   | 2007 |   |
|                                             |   |              |   |   |   |   |   |
| Equity      interests in tax credit partnerships |   | $                 | 31,367 |   | $ | 38,761 |   |

NOTE 10 – Other Investments

|                                                                                                               |   | December      31, |    |
|--------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|
| (in      thousands)                                                                                                |   | 2008              |    | 2007 |   |
|                                                                                                               |   |              |    |   |   |   |   |
| Mortgage      loans held for sale                                                                                  |   | $                 | 46,912  |   | $ | 91,065 |   |
| Mortgage      loans held for investment(1)                                                                         |   |              | 10,292  |   |   | 15,687 |   |
| Stabilization      escrow                                                                                          |   |              | 72,397  |   |   | 62,565 |   |
| Construction      loans to tax credit properties                                                                   |   |              | 150     |   |   | 6,379 |   |
| Miscellaneous      investments                                                                                     |   |              | 4,476   |   |   | 8,768 |   |
|  Total                                                                                                        |   | $                 | 134,227 |   | $ | 184,464 |   |
|  (1)         Net of valuation allowance of $1.7 million in 2008 and $0.3 million      in 2007. |   |

----

|                                                                              |   | December      31, |    |
|-----------------------------------------------------------------------------------|--------|-------------------|---------|
| (in      thousands)                                                               |   | 2008              |    | 2007 |   |
|  Cash      balance                                                           |   | $                 | 84,503  |   | $ | 76,032 |   |
| Present      value discount net of eliminations and accumulated      amortization |   |              | (12,106 | ) |   | (13,467 | ) |
|  Total                                                                       |   | $                 | 72,397  |   | $ | 62,565 |   |

|                                |   | December      31, |    |
|-------------------------------------|--------|-------------------|---------|
| (in      thousands)                 |   | 2008              |    | 2007 |   |
|                                |   |              |    |   |   |   |   |
| Goodwill                            |   | $                 | 248,978 |   | $ | 342,667 |   |
| Other      intangible assets, net   |   |              | 37,189  |   |   | 103,077 |   |
| Mortgage      servicing rights, net |   |              | 52,483  |   |   | 58,529 |   |
|  Total                         |   | $                 | 338,650 |   | $ | 504,273 |   |

----

| (in      thousands)                     |   | Total  |    |
|-----------------------------------------|--------|--------|---------|
|  Balance      at January 1, 2007   |   | $      | 345,806 |   |
| Additions                               |   |   | 432     |   |
| Reductions                              |   |   | (3,571  | ) |
|  Balance      at December 31, 2007 |   |   | 342,667 |   |
| Additions                               |   |   | --      |   |
| Impairment                              |   |   | (92,748 | ) |
| Other      reductions                   |   |   | (941    | ) |
|  Balance      at December 31, 2008 |   | $      | 248,978 |   |

----

| (dollars      in thousands)                                     |   | EstimatedUsefulLife(in      Years) |   | GrossCarrying      Amount |   | AccumulatedAmortization                         |    | Net    |   |
|-----------------------------------------------------------------|--------|------------------------------------|--------|---------------------------|--------|-------------------------------------------------|---------|--------|--------|
|                                                            |   |                               |   | 2008                      |   | 2007                                            |    | 2008   |   | 2007 |   | 2008 |   | 2007 |   |
|  Amortized      intangible assets:                         |   |                               |   |                      |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Transactional      relationships                                |   | 5.3                                |   | 103,000                   |   | $                                               | 103,000 |   | $      | 97,028 |   | $ | 34,721 |   | $ | 5,972 |   | $ | 68,279 |   |
| Partnership      service contracts                              |   | 9.4                                |   | 44,421                    |   |                                            | 47,300  |   |   | 31,744 |   |   | 28,057 |   |   | 12,677 |   |   | 19,243 |   |
| General      partner interests                                  |   | 7.0                                |   | 13,521                    |   |                                            | 6,016   |   |   | 4,030 |   |   | 2,547 |   |   | 9,491 |   |   | 3,469 |   |
| Joint      venture developer relationships                      |   | 5.0                                |   | 4,800                     |   |                                            | 4,800   |   |   | 4,800 |   |   | 3,955 |   |   | -- |   |   | 845 |   |
| Mortgage      banking broker relationships                      |   | 5.0                                |   | 1,080                     |   |                                            | 1,080   |   |   | 829 |   |   | 612 |   |   | 251 |   |   | 468 |   |
| Weighted      average life/subtotal                             |   | 6.6                                |   | 166,822                   |   |                                            | 162,196 |   |   | 138,431 |   |   | 69,892 |   |   | 28,391 |   |   | 92,304 |   |
|                                                            |   |                               |   |                      |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unamortized      intangible assets:                             |   |                               |   |                      |   |                                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage      banking licenses and approvals with no expiration |   |                               |   | 8,798                     |   |                                            | 10,773  |   |   | -- |   |   | -- |   |   | 8,798 |   |   | 10,773 |   |
|  Total                                                     |   |                               |   | 175,620                   |   | $                                               | 172,969 |   | $      | 138,431 |   | $ | 69,892 |   | $ | 37,189 |   | $ | 103,077 |   |
|                                                            |   |                               |   |                      |   |    Years      Ended December 31, |    |   |   |   |   |   |   |
| (in      thousands)                                             |   |                               |   |                      |   | 2008                                            |    | 2007   |   | 2006 |   |   |   |   |   |   |   |
|  Amortization      expense                                 |   |                               |   |                      |   | $                                               | 13,350  |   | $      | 15,387 |   | $ | 15,534 |   |   |   |   |   |   |   |
| Impairment                                                      |   |                               |   |                      |   | $                                               | 60,044  |   | $      | 7,226 |   | $ | 1,647 |   |   |   |   |   |   |   |

|   |   | (in      thousands) |   |
|--------|--------|---------------------|--------|
|   |   |                |   |   |
| 2009   |   | $                   | 13,740 |   |
| 2010   |   | $                   | 9,025  |   |
| 2011   |   | $                   | 2,167  |   |
| 2012   |   | $                   | 1,899  |   |
| 2013   |   | $                   | 1,302  |   |

----

|                              |   | (in      thousands) |    |
|-----------------------------------|--------|---------------------|---------|
|                              |   |                |    |   |
| Balance      at January 1, 2007   |   | $                   | 68,785  |   |
| MSRs      capitalized             |   |                | 10,815  |   |
| Amortization                      |   |                | (21,071 | ) |
| Balance      at December 31, 2007 |   |                | 58,529  |   |
| MSRs      capitalized             |   |                | 6,662   |   |
| Amortization                      |   |                | (12,708 | ) |
| Increase      in reserves         |   |                | --      |   |
| Balance      at December 31, 2008 |   | $                   | 52,483  |   |
|                              |   |                |    |   |
| Reserve      for Loan Losses :    |   |                |    |   |
|                              |   |                |    |   |
| Balance      at January 1, 2007   |   | $                   | 13,116  |   |
| Net      additions                |   |                | --      |   |
| Balance      at December 31, 2007 |   |                | 13,116  |   |
| Net      additions                |   |                | --      |   |
| Balance      at December 31, 2008 |   | $                   | 13,116  |   |

|   |   | (in      thousands) |   |
|--------|--------|---------------------|--------|
|   |   |                |   |   |
| 2009   |   | $                   | 10,911 |   |
| 2010   |   | $                   | 8,167  |   |
| 2011   |   | $                   | 7,424  |   |
| 2012   |   | $                   | 6,238  |   |
| 2013   |   | $                   | 5,021  |   |

|                                      |   | December      31, |           |
|-------------------------------------------|--------|-------------------|----------------|
|                                      |   | 2008              |           | 2007 |   |
|  Weighted      average discount rate |   |              | 18.17          | % |   | 17.54 | % |
| Weighted      average pre-pay speed       |   |              | 9.50           | % |   | 9.98 | % |
| Weighted      average lockout period      |   |              | 4.5      years |   |   | 4.0      years |   |
| Weighted      average default rate        |   |              | 0.47           | % |   | 0.50 | % |
| Cost      to service loans                |   | $                 | 2,192          |   | $ | 2,215 |   |
| Acquisition      cost (per loan)          |   | $                 | 1,474          |   | $ | 1,464 |   |

----

|                                               |   | December      31, |   |
|----------------------------------------------------|--------|-------------------|--------|
| (in      thousands)                                |   | 2008              |   | 2007 |   |
|  Fair      value of MSRs                      |   | $                 | 77,463 |   | $ | 85,762 |   |
|                                               |   |              |   |   |   |   |   |
| Prepayment      speed:                             |   |              |   |   |   |   |   |
| Fair      value after impact of 10% adverse change |   |              | 76,846 |   |   | 84,989 |   |
| Fair      value after impact of 20% adverse change |   |              | 76,263 |   |   | 84,281 |   |
|                                               |   |              |   |   |   |   |   |
| Discount      rate:                                |   |              |   |   |   |   |   |
| Fair      value after impact of 10% adverse change |   |              | 73,211 |   |   | 81,013 |   |
| Fair      value after impact of 20% adverse change |   |              | 69,529 |   |   | 76,915 |   |
|                                               |   |              |   |   |   |   |   |
| Default      rate:                                 |   |              |   |   |   |   |   |
| Fair      value after impact of 10% adverse change |   |              | 77,363 |   |   | 85,683 |   |
| Fair      value after impact of 20% adverse change |   |              | 77,256 |   |   | 85,613 |   |

| (in      thousands) |   | TotalServicingFees |   | ServicingFees      fromSecuritizedAssets(included      inTotalServicingFees) |   |
|---------------------|--------|--------------------|--------|------------------------------------------------------------------------------|--------|
|  2008          |   | $                  | 22,082 |                                                                         | $      | 826 |   |
| 2007                |   | $                  | 23,672 |                                                                         | $      | 78 |   |
| 2006                |   | $                  | 20,738 |                                                                         | $      | -- |   |

----

|                                      |   | Years      Ended December 31, |    |
|-------------------------------------------|--------|-------------------------------|---------|
| (in      thousands)                       |   | 2008                          |    | 2007 |   | 2006 |   |
|                                      |   |                          |    |   |   |   |   |   |   |   |
| Goodwill                                  |   | $                             | 92,748  |   | $ | -- |   | $ | 997 |   |
|  Amortized      intangible assets:   |   |                          |    |   |   |   |   |   |   |   |
| Transactional      relationships          |   |                          | 55,190  |   |   | -- |   |   | 1,647 |   |
| Partnership      service contracts        |   |                          | 2,879   |   |   | 7,226 |   |   | -- |   |
|  Unamortized      intangible assets: |   |                          |    |   |   |   |   |   |   |   |
| Mortgage      banking licenses            |   |                          | 1,975   |   |   | -- |   |   | -- |   |
|                                      |   | $                             | 152,792 |   | $ | 7,226 |   | $ | 2,644 |   |

----

|                                                     |   | December      31, |    |
|----------------------------------------------------------|--------|-------------------|---------|
| (in      thousands)                                      |   | 2008              |    | 2007 |   |
|                                                     |   |              |    |   |   |   |   |
| Deferred      financing and other costs                  |   | $                 | 34,673  |   | $ | 39,599 |   |
| Less:      Accumulated amortization                      |   |              | (11,879 | ) |   | (5,176 | ) |
|                                                     |   |              |    |   |   |   |   |
| Net      deferred costs                                  |   |              | 22,794  |   |   | 34,423 |   |
|                                                     |   |              |    |   |   |   |   |
| Deposits      receivable                                 |   |              | 75,955  |   |   | 59,957 |   |
| Interest      receivable, net                            |   |              | 4,885   |   |   | 10,550 |   |
| Fees      receivable, net                                |   |              | 4,585   |   |   | 4,291 |   |
| Furniture,      fixtures and leasehold improvements, net |   |              | 3,588   |   |   | 8,366 |   |
| Other                                                    |   |              | 23,872  |   |   | 23,851 |   |
|  Total                                              |   | $                 | 135,679 |   | $ | 141,438 |   |

----

|                                                           |   | December      31,                                |      |
|----------------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                           |   |  2008                                       |      | 2007 |   |
| (in      thousands)                                            |   | Tax      CreditFund      andPropertyPartnerships |      | CMBS      andHigh-YieldDebt      FundPartnerships |   | Total |   | Tax      CreditFund      andPropertyPartnerships |   |  CMBS      andHigh-YieldDebt      FundPartnerships |   | Total |   |
|                                                           |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale, at fair      value                         |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CMBS                                                           |   | $                                                | --        |   | $ | 182,828 |   | $ | 182,828 |   | $ | -- |   | $ | 1,235,059 |   | $ | 1,235,059 |   |
| Retained      CMBS certificates                                |   |                                             | --        |   |   | 9,867 |   |   | 9,867 |   |   | -- |   |   | 482,424 |   |   | 482,424 |   |
| CDO      Debt and Equity                                       |   |                                             | --        |   |   | 33,189 |   |   | 33,189 |   |   | -- |   |   | 65,060 |   |   | 65,060 |   |
|                                                           |   |                                             | --        |   |   | 225,884 |   |   | 225,884 |   |   | -- |   |   | 1,782,543 |   |   | 1,782,543 |   |
|                                                           |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to Maturity                                               |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retained      CMBS certificates                                |   |                                             | --        |   |   | 288,960 |   |   | 288,960 |   |   | -- |   |   | -- |   |   | -- |   |
|  Equity method                                            |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity      interests in tax credit properties                 |   |                                             | 4,234,251 |   |   | -- |   |   | 4,234,251 |   |   | 4,178,206 |   |   | -- |   |   | 4,178,206 |   |
|  Other                                                    |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage      loans held for investment                        |   |                                             | --        |   |   | 200,611 |   |   | 200,611 |   |   | -- |   |   | 336,322 |   |   | 336,322 |   |
| Other      investments                                         |   |                                             | 47,858    |   |   | -- |   |   | 47,858 |   |   | 78,055 |   |   | -- |   |   | 78,055 |   |
|                                                           |   |                                             | 47,858    |   |   | 200,611 |   |   | 248,469 |   |   | 78,055 |   |   | 336,322 |   |   | 414,377 |   |
|  Total      investments held by consolidated partnerships |   |                                             | 4,282,109 |   |   | 715,455 |   |   | 4,997,564 |   |   | 4,256,261 |   |   | 2,118,865 |   |   | 6,375,126 |   |
|  Land,      buildings and improvements, net               |   |                                             | 697,422   |   |   | -- |   |   | 697,422 |   |   | 661,380 |   |   | -- |   |   | 661,380 |   |
| Other      assets                                              |   |                                             | 309,962   |   |   | 63,970 |   |   | 373,932 |   |   | 290,076 |   |   | 81,659 |   |   | 371,735 |   |
| Total      other assets of consolidated partnerships           |   |                                             | 1,007,384 |   |   | 63,970 |   |   | 1,071,354 |   |   | 951,456 |   |   | 81,659 |   |   | 1,033,115 |   |
|  Total                                                    |   | $                                                | 5,289,493 |   | $ | 779,425 |   | $ | 6,068,918 |   | $ | 5,207,717 |   | $ | 2,200,524 |   | $ | 7,408,241 |   |

----

| (dollars      in thousands) |   | FaceAmount |      | PurchaseCost |   | AccretedCost(1) |   | UnrealizedGain |      | UnrealizedLoss(1) |   | Fair      Value |   | Percentageof      FairValue |           |
|-----------------------------|--------|------------|-----------|--------------|--------|-----------------|--------|----------------|-----------|-------------------|--------|-----------------|--------|-----------------------------|----------------|
|                        |   |       |      |         |   |            |   |           |      |              |   |            |   |                        |           |   |   |   |   |   |   |
| Security      rating:       |   |       |      |         |   |            |   |           |      |              |   |            |   |                        |           |   |   |   |   |   |   |
| BBB+                        |   | $          | 17,000    |         | $      | 17,000          |   | $              | 17,000    |              | $      | --              |   | $                           |  (16,150  | ) | $ | 850 |   | 0.4 | % |
| BBB                         |   |       | 86,139    |         |   | 74,530          |   |           | 75,469    |              |   | --              |   |                        |  (67,376  | ) |   | 8,093 |   | 4.4 |   |
| BBB-                        |   |       | 300,620   |         |   | 267,367         |   |           | 271,091   |              |   | --              |   |                        |  (241,856 | ) |   | 29,235 |   | 16.0 |   |
| BB+                         |   |       | 309,286   |         |   | 252,025         |   |           | 258,069   |              |   | --              |   |                        |  (221,171 | ) |   | 36,898 |   | 20.2 |   |
| BB                          |   |       | 288,641   |         |   | 230,680         |   |           | 237,147   |              |   | --              |   |                        | (214,784       | ) |   | 22,363 |   | 12.2 |   |
| BB-                         |   |       | 302,145   |         |   | 211,989         |   |           | 221,542   |              |   | --              |   |                        | (199,743       | ) |   | 21,799 |   | 11.9 |   |
| B+                          |   |       | 286,434   |         |   | 184,166         |   |           | 186,724   |              |   | --              |   |                        | (169,866       | ) |   | 16,859 |   | 9.2 |   |
| B                           |   |       | 177,623   |         |   | 100,012         |   |           | 92,832    |              |   | --              |   |                        | (83,504        | ) |   | 9,328 |   | 5.1 |   |
| B-                          |   |       | 209,746   |         |   | 93,553          |   |           | 84,471    |              |   | --              |   |                        | (75,000        | ) |   | 9,470 |   | 5.2 |   |
| CCC+                        |   |       | 31,705    |         |   | 17,790          |   |           | 1,122     |              |   | --              |   |                        | --             |   |   | 1,122 |   | 0.6 |   |
| CCC                         |   |       | 6,826     |         |   | 4,197           |   |           | 273       |              |   | --              |   |                        | --             |   |   | 273 |   | 0.1 |   |
| CCC-                        |   |       | 16,239    |         |   | 7,855           |   |           | 4,869     |              |   | --              |   |                        |  (4,382   | ) |   | 487 |   | 0.3 |   |
| Non-rated                   |   |       | 967,247   |         |   | 323,228         |   |           | 232,729   |              |   | --              |   |                        |  (206,678 | ) |   | 26,051 |   | 14.4 |   |
|  Total                 |   | $          | 2,999,651 |         | $      | 1,784,392       |   | $              | 1,683,338 |              | $      | --              |   | $                           | (1,500,510     | ) | $ | 182,828 |   | 100.0 | % |

| (1) | Unrealized      losses do not include non-cash impairment charges of $96.0 million we      recorded during the year ended December 31, 2008 included in “loss on      impairment of assets of consolidated partnerships” (see Note      24).  The impairment was primarily due to increased rates of      default within one CMBS trust.  Accreted cost is shown net of      this amount. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars      in thousands) |   | Less      than12      Months |   | 12      Months orMore |   | Total     |   |
|-----------------------------|--------|------------------------------|--------|-----------------------|--------|-----------|--------|
|  December 31, 2008     |   |                         |   |                  |   |      |   |   |   |   |
|  Number                |   |                         | 26     |                  |   | 297       |   |   | 323 |   |
| Fair      Value             |   | $                            | 19,165 |                  | $      | 158,655   |   | $ | 177,820 |   |
| Gross      Unrealized loss  |   | $                            | 71,714 |                  | $      | 1,428,796 |   | $ | 1,500,510 |   |

----

| (dollars      in thousands) |   | FaceAmount |    | PurchaseCost |   | AccretedCost(1) |   | UnrealizedGain |   | UnrealizedLoss(1) |   | Fair      Value |   | Percentageof      FairValue |    |
|-----------------------------|--------|------------|---------|--------------|--------|-----------------|--------|----------------|--------|-------------------|--------|-----------------|--------|-----------------------------|---------|
|                        |   |       |    |         |   |            |   |           |   |              |   |            |   |                        |    |   |   |   |   |   |   |
| Security      rating:       |   |       |    |         |   |            |   |           |   |              |   |            |   |                        |    |   |   |   |   |   |   |
| CCC-                        |   | $          | 220,326 |         | $      | 124,183         |   | $              | 90,534 |              | $      | --              |   | $                           | (82,490 | ) | $ |  8,044 |   | 81.5 | % |
| Non-rated                   |   |       | 158,680 |         |   | 11,674          |   |           | 1,587  |              |   | --              |   |                        | --      |   |   |  1,587 |   | 16.1 |   |
| Non-rated      IO           |   |       | --      |         |   | 5,863           |   |           | 3,869  |              |   | --              |   |                        | (3,633  | ) |   |  236 |   | 2.4 |   |
|  Total                 |   | $          | 379,006 |         | $      | 141,720         |   | $              | 95,990 |              | $      | --              |   | $                           | (86,123 | ) | $ |  9,867 |   | 100.0 | % |

| (1) | Unrealized      losses do not include non-cash impairment charges of $27.0 million we      recorded during the year ended December 31, 2008 and an additional $20.9      million recognized in 2007 included in “loss on impairment of assets of      consolidated partnerships” (see Note 24).  One of the CMBS Fund      Partnerships is scheduled to liquidate within the next two years and may      not be able to hold the assets until recovery.  Accreted cost is      shown net of these amounts. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (dollars      in thousands) |   | Less      than12      Months |   | 12      Monthsor      More |   | Total  |   |
|-----------------------------|--------|------------------------------|--------|----------------------------|--------|--------|--------|
|  December 31, 2008     |   |                         |   |                       |   |   |   |   |   |   |
|  Number                |   |                         | 2      |                       |   | 3      |   |   | 5 |   |
| Fair      Value             |   | $                            | 236    |                       | $      | 4,778  |   | $ | 5,014 |   |
| Gross      Unrealized loss  |   | $                            | 3,633  |                       | $      | 82,490 |   | $ | 86,123 |   |

----

|                              |   |                           |   |                                                   |   | ExpectedCredit      Loss |   | Discount      RateApplied      to Cash Flows |   |
|-----------------------------------|--------|--------------------------------|--------|--------------------------------------------------------|--------|--------------------------|--------|----------------------------------------------|--------|
|  (dollars      in thousands) |   | WeightedAverageLife      (yrs) |   |  Discount      Rateapplied      toCash      Flows |   |  1.0%CDR(1)         |   |  2.0%CDR(1)                             |   | 1.0%AdverseChange |   | 2.0%AdverseChange |   |
|                              |   |                           |   |                                                   |   |                     |   |                                         |   |   |   |   |   |   |   |   |   |
| Security      rating:             |   |                           |   |                                                   |   |                     |   |                                         |   |   |   |   |   |   |   |   |   |
| CCC-                              |   | 7.84                           |   | 148.66                                                 | %      | $                        | 7,967  |                                         | $      | 7,937 |   | $ | 7,918 |   | $ | 7,869 |   |
| Non-rated                         |   | --                             |   | 594.26                                                 |   |                     | 1,580  |                                         |   | 1,574 |   |   | 1,578 |   |   | 1,577 |   |
| Non-rated      interest only      |   | N/A                            |   | 213.44                                                 |   |                     | 235    |                                         |   | 235 |   |   | 236 |   |   | 236 |   |

| (1) | Constant      Default Rate |
|-----|----------------------------|

| (dollars      in thousands) |   | FaceAmount |    | PurchaseCost |   | AccretedCost(1)                                                                                                                             |   | UnrealizedGain |    | UnrealizedLoss(1) |   | Fair      Value |   | Percentageof      FairValue |     |
|-----------------------------|--------|------------|---------|--------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|---------|-------------------|--------|-----------------|--------|-----------------------------|----------|
|                        |   |       |    |         |   |                                                                                                                                        |   |           |    |              |   |            |   |                        |     |   |   |   |   |   |   |
| Security      rating:       |   |       |    |         |   |                                                                                                                                        |   |           |    |              |   |            |   |                        |     |   |   |   |   |   |   |
| BBB                         |   | $          | 9,750   |         | $      | 9,442                                                                                                                                       |   | $              | 9,468   |              | $      | --              |   | $                           | (8,006   | ) | $ | 1,462 |   | 4.4 | % |
| BBB-                        |   |       | 28,550  |         |   | 26,986                                                                                                                                      |   |           | 14,063  |              |   | --              |   |                        | (10,228  | ) |   | 3,835 |   | 11.6 |   |
| BB+                         |   |       | 42,300  |         |   | 40,041                                                                                                                                      |   |           | 20,765  |              |   | --              |   |                        | (15,689  | ) |   | 5,076 |   | 15.3 |   |
| BB                          |   |       | 17,413  |         |   | 16,342                                                                                                                                      |   |           | 8,938   |              |   | --              |   |                        | (6,848   | ) |   | 2,090 |   | 6.3 |   |
| BB-                         |   |       | 11,325  |         |   | 10,495                                                                                                                                      |   |           | 5,708   |              |   | --              |   |                        | (4,349   | ) |   | 1,359 |   | 4.1 |   |
| B+                          |   |       | 18,575  |         |   | 17,068                                                                                                                                      |   |           | 10,144  |              |   | --              |   |                        | (8,286   | ) |   | 1,858 |   | 5.6 |   |
| B                           |   |       | 7,124   |         |   | 6,286                                                                                                                                       |   |           | 6,343   |              |   | --              |   |                        | (5,631   | ) |   | 712 |   | 2.1 |   |
| B-                          |   |       | 17,325  |         |   | 16,472                                                                                                                                      |   |           | 5,341   |              |   | --              |   |                        | (3,608   | ) |   | 1,733 |   | 5.2 |   |
| Non-rated                   |   |       | 118,576 |         |   | 101,890                                                                                                                                     |   |           | 64,927  |              |   | --              |   |                        | (49,863  | ) |   | 15,064 |   | 45.4 |   |
|  Total                 |   | $          | 270,938 |         | $      |                       245,022 |   | $              | 145,697 |              | $      | --              |   | $                           | (112,508 | ) | $ | 33,189 |   | 100.0 | % |

| (1) | Unrealized      losses do not include non-cash impairment charges of $101.0 million the      High-Yield Debt Fund Partnership recorded during the year ended December      31, 2008 included in “loss on impairment of assets of consolidated      partnerships” (see Note 24).  The impairment was primarily due      to increased rates of expected default within one of the      CDOs.  Accreted cost is shown net of this  amount. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (dollars      in thousands) |   | Less      than12      Months |    | 12      Monthsor      More |   | Total  |   |
|-----------------------------|--------|------------------------------|---------|----------------------------|--------|--------|--------|
|  December 31, 2008     |   |                         |    |                       |   |   |   |   |   |   |
|  Number                |   |                         | 9       |                       |   | --     |   |   | 9 |   |
| Fair      value             |   | $                            | 18,223  |                       | $      | --     |   | $ | 18,223 |   |
| Gross      unrealized loss  |   | $                            | 112,508 |                       | $      | --     |   | $ | 112,508 |   |

| (dollars      in thousands) |   | FaceAmount |         | PurchaseCost |   | CarryingValue |   | UnrealizedGain |         | UnrealizedLoss |   | Fair      Value |   | Percentageof      FairValue |          |
|-----------------------------|--------|------------|--------------|--------------|--------|---------------|--------|----------------|--------------|----------------|--------|-----------------|--------|-----------------------------|---------------|
|                        |   |       |         |         |   |          |   |           |         |           |   |            |   |                        |          |   |   |   |   |   |   |
| Security      rating:       |   |       |         |         |   |          |   |           |         |           |   |            |   |                        |          |   |   |   |   |   |   |
| AAA                         |   | $          | 147,900      |         | $      | 142,631       |   | $              | 121,724      |           | $      | --              |   | $                           |  (90,149 | ) | $ | 31,575 |   | 66.8 | % |
| AA+                         |   |       |  51,100 |         |   | 48,312        |   |           | 37,403       |           |   | --              |   |                        | (32,908       | ) |   | 4,495 |   | 9.6 |   |
| AA                          |   |       |  15,400 |         |   | 16,514        |   |           |  10,728 |           |   | --              |   |                        | (9,958        | ) |   | 770 |   | 1.6 |   |
| A+                          |   |       |  62,600 |         |   | 62,723        |   |           |  41,275 |           |   | --              |   |                        | (38,145       | ) |   | 3,130 |   | 6.6 |   |
| A                           |   |       |  66,500 |         |   | 73,006        |   |           |  39,518 |           |   | --              |   |                        | (36,193       | ) |   | 3,325 |   | 7.0 |   |
| A-                          |   |       |  30,700 |         |   | 28,054        |   |           |  17,505 |           |   | --              |   |                        | (15,970       | ) |   |  1,535 |   | 3.2 |   |
| BBB+                        |   |       |  49,600 |         |   | 44,764        |   |           |  20,807 |           |   | --              |   |                        | (18,327       | ) |   |  2,480 |   | 5.2 |   |
|  Total                 |   | $          | 423,800      |         | $      | 416,004       |   | $              | 288,960      |           | $      | --              |   | $                           | (241,650      | ) | $ | 47,310 |   | 100.0 | % |

| (dollars      in thousands) |   | Less      than12      Months |   | 12      Months orMore |   | Total   |   |
|-----------------------------|--------|------------------------------|--------|-----------------------|--------|---------|--------|
|  December 31, 2008     |   |                         |   |                  |   |    |   |   |   |   |
|  Number                |   |                         | 5      |                  |   | 9       |   |   | 14 |   |
| Fair      Value             |   | $                            | 8,145  |                  | $      | 39,165  |   | $ | 47,310 |   |
| Gross      Unrealized loss  |   | $                            | 69,824 |                  | $      | 171,826 |   | $ | 241,650 |   |

----

|                                                   |   |                           |   |                                       |   | ExpectedCredit      Loss |   | Discount      RateApplied      to Cash Flows |   |
|--------------------------------------------------------|--------|--------------------------------|--------|--------------------------------------------|--------|--------------------------|--------|----------------------------------------------|--------|
| (dollars      in thousands)                            |   | WeightedAverageLife      (yrs) |   | DiscountRateapplied      toCash      Flows |   |  1.0%CDR(1)         |   |  2.0%CDR(1)                             |   | 1.0%AdverseChange |   | 2.0%AdverseChange |   |
|                                                   |   |                           |   |                                       |   |                     |   |                                         |   |   |   |   |   |   |   |   |   |
| Security      rating:                                  |   |                           |   |                                       |   |                     |   |                                         |   |   |   |   |   |   |   |   |   |
| AAA                                                    |   | 2.35                           |   | 95.64                                      |   | $                        | 30,993 |                                         | $      | 30,105 |   | $ | 30,624 |   | $ | 30,261 |   |
| AA+                                                    |   | 3.04                           |   | 135.62                                     |   |                     | 4,385  |                                         |   | 4,103 |   |   | 4,335 |   |   | 4,285 |   |
| AA                                                     |   | 3.49                           |   | 196.90                                     |   |                     | 759    |                                         |   | 759 |   |   | 754 |   |   | 748 |   |
| A+                                                     |   | 3.66                           |   | 189.82                                     |   |                     | 3,042  |                                         |   | 2,969 |   |   | 3,023 |   |   | 3,004 |   |
| A                                                      |   | 4.10                           |   | 220.71                                     |   |                     | 3,314  |                                         |   | 3,290 |   |   | 3,299 |   |   | 3,285 |   |
| A-                                                     |   | 4.66                           |   | 168.36                                     |   |                     | 1,502  |                                         |   | 1,478 |   |   | 1,493 |   |   | 1,484 |   |
| BBB+                                                   |   | 6.16                           |   | 185.70                                     |   |                     | 2,471  |                                         |   | 2,464 |   |   | 2,459 |   |   | 2,488 |   |
|  (1)         Constant Default Rate |   |

----

| (dollars      in thousands)                                                                                                                                                                       |   | CarryingValue(1) |    | Allocation      byProduct      Type |   | WeightedAverageYield(2) |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|---------|-------------------------------------|--------|-------------------------|--------|
|                                                                                                                                                                                              |   |             |    |                                |   |                    |   |
| December 31, 2008                                                                                                                                                                                 |   |             |    |                                |   |                    |   |
|  Product      Type:                                                                                                                                                                          |   |             |    |                                |   |                    |   |   |
| Bridge      loans, variable rate                                                                                                                                                                  |   | $                | 3,308   |                                | 1.6    | %                       | 4.43   | % |
| Bridge      loans, fixed rate                                                                                                                                                                     |   |             | 8,525   |                                | 4.2    |                    | 7.71   |   |
| Subordinated      notes, variable rate                                                                                                                                                            |   |             | 65,364  |                                | 32.6   |                    | 5.59   |   |
| Subordinated      notes, fixed rate                                                                                                                                                               |   |             | 14,191  |                                | 7.1    |                    | 7.74   |   |
| Mezzanine      loans, variable rate                                                                                                                                                               |   |             | 46,116  |                                | 23.0   |                    | 3.47   |   |
| Mezzanine      loans, fixed rate                                                                                                                                                                  |   |             | 61,822  |                                | 30.8   |                    | 7.10   |   |
| First      mortgage, variable rate                                                                                                                                                                |   |             | 1,285   |                                | 0.7    |                    | 5.50   |   |
|  2008      Total/Average                                                                                                                                                                     |   | $                | 200,611 |                                | 100.0  | %                       | 5.75   | % |
|                                                                                                                                                                                              |   |             |    |                                |   |                    |   |   |
| December 31, 2007                                                                                                                                                                                 |   |             |    |                                |   |                    |   |   |
|  Product      Type:                                                                                                                                                                          |   |             |    |                                |   |                    |   |   |
| Bridge      loans, variable rate                                                                                                                                                                  |   | $                | 12,472  |                                | 3.7    | %                       | 7.70   | % |
| Bridge      loans, fixed rate                                                                                                                                                                     |   |             | 43,764  |                                | 13.0   |                    | 7.12   |   |
| Subordinated      notes, variable rate                                                                                                                                                            |   |             | 20,313  |                                | 6.0    |                    | 7.98   |   |
| Subordinated      notes, fixed rate                                                                                                                                                               |   |             | 25,807  |                                | 7.7    |                    | 7.93   |   |
| Mezzanine      loans, variable rate                                                                                                                                                               |   |             | 149,579 |                                | 44.5   |                    | 8.93   |   |
| Mezzanine      loans, fixed rate                                                                                                                                                                  |   |             | 83,033  |                                | 24.7   |                    | 9.79   |   |
| First      mortgage, variable rate                                                                                                                                                                |   |             | 1,354   |                                | 0.4    |                    | 6.63   |   |
|  2007      Total/Average                                                                                                                                                                     |   | $                | 336,322 |                                | 100.0  | %                       | 7.81   | % |
|   (1)         Net of valuation allowance.(2)         Represents either the fixed rate or the average yield for variable      rate loans as of December31. |

| (in      thousands)     |   | FundedAmount |    | ValuationAllowance |   | CarryingValue |   |
|-------------------------|--------|--------------|---------|--------------------|--------|---------------|--------|
|                    |   |         |    |               |   |          |   |   |
| December 31, 2008       |   |         |    |               |   |          |   |   |
|                    |   |         |    |               |   |          |   |   |   |   |
| Impaired      loans     |   | $            | 112,381 |               | $      | (98,244       | )      | $ | 14,137 |   |
| Loans      not impaired |   |         | 186,474 |               |   | --            |   |   | 186,474 |   |
|  Total             |   | $            | 298,855 |               | $      | (98,244       | )      | $ | 200,611 |   |
|                    |   |         |    |               |   |          |   |   |   |   |
| December 31, 2007       |   |         |    |               |   |          |   |   |   |   |
|                    |   |         |    |               |   |          |   |   |   |   |
| Impaired      loans     |   | $            | --      |               | $      | --            |   | $ | -- |   |
| Loans      not impaired |   |         | 336,322 |               |   | --            |   |   | 336,322 |   |
|  Total             |   | $            | 336,322 |               | $      | --            |   | $ | 336,322 |   |

----

|                                                                                                                                                                                                                                                              |   | (in      thousands) |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                                                                                                                                                                                                              |   |                |   |   |
| Balance      at January 1, 2006                                                                                                                                                                                                                                   |   | $                   | --     |   |
| Additions      charged to statement of operations                                                                                                                                                                                                                 |   |                | --     |   |
| Balance      at December 31, 2007                                                                                                                                                                                                                                 |   |                | --     |   |
| Additions      charged to statement of operations                                                                                                                                                                                                                 |   |                | --     |   |
| Direct      charge offs net of recoveries                                                                                                                                                                                                                         |   |                | --     |   |
| Balance      at December 31, 2007                                                                                                                                                                                                                                 |   |                | --     |   |
| Additions      charged to statement of operations (1)                                                                                                                                                                                                             |   |                | 98,244 |   |
| Direct      charge offs net of recoveries                                                                                                                                                                                                                         |   |                | --     |   |
| Balance      at December 31, 2008                                                                                                                                                                                                                                 |   | $                   | 98,244 |   |
|  (1)           Included in “loss on impairment of assets of consolidated      partnerships” (see Note 24).  A portion of this amount pertained      to properties developed by a related party (see Note 28). |   |

| Year      of Maturity |   | Number      ofLoansMaturing |   | CurrentCarryingValue(in      thousands) |    |
|-----------------------|--------|-----------------------------|--------|-----------------------------------------|---------|
|                  |   |                        |   |                                    |    |   |
| 2009                  |   | 8                           |   | $                                       | 107,651 |   |
| 2010                  |   | 5                           |   |                                    | 18,962  |   |
| 2011                  |   | 4                           |   |                                    | 6,625   |   |
| 2012                  |   | 1                           |   |                                    | 4,637   |   |
| 2013                  |   | --                          |   |                                    | --      |   |
| Thereafter            |   | 5                           |   |                                    | 62,736  |   |
| Total                 |   | 23                          |   | $                                       | 200,611 |   |

|                                          |   | December      31, |    |
|-----------------------------------------------|--------|-------------------|---------|
| (in      thousands)                           |   | 2008              |    | 2007 |   |
|                                          |   |              |    |   |   |   |   |
| Term      loan                                |   | $                 | 68,884  |   | $ | 140,000 |   |
| Revolving      credit facility                |   |              | 228,000 |   |   | 210,000 |   |
| Mortgage      banking warehouse line          |   |              | 32,229  |   |   | 32,302 |   |
| Multifamily      ASAP plus facility           |   |              | 14,869  |   |   | 58,413 |   |
| Commercial      Real Estate lines             |   |              | 13,846  |   |   | 56,912 |   |
| Syndicated      corporate debt warehouse line |   |              | --      |   |   | 5,423 |   |
| Other                                         |   |              | 233     |   |   | 2,838 |   |
|  Total                                   |   | $                 | 358,061 |   | $ |  505,888 |   |

----

|   | · | incurring      additional unsecured indebtedness without lender  approval; |
|--------|--------|----------------------------------------------------------------------------|

|   | · | declaring      and paying dividends (including distributions to minority      interests); |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | certain      new business investment without lender approval;  and |
|--------|--------|--------------------------------------------------------------------|

|   | · | conducting      transactions with our affiliates. |
|--------|--------|---------------------------------------------------|

|   | · | a      minimum level of consolidated networth; |
|--------|--------|------------------------------------------------|

|   | · | a      minimum ratio of consolidated EBITDA to fixed charges;  and |
|--------|--------|--------------------------------------------------------------------|

|   | · | a      minimum ratio of funded debt to consolidated  EBITDA. |
|--------|--------|--------------------------------------------------------------|

----

|   | (1) | 1.40%      plus the higher of |
|--------|-----|-------------------------------|

|   | a. | the      Prime Rate, or |
|--------|----|-------------------------|

|   | b. | the      federal funds effective rate, as defined, plus 0.5%;  or |
|--------|----|-------------------------------------------------------------------|

|   | (2) | LIBOR      plus 0.40%. |
|--------|-----|------------------------|

|       |   | (in      thousands) |    |
|------------|--------|---------------------|---------|
|  2009 |   | $                   | 68,884  |   |
| 2010       |   |                | 220,000 |   |
|       |   | $                   | 288,884 |   |

----

|                               |   | December      31, |    |
|------------------------------------|--------|-------------------|---------|
| (in      thousands)                |   | 2008              |    | 2007 |   |
|                               |   |              |    |   |   |   |   |
| Freddie      Mac secured financing |   | $                 | 348,989 |   | $ | 548,227 |   |
| Bond      securitizations          |   |              | 62,424  |   |   | 14,275 |   |
|  Total                        |   | $                 | 411,413 |   | $ | 562,502 |   |

|                                                                                                                                                             |   | Years      Ended December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                                                                                             |   | 2008                          |   | 2007 |   | 2006 |   |
|                                                                                                                                                             |   |                          |   |   |   |   |   |   |   |   |
| Cost      of funds(1)                                                                                                                                            |   |                          | 6.10   | % |   | 4.79 | % |   | 4.17 | % |
| Interest      expense (in millions)(1)                                                                                                                           |   | $                             | 31.3   |   | $ | 80.4 |   | $ | 68.7 |   |
|  Rate      at December 31, excluding fees:                                                                                                                  |   |                          |   |   |   |   |   |   |   |   |
|                                                                                                                                                             |   |                          |   |   |   |   |   |   |   |   |
| Freddie      Mac secured financing                                                                                                                               |   |                          | 5.84   | % |   | 5.20 | % |   | -- |   |
| Bond      securitizations                                                                                                                                        |   |                          | 4.25   | % |   | 5.00 | % |   | 4.17 | % |
|  (1)         Includes the effect of our swaps and, in 2006, incremental costs      related to restructuring of our securitization  programs. |

----

|                                                 |   | December      31, |    |
|------------------------------------------------------|--------|-------------------|---------|
| (in      thousands)                                  |   | 2008              |    | 2007 |   |
|                                                 |   |              |    |   |   |   |   |
| Deferred      revenues                               |   | $                 | 69,516  |   | $ | 100,610 |   |
| Transaction      costs payable                       |   |              | 30,414  |   |   | 35,314 |   |
| Interest      rate swaps at fair value (Note 27)     |   |              | 40,525  |   |   | 50,445 |   |
| Distributions      payable                           |   |              | 2,094   |   |   | 41,016 |   |
| Accounts      payable                                |   |              | 16,804  |   |   | 15,976 |   |
| Salaries      and benefits payable                   |   |              | 11,781  |   |   | 30,513 |   |
| Accrued      fund organization and offering expenses |   |              | 6,306   |   |   | 8,484 |   |
| Deposits      payable                                |   |              | 100     |   |   | 3,760 |   |
| Accrued      interest payable                        |   |              | 4,712   |   |   | 1,350 |   |
| Unsettled      investment purchases                  |   |              | --      |   |   | 15,000 |   |
| Income      tax reserves (Note 25)                   |   |              | 2,484   |   |   | 3,078 |   |
| Other                                                |   |              | 20,728  |   |   | 7,704 |   |
|  Total                                          |   | $                 | 205,464 |   | $ | 313,250 |   |

----

|                                                      |   | December      31,                                |      |
|-----------------------------------------------------------|--------|--------------------------------------------------|-----------|
|                                                      |   |  2008                                       |      | 2007 |   |
| (in      thousands)                                       |   | Tax      CreditFund      andPropertyPartnerships |      |  CMBS      andHigh-YieldDebt      FundPartnerships |   | Total |   | Tax      CreditFund      andPropertyPartnerships |   | CMBS      andHigh-YieldDebt      FundPartnerships |   | Total |   |
|                                                      |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                             |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financing      arrangements                               |   | $                                                | --        |   | $ | 1,121,475 |   | $ | 1,121,475 |   | $ | -- |   | $ | 1,122,906 |   | $ | 1,122,906 |   |
| Notes      payable                                        |   |                                             | 377,730   |   |   | 295,000 |   |   | 672,730 |   |   | 422,904 |   |   | 35,463 |   |   | 458,367 |   |
| Repurchase      agreements                                |   |                                             | --        |   |   | 39,125 |   |   | 39,125 |   |   | -- |   |   | 416,059 |   |   | 416,059 |   |
| Due      to property partnerships                         |   |                                             | 577,160   |   |   | -- |   |   | 577,160 |   |   | 970,602 |   |   | -- |   |   | 970,602 |   |
| Other      liabilities                                    |   |                                             | 192,508   |   |   | 16,156 |   |   | 208,664 |   |   | 177,979 |   |   | 15,041 |   |   | 193,020 |   |
|  Total      liabilities of consolidated partnerships |   | $                                                | 1,147,398 |   | $ | 1,471,756 |   | $ | 2,619,154 |   | $ | 1,571,485 |   | $ | 1,589,469 |   | $ | 3,160,954 |   |

----

|                                  |   | December      31,      |    |
|---------------------------------------|--------|------------------------|---------|
|                                  |   |  2008             |    | 2007 |   |
| (dollars      in thousands)           |   |  TotalCommitments |    | OutstandingBalance |   | Fair      Value ofCollateral |   | TotalCommitments |   | OutstandingBalance |   | Fair      Value ofCollateral |   |
|                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CMBS      Fund Partnerships           |   | $                      | --      |   | $ | -- |   | $ | -- |   | $ | 784,100 |   | $ | 318,629 |   | $ | 622,449 |   |
|                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average interest rate   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   | 5.4%      to 6.3% |   |   |   |   |
|                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High-Yield      Debt Fund Partnership |   |                   | 228,000 |   |   | 39,125 |   |   | 73,926 |   |   | 350,000 |   |   | 97,430 |   |   | 194,623 |   |
|                                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average interest rate   |   |                   |    |   |   | 2.9%      to 5.0% |   |   |   |   |   |   |   |   | 6.0%      to 6.4% |   |   |   |   |
|  Total      borrowings           |   | $                      | 228,000 |   | $ | 39,125 |   | $ | 73,926 |   | $ | 1,134,100 |   | $ | 416,059 |   | $ | 817,072 |   |

----

| Preferred      Series |   | Date      ofIssuance |   | MandatoryTender    |   | MandatoryRepurchase |   | Number      ofShares |   | LiquidationPreferenceper      Share |   | Total      FaceAmount |   | DividendRate |
|-----------------------|--------|----------------------|--------|--------------------|--------|---------------------|--------|----------------------|--------|-------------------------------------|--------|-----------------------|--------|--------------|
|                  |   |                 |   |               |   |                |   |                 |   | (in      thousands)                 |   |                  |   |
| Series      A         |   | June      1999       |   | July      2009     |   | July      2049      |   | 45                   |   | $                                   | 2,000  |                  | $      | 90,000       |   | 6.625 | % |
| Series      A-1       |   | July      2000       |   | July      2009     |   | July      2049      |   | 48                   |   |                                | 500    |                  |   | 24,000       |   | 7.100 | % |
| Series      A-2       |   | October      2001    |   | July      2009     |   | July      2049      |   | 62                   |   |                                | 500    |                  |   | 31,000       |   | 6.300 | % |
| Series      A-3       |   | June      2002       |   | November      2014 |   | November      2052  |   | 60                   |   |                                | 500    |                  |   | 30,000       |   | 6.800 | % |
| Series      B         |   | July      2000       |   | December      2010 |   | December      2050  |   | 110                  |   |                                | 500    |                  |   | 55,000       |   | 7.600 | % |
| Series      B-1       |   | October      2001    |   | December      2010 |   | December      2050  |   | 37                   |   |                                | 500    |                  |   | 18,500       |   | 6.800 | % |
| Series      B-2       |   | June      2002       |   | November      2014 |   | November      2052  |   | 50                   |   |                                | 500    |                  |   | 25,000       |   | 7.200 | % |
| Total                 |   |                 |   |               |   |                |   |                 |   |                                |   |                  | $      | 273,500      |   |   |   |

|   | · | all      classes or series of Convertible CRA Shares (see Notes 19 and      20); |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | all      Series B shares; and |
|--------|--------|-------------------------------|

|   | · | our      common shares. |
|--------|--------|-------------------------|

----

| Preferred      Series   |   | Date      ofIssuance |   | MandatoryTender     |   | Number      ofShares |   | LiquidationPreference      perShare |   | Total      FaceAmount(in      thousands) |   | DividendRate |
|-------------------------|--------|----------------------|--------|---------------------|--------|----------------------|--------|-------------------------------------|--------|------------------------------------------|--------|--------------|
|  Series      A-4-1 |   | May      2004        |   |  May      2015 |   | 60                   |   | $                                   | 500    |                                     | $      | 30,000       |   | 5.75 | % |
| Series      A-4-2       |   | May      2004        |   | May      2019       |   | 58                   |   |                                | 500    |                                     |   | 29,000       |   | 6.00 | % |
| Series      B-3-1       |   | May      2004        |   | May      2015       |   | 50                   |   |                                | 500    |                                     |   | 25,000       |   | 6.00 | % |
| Series      B-3-2       |   | May      2004        |   | May      2019       |   | 40                   |   |                                | 500    |                                     |   | 20,000       |   | 6.30 | % |
|  Total             |   |                 |   |                |   |                 |   |                                |   |                                     | $      | 104,000      |   |   |   |

|   | · | the      Series A-4-1and Series A-4-2 shares have the same characteristics as the      Series A Shares described above;and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | · | the      Series B-3-1 and Series B-3-2 shares have the same characteristics as the      Series B Shares described above. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                  |   | December      31, |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|
| (in      thousands)                                                                                                   |   | 2008              |   | 2007 |   |
|                                                                                                                  |   |              |   |   |   |   |   |
| Convertible      SCUs of a subsidiary; 13,131 outstanding in 2008 and 14,298 outstanding in      2007                 |   | $                 | 64,318 |   | $ | 165,717 |   |
| Convertible      Special Common Interests (“SCIs”) of a subsidiary; 268 outstanding in 2008      and 2007 |   |              | 2,611  |   |   | 3,984 |   |
| Other                                                                                                                 |   |              | 8,151  |   |   | 7,015 |   |
|  Total                                                                                                           |   | $                 | 75,080 |   | $ | 176,716 |   |

|                |   | Years      Ended December 31, |    |
|---------------------|--------|-------------------------------|---------|
| (in      thousands) |   | 2008                          |    | 2007 |   | 2006 |   |
|                |   |                          |    |   |   |   |   |   |   |   |
| SCUs                |   | $                             | (92,685 | ) | $ | (23,852 | ) | $ | 16,131 |   |
| SCIs                |   |                          | (1,269  | ) |   | (313 | ) |   | 80 |   |
| SMUs                |   |                          | --      |   |   | (296 | ) |   | 102 |   |
| Other               |   |                          | (363    | ) |   | 350 |   |   | (219 | ) |
|  Total         |   | $                             | (94,317 | ) | $ | (24,111 | ) | $ | 16,094 |   |

|   | · | exchange      all or a portion of their SCUs for cash;and |
|--------|--------|-----------------------------------------------------------|

|   | · | receive      cash for any accrued but unpaid distributions with respect to SCUs      exchanged (not including accrued and unpaid distributions for the      quarterly period in which the exchangeoccurs). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | exchange      all or a portion of their SCIs for cash;and |
|--------|--------|-----------------------------------------------------------|

|   | · | receive      cash for any accrued but unpaid distributions with respect to SCIs      exchanged (not including accrued and unpaid distributions for the      quarterly period in which the exchangeoccurs). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year                                                                                                                                                 |   |   |   | NumberRedeemed |   | CommonShares      Issued |   | Cash      Paid      |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|----------------|--------|--------------------------|--------|---------------------|--------|
|                                                                                                                                                 |   |   |   |           |   |                     |   | (in      thousands) |   |
|  2006                                                                                                                                           |   | SCUs   |   | 60,000         |   | 20,000                   |   | $                   | 723    |   |
|                                                                                                                                                 |   | SMUs   |   | 75,000         |   | 75,000                   |   |                | --     |   |
|                                                                                                                                                 |   |   |   |           |   |                     |   |                |   |   |
| 2007                                                                                                                                                 |   | SCUs   |   | 528,000        |   | --                       |   | $                   | 7,066  | (1) |
|                                                                                                                                                 |   | SMUs   |   | 278,000        |   | 278,000                  |   |                | --     |   |
|                                                                                                                                                 |   |   |   |           |   |                     |   |                |   |   |
| 2008                                                                                                                                                 |   | SCUs   |   | 1,166,120      |   | 1,166,120                |   | $                   | --     |   |
|  (1)         Of this amount, $3.8 million related to shares redeemed as of      December 31, 2007, and was paid in January 2008. |   |

----

|                                               |   | December      31, |    |
|----------------------------------------------------|--------|-------------------|---------|
| (in      thousands)                                |   |  2008        |    | 2007 |   |
| Series                                             |   | CarryingValue     |    | Number      ofShares |   |  Number      ofCommonChares      ifConverted |   | CarryingValue |   | Number      ofShares |   | Number      ofCommonShares      ifConverted |   |
|  Convertible      Redeemable CRA Shares       |   | $                 | 89,273  |   | 5,682 |   | 5,617 |   | $ | 13,893 |   | 974 |   | 652 |   |
| Redeemable      CRA Shares                         |   |              | 4,668   |   | 271 |   | -- |   |   | 4,502 |   | 271 |   | -- |   |
| Convertible      Redeemable CRA Preferred Shares   |   |              | 50,291  |   | 1,060 |   | 1,916 |   |   | -- |   | -- |   | -- |   |
| Redeemable      CRA Preferred Shares               |   |              | 52,774  |   | 1,100 |   | -- |   |   | 51,493 |   | 1,100 |   | -- |   |
| 11.0%      Cumulative Convertible Preferred Shares |   |              | 129,373 |   | 11,214 |   | 12,205 |   |   | -- |   | -- |   | -- |   |
|  Total                                        |   | $                 | 326,379 |   | 19,327 |   | 19,738 |   | $ | 69,888 |   | 2,345 |   | 652 |   |

|   | · | we      have the option to repurchase the shares for the original gross issuance      price per share (plus accumulated and unpaid distributions) at any time      from the date of the agreement; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | if      we do not repurchase the shares by certain dates, the shareholders have      the option to require us to purchase the shares for the original gross      issuance price per share (plus accumulated and unpaid      distributions). |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | special      preferred voting shares, |
|--------|--------|---------------------------------------|

|   | · | common      shares issuable upon exchange of their SCUs,and |
|--------|--------|-------------------------------------------------------------|

|   | · | any      other common shares currently owned or which may be acquired by them in      the future. |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | vote      their common shares or special preferred voting shares in favor of the      election of any independent trustee approved by our Board of Trustees or      in the same proportion as the unaffiliated holders of our common shares      vote in such election (this excludes the 11.0% Preferred Shares owned by      an affiliate of TRCLP); and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | not      exercise any right as shareholder of our Company to nominate any      independent trustee. |
|--------|--------|-----------------------------------------------------------------------------------------------------|

----

|   | · | receipt      of the same dividends per share; |
|--------|--------|-----------------------------------------------|

|   | · | pro      rata allocation of earnings between the two classes of      shares;  and |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | equal      ranking with the common shares with respect to rights upon liquidation,      dissolution or winding up of ourCompany. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|                                                   |   | December      31, |   |
|--------------------------------------------------------|--------|-------------------|--------|
| (in      thousands)                                    |   | 2008              |   | 2007 |   |
|  Convertible      CRA Shares issued prior to 2002 |   | --                |   | 291 |   |
| Convertible      CRA Shares issued 2002 and later      |   | 519               |   | 5,015 |   |
| Total      outstanding                                 |   | 519               |   | 5,306 |   |
| Common      shares issuable upon conversion            |   | 519               |   | 5,297 |   |

----

|                                                 |   | Years      Ended December 31, |   |
|------------------------------------------------------|--------|-------------------------------|--------|
| (in      thousands)                                  |   | 2008                          |   | 2007 |   | 2006 |   |
|                                                 |   |                          |   |   |   |   |   |   |   |   |
| Number      of shares                                |   |                          | 316    |   |   | 1,972 |   |   | 1,082 |   |
| Cost,      including commissions and service charges |   | $                             | 972    |   | $ | 36,294 |   | $ | 20,883 |   |

| (in      thousands)                                                                                    |   | Net      UnrealizedGain/(Loss)      onAvailable-for-Sale      Securities,Net      of Tax |     | Net      UnrealizedGain/(Loss)      onDerivatives,Net      of Tax |   | Net      UnrealizedGain/(Loss)      ofEquityInvestees(1) |   | Net      UnrealizedLossAttributable      to Minority Interests in Consolidated Partnerships |     | AccumulatedOtherComprehensiveIncome      (Loss) |   |
|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|----------|-------------------------------------------------------------------|--------|----------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|----------|-------------------------------------------------|--------|
|                                                                                                   |   |                                                                                     |     |                                                              |   |                                                     |   |                                                                                        |     |                                            |   |   |   |   |   |   |
| Balance      at January 1, 2006                                                                        |   | $                                                                                        | 96,804   |                                                              | $      | 3,300                                                    |   | $                                                                                           | --       |                                            | $      | -- |   | $ | 100,104 |   |
| Unrealized      gains (losses), net                                                                    |   |                                                                                     | (35,691  | )                                                                 |   | (3,513                                                   | )      |                                                                                        | 1,832    |                                            |   | -- |   |   | (37,372 | ) |
| Tax      effect                                                                                        |   |                                                                                     | 243      |                                                              |   | (244                                                     | )      |                                                                                        | --       |                                            |   | -- |   |   | (1) |   |
| Reclassification      to net income                                                                    |   |                                                                                     | 4,132    |                                                              |   | --                                                       |   |                                                                                        | --       |                                            |   | -- |   |   | 4,132 |   |
| Balance      at December 31, 2006                                                                      |   |                                                                                     | 65,488   |                                                              |   | (457                                                     | )      |                                                                                        | 1,832    |                                            |   | -- |   |   | 66,863 |   |
| Unrealized      gains (losses), net                                                                    |   |                                                                                     | (86,392  | )                                                                 |   | (13,885                                                  | )      |                                                                                        | (63,295  | )                                               |   | -- |   |   | (163,572 | ) |
| Tax      effect                                                                                        |   |                                                                                     | (1,575   | )                                                                 |   | 244                                                      |   |                                                                                        | --       |                                            |   | -- |   |   | (1,331 | ) |
| Net      unrealized losses of Consolidated Partnerships in excess of minority      interest balances   |   |                                                                                     | --       |                                                              |   | --                                                       |   |                                                                                        | --       |                                            |   | (27,654 | ) |   | (27,654 | ) |
| Reclassification      to net income                                                                    |   |                                                                                     | 19,790   |                                                              |   | --                                                       |   |                                                                                        | --       |                                            |   | -- |   |   | (19,790 | ) |
| Balance      at December 31, 2007                                                                      |   |                                                                                     | (2,689   | )                                                                 |   | (14,098                                                  | )      |                                                                                        | (61,463  | )                                               |   | (27,654 | ) |   | (105,904 | ) |
| Unrealized      gains (losses), net                                                                    |   |                                                                                     | (122,830 | )                                                                 |   | 253                                                      |   |                                                                                        | (93,830  | )                                               |   | -- |   |   | (216,407 | ) |
| Tax      effect                                                                                        |   |                                                                                     | (1,160   | )                                                                 |   | 1,160                                                    |   |                                                                                        | --       |                                            |   | -- |   |   | -- |   |
| Net      unrealized losses of Consolidated Partnerships in excess of minority      interest balances s |   |                                                                                     | --       |                                                              |   | --                                                       |   |                                                                                        | --       |                                            |   | (867,057 | ) |   | (867,057 | ) |
| Reclassification      to net income                                                                    |   |                                                                                     | 29,077   |                                                              |   | 2,221                                                    |   |                                                                                        | 13,948   |                                            |   | -- |   |   | 45,246 |   |
| Balance      at December 31, 2008                                                                      |   | $                                                                                        | (97,602  | )                                                                 | $      | (10,464                                                  | )      | $                                                                                           | (141,345 | )                                               | $      | (894,711 | ) | $ | (1,144,122 | ) |

| (1) | Excluding      amounts absorbed after minority interests in Consolidated Partnerships      were reduced to zero balances. |
|-----|---------------------------------------------------------------------------------------------------------------------------|

----

|                                                      |   | Years      Ended December 31, |    |
|-----------------------------------------------------------|--------|-------------------------------|---------|
| (in      thousands)                                       |   | 2008                          |    | 2007 |   | 2006 |   |
|                                                      |   |                          |    |   |   |   |   |   |   |   |
| Salaries      and benefits                                |   | $                             | 87,322  |   | $ | 116,764 |   | $ | 94,916 |   |
| Other:                                                    |   |                          |    |   |   |   |   |   |   |   |
| Professional      fees                                    |   |                          | 16,259  |   |   | 13,510 |   |   | 14,403 |   |
| Tax      Credit Fund origination and property acquisition |   |                          | 4,480   |   |   | 8,370 |   |   | 12,338 |   |
| Rent      expense                                         |   |                          | 17,521  |   |   | 8,937 |   |   | 9,219 |   |
| Bad      debt reserves                                    |   |                          | 7,237   |   |   | 4,913 |   |   | 6,557 |   |
| Computer-related      expense                             |   |                          | 4,087   |   |   | 3,683 |   |   | 1,132 |   |
| Miscellaneous                                             |   |                          | 28,122  |   |   | 26,307 |   |   | 22,221 |   |
|  Total                                               |   | $                             | 165,028 |   | $ | 182,484 |   | $ | 160,786 |   |

|                                                                  |   | Years      Ended December 31, |   |
|-----------------------------------------------------------------------|--------|-------------------------------|--------|
|  (in      thousands)                                             |   | 2008                          |   | 2007 |   | 2006 |   |
|                                                                  |   |                          |   |   |   |   |   |   |   |   |
| Available-for-sale      investments (see Note 8):                     |   |                          |   |   |   |   |   |   |   |   |
| Mortgage      revenue bonds                                           |   | $                             | 10,928 |   | $ | 19,933 |   | $ | 4,676 |   |
| Series      B Freddie Mac certificates                                |   |                          | 7,968  |   |   | -- |   |   | -- |   |
| Retained      CMBS certificates                                       |   |                          | 10,736 |   |   | -- |   |   | -- |   |
| Marketable      and other securities                                  |   |                          | 2,848  |   |   | 75 |   |   | -- |   |
| Furniture,      fixtures and leasehold improvements(see      Note 12) |   |                          | 15,892 |   |   | -- |   |   | -- |   |
| Other                                                                 |   |                          | 563    |   |   | -- |   |   | 327 |   |
|  Total                                                           |   | $                             | 48,935 |   | $ | 20,008 |   | $ | 5,003 |   |

----

|   | · | 10%      of the number of total shares outstanding (as defined in the Plan) as of      December 31 preceding issuances of such awards;  or |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      limits prescribed by the national security exchange or national quotation      system on which the shares may then belisted. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

----

| Year   |   | Number  |   | WeightedAverageExercise      Price |   | WeightedAverage      Term |            | WeightedAverageVesting      Period |           |
|--------|--------|---------|--------|------------------------------------|--------|---------------------------|-----------------|------------------------------------|----------------|
|   |   |    |   |                               |   |                      |            |                               |           |   |
| 2008   |   | --      |   | $                                  | --     |                      | --              |                               | --             |   |
| 2007   |   | 984,349 |   | $                                  | 19.06  |                      | 10.0      years |                               | 1.3      years |   |
| 2006   |   | 544,000 |   | $                                  | 21.78  |                      | 7.4      years  |                               | 2.1      years |   |

|                               |   | 2007  |   | 2006  |   |
|------------------------------------|--------|-------|--------|-------|--------|
|  Risk      free interest rate |   | 4.75  | %      | 4.42  | %      |
| Expected      years until exercise |   | 1.11  |   | 1.71  |   |
| Expected      stock volatility     |   | 23.01 | %      | 23.14 | %      |
| Dividend      yield                |   | 8.81  | %      | 8.11  | %      |

|                                                                                                                              |   | Years      Ended December 31, |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                                                              |   |  2008                    |   | 2007 |   | 2006 |   |
|                                                                                                                              |   |    Options     |   |  WeightedAverageExercisePrice |   |    Options |   | WeightedAverageExercisePrice |   |    Options |   | WeightedAverageExercisePrice |   |
|                                                                                                                              |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding      at beginning of year                                                                                             |   | 2,879,180                     |   | $ | 20.17 |   | 2,018,741 |   | $ | 20.77 |   | 1,510,341 |   | $ | 20.42 |   |
| Granted(1)                                                                                                                        |   | --                            |   |   | -- |   | 984,349 |   |   | 19.06 |   | 544,000 |   |   | 21.78 |   |
| Forfeited                                                                                                                         |   | (492,292                      | )      |   | 18.52 |   | (91,910 | ) |   | 21.18 |   | -- |   |   | -- |   |
| Exercised                                                                                                                         |   | --                            |   |   | -- |   | (32,000 | ) |   | 21.18 |   | (35,600 | ) |   | 21.18 |   |
| Outstanding      at end of year                                                                                                   |   | 2,386,888                     |   | $ | 20.51 |   | 2,879,180 |   | $ | 20.17 |   | 2,018,741 |   | $ | 20.77 |   |
| Fair      value of options granted during the year (in thousands)                                                                 |   |                          |   | $ | -- |   |   |   | $ | 1,325 |   |   |   | $ | 852 |   |
|  (1)         Excludes options cancelled and reissued.  See Re-issuance of Share Options      below. |

----

|                                                    |   | As      of December 31, 2008 |   |
|---------------------------------------------------------|--------|------------------------------|--------|
|                                                    |   | Options                      |   | Weighted      AverageExercisePrice |   |  Weighted      AverageRemaining      Contractual Term(in      years) |   | Aggregate      Intrinsic Value(in      thousands) |   |
|  Vested      and expected to vest at end of period |   | 2,386,888                    |   | $ | 20.51 |   | 6.3 |   | $ | -- |   |
| Exercisable      at end of year                         |   | 2,269,300                    |   | $ | 20.50 |   | 6.2 |   | $ | -- |   |

| Exercise      Price |               | NumberOutstanding |      | WeightedAverageRemainingContractualLife(in      Years) |   | NumberExercisable |      |
|---------------------|--------------------|-------------------|-----------|--------------------------------------------------------|--------|-------------------|-----------|
|                |               |              |      |                                                   |   |              |      |   |
| $                   | 11.56              |              | 10,000    |                                                   | 1.4    |              | 10,000    |   |
| $                   | 17.78              |              | 800,000   |                                                   | 4.9    |              | 800,000   |   |
| $                   | 19.06              |              | 555,883   |                                                   | 8.2    |              | 502,376   |   |
| $                   | 22.03              |              | 384,490   |                                                   | 7.0    |              | 320,409   |   |
| $                   | 24.44              |              | 636,515   |                                                   | 6.0    |              | 636,515   |   |
|                |          |              | 2,386,888 |                                                   | 6.3    |              | 2,269,300 |   |

----

|                                 |   | Non-vested      shares |       | WeightedAverageGrant      DateFair      Value |   | Non-vestedSCUs |   | WeightedAverageGrant      DateFair      Value |     |
|--------------------------------------|--------|------------------------|------------|-----------------------------------------------|--------|----------------|--------|-----------------------------------------------|----------|
|                                 |   |                   |       |                                          |   |           |   |                                          |     |   |   |   |   |
| Non-vested      at January 1, 2006   |   |                   | 241,194    |                                          | $      | 20.25          |   |                                          | 310,400  |   | $ | 17.92 |   |
| Granted                              |   |                   | 2,170,371  |                                          |   | 19.73          |   |                                          | --       |   |   | -- |   |
| Vested                               |   |                   | (300,483   | )                                             |   | 20.06          |   |                                          | (148,087 | ) |   | 17.92 |   |
| Forfeited                            |   |                   | (22,511    | )                                             |   | 20.56          |   |                                          | --       |   |   | -- |   |
| Non-vested      at December 31, 2006 |   |                   | 2,088,571  |                                          |   | 19.74          |   |                                          | 162,313  |   |   | 17.92 |   |
| Granted                              |   |                   | 914,841    |                                          |   | 17.20          |   |                                          | --       |   |   | -- |   |
| Vested                               |   |                   | (856,102   | )                                             |   | 19.76          |   |                                          | (162,313 | ) |   | 17.92 |   |
| Forfeited                            |   |                   | (70,821    | )                                             |   | 19.82          |   |                                          | --       |   |   | -- |   |
| Non-vested      at December 31, 2007 |   |                   | 2,076,489  |                                          |   | 18.61          |   |                                          | --       |   |   | -- |   |
| Granted                              |   |                   | 2,332,534  |                                          |   | 3.40           |   |                                          | --       |   |   | -- |   |
| Vested                               |   |                   | (1,230,124 | )                                             |   | 14.42          |   |                                          | --       |   |   | -- |   |
| Forfeited                            |   |                   | (559,193   | )                                             |   | 12.91          |   |                                          | --       |   |   | -- |   |
| Non-vested      at December 31, 2008 |   |                   | 2,619,706  |                                          | $      | 8.25           |   |                                          | --       |   | $ | -- |   |

| Year                                                                                                                                 |   | Number  |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|
|                                                                                                                                 |   |    |   |
| 2008                                                                                                                                 |   | 240,761 |   |
| 2007                                                                                                                                 |   | 51,542  | (1)    |
| 2006                                                                                                                                 |   | 11,625  |   |
|  (1)         Of the 2007 shares issued, 10,077 were issued in January 2007 in      connection with 2006services. |

----

|                                                 |   | Years      Ended December 31, |   |
|------------------------------------------------------|--------|-------------------------------|--------|
| (in      thousands)                                  |   | 2008                          |   | 2007 |   | 2006 |   |
|  Outperformance      program                    |   | $                             | 189    |   | $ | 74 |   | $ | -- |   |
| Share      options                                   |   |                          | 322    |   |   | 1,402 |   |   | 937 |   |
| Non-vested      shares and SCUs (net of forfeitures) |   |                          | 12,143 |   |   | 26,969 |   |   | 14,209 |   |
| Trustee      grants                                  |   |                          | 291    |   |   | 574 |   |   | 279 |   |
|  Net                                            |   | $                             | 12,945 |   | $ | 29,019 |   | $ | 15,425 |   |

|                                     |   | Years      Ended December 31,                          |    |
|------------------------------------------|--------|--------------------------------------------------------|---------|
|                                     |   |  2008                                             |    |   | 2007 |   |   | 2006 |   |
| (in      thousands)                      |   |  Tax      CreditFund      andPropertyPartnerships |    |   | CMBS      andDirect      LoanFundPartnerships |   |   | Total |   |   | Tax      CreditFund      andPropertyPartnerships |   |   | CMBS      FundDirect      LoanFundPartnerships |   |   | Total |   |   | Tax      CreditFund      andPropertyPartnerships |   |   | CMBS      FundDirect      LoanFundPartnerships |   |   | Total |   |
|                                     |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                     |   | $                                                      | 10,201  |   |   | $ | 252,796 |   |   | $ | 262,997 |   |   | $ | 14,565 |   |   | $ | 180,638 |   |   | $ | 195,203 |   |   | $ | 10,510 |   |   | $ | 41,218 |   |   | $ | 51,728 |   |
| Rental      income                       |   |                                                   | 68,357  |   |   |   | -- |   |   |   | 68,357 |   |   |   | 55,541 |   |   |   | -- |   |   |   | 55,541 |   |   |   | 30,701 |   |   |   | -- |   |   |   | 30,701 |   |
| Other                                    |   |                                                   | 8,180   |   |   |   | 425 |   |   |   | 8,605 |   |   |   | 6,539 |   |   |   | 738 |   |   |   | 7,277 |   |   |   | 7,127 |   |   |   | 100 |   |   |   | 7,227 |   |
|  Total      revenues                |   | $                                                      | 86,738  |   |   | $ | 253,221 |   |   | $ | 339,959 |   |   | $ | 76,645 |   |   | $ | 181,376 |   |   | $ | 258,021 |   |   | $ | 48,338 |   |   | $ | 41,318 |   |   | $ | 89,656 |   |
|  Interest      expense              |   | $                                                      | 15,300  |   |   | $ | 149,722 |   |   | $ | 165,022 |   |   | $ | 19,245 |   |   | $ | 81,076 |   |   | $ | 100,321 |   |   | $ | 25,989 |   |   | $ | 21,937 |   |   | $ | 47,926 |   |
|                                     |   |                                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      in impairment of assets        |   | $                                                      | --      |   |   | $ | 317,264 |   |   | $ | 317,264 |   |   | $ | -- |   |   | $ | 20,941 |   |   | $ | 20,941 |   |   | $ | -- |   |   | $ | -- |   |   | $ | -- |   |
|  Asset      management fees         |   |                                                   | 28,824  |   |   |   | -- |   |   |   | 28,824 |   |   |   | 24,611 |   |   |   | -- |   |   |   | 24,611 |   |   |   | 20,960 |   |   |   | -- |   |   |   | 20,960 |   |
| Property      operating expenses         |   |                                                   | 31,473  |   |   |   | -- |   |   |   | 31,473 |   |   |   | 26,395 |   |   |   | -- |   |   |   | 26,395 |   |   |   | 20,825 |   |   |   | -- |   |   |   | 20,825 |   |
| General      and administrative expenses |   |                                                   | 25,122  |   |   |   | 4,733 |   |   |   | 29,855 |   |   |   | 21,324 |   |   |   | 3,028 |   |   |   | 24,352 |   |   |   | 14,447 |   |   |   | 438 |   |   |   | 14,885 |   |
| Depreciation      and amortization       |   |                                                   | 33,134  |   |   |   | 5,722 |   |   |   | 38,856 |   |   |   | 29,451 |   |   |   | 3,643 |   |   |   | 33,094 |   |   |   | 22,515 |   |   |   | -- |   |   |   | 22,515 |   |
| Other      expenses                      |   |                                                   | 9,832   |   |   |   | -- |   |   |   | 9,832 |   |   |   | 4,579 |   |   |   | -- |   |   |   | 4,579 |   |   |   | 2,957 |   |   |   | -- |   |   |   | 2,957 |   |
| Subtotal                                 |   |                                                   | 128,385 |   |   |   | 10,455 |   |   |   | 138,840 |   |   |   | 106,360 |   |   |   | 6,671 |   |   |   | 113,031 |   |   |   | 81,704 |   |   |   | 438 |   |   |   | 82,142 |   |
|  Total      expenses                |   | $                                                      | 143,685 |   |   | $ | 477,441 |   |   | $ | 621,126 |   |   | $ | 125,605 |   |   | $ | 108,688 |   |   | $ | 234,293 |   |   | $ | 107,693 |   |   | $ | 22,375 |   |   | $ | 130,068 |   |

----

|                                               |   | Years      Ended December 31, |     |
|----------------------------------------------------|--------|-------------------------------|----------|
| (in      thousands)                                |   | 2008                          |     | 2007 |   | 2006 |   |
|                                               |   |                          |     |   |   |   |   |   |   |   |
| Not      subject to tax                            |   | $                             | (44,469  | ) | $ | (36,337 | ) | $ | 79,341 |   |
| Subject      to tax                                |   |                          | (183,866 | ) |   | (19,284 | ) |   | (31,555 | ) |
|  Total      (loss) income before income taxes |   | $                             | (228,335 | ) | $ | (55,621 | ) | $ | 47,786 |   |

|                           |   | Years      Ended December 31, |    |
|--------------------------------|--------|-------------------------------|---------|
| (in      thousands)            |   | 2008                          |    | 2007 |   | 2006 |   |
|                           |   |                          |    |   |   |   |   |   |   |   |
| Current:                       |   |                          |    |   |   |   |   |   |   |   |
| Federal                        |   | $                             | 1,059   |   | $ | 268 |   | $ | 1,107 |   |
| State      and local           |   |                          | 2,179   |   |   | 1,091 |   |   | 3,230 |   |
| Total      current             |   |                          | 3,238   |   |   | 1,359 |   |   | 4,337 |   |
|  Deferred:                |   |                          |    |   |   |   |   |   |   |   |
| Federal                        |   |                          | (72,253 | ) |   | (14,574 | ) |   | (17,560 | ) |
| State      and local           |   |                          | (21,278 | ) |   | (1,979 | ) |   | (9,436 | ) |
| Total      deferred            |   |                          | (93,531 | ) |   | (16,553 | ) |   | (26,996 | ) |
|  Valuation      allowance |   |                          | 94,116  |   |   | 19,701 |   |   | 29,151 |   |
|  Total      tax provision |   | $                             | 3,823   |   | $ | 4,507 |   | $ | 6,492 |   |

|                                               |   | Years      Ended December 31, |   |
|----------------------------------------------------|--------|-------------------------------|--------|
|                                               |   | 2008                          |   | 2007 |   | 2006 |   |
|                                               |   |                          |   |   |   |   |   |
| Statutory      tax rate                            |   | 35.0                          | %      | 35.0 | % | 35.0 | % |
| Valuation      allowance                           |   | (41.2                         | )      | (37.5 | ) | 61.1 |   |
| State      and local taxes, net of federal benefit |   | 5.5                           |   | 1.4 |   | (8.6 | ) |
| Partnership      income not subject to tax         |   | (7.9                          | )      | (36.1 | ) | (54.2 | ) |
| Goodwill      write-off                            |   | (9.7                          | )      | -- |   | -- |   |
| SCUs/SMUs      (see Note 18)                       |   | 14.5                          |   | 28.0 |   | (13.0 | ) |
| Tax-exempt      interest                           |   | --                            |   | 2.6 |   | (5.3 | ) |
| Share-based      compensation                      |   | (1.4                          | )      | -- |   | (0.5 | ) |
| Other                                              |   | 3.6                           |   | (1.5 | ) | (0.9 | ) |
| Effective      tax rate                            |   | (1.7                          | )%     | (8.1 | )% | 13.6 | % |

----

|                                    |   | December      31, |     |
|-----------------------------------------|--------|-------------------|----------|
| (in      thousands)                     |   | 2008              |     | 2007 |   |
|  Deferred      tax assets:         |   |              |     |   |   |   |   |
| Deferred      revenue                   |   | $                 | 27,484   |   | $ | 35,425 |   |
| Share-based      compensation           |   |              | 15,101   |   |   | 7,234 |   |
| Goodwill                                |   |              | 11,616   |   |   | -- |   |
| Intangible      assets                  |   |              | 18,749   |   |   | -- |   |
| Unrealized      loss on derivatives     |   |              | 1,896    |   |   | 1,006 |   |
| Purchased      servicing rights         |   |              | 2,374    |   |   | 500 |   |
| Bad      debt reserves                  |   |              | 7,587    |   |   | 5,417 |   |
| Partnerships      and depreciation      |   |              | 13,184   |   |   | 4,708 |   |
| Net      operating losses               |   |              | 54,157   |   |   | 14,754 |   |
| Alternative      tax credits            |   |              | 2,394    |   |   | 2,507 |   |
| Other,      net                         |   |              | 864      |   |   | 610 |   |
| Total      deferred tax assets          |   |              | 155,406  |   |   | 72,161 |   |
|  Deferred      tax liabilities:    |   |              |     |   |   |   |   |
| Intangible      assets                  |   |              | --       |   |   | (13,242 | ) |
| Deferred      costs                     |   |              | (465     | ) |   | (748 | ) |
| Originated      mortgage service rights |   |              | (11,369  | ) |   | (10,651 | ) |
| Total      deferred tax liabilities     |   |              | (11,834  | ) |   | (24,641 | ) |
|  Valuation      allowance          |   |              | (143,572 | ) |   | (47,520 | ) |
|  Net      deferred tax asset       |   | $                 | --       |   | $ | -- |   |

|                                                       |   | (in      thousands) |   |
|------------------------------------------------------------|--------|---------------------|--------|
|  Low      income housing credits (expiration at 2024) |   | $                   | 1,483  |   |
| Alternative      minimum tax credits (do not expire)       |   | $                   | 912    |   |
| Net      operating loss (expiration at 2027)               |   | $                   | 54,157 |   |

----

| Balance      at January 1, 2007                                   |   | $      | 2,543 |   |
|-------------------------------------------------------------------|--------|--------|-------|--------|
| Additions      based on tax positions related to the current year |   |   | --    |   |
| Additions      for tax positions of prior years                   |   |   | 535   |   |
| Reductions      for tax positions of prior years                  |   |   | --    |   |
| Settlements                                                       |   |   | --    |   |
|  Balance      at December 31, 2007                           |   |   | 3.078 |   |
| Additions      based on tax positions related to the current year |   |   | --    |   |
| Additions      for tax positions of prior years                   |   |   | 102   |   |
| Reductions      for tax positions of prior years                  |   |   | (696  | )      |
| Settlements                                                       |   |   | --    |   |
|  Balance      at December 31, 2008                           |   | $      | 2,484 |   |

|                                                                                                                                                                                                                                                                                                                                                                 |   | Years      Ended December 31, |     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|----------|
| (in      thousands, except per share amounts)                                                                                                                                                                                                                                                                                                                        |   | 2008                          |     | 2007 |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                 |   |                          |     |   |   |   |   |   |   |   |
| Numerator:                                                                                                                                                                                                                                                                                                                                                           |   |                          |     |   |   |   |   |   |   |   |
| Net      (loss) income                                                                                                                                                                                                                                                                                                                                               |   | $                             | (232,158 | ) | $ | (60,128 | ) | $ | 41,294 |   |
| Preferred      dividends(1)                                                                                                                                                                                                                                                                                                                                          |   |                          | (19,085  | ) |   | (4,757 | ) |   | (4,752 | ) |
| Dividends      for redeemable securities                                                                                                                                                                                                                                                                                                                             |   |                          | (1,266   | ) |   | -- |   |   | -- |   |
| Undistributed      (loss) income                                                                                                                                                                                                                                                                                                                                     |   |                          | (252,509 | ) |   | (64,885 | ) |   | 36,542 |   |
| Effect      of redeemable share conversions                                                                                                                                                                                                                                                                                                                          |   |                          | (16,912  | ) |   | (3,390 | ) |   | -- |   |
| Net      (loss) income for EPS calculations                                                                                                                                                                                                                                                                                                                          |   | $                             | (269,421 | ) | $ | (68,275 | ) | $ | 36,542 |   |
|  Denominator:                                                                                                                                                                                                                                                                                                                                                   |   |                          |     |   |   |   |   |   |   |   |
| Weighted      average shares outstanding                                                                                                                                                                                                                                                                                                                             |   |                          |     |   |   |   |   |   |   |   |
| Basic                                                                                                                                                                                                                                                                                                                                                                |   |                          | 51,997   |   |   | 57,175 |   |   | 58,154 |   |
| Effect      of dilutive shares(2)                                                                                                                                                                                                                                                                                                                                    |   |                          | --       |   |   | -- |   |   | 557 |   |
| Diluted                                                                                                                                                                                                                                                                                                                                                              |   |                          | 51,997   |   |   | 57,175 |   |   | 58,711 |   |
|  Calculation      of EPS:                                                                                                                                                                                                                                                                                                                                       |   |                          |     |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                 |   |                          |     |   |   |   |   |   |   |   |
| Net      (loss) income as computed above                                                                                                                                                                                                                                                                                                                             |   | $                             | (269,421 | ) | $ | (68,275 | ) | $ | 36,542 |   |
| Weighted      average shares outstanding – basic                                                                                                                                                                                                                                                                                                               |   |                          | 51,997   |   |   | 57,175 |   |   | 58,154 |   |
| Net      (loss) income per share – basic                                                                                                                                                                                                                                                                                                                       |   | $                             | (5.18    | ) | $ | (1.19 | ) | $ | 0.63 |   |
|  Net      (loss) income as computed above                                                                                                                                                                                                                                                                                                                       |   | $                             | (269,421 | ) | $ | (68,275 | ) | $ | 36,542 |   |
| Weighted      average shares outstanding – diluted(1)                                                                                                                                                                                                                                                                                                          |   |                          | 51,997   |   |   | 57,175 | ) |   | 58,711 |   |
| Net      (loss) income per share – diluted                                                                                                                                                                                                                                                                                                                     |   | $                             | (5.18    | ) | $ | (1.19 | ) | $ | 0.62 |   |
|  (1)            2008 includes dividends in arrears.(2)           In accordance with SFAS 128, common share equivalents of less than      0.1 million in 2008 and 0.8 million in 2007 have been excluded from the      Diluted EPS calculation, as we reported a net loss after preferred      dividends. |

----

| ·   | Term Loan and Revolving Credit      Facility Interest Rate Swap:  Our Term Loan and the      Revolving Credit Facility (see Note 14) incur interest expense at variable      rates, exposing us to interest rate risk.  We currently manage a      portion of our interest rate risk resulting from the exposure to variable      rates (benchmark rate) on our credit facility through the use of an      interest rate swap indexed to LIBOR.  Under the swap agreement,      for a specified period of time we are required to pay a fixed rate of      interest on a specified notional amount to the transaction counterparty      and we receive a floating rate of interest equivalent to the LIBOR      index.  The swap outstanding at December 31, 2008, had a      notional amount of $275.0 million, expires in August 2009 and has a fixed      rate of 5.25%.  The average LIBOR rate was 2.67% in 2008, 5.25%      in 2007 and 5.13% in 2006.  Until the fourth quarter of 2008, we      accounted for this swap as a hedge; beginning in October 2008, we ceased      applying hedge accounting to this interest rate swap and the unrealized      loss in accumulated other comprehensive income (loss) at that date will be      amortized into expense until the swap’s end date in August      2009. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Developer of      Properties:  As of December 31, 2008, we were party to 25      interest rate swap agreements with the developers of properties relating      to certain mortgage revenue bonds we previously owned.  Under      the terms of these agreements, we pay a variable rate of interest and      receive interest at fixed rates equal to those of the related      bonds.  Since the December 2007 re-securitization transaction      (see Note 7), these swaps (with the exception of one) are now deemed to be      free-standing derivatives.  At December 31, 2008, these swaps      had an aggregate notional amount of $258.4 million, a weighted average      interest rate of 6.04% and a weighted average remaining term of 13.5      years.   In November 2008, we terminated one of the      agreements and realized a gain of $1.8million. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our      Credit Risk Products group is party to an interest rate swap whereby we      pay a variable rate of interest and receive interest at fixed rate. At      December 31, 2008, the swap had a notional amount of $9.5 million, with an      interest rate of 1.38% and remaining term of 14.5  years. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                        |   | Years      Ended December 31, |    |
|-----------------------------------------------------------------------------|--------|-------------------------------|---------|
| (in      thousands)                                                         |   | 2008                          |    | 2007 |   | 2006 |   |
|                                                                        |   |                          |    |   |   |   |   |   |   |   |
| Included      in interest expense:Interest      payments                    |   | $                             | 28,338  |   | $ | 560 |   | $ | -- |   |
| Interest      receipts                                                      |   |                          | (13,107 | ) |   | (4,048 | ) |   | (2,262 | ) |
| Change      in fair value of derivatives                                    |   |                          | 20,563  |   |   | 18,527 |   |   | 208 |   |
| Termination      of derivatives (net of amount charged to CMBS fund)        |   |                          | (22,931 | ) |   | -- |   |   | -- |   |
| Ineffectiveness                                                             |   |                          | 1,876   |   |   | 757 |   |   | 799 |   |
|  Net                                                                   |   | $                             | 14,739  |   | $ | 15,796 |   | $ | (1,255 | ) |
|  Included      in loss on re-securitization of mortgage revenue bonds: |   |                          |    |   |   |   |   |   |   |   |
| Termination      of derivatives                                             |   | $                             | --      |   | $ | 1,694 |   | $ | -- |   |
| Fair      value of swaps associated with bonds re-securitized               |   |                          | --      |   |   | 21,201 |   |   | -- |   |
|  Net                                                                   |   | $                             | --      |   | $ | 22,895 |   | $ | -- |   |

|                        |   | December      31, |   |
|-----------------------------|--------|-------------------|--------|
| (in      thousands)         |   | 2008              |   | 2007 |   |
|                        |   |              |   |   |   |   |   |
| Net      liability position |   | $                 | 40,525 |   | $ | 50,445 |   |
| Net      asset position     |   | $                 | 1,307  |   | $ | -- |   |

|                                                            |   | December      31, |   |
|-----------------------------------------------------------------|--------|-------------------|--------|
| (in      thousands)                                             |   | 2008              |   | 2007 |   |
|                                                            |   |              |   |   |   |   |   |
| Terminated      cash flow hedges                                |   | $                 | (9,019 | ) | $ | -- |   |
| Term      Loan and Revolving Credit Facility Interest Rate Swap |   | $                 | (2,603 | ) | $ |  (6,350 | ) |

----

| (dollars      in thousands)           |   | HedgeDesignatedNotionalAmount |                          | Non-HedgeDesignatedNotionalAmount |   | UnrealizedLoss      Includedin      OtherComprehensiveIncome |   | UnrealizedLoss      Includedin      Net Income |   |
|---------------------------------------|--------|-------------------------------|-------------------------------|-----------------------------------|--------|--------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                  |   |                          |                          |                              |   |                                                         |   |                                           |   |   |   |   |   |
|                                  |   |                          |                          |                              |   |                                                         |   |                                           |   |   |   |   |   |
| CMBS      Fund Partnerships           |   | $                             | 334,936                       |                              | $      | 27,655                                                       |   | $                                              | 11,656 |   | $ | 1,961 |   |
|                                  |   |                          |                          |                              |   |                                                         |   |                                           |   |   |   |   |   |
| Interest      Rates                   |   |                          | 4.63%      to 5.69            | %                                 |   | 5.23%      to 5.77                                           | %      |                                           |   |   |   |   |   |
|                                  |   |                          |                          |                              |   |                                                         |   |                                           |   |   |   |   |   |
| Maturity      Dates                   |   |                          | Jan      2017 toOct      2018 |                              |   | Jan      2017                                                |   |                                           |   |   |   |   |   |
|                                  |   |                          |                          |                              |   |                                                         |   |                                           |   |   |   |   |   |
| High-Yield      Debt Fund Partnership |   | $                             | 73,006                        |                              | $      | --                                                           |   | $                                              | 3,407  |   | $ | -- |   |
|                                  |   |                          |                          |                              |   |                                                         |   |                                           |   |   |   |   |   |
| Interest      Rates                   |   |                          | 4.89%      to 5.17            | %                                 |   |                                                         |   |                                           |   |   |   |   |   |
|                                  |   |                          |                          |                              |   |                                                         |   |                                           |   |   |   |   |   |
| Maturity      Dates                   |   |                          | Dec      2009 toMay      2017 |                              |   |                                                         |   |                                           |   |   |   |   |   |

|                                        |   |                                     |   |                     |    |                             |   | Gain      (Loss)prior      toTerminationDate  |   | Gain      (Loss) onTermination      Date    |   | Amortizationof      OCIIncluded      inStatement      ofOperationsSubsequent      toTerminationDate |   | In-effectiveness                      |   |  Gain      (Loss)Included      inAcc.      OtherComp.      Loss atDecember      31,2008 |    |
|---------------------------------------------|--------|------------------------------------------|--------|--------------------------|---------|----------------------------------|--------|-----------------------------------------------|--------|---------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|----------------------------------------------------------------------------------------------|---------|
| (in      thousands)                         |   | TerminationDates                         |   | NotionalAmountTerminated |    | Cash      Paid onTerminationDate |   |  Included      in Statement ofOperations |   | Included      inStatement      ofOperations |   | Included      inAcc.      OtherComp.      Loss                                                      |   | Year      EndedDecember      31, 2008 |   |                                                                                         |
|  High-Yield      Debt Fund Partnership |   | January      2008                        |   | $                        | 73,006  |                             | $      | 5,598                                         |   | $                                           | --     |                                                                                                | $      | --                                    |   | $                                                                                            | (5,598  | ) | $ | (686 | ) | $ | (4,346 | ) | $ | (566 | ) |
|  CMBS      Fund Partnerships           |   | February      2008 – November 2008 |   |                     | 362,591 |                             |   | 31,161                                        |   |                                        | (3,414 | )                                                                                                   |   | 163                                   |   |                                                                                         | (27,910 | ) |   | (6,615 | ) |   | (7,600 | ) |   | (13,695 | ) |
|  Total                                 |   |                                     |   | $                        | 435,597 |                             | $      | 36,759                                        |   | $                                           | (3,414 | )                                                                                                   | $      | 163                                   |   | $                                                                                            | (33,508 | ) | $ | (7,301 | ) | $ | (11,946 | ) | $ | (14,261 | ) |

----

|                                                                                                                                                                                                                                                                                                                                                  |   | December      31, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|
| (in      thousands)                                                                                                                                                                                                                                                                                                                                   |   | 2008              |    | 2007 |   |
|  Loan      to AMAC                                                                                                                                                                                                                                                                                                                               |   | $                 | 79,877  |   | $ | 77,685 |   |
| Investment      in AMAC common and preferred shares                                                                                                                                                                                                                                                                                                   |   |              | 12,195  |   |   | 12,195 |   |
| Interest      receivable on loan to AMAC                                                                                                                                                                                                                                                                                                              |   |              | 3,872   |   |   | 529 |   |
| Fees      receivable from AMAC                                                                                                                                                                                                                                                                                                                        |   |              | 1,290   |   |   | 1,257 |   |
| Subtotal                                                                                                                                                                                                                                                                                                                                              |   |              | 97,234  |   |   | 91,666 |   |
| Cumulative      equity losses and other comprehensive loss on investment in      AMAC                                                                                                                                                                                                                                                                 |   |              | (12,195 | ) |   | (5,285 | ) |
| Reserves      on loan to AMAC, interest and fees receivable                                                                                                                                                                                                                                                                                           |   |              | (75,439 | ) |   | -- |   |
| Subtotal                                                                                                                                                                                                                                                                                                                                              |   |              | 9,600   |   |   | 86,381 |   |
|  Co-investment      in consolidated CMBS and High-Yield Debt Fund Partnerships(1)                                                                                                                                                                                                                                                                |   |              | (55,953 | ) |   | 36,101 |   |
| Co-investment      in CUC                                                                                                                                                                                                                                                                                                                             |   |              | 3,406   |   |   | 4,184 |   |
| Due      from partnerships, net                                                                                                                                                                                                                                                                                                                       |   |              | 50,570  |   |   | 35,025 |   |
| Fees      receivable, net                                                                                                                                                                                                                                                                                                                             |   |              | 3,060   |   |   | 8,310 |   |
| Subtotal                                                                                                                                                                                                                                                                                                                                              |   |              | 10,683  |   |   | 170,001 |   |
| Less:      Eliminations(2)                                                                                                                                                                                                                                                                                                                            |   |              | 8,539   |   |   | (62,826 | ) |
|  Total                                                                                                                                                                                                                                                                                                                                           |   | $                 | 19,222  |   | $ | 107,175 |   |
|  (1)         Represents the carrying amount of these co-investments, net of our      share of accumulated other comprehensive loss.(2)         Given the minority economic interest we have in consolidated      partnerships, for internal purposes, we treat consolidated partnerships as      equity investees. |   |

|                                                                                     |   | Years      Ended December 31, |    |
|------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
| (in      thousands)                                                                      |   | 2008                          |    | 2007 |   | 2006 |   |
|                                                                                     |   |                          |    |   |   |   |   |   |   |   |
| AMAC      asset management and incentive management fees and expense      reimbursements |   | $                             | 1,201   |   | $ | 3,526 |   | $ | 3,630 |   |
| AMAC      credit facility interest income                                                |   | $                             | 3,988   |   | $ | 2,970 |   | $ | 1,461 |   |
| AMAC      servicing fee income                                                           |   | $                             | 358     |   | $ | 655 |   | $ | 66 |   |
| Equity      in loss of AMAC(1)                                                           |   | $                             | (78,056 | ) | $ | (4,012 | ) | $ | -- |   |
| Equity      in (loss) income of CUC                                                      |   | $                             | (703    | ) | $ | (139 | ) | $ | 3 |   |
| TRCLP      shared service fee expense                                                    |   | $                             | --      |   | $ | (243 | ) | $ | (620 | ) |
| TRCLP      property management services expense                                          |   | $                             | (5,156  | ) | $ | (4,354 | ) | $ | (4,277 | ) |
|  (1)         Includes write-down of loan and  investments.           |

----

----

| ·   | CRESS      recorded aggregate impairment charges of $63.9 million, of which our      proportionate share is $3.2million. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| ·   | CUC      recorded an impairment charge of $18.0 million of which our proportionate      share is $0.5 million. |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | AMAC      recorded aggregate impairment charges of $47.4 million, which is one of      the factors in determining the estimated recovery amount for the revolving      credit facility we had extended (seeabove). |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                              |   | Years      Ended December 31, |     |
|---------------------------------------------------------------------------------------------------|--------|-------------------------------|----------|
| (in      thousands)                                                                               |   | 2008                          |     | 2007 |   | 2006 |   |
|  Revenues                                                                                    |   |                          |     |   |   |   |   |   |   |   |
| Affordable      Housing                                                                           |   | $                             | 161,900  |   | $ | 293,944 |   | $ | 287,686 |   |
| Commercial      Real Estate                                                                       |   |                          | 66,152   |   |   | 69,488 |   |   | 55,062 |   |
| Portfolio      Management                                                                         |   |                          | 41,463   |   |   | 60,774 |   |   | 35,372 |   |
| Credit      Risk Products                                                                         |   |                          | 8,615    |   |   | 15,859 |   |   | 3,644 |   |
| Corporate                                                                                         |   |                          | 28,022   |   |   | 22,337 |   |   | 23,940 |   |
| Consolidated      Partnerships                                                                    |   |                          | 339,959  |   |   | 258,021 |   |   | 89,656 |   |
| Eliminations                                                                                      |   |                          | (134,536 | ) |   | (147,496 | ) |   | (108,101 | ) |
| Consolidated      Revenues                                                                        |   | $                             | 511,575  |   | $ | 572,927 |   | $ | 387,259 |   |
|  DepreciationandAmortization                                                                 |   |                          |     |   |   |   |   |   |   |   |
| Affordable      Housing                                                                           |   | $                             | 1,128    |   | $ | 908 |   | $ | 6,438 |   |
| Commercial      Real Estate                                                                       |   |                          | 12,107   |   |   | 15,926 |   |   | 18,058 |   |
| Portfolio      Management                                                                         |   |                          | 4,188    |   |   | 6,819 |   |   | 107 |   |
| Credit      Risk Products                                                                         |   |                          | 1,654    |   |   | 85 |   |   | -- |   |
| Corporate                                                                                         |   |                          | 26,953   |   |   | 21,361 |   |   | 20,792 |   |
| Consolidated      Depreciation and Amortization                                                   |   | $                             | 46,030   |   | $ | 45,099 |   | $ | 45,395 |   |
|                                                                                              |   |                          |     |   |   |   |   |   |   |   |
| Depreciation      and Amortization of Consolidated Partnerships                                   |   | $                             | 39,558   |   | $ | 33,094 |   | $ | 22,515 |   |
|  Adjusted      Net Income (Loss)                                                             |   |                          |     |   |   |   |   |   |   |   |
| Affordable      Housing                                                                           |   | $                             | 9,072    |   | $ | 13,786 |   | $ | 99,689 |   |
| Commercial      Real Estate                                                                       |   |                          | (53,070  | ) |   | (10,296 | ) |   | 7,895 |   |
| Portfolio      Management                                                                         |   |                          | 10,582   |   |   | 26,314 |   |   | 18,941 |   |
| Credit      Risk Products                                                                         |   |                          | (7,970   | ) |   | (910 | ) |   | (5,645 | ) |
| Corporate                                                                                         |   |                          | (68,298  | ) |   | (66,503 | ) |   | (64,506 | ) |
| Consolidated      Partnerships                                                                    |   |                          | 7,823    |   |   | 22,575 |   |   | 15,012 |   |
| Eliminations                                                                                      |   |                          | (7,819   | ) |   | (18,023 | ) |   | (11,437 | ) |
| Total      Adjusted Net (Loss) Income                                                             |   |                          | (109,680 | ) |   | (33,057 | ) |   | 59,949 |   |
| Amortization      or write-off of acquired intangible assets, net of minority      interests      |   |                          | (120,540 | ) |   | (15,806 | ) |   | (12,042 | ) |
| Amortization      of acquisition-related share-based compensation, net of minority      interests |   |                          | (1,938   | ) |   | (11,265 | ) |   | (6,613 | ) |
| Net      (loss) income                                                                            |   | $                             | (232,158 | ) | $ | (60,128 | ) | $ | 41,294 |   |
|                                                                                              |   |                          |     |   |   |   |   |   |   |   |
|                                                                                              |   |                          |     |   |  December      31, |   |
|                                                                                              |   |                          |     |   | 2008 |   | 2007 |   |
|  Identifiable      Assets                                                                    |   |                          |     |   |   |   |   |   |   |   |
| Affordable      Housing                                                                           |   |                          |     |   | $ | 1,137,782 |   | $ | 1,431,155 |   |
| Commercial      Real Estate                                                                       |   |                          |     |   |   | 251,362 |   |   | 439,156 |   |
| Portfolio      Management                                                                         |   |                          |     |   |   | 24,885 |   |   | 32,725 |   |
| Credit      Risk Products                                                                         |   |                          |     |   |   | 82,128 |   |   | 108,608 |   |
| Corporate                                                                                         |   |                          |     |   |   | 379,404 |   |   | 573,875 |   |
| Consolidated      Partnerships                                                                    |   |                          |     |   |   | 6,099,222 |   |   | 7,412,165 |   |
| Elimination      of intersegment balances                                                         |   |                          |     |   |   | (592,776 | ) |   | (507,482 | ) |
| Consolidated      Assets                                                                          |   |                          |     |   | $ | 7,382,007 |   | $ | 9,490,202 |   |

----

----

|                        |   | Number |   | CenterlineSponsoredFund      is EquityPartner |   | Included      inCreditIntermediatedFunds |   | CenterlineHolds      GPInterest |   | Third      Party isEquity      Partner |   |
|-----------------------------|--------|--------|--------|-----------------------------------------------|--------|------------------------------------------|--------|---------------------------------|--------|----------------------------------------|--------|
|  PRS      Partnerships |   |   |   |                                          |   |                                     |   |                            |   |                                   |   |   |   |
| Lease-Up                    |   |   | 7      |                                          |   | 6                                        |   |                            | 3      |                                   |   | 6 |   |   | 1 |   |
| Stabilized                  |   |   | 5      |                                          |   | --                                       |   |                            | --     |                                   |   | -- |   |   | 5 |   |
| Subtotal                    |   |   | 12     |                                          |   | 6                                        |   |                            | 3      |                                   |   | 6 |   |   | 6 |   |
|                        |   |   |   |                                          |   |                                     |   |                            |   |                                   |   |   |   |   |   |   |
| CRG      Partnerships       |   |   |   |                                          |   |                                     |   |                            |   |                                   |   |   |   |
| Lease-Up                    |   |   | 8      |                                          |   | 7                                        |   |                            | 4      |                                   |   | 4 |   |   | 1 |   |
| Subtotal                    |   |   | 8      |                                          |   | 7                                        |   |                            | 4      |                                   |   | 4 |   |   | 1 |   |
|                        |   |   |   |                                          |   |                                     |   |                            |   |                                   |   |   |   |   |   |   |
| GCG      Partnerships       |   |   |   |                                          |   |                                     |   |                            |   |                                   |   |   |   |
| Lease-Up                    |   |   | 2      |                                          |   | 2                                        |   |                            | 1      |                                   |   | -- |   |   | -- |   |
| Subtotal                    |   |   | 2      |                                          |   | 2                                        |   |                            | 1      |                                   |   | -- |   |   | -- |   |
|                        |   |   |   |                                          |   |                                     |   |                            |   |                                   |   |   |   |   |   |   |
| ERC      Partnerships       |   |   |   |                                          |   |                                     |   |                            |   |                                   |   |   |   |
| Lease-Up                    |   |   | 15     |                                          |   | 15                                       |   |                            | 13     |                                   |   | 14 |   |   | -- |   |
| Stabilized                  |   |   | 3      |                                          |   | 3                                        |   |                            | 1      |                                   |   | 3 |   |   | -- |   |
| Subtotal                    |   |   | 18     |                                          |   | 18                                       |   |                            | 14     |                                   |   | 17 |   |   | -- |   |
|  Total                 |   |   | 40     |                                          |   | 33                                       |   |                            | 22     |                                   |   | 27 |   |   | 7 |   |

|   | Cash required to bring      the properties to break-even operation – As of December 31, 2008,      advances outstanding totaled $35.1 million, net of      reserves.  These advances, and additional loans, are assessed      periodically for collectability.  In 2008, we recorded reserves      (net of recoveries) of $0.8 million, all recorded during the first half of      the year, related to theseadvances. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Potential cost to      provide specified yields – As noted in the table above, 22 of the      partnerships are included in credit intermediated funds, for which we are      obligated to provide specified yields (see D. Yield Transactions      below).  As construction delays are likely to reduce the      expected yields of the properties themselves, performance of the funds is      likely to be impacted as well.  The obligations, however,      provide for expected yields on pools of properties, some of which are      performing above expected levels and the funds themselves often provide      for adjustors that may mitigate the negative impact that would arise from      the construction delays over the guarantee period covered by the      agreements.  Our current estimate given these factors, and      assuming that the property level partnerships meet their obligations under      existing partnership agreements, is that no exposure under these      agreements is probable at thistime. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | through      the construction and lease-up phases of the  properties; |
|--------|--------|-----------------------------------------------------------------------|

|   | · | for      the period from the completion of the construction and lease-up phases      through the operating phase of the properties;  or |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | covering      both periods. |
|--------|--------|-----------------------------|

----

----

|   | · | On      January 18, 2008, Kramer v. Ross, et al., Index. No. 100861-08, was filed      against us and our board of trustees, in New York County Supreme      Court; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      January 25, 2008, Carfagno v. Schnitzer, et al., No. 08 CV 00912, was      filed against us and our board of trustees in the United States District      Court for the Southern District of NewYork; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      January 30, 2008, Ciszerk v. Ross, et al., CA No. 3511, was filed against      us, our board of trustees and The Related Companies, L.P. in the Delaware      Court of Chancery; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      February 22, 2008, Kanter v. Ross, et al., 08 Civ. 01827, was filed      against us, our board of trustees and The Related Companies, L.P. in the      United States District Court for the Southern District of New      York; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      February 27, 2008, Broy v. Centerline Holding Company et al., No. 08 CV      01971, was filed against us and certain of our officers and trustees in      the United States District Court for the Southern District of New      York; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      April 10, 2008, Kastner v. Schnitzer et al, Index No. 601043-08, was filed      against us and our board of trustees, in New York Supreme Court;      and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      April 10, 2008, Kostecka v. Schnitzer et al, Index No. 601044-08, was      filed against us and our board of trustees, in New York Supreme      Court. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (in      thousands)           |   | Minimumleasepayments |    | Subleaseincome |   | Netminimumleasepayments |   |
|-------------------------------|--------|----------------------|---------|----------------|--------|-------------------------|--------|
|                          |   |                 |    |           |   |                    |   |   |   |   |
| Year      Ending December 31, |   |                 |    |           |   |                    |   |   |   |   |
| 2009                          |   | $                    | 21,008  |           | $      | (1,318                  | )      | $ | 19,690 |   |
| 2010                          |   |                 | 22,153  |           |   | (1,349                  | )      |   | 20,804 |   |
| 2011                          |   |                 | 20,613  |           |   | (1,317                  | )      |   | 19,296 |   |
| 2012                          |   |                 | 19,720  |           |   | (1,317                  | )      |   | 18,403 |   |
| 2013                          |   |                 | 20,101  |           |   | (302                    | )      |   | 19,799 |   |
| Thereafter                    |   |                 | 170,428 |           |   | --                      |   |   | 170,428 |   |
|  Total                   |   | $                    | 274,023 |           | $      | (5,603                  | )      | $ | 268,420 |   |

----

|                                      |   | 2008      Quarter Ended       |    |
|-------------------------------------------|--------|-------------------------------|---------|
|                                      |   | March      31                 |    | June      30 |   | September      30(2) |   | December      31(3) |   |
|  Total      revenues                 |   | $                             | 134,188 |   | $ | 129,774 |   | $ | 128,188 |   | $ | 119,425 |   |
| Loss      before income taxes             |   | $                             | (20,590 | ) | $ | (2,374 | ) | $ | (149,710 | ) | $ | (55,658 | ) |
| Net      loss                             |   | $                             | (21,639 | ) | $ | (2,329 | ) | $ | (150,725 | ) | $ | (57,465 | ) |
| Net      loss per share(1)                |   |                          |    |   |   |   |   |   |   |   |   |   |   |
| Basic      and diluted                    |   | $                             | (0.74   | ) | $ | (0.19 | ) | $ | (3.03 | ) | $ | (1.22 | ) |
| Weighted      average shares outstanding  |   |                          |    |   |   |   |   |   |   |   |   |   |   |
| Basic      and diluted                    |   |                          | 51,864  |   |   | 51,725 |   |   | 51,931 |   |   | 52,463 |   |
|                                      |   |  2007      Quarter Ended |    |
|                                      |   | March      31                 |    | June      30 |   | September      30 |   | December      31(4) |   |
|  Total      revenues                 |   | $                             | 117,165 |   | $ | 135,064 |   | $ | 158,351 |   | $ | 162,347 |   |
| (Loss)      income before income taxes    |   | $                             | (17,691 | ) | $ | 4,667 |   | $ | 9,081 |   | $ | (51,678 | ) |
| Net      income                           |   | $                             | (14,745 | ) | $ | 4,980 |   | $ | 10,640 |   | $ | (61,003 | ) |
| Net(loss)      income per share(1):       |   |                          |    |   |   |   |   |   |   |   |   |   |   |
| Basic                                     |   | $                             | (0.27   | ) | $ | 0.07 |   | $ | 0.17 |   | $ | (1.15 | ) |
| Diluted                                   |   | $                             | (0.27   | ) | $ | 0.06 |   | $ | 0.16 |   | $ | (1.15 | ) |
| Weighted      average shares outstanding: |   |                          |    |   |   |   |   |   |   |   |   |   |   |
| Basic                                     |   |                          | 57,957  |   |   | 57,219 |   |   | 56,582 |   |   | 56,959 |   |
| Diluted                                   |   |                          | 57,957  |   |   | 58,690 |   |   | 57,736 |   |   | 56,959 |   |

| (1) | The      total for the year may differ from the sum of the quarters as a result of      weighting. |
|-----|----------------------------------------------------------------------------------------------------|

| (2) | During      the quarter, we recorded an estimated goodwill impairment of $60.0 million      (see Note 11), intangible asset impairment charges of $55.2 million      related to our transactional relationships with Freddie Mac and Fannie Mae      (see Note 11) and impairment charges of $77.7 million with respect to      intangible assets, preferred interests and our loan associated with AMAC      (see Notes 11 and 28).  All of these amounts are before minority      interest allocations. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | We      recorded an additional goodwill impairment charge of $32.7 million (before      minority interest allocations). |
|-----|-------------------------------------------------------------------------------------------------------------------------|

| (4) | The      December 2007 re-securitization transaction (see Note 7) resulted in a net      loss of $55.4 million ($77.9 million before      minority interest allocations). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item      9.   | Changes      in and Disagreements with Accountants on Accounting and Financial      Disclosure.  |
|---------------------|-------------------------------------------------------------------------------------------------------|
|                | None.                                                                                            |
| Item      9A.  | Controls      and Procedures.                                                                    |
|                | (a)                                                                                              | Evaluation      of Disclosure Controls and Procedures.  Our Chief Executive      Officer and Chief Financial Officer have evaluated the effectiveness of      our disclosure controls and procedures (as defined in Rule 13a-15(e) or      Rule 15a-15(e) under the Securities Exchange Act of 1934, as amended (the      “Exchange Act”)) as of the end of the period covered by this annual      report.  Based on such evaluation, such officers have concluded      that our disclosure controls and procedures as of the end of the period      covered by this annual report were effective to ensure that information      required to be disclosed by the Company in the reports that the Company      files or submits under the Exchange Act is recorded, processed, summarized      and reported, within the time periods specified in the SEC rules and      forms, and to ensure that such information is accumulated and communicated      to the Company’s management, including the Chief Executive Officer and      Chief Financial Officer, as appropriate, to allow timely decisions      regarding required disclosure.  |
|                | (b)                                                                                              | Internal Control over      Financial Reporting.  There have not been any significant      changes in our internal control over financial reporting during the period      to which this report relates that have materially affected, or are      reasonably likely to materially affect, our internal control over      financial reporting.  Refer to Management’s Report on the      Effectiveness of Internal Control over Financial Reporting on page      75.  |
| Item      9B.  | Other      Information                                                                           |
|                | None.                                                                                            |

----

| PART      III  |
|---------------------|
| Item      10.  | Directors,      Executive Officers and Corporate Governance.  |
|                | The      information required by this item is incorporated herein by reference to      our definitive proxy statement to be filed pursuant to Regulation 14A      under the Exchange Act.  |
| Item      11.  | Executive      Compensation.  |
|                | The      information required by this item is incorporated herein by reference to      our definitive proxy statement to be filed pursuant to Regulation 14A      under the Exchange Act.  |
| Item      12.  | Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters.  |
|                | The      information required by this item is incorporated herein by reference to      our definitive proxy statement to be filed pursuant to Regulation 14A      under the Exchange Act.  |
| Item      13.  | Certain      Relationships and Related Transactions, and Director      Independence.  |
|                | The      information required by this item is incorporated herein by reference to      our definitive proxy statement to be filed pursuant to Regulation 14A      under the Exchange Act.  |
| Item      14.  | Principal      Accounting Fees and Services.  |
|                | The      information required by this item is incorporated herein by reference to      our definitive proxy statement to be filed pursuant to Regulation 14A      under the Exchange Act.  |

----

| PART      IV   |
|---------------------|
| Item      15.  | Exhibits      and Financial Statement Schedules.  |
|                |   |   | SequentialPage |
| (a)1.          | Financial      Statements  |   |   |   |
|                | Report      of Independent Registered Public Accounting Firm  |   | 78  |   |
|                | Consolidated      Balance Sheets as of December 31, 2008 and 2007  |   | 79  |   |
|                | Consolidated      Statements of Operations for the years ended December 31, 2008, 2007 and      2006  |   | 80  |   |
|                | Consolidated      Statements of Shareholders’ Equity for the years ended December 31, 2008,      2007 and 2006  |   | 81  |   |
|                | Consolidated      Statements of Cash Flows for the years ended December 31, 2008, 2007 and      2006  |   | 82  |   |
|                | Notes      to Consolidated Financial Statements  |   | 84  |   |
| (a)2.          | Financial      Statement Schedules  |   |
|                | Schedule      I – Condensed Financial Information of Registrant  |   | 173  |   |
|                | Schedule      II – Valuation and Qualifying Accounts  |   | 177  |   |
|                | All      other schedules have been omitted because they are not applicable or the      required information is included in the consolidated financial statements      and the notes thereto.  |
| (a)3.          | Exhibits  |
|                | 3(i)a  | Certificate      of Business Trust dated as of August 12, 1996 (incorporated by reference      to Exhibit 3.1 of our Registration Statement on Form 10, filed with the      Commission on August 1, 1997).  |
|                | 3(i)b  | Certificate      of Amendment of the Restated Certificate of Business Trust (incorporated      by reference to Exhibit 3.3 of our Registration Statement on Form S-8,      filed with the Commission on November 25, 2003).  |
|                | 3(i)c  | Certificate      of Amendment to the Restated Certificate of Trust, effective April 2, 2008      and dated March 28, 2008 (incorporated by reference to Exhibit 3.3 of our      Current Report on Form 8-K filed with the Commission on April 6,      2007).  |
|                | 3(i)d  | Second      Amended and Restated Trust Agreement dated as of November 17, 2003      (incorporated by reference to Exhibit 3.1(c) of our December 31, 2005      Annual Report on Form 10-K).  |
|                | 3(i)e  | Amendment      No. 1 to Second Amended and Restated Trust Agreement dated as of September      20, 2005 (incorporated by reference to Exhibit 99.1 of our Current Report      on Form 8-K, filed with the Commission on September 22,2005).  |
|                | 3(i)f  | Amendment      No. 2 to Second Amended and Restated Trust Agreement dated as of November      30, 2005 (incorporated by reference to Exhibit 3.3 of our Registration      Statement on Form 8-A filed with the Commission on January 3,      2006).  |
|                | 3(i)g  | Amendment      No. 3 to Second Amended and Restated Trust Agreement (incorporated by      reference to Exhibit 3.1(a) of our June 30, 2006 Quarterly Report on Form      10-Q).  |
|                | 3(i)h  | Amendment      No. 4 to the Second Amended and Restated Trust Agreement, effective April      2, 2008 and dated March 28, 2007 (incorporated by reference to Exhibit 3.1      of our Current Report on Form 8-K filed with the Commission on April 6,      2007).  |

----

|   | 3(ii)a  | Fifth      Amended and Restated Bylaws of CharterMac, dated March 14, 2007      (incorporated by reference to Exhibit 3.2 of our Current Report on Form      8-K filed with the Commission on March 20, 2007).                                                                                                                                                               |
|--------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 3(ii)b  | Amendment      No. 1 to the Fifth Amended and Restated Bylaws of Centerline Holding      Company (incorporated by reference to Exhibit 3.2 of our Current Report on      Form 8-K filed with the Commission on April 6, 2007).                                                                                                                                               |
|   | 3(ii)c  | Amendment      No. 2 to Fifth Amended and Restated Bylaws of Centerline Holding Company      (incorporated by reference to Exhibit 3.1 of our Current Report on Form      8-K filed with the Commission on October 31, 2008).                                                                                                                                                |
|   | 3(ii)d  | Amendment      No. 3 to Fifth Amended and Restated Bylaws of Centerline Holding Company      (incorporated by reference to Exhibit 3.1 of our Current Report on Form      8-K filed with the Commission on December 16, 2008).                                                                                                                                               |
|   | 4(a)    | Specimen      Copy of Share Certificate for shares of our beneficial interest      (incorporated by reference to Exhibit 4.1 of our Registration Statement on      Form S-8, filed with the Commission on November 25, 2003).                                                                                                                                                |
|   | 4(b)    | Certificate      of Designation of Special Preferred Voting Shares, dated November 17, 2003      (incorporated by reference to Exhibit 99.4 of our Current Report on Form      8-K, filed with the Commission on December 1, 2003).                                                                                                                                          |
|   | 4(c)    | Amendment      No. 1 to the Certificate of Designation of Special Preferred Voting Shares      of Centerline Holding Company, effective May 4, 2007 (incorporated by      reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the      Commission on May 10, 2007).                                                                                       |
|   | 4(d)    | Certificate      of Designation for 4.40% Cumulative Convertible Preferred Shares, Series      A-1 (incorporated by reference to Exhibit 99.3 of our Current Report on      Form 8-K filed with the Commission on August 3, 2005).                                                                                                                                           |
|   | 4(e)    | Certificate      of Designation for 11.0% Cumulative Convertible Preferred Shares, Series      A-1 (incorporated by reference to Exhibit 3.1 of our Current Report on      Form 8-K filed with the Commission on January 31, 2007).                                                                                                                                          |
|   | 10(a)   | Contribution      Agreement dated as of December 17, 2002 (incorporated by reference to our      Preliminary Proxy Statement on Schedule 14A filed with the Commission on      February 2, 2003).                                                                                                                                                                            |
|   | 10(b)   | Ross      Non-Qualified Share Option Agreement (incorporated by reference to Exhibit      4.3 of our Registration Statement on Form S-8 filed with the Commission on      November 25, 2003).                                                                                                                                                                                |
|   | 10(c)   | Registration      Rights Agreement, dated as of November 17, 2003, by and among our Company      and APH Associates L.P., DLK Associates L.P., Marc Associates, L.P.,      Related General II, L.P. and SJB Associates L.P. (incorporated by      reference to Exhibit 99.1 of our Registration Statement on Form S-8 filed      with the Commission on November 25, 2003).  |
|   | 10(d)   | Registration      Rights Agreement, dated January 25, 2007, between Centerline Holding      Company and Related Special Assets LLC (incorporated by reference to      Exhibit 4.1 of our Current Report on Form 8-K filed with the Commission on      January 31 2007).                                                                                                      |
|   | 10(e)   | Restricted      Share Plan (incorporated by reference to Exhibit 4.2 of our Registration      Statement on Form S-8 filed with the Commission on November 25,      2003).                                                                                                                                                                                                    |
|   | 10(f)   | Management      Agreement dated as of November 17, 2003, between us and Related Capital      Company LLC (incorporated by reference to Exhibit 10(a) of our December      31, 2003 Annual Report on Form 10-K).                                                                                                                                                              |
|   | 10(g)   | Amended      and Restated Operating Agreement of CharterMac Capital Company LLC, dated      as of November 17, 2003 (incorporated by reference to Exhibit 99.7 of our      Current Report on Form 8-K filed with the Commission on December 1,      2003).                                                                                                                   |

----

|   | 10(h)  | Special      Preferred Voting Shares Purchase Agreement, dated as of November 17, 2003,      by and among the Company and APH Associates L.P., DLK Associates L.P.,      Marc Associates, L.P., Related General II, L.P. and SJB Associates L.P.      (incorporated by reference to Exhibit 99.8 of our Current Report on Form      8-K filed with the Commission on December 1, 2003).                       |
|--------|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10(i)  | Standstill      Agreement, dated as of November 17, 2003, by and among the Company and APH      Associates L.P., DLK Associates L.P., Marc Associates, L.P., Related      General II, L.P. and SJB Associates L.P. (incorporated by reference to      Exhibit 99.9 of our Current Report on Form 8-K filed with the Commission      on December 1, 2003).                                                     |
|   | 10(j)  | Voting      Agreement, dated as of November 17, 2003, by and among the Company and APH      Associates L.P., DLK Associates L.P., Marc Associates, L.P., Related      General II, L.P. and SJB Associates L.P. (incorporated by reference to      Exhibit 99.10 of our Current Report on Form 8-K filed with the Commission      on December 1, 2003).                                                        |
|   | 10(k)  | Exchange      Rights Agreement, dated as of November 17, 2003, by and among CharterMac      Capital Company, LLC, CharterMac Corporation, APH Associates L.P., DLK      Associates L.P, Marc Associates, L.P., Related General II, L.P. and SJB      Associates L.P. (incorporated by reference to Exhibit 99.11 of our Current      Report on Form 8-K filed with the Commission on December 1,      2003).  |
|   | 10(l)  | Lock-up      Agreement of Marc D. Schnitzer, dated November 17, 2003 (incorporated by      reference to Exhibit 99.14 of our Current Report on Form 8-K filed with      the Commission on December 1, 2003).                                                                                                                                                                                                  |
|   | 10(m)  | Lock-Up      Agreement of Stephen M. Ross, dated November 17, 2003 (incorporated by      reference to Exhibit 99.16 of our Current Report on Form 8-K filed with      the Commission on December 1, 2003).                                                                                                                                                                                                    |
|   | 10(n)  | Future      Relations Agreement, dated as of November 17, 2003, by and among Stephen      Ross, Related General II L.P., RCMP Management Inc., the Related      Companies, L.P., and CharterMac Capital Company, LLC (incorporated by      reference to Exhibit 99.21 of our Current Report on Form 8-K filed with      the Commission on December 1, 2003).                                                  |
|   | 10(o)  | Shared      Services Agreement, dated as of November 17, 2003, by and among The      Related Companies, L.P., Related Management Company, and CharterMac      Capital Company (incorporated by reference to Exhibit 99.24 of our Current      Report on Form 8-K filed with the Commission on December 1,      2003).                                                                                         |
|   | 10(p)  | Other      Services Agreement, dated November 17, 2003, by and between Relcap Holding      Company LLC and CharterMac Capital Company, LLC (incorporated by reference      to Exhibit 99.25 of our Current Report on Form 8-K filed with the      Commission on December 1, 2003).                                                                                                                            |
|   | 10(q)  | CharterMac      Guaranty, dated December 17, 2002 (incorporated by reference to Exhibit      99.27 of our Current Report on Form 8-K filed with the Commission on      December 1, 2003).                                                                                                                                                                                                                     |
|   | 10(r)  | Amended      and Restated Incentive Share Plan (incorporated by reference to Exhibit      99.1 of our Form S-8/A, filed with the Commission on March 2,      2004).                                                                                                                                                                                                                                           |
|   | 10(s)  | Form      of Non-Qualified Share Option Award Agreement (incorporated by reference      to Exhibit 10(af) of our December 31, 2004 Annual Report on Form      10-K).                                                                                                                                                                                                                                          |
|   | 10(t)  | Form      of Restricted Share Award Agreement (incorporated by reference to Exhibit      10(ag) of our December 31, 2004 Annual Report on Form 10-K).                                                                                                                                                                                                                                                         |
|   | 10(u)  | Centerline      Holding Company 2007 Incentive Share Plan and Form of 2007 Incentive Share      Plan (incorporated by reference to our definitive proxy statement on      Schedule 14A filed with the Commission on April 23, 2007).                                                                                                                                                                          |
|   | 10(v)  | Centerline      2007 Outperformance Plan and Form of 2007 Outperformance Plan      (incorporated by reference to Exhibit 10.2 of our Current Report on Form      8-K filed with the Commission on June 19, 2007).                                                                                                                                                                                             |
|   | 10(w)  | Centerline      Annual Incentive Bonus Program “A” and Form of Centerline Annual Incentive      Bonus Program A (incorporated by reference to Exhibit 10.3 of our Current      Report on Form 8-K filed with the Commission on June 19,      2007).                                                                                                                                               |

----

|   | 10(x)   | Centerline      Annual Incentive Bonus Program “B” and Form of Centerline Annual Incentive      Bonus Program B (incorporated by reference to Exhibit 10.4 of our Current      Report on Form 8-K filed with the Commission on June 19,      2007).                                                                     |
|--------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10(y)   | Second      Amended and Restated Advisory Services Agreement between American Mortgage      Acceptance Company and CharterMac AMI Associates, Inc. (incorporated by      reference to Exhibit 10(ak) in our December 31, 2005 Annual Report on Form      10-K).                                                                     |
|   | 10(z)   | First      Amendment to Second Amended and Restated Advisory Services Agreement      between American Mortgage Acceptance Company and CharterMac AMI      Associates, Inc., dated July 26, 2006 (incorporated by reference to      Exhibit 10(y) of our December 31, 2006 Annual Report on Form      10-K).                         |
|   | 10(aa)  | Amended      and Restated Credit Note of American Mortgage Acceptance Company      (incorporated by reference to Exhibit 10.3 of our Current Report on Form      8-K filed with the Commission on April 26, 2006).                                                                                                                  |
|   | 10(ab)  | Limited      Liability Company Agreement of Centerbrook Holdings LLC and IXIS Financial      Products Inc. and Charter Mac Corporation dated June 28, 2006      (incorporated by reference to Exhibit 10.1 of our June 30, 2006 Quarterly      Report on Form 10-Q).                                                                |
|   | 10(ac)  | Unitholder      and Warrant Agreement among Centerbrook Holdings LLC, IXIS Financial      Products Inc. and Charter Mac Corporation, dated as of June 28, 2006      (incorporated by reference to Exhibit 10.2 of our June 30, 2006 Quarterly      Report on Form 10-Q).                                                            |
|   | 10(ad)  | Limited      Liability Company Agreement of Centerbrook Financial LLC, dated as of June      28, 2006 (incorporated by reference to Exhibit 10.3 of our June 30, 2006      Quarterly Report on Form 10-Q).                                                                                                                          |
|   | 10(ae)  | Senior      Loan Agreement among Centerbrook Financial LLC, the lenders that are party      thereto and Citibank, N.A., as senior agent, dated as of June 28, 2006      (incorporated by reference to Exhibit 10.4 of our June 30, 2006 Quarterly      Report on Form 10-Q).                                                        |
|   | 10(af)  | Mezzanine      Loan Agreement among Centerbrook Financial LLC, the  lenders      that are party thereto and Citibank, N.A., as mezzanine      agent,  dated as of June 28, 2006 (incorporated by reference to      Exhibit 10.5 of our June 30, 2006 Quarterly Report on Form      10-Q).                       |
|   | 10(ag)  | Subordination      and Security Agreement among Centerbrook Financial LLC, Deutsche Bank      Trust Company Americas, and Citibank, N.A., as senior agent and mezzanine      agent,  dated as of June 28, 2006 (incorporated by reference to      Exhibit 10.6 of our June 30, 2006 Quarterly Report on Form      10-Q).  |
|   | 10(ah)  | Guarantee      Agreement between CharterMac and IXIS Financial Products Inc., dated as of      June 28, 2006 (incorporated by reference to Exhibit 10.7 of our June 30,      2006 Quarterly Report on Form 10-Q).                                                                                                                   |
|   | 10(ai)  | Right      of First Refusal Letter Agreement among CharterMac and Centerbrook      Financial LLC, dated as of June 28, 2006 (incorporated by reference to      Exhibit 10.8 of our June 30, 2006 Quarterly Report on Form      10-Q).                                                                                               |
|   | 10(aj)  | Fee      Letter between IXIS Capital Markets North America Inc. and Centerbrook      Holdings LLC, dated as of June 28, 2006 (incorporated by reference to      Exhibit 10.9 of our June 30, 2006 Quarterly Report on Form      10-Q).                                                                                              |
|   | 10(ak)  | Credit      Support Swap between Charter Mac Origination Trust 1 and Centerbrook      Financial LLC (incorporated by reference to Exhibit 10.10 of our June 30,      2006 Quarterly Report on Form 10-Q).                                                                                                                           |
|   | 10(al)  | Securities      Purchase Agreement, dated as of August 15, 2006, by and among the Company,      ARCap Investors, the Selling Members, ARCap REIT, AISR, CM Corp and CM      ARCap Investors (incorporated by reference to Exhibit 2.1 of our Current      Report on Form 8-K filed with the Commission on August 21,      2006).    |
|   | 10(am)  | Executive      Employment Agreement, dated as of November 28, 2006, by and between Robert      Levy and CharterMac Capital LLC (incorporated by reference to Exhibit 10.2      of our current report on Form 8-K filed with the Commission on December 4,      2006).                                                               |

----

|   | 10(an)   | Amendment      to Executive Employment Agreement between Centerline Capital LLC and      Robert L. Levy dated as of August 10, 2007 (incorporated by reference to      Exhibit 10.3 of our Current Report on Form 8-K filed with the Commission      on August 16, 2007).    |
|--------|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10(ao)   | Amendment      to Executive Employment Agreement of Robert L. Levy, dated April 17, 2008      (incorporated by reference to Exhibit 99.2 of our Current Report on Form      8-K filed with the Commission on April 18, 2008).                                                |
|   | 10(ap)   | Amendment      to Executive Employment Agreement of Robert L. Levy, dated December 31,      2008 (incorporated by reference to Exhibit 99.2 of our Current Report on      Form 8-K filed with the Commission on January 7, 2009).                                            |
|   | 10(aq)   | Executive      Employment Agreement, dated as of January 1, 2007, by and between      Centerline Capital Group, Inc. and Chris Crouch (incorporated by reference      to Exhibit 10(as) of our December 31, 2006 Annual Report on Form      10-K).                           |
|   | 10(ar)   | Amendment      to Executive Employment Agreement of Christopher G. Crouch, dated December      31, 2008 (incorporated by reference to Exhibit 99.3 of our Current Report      on Form 8-K filed with the Commission on January 7, 2009).                                     |
|   | 10(as)   | Executive      Employment Agreement, dated as of January 1, 2007, by and between      Centerline Capital Group, Inc. and Donald J. Meyer (incorporated by      reference to Exhibit 10(as) of our December 31, 2006 Annual Report on Form      10-K).                        |
|   | 10(at)   | Amendment      to the Executive Employment Agreement, by and between Centerline Capital      Group, Inc. and Donald J. Meyer, dated April 28, 2008 (incorporated by      reference to Exhibit 10.1 of our May 12, 2008 Quarterly Report on Form      10-Q).                  |
|   | 10(au)   | Amendment to Executive Employment Agreement of Donald      J. Meyer, dated December 31, 2008.*                                                                                                                                                                               |
|   | 10(av)   | Executive      Employment Agreement, dated as of January 1, 2007, by and between Marc D.      Schnitzer and CharterMac Capital LLC (incorporated by reference to Exhibit      10.2 of our Current Report on Form 8-K filed with the Commission on      February 7, 2007).    |
|   | 10(aw)   | Amendment      to Executive Employment Agreement of Marc D. Schnitzer, dated April 17,      2008 (incorporated by reference to Exhibit 99.1 of our Current Report on      Form 8-K filed with the Commission on April 18, 2008).                                             |
|   | 10(ax)   | Amendment      to Executive Employment Agreement of Marc D. Schnitzer, dated December 31,      2008 (incorporated by reference to Exhibit 99.1 of our Current Report on      Form 8-K filed with the Commission on January 7, 2009).                                         |
|   | 10(ay)   | Executive      Employment Agreement, dated as of January 1, 2007, by and between      Centerline Capital Group, Inc. and Andrew J. Weil (incorporated by      reference to Exhibit 10(av) of our December 31, 2006 Annual Report on Form      10-K).                         |
|   | 10(az)   | Amendment      to the Executive Employment Agreement, by and between Centerline Capital      Group, Inc. and Andrew J. Weil, dated as of April 15, 2008 (incorporated      by reference to Exhibit 10.4  of our May 12, 2008 Quarterly      Report on Form 10-Q).  |
|   | 10(aaa)  | Amendment to Executive Employment Agreement of Andrew      J. Weil, dated December 31, 2008.*                                                                                                                                                                                |
|   | 10(abb)  | Executive      Employment Agreement, dated as of January 15, 2007, by and between      Centerline Capital Group, Inc. and Nicholas A.C. Mumford. (incorporated by      reference to Exhibit 10.1 of our May 10, 2007 Quarterly Report on Form      10-Q).                    |
|   | 10(acc)  | Amendment      to the Executive Employment Agreement, by and between Centerline Capital      Group, Inc. and Nicholas A.C. Mumford, dated April 15, 2008 (incorporated      by reference to Exhibit 10.2 of our May 12, 2008 Quarterly Report on Form      10-Q).            |
|   | 10(add)  | Amendment to Executive Employment Agreement of      Nicholas A.C. Mumford, dated December 31, 2008.*                                                                                                                                                                         |

----

|   | 10(aee)  | Amendment      to the Executive Employment Agreement, by and between Centerline Capital      Group, Inc. and Paul G. Smyth, dated as of April 15, 2008 (incorporated by      reference to Exhibit 10.3 of our May 12, 2008 Quarterly Report on Form      10-Q).                                                                                                                                                                                                           |
|--------|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10(aff)  | Separation      Agreement, effective March 15, 2007, by and between Alan P. Hirmes and      CharterMac Capital, LLC (incorporated by reference to Exhibit 10.1 of our      Current Report on Form 8-K filed with the Commission on March 20,      2007).                                                                                                                                                                                                                  |
|   | 10(agg)  | Participation      OPP Letter between Centerline Holding Company and Robert L. Levy dated as      of August 10, 2007 (incorporated by reference to Exhibit 10.6 of our      Current Report on Form 8-K filed with the Commission on August 16,      2007).                                                                                                                                                                                                                |
|   | 10(ba)   | Participation      OPP Letter between Centerline Holding Company and Marc D. Schnitzer dated      as of August 10, 2007 (incorporated by reference to Exhibit 10.4 of our      Current Report on Form 8-K filed with the Commission on August 16,      2007).                                                                                                                                                                                                             |
|   | 10(bb)   | Centerline      Holding Company Ross Non-Qualified Share Option Agreement, dated July 13,      2007 (incorporated by reference to Exhibit 10.1 of our Current Report on      Form 8-K filed with the Commission on July 18, 2007).                                                                                                                                                                                                                                        |
|   | 10(bc)   | Letter      agreement dated July 12, 2007 between Stephen M. Ross and Centerline      Holding Company (incorporated by reference to Exhibit 10.2 of our Current      Report on Form 8-K filed with the Commission on July 18,      2007).                                                                                                                                                                                                                                 |
|   | 10(bd)   | Amendment      to Amended and Restated Incentive Share Plan (incorporated by reference to      Exhibit 10(s) of our December 31, 2006 Annual Report on Form      10-K).                                                                                                                                                                                                                                                                                                   |
|   | 10(be)   | Warehousing      Credit and Security Agreement, dated as of May 30, 2007, among Centerline      Mortgage Capital Inc., Centerline Mortgage Partners Inc., and Citicorp      USA, Inc., as agent for the lenders, and as a lender (incorporated by      reference to Exhibit 10.1 of our Current Report on Form 8-K filed with the      Commission on June 5, 2007).                                                                                                       |
|   | 10(bf)   | First      Amendment to Warehousing Credit and Security Agreement, dated as of August      29, 2007, among Centerline Mortgage Capital Inc. and Centerline Mortgage      Partners Inc, as borrowers, Citicorp USA, Inc., SunTrust Bank and Wachovia      Bank, N.A., as lenders, and Citicorp USA, Inc, as agent for the lenders      (incorporated by reference to Exhibit 10.1 of our Current Report on Form      8-K filed with the Commission on September 5, 2007).  |
|   | 10(bg)   | Second      Amendment to the Warehousing Credit and Security Agreement, dated as of      December 20, 2007, among Centerline Mortgage Capital Inc., Centerline      Mortgage Partners Inc., and Citicorp USA, Inc., as agent for the lenders,      and as a lender  (incorporated by reference to our Current      Report on Form 8-K filed with the Commission on December 27,      2007).                                                                     |
|   | 10(bh)   | Third      Amendment to the Warehousing Credit and Security Agreement, dated as of      December 27, 2007, among Centerline Mortgage Capital Inc., Centerline      Mortgage Partners Inc., and Bank of America, NA., as agent for the      lenders, and as a lender (incorporated by reference to Exhibit 10.1 of our      Current Report on Form 8-K filed with the Commission on January 3,      2007).                                                                 |
|   | 10(bi)   | Amended      and Restated Warehousing Credit and Security Agreement, dated as of May      30, 2008, among Centerline Mortgage Capital Inc, Centerline Mortgage      Partners Inc., and Bank of America, N.A., as agent for the lenders, and as      a lender (incorporated by reference to Exhibit 10.1 of our Current Report      on Form 8-K filed with the Commission on June 5, 2008).                                                                                |
|   | 10(bj)   | First      Amended and Restated Loan Agreement Between Centerline Holding Company and      American Mortgage Acceptance Company, dated September 17, 2007      (incorporated by reference to Exhibit 10(bj) of our December 31, 2006      Annual Report on Form 10-K).                                                                                                                                                                                                    |
|   | 10(bk)   | Bond      Exchange Agreement, dated as of December 27, 2007, among Federal Home Loan      Mortgage Corporation, Centerline 2007-1 EIT Securitization, LLC,      Centerline 2008-1 SU Securitization, LLC and Centerline 2007-1 T      Securitization, LLC (incorporated by reference to Exhibit 10.1 of our      Current Report on Form 8-K filed with the Commission on January 3,      2007).                                                                           |
|   | 10(bl)   | Reimbursement,      Pledge and Security Agreement, dated as of December 27, 2008, between      Federal Home Loan Mortgage Corporation and Centerline Sponsor 2008-2      Securitization, LLC (incorporated by reference to Exhibit 10.2 of our      Current Report on Form 8-K filed with the Commission on January 3,      2007).                                                                                                                                        |

----

|   | 10(bm)  | Series      Certificate Agreement, dated as of December 27, 2007, by and between      Federal Home Loan Mortgage Corporation, in its corporate capacity, and      Federal Home Loan Mortgage Corporation, in its capacity as administrator,      with respect to Freddie Mac Multifamily Variable Rate Certificates Series      M012 (incorporated by reference to Exhibit 10.4 of our Current Report on      Form 8-K filed with the Commission on January 3, 2007).                                                                                                                                                                                            |
|--------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10(bn)  | Series      Certificate Agreement, dated as of December 27, 2007, by and between      Federal Home Loan Mortgage Corporation, in its corporate capacity, and      Federal Home Loan Mortgage Corporation, in its capacity as administrator,      with respect to Freddie Mac Multifamily Variable Rate Certificates Series      M013 (incorporated by reference to Exhibit 10.4 of our Current Report on      Form 8-K filed with the Commission on January 3, 2007).                                                                                                                                                                                            |
|   | 10(bo)  | Series      Certificate Agreement, dated as of December 27, 2007, by and between      Federal Home Loan Mortgage Corporation, in its corporate capacity, and      Federal Home Loan Mortgage Corporation, in its capacity as administrator,      with respect to Freddie Mac Multifamily Variable Rate Certificates Series      M014 (incorporated by reference to Exhibit 10.5 of our Current Report on      Form 8-K filed with the Commission on January 3, 2007).                                                                                                                                                                                            |
|   | 10(bp)  | Limited      Support Agreement, dated as of December 27, 2007, between Centerline      Guarantor LLC and Federal Home Loan Mortgage Corporation (incorporated by      reference to Exhibit 10.6 of our Current Report on Form 8-K filed with the      Commission on January 3, 2007).                                                                                                                                                                                                                                                                                                                                                                            |
|   | 10(bq)  | Limited      Support Agreement, dated as of December 27, 2007, between Centerline      Holding Company and Federal Home Loan Mortgage Corporation (incorporated      by reference to Exhibit 10.7 of our Current Report on Form 8-K filed with      the Commission on January 3, 2007).                                                                                                                                                                                                                                                                                                                                                                          |
|   | 10(br)  | Stabilization      Guaranty, Escrow and Security Agreement, dated as of December 27, 2007,      between Centerline Stabilization 2008-1 Securitization, LLC and Federal      Home Loan Mortgage Corporation (incorporated by reference to Exhibit 10.8      of our Current Report on Form 8-K filed with the Commission on January 3,      2007).                                                                                                                                                                                                                                                                                                                |
|   | 10(bs)  | Stabilization      Limited Support Agreement, dated as of December 27, 2007, between      Centerline Holding Company and Federal Home Loan Mortgage Corporation      (incorporated by reference to Exhibit 10.9 of our Current Report on Form      8-K filed with the Commission on January 3, 2007).                                                                                                                                                                                                                                                                                                                                                            |
|   | 10(bt)  | Certificate      Placement Agreement, dated as of December 27, 2007, among Morgan Stanley      & Co., Centerline Holding Company and Federal Home Loan Mortgage      Corporation (incorporated by reference to Exhibit 10.10 of our Current      Report on Form 8-K filed with the Commission on January 3,      2007).                                                                                                                                                                                                                                                                                                                                      |
|   | 10(bu)  | Revolving      Credit and Term Loan Agreement, dated as of December 27, 2007, by and      among Centerline Holding Company, Centerline Capital Group Inc., the      Guarantors listed on Schedule 1 thereto, the Lenders named therein, Bank      of America, N.A. as agent, Bank of America, N.A., as issuing bank and      swingline lender and as administrative agent, Banc of America Securities,      LLC and Citicorp USA, Inc., as joint lead arrangers and Banc of America      Securities, LLC as book manager (incorporated by reference to Exhibit      10.11 of our Current Report on Form 8-K filed with the Commission on      January 3, 2007).  |
|   | 10(bv)  | First      Amendment to Revolving Credit and Term Loan Agreement, dated January 22,      2007, by and between Centerline Holding Company, Centerline Capital Group      Inc., the Guarantors listed on Schedule 1 thereto and the Required Lenders      (incorporated by reference to our Current Report on Form 8-K filed with      the Commission on January 28, 2007).                                                                                                                                                                                                                                                                                        |
|   | 10(bw)  | Second      Amendment to Revolving Credit and Term Loan Agreement, dated February 28,      2007, by and among Centerline Holding Company, Centerline Capital Group      Inc., the Guarantors listed on Schedule 1 thereto and the Required Lenders      (incorporated by reference to our Current Report on Form 8-K filed with      the Commission on February 5, 2007).                                                                                                                                                                                                                                                                                        |
|   | 10(bx)  | Third      Amendment to Revolving Credit and Term Loan Agreement dated August 06,      2008, by and between Centerline Holding Company, Centerline Capital Group      Inc., the Guarantors listed on Schedule 1 thereto and the Required Lenders      (incorporated by reference to Exhibit 10.1 of our Current Report on Form      8-K filed with the Commission on August 12, 2008) .                                                                                                                                                                                                                                                                          |

----

|   | 10(by)  | Fourth      Amendment to Revolving Credit and Term Loan Agreement, dated October 31,      2008, by and between Centerline Holding Company, Centerline Capital Group      Inc., the Guarantors listed on Schedule 1 thereto and the Required      Lenders, including the Term Loan Lenders (incorporated by reference to      Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission      on November 3, 2008).                                                                                                                                                                                   |
|--------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10(bz)  | Fifth      Amendment to Revolving Credit and Term Loan Agreement, dated November 21,      2008 by and between Centerline Holding Company, Centerline Capital Group      Inc., the Guarantors listed on Schedule 1 thereto and the Required      Lenders, including the Term Loan Lenders (incorporated by reference to      Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission      on November 24, 2008).                                                                                                                                                                                   |
|   | 10(ca)  | Sixth      Amendment to Revolving Credit and Term Loan Agreement, dated December 5,      2008, by and between Centerline Holding Company, Centerline Capital Group      Inc., the Guarantors listed on Schedule 1 thereto and the Required      Lenders, including the Term Loan Lenders (incorporated by reference to      Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission      on December 8, 2008).                                                                                                                                                                                    |
|   | 10(cb)  | Amended      and Restated Revolving Credit and Term Loan Agreement, dated December 19,      2008, by and among Centerline Holding Company, Centerline Capital Group      Inc., the Guarantors listed on Schedule 1 thereto, the Lenders named      therein, Bank of America, N.A. as issuing bank and as administrative      agent, Banc of America Securities, LLC and Citicorp USA, Inc., as co-lead      arrangers and Banc of America Securities, LLC as book manager      (incorporated by reference to Exhibit 10.1 of our Current Report on Form      8-K filed with the Commission on December 30, 2008).  |
|   | 10(cc)  | Securities      Purchase Agreement, dated January 25, 2007, between Centerline Holding      Company and Related Special Assets LLC (incorporated by reference to      Exhibit 10.1 of our Current Report on Form 8-K filed with the Commission      on January 31, 2007).                                                                                                                                                                                                                                                                                                                                          |
|   | 12      | Ratio of earnings to fixed charges and preferred      dividends. *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 21      | Subsidiaries of our Company.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | 23      | Consent of Independent Registered Public Accounting      Firm.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | 31.1    | Chief Executive Officer certification pursuant to      Section 302 of the Sarbanes- Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | 31.2    | Chief Financial Officer certification pursuant to      Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | 32      | Certification pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | *       | Filed      herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

----

| Date:  |   | March      10, 2009 |   | By:    |   | /s/      Marc D. Schnitzer                                                                                          |
|--------|--------|---------------------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------|
|   |   |                |   |   |   | Marc      D. SchnitzerManaging      Trustee, Chief Executive Officer andPresident(Principal      Executive Officer) |

| Date:  |   | March      10, 2009 |   | By:    |   | /s/      Robert L. Levy                                                                                             |
|--------|--------|---------------------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------|
|   |   |                |   |   |   | Robert      L. LevyChief      Financial Officer(Principal      Financial Officer and Principal Accounting  Officer) |

| Date:  |   | March      10, 2009 |   | By:    |   | /s/      Marc D. Schnitzer                                                                                          |
|--------|--------|---------------------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------|
|   |   |                |   |   |   | Marc      D. SchnitzerManaging      Trustee, Chief Executive Officer andPresident(Principal      Executive Officer) |

| Date:  |   | March      10, 2009 |   | By:    |   | /s/      Robert L. Levy                                                                                             |
|--------|--------|---------------------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------|
|   |   |                |   |   |   | Robert      L. LevyChief      Financial Officer(Principal      Financial Officer and Principal Accounting  Officer) |

----

| Signature                         |   | Title                                                        |   | Date                |
|-----------------------------------|--------|--------------------------------------------------------------|--------|---------------------|
|                              |   |                                                         |   |                |
|  /s/      Stephen M. Ross    |   |                                                         |   |                |
| Stephen      M. Ross              |   | Managing      Trustee and Chairman of the Board              |   | March      10, 2009 |
|  /s/      Marc D. Schnitzer  |   |                                                         |   |                |
| Marc      D. Schnitzer            |   | Managing      Trustee, Chief Executive Officer and President |   | March      10, 2009 |
|  /s/ Jeff T. Blau            |   |                                                         |   |                |
| Jeff      T. Blau                 |   | Managing      Trustee                                        |   | March      10, 2009 |
|  /s/      Robert J. Dolan    |   |                                                         |   |                |
| Robert      J. Dolan              |   | Managing      Trustee                                        |   | March      10, 2009 |
|  /s/      Jerome Y. Halperin |   |                                                         |   |                |
| Jerome      Y. Halperin           |   | Managing      Trustee                                        |   | March      10, 2009 |
|  /s/      Robert L. Loverd   |   |                                                         |   |                |
| Robert      L. Loverd             |   | Managing      Trustee                                        |   | March      10, 2009 |
|  /s/      Robert A. Meister  |   |                                                         |   |                |
| Robert      A. Meister            |   | Managing      Trustee                                        |   | March      10, 2009 |
|  /s/      Thomas W. White    |   |                                                         |   |                |
| Thomas      W. White              |   | Managing      Trustee                                        |   | March      10,2009  |

----

|                                                                                                                                                                  |   | December      31, |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|------------|
|                                                                                                                                                                  |   | 2008              |       | 2007 |   |
|  ASSETS                                                                                                                                                          |
|  Cash      and cash equivalents                                                                                                                                  |   | $                 | 13         |   | $ | 1,641 |   |
| Investments:                                                                                                                                                          |   |              |       |   |   |   |   |
| Available-for-sale                                                                                                                                                    |   |              | 51,094     |   |   | 6,113 |   |
| Other      investments                                                                                                                                                |   |              | 5,707      |   |   | 7,257 |   |
| Investments      in and loans to affiliates                                                                                                                           |   |              | --         |   |   | 654,375 |   |
| Deferred      costs and other assets                                                                                                                                  |   |              | 8,865      |   |   | 6,096 |   |
| Total      assets                                                                                                                                                     |   | $                 | 65,679     |   | $ | 675,482 |   |
|  LIABILITIES      AND EQUITY                                                                                                                                     |
|  Liabilities:                                                                                                                                                    |   |              |       |   |   |   |   |
| Notes      payable                                                                                                                                                    |   | $                 | --         |   | $ | 2,605 |   |
| Secured      financing                                                                                                                                                |   |              | 62,424     |   |   | 3,049 |   |
| Negative      carrying value of equity investments (Note 4)                                                                                                           |   |              | 516,392    |   |   | -- |   |
| Accounts      payable, accrued expenses and other liabilities                                                                                                         |   |              | 27,995     |   |   | 33,276 |   |
| Distributions      payable                                                                                                                                            |   |              | --         |   |   | 26,072 |   |
| Total      liabilities                                                                                                                                                |   |              | 606,811    |   |   | 65,002 |   |
|  Redeemable      securities                                                                                                                                      |   |              | 326,379    |   |   | 69,888 |   |
| Commitments      and contingencies                                                                                                                                    |   |              |       |   |   |   |   |
|  Shareholders’      (deficit) equity:                                                                                                                      |   |              |       |   |   |   |   |
| Beneficial      owners equity:                                                                                                                                        |   |              |       |   |   |   |   |
| 4.4%      Convertible CRA preferred shares; no par value (no shares issued and      outstanding in 2008 and 1,060 shares issued and outstanding in      2007)         |   |              | --         |   |   | 51,281 |   |
| Convertible      CRA Shares (519 shares issued and outstanding in 2008 and 5,306 shares      issued and outstanding in 2007)                                          |   |              | 3,144      |   |   | 66,879 |   |
| Special      preferred voting shares; no par value (13,131 shares issued and      outstanding in 2008 and 14,298 shares issued and outstanding in      2007)          |   |              | 131        |   |   | 143 |   |
| Common      shares; no par value (160,000 shares authorized; 56,662 issued and 52,970      outstanding in 2008 and 53,943 issued and 50,567 outstanding in      2007) |   |              | 338,619    |   |   | 592,505 |   |
| Treasury      shares of beneficial interest – common, at cost (3,692 shares in 2008 and      3,376 shares in 2007)                                              |   |              | (65,283    | ) |   | (64,312 | ) |
| Accumulated      other comprehensive (loss) income                                                                                                                    |   |              | (1,144,122 | ) |   | (105,904 | ) |
| Total      shareholders’ (deficit) equity                                                                                                                       |   |              | (867,511   | ) |   | 540,592 |   |
|  Total      liabilities and equity                                                                                                                               |   | $                 | 65,679     |   | $ | 675,482 |   |
|                                                                                                                                                                  |   |              |       |   |   |   |   |

----

|                                                            |   | Years      ended December 31, |     |
|-----------------------------------------------------------------|--------|-------------------------------|----------|
|                                                            |   | 2008                          |     | 2007 |   | 2006 |   |
|                                                            |   |                          |     |   |   |   |   |   |   |   |
| Revenues:                                                       |   |                          |     |   |   |   |   |   |   |   |
| Mortgage      revenue bond interest income                      |   | $                             | 20,653   |   | $ | 5,323 |   | $ | 8,025 |   |
| Other      revenues                                             |   |                          | 2,014    |   |   | 12,625 |   |   | 16,211 |   |
| Total      revenues                                             |   |                          | 22,667   |   |   | 17,948 |   |   | 24,236 |   |
|  Expenses:                                                 |   |                          |     |   |   |   |   |   |   |   |
| Interest                                                        |   |                          | 4,474    |   |   | 7,700 |   |   | 2,595 |   |
| General      and administrative                                 |   |                          | 8,298    |   |   | 6,812 |   |   | 8,206 |   |
| Depreciation      and amortization                              |   |                          | --       |   |   | 566 |   |   | 4,333 |   |
| Impairment      of assets                                       |   |                          | 564      |   |   | 117 |   |   | 428 |   |
| Total      expenses                                             |   |                          | 13,336   |   |   | 15,195 |   |   | 15,562 |   |
|  Income      before other income                           |   |                          | 9,331    |   |   | 2,753 |   |   | 8,674 |   |
|                                                            |   |                          |     |   |   |   |   |   |   |   |
| Other      (loss) income:                                       |   |                          |     |   |   |   |   |   |   |   |
| Equity      in (loss) earnings of subsidiaries                  |   |                          | (163,214 | ) |   | (97,880 | ) |   | 32,058 |   |
| Equity      in (loss) earnings of investments                   |   |                          | (78,056  | ) |   | (4,012 | ) |   | 568 |   |
| (Loss)      gain on repayment or sale of investments, net       |   |                          | (166     | ) |   | 657 |   |   | (6 | ) |
| (Loss)      gain on re-securitization of mortgage revenue bonds |   |                          | (53      | ) |   | 38,354 |   |   | -- |   |
|  Net      (loss) income                                    |   | $                             | (232,158 | ) | $ | (60,128 | ) | $ | 41,294 |   |
|  Allocation      of net (loss) income to:                  |   |                          |     |   |   |   |   |   |   |   |
| 4.4%      Convertible CRA preferred shareholders                |   | $                             | 38       |   | $ | 4,757 |   | $ | 4,752 |   |
| Common      shareholders                                        |   |                          | (228,646 | ) |   | (57,449 | ) |   | 32,405 |   |
| Convertible      CRA shareholders                               |   |                          | (3,550   | ) |   | (7,436 | ) |   | 4,137 |   |
| Total                                                           |   | $                             | (232,158 | ) | $ | (60,128 | ) | $ | 41,294 |   |
|                                                            |   |                          |     |   |   |   |   |   |   |   |

----

|                                                                      |   | Years      Ended December 31, |     |
|---------------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                                      |   | 2008                          |     | 2007 |   | 2006 |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES:                                |   |                          |     |   |   |   |   |   |   |   |
| Net      (loss) income                                                    |   | $                             | (68,944  | ) | $ | (60,128 | ) | $ | 41,294 |   |
| Reconciling      items:                                                   |   |                          |     |   |   |   |   |   |   |   |
| (Gain)      loss on repayment of mortgage revenue bonds                   |   |                          | (123     | ) |   | (657 | ) |   | 101 |   |
| Impairment      of assets                                                 |   |                          | 500      |   |   | 117 |   |   | -- |   |
| Depreciation      and amortization                                        |   |                          | --       |   |   | 566 |   |   | 4,333 |   |
| Gain      on re-securitization of mortgage revenue bonds                  |   |                          | --       |   |   | (38,354 | ) |   | -- |   |
| Equity      in earnings of subsidiaries and unconsolidated entities       |   |                          | 78,057   |   |   | 101,892 |   |   | (32,626 | ) |
| Distributions      received from subsidiaries and unconsolidated entities |   |                          | 137,873  |   |   | 255,404 |   |   | 349,553 |   |
| Non-cash      compensation expense                                        |   |                          | 1,512    |   |   | 29,640 |   |   | 7,036 |   |
| Other      non-cash expense                                               |   |                          | (229     | ) |   | (188 | ) |   | 1,014 |   |
| Reserve      for bad debts                                                |   |                          | (93      | ) |   | 497 |   |   | -- |   |
| Changes      in operating assets and liabilities:                         |   |                          |     |   |   |   |   |   |   |   |
| Deferred      revenues                                                    |   |                          | (199     | ) |   | -- |   |   | -- |   |
| Other      assets and receivables                                         |   |                          | 4,159    |   |   | 1,049 |   |   | (4,629 | ) |
| Accounts      payable, accrued expenses and other liabilities             |   |                          | (6,304   | ) |   | 25,084 |   |   | 2,285 |   |
| Due      to / from subsidiaries                                           |   |                          | (170,726 | ) |   | (39,584 | ) |   | 85,733 |   |
| Net      cash flows from operating activities                             |   |                          | (24,517  | ) |   | 275,338 |   |   | 454,094 |   |
|  CASH      FLOWS FROM INVESTING ACTIVITIES:                          |   |                          |     |   |   |   |   |   |   |   |
| Sale      and repayments of available-for-sale securities                 |   |                          | 3,564    |   |   | -- |   |   | -- |   |
| Purchases      of available-for-sale securities                           |   |                          | (26,096  | ) |   | -- |   |   | -- |   |
| Repayments      of mortgage revenue bonds and notes                       |   |                          | 42       |   |   | 150,500 |   |   | 1,679 |   |
| Mortgage      revenue bond acquisitions and fundings                      |   |                          | (1,144   | ) |   | (4,004 | ) |   | (7,683 | ) |
| Deferred      investment acquisition costs                                |   |                          | --       |   |   | -- |   |   | 226 |   |
| (Investment      in) subsidiaries and unconsolidated entities             |   |                          | (90,524  | ) |   | (157,981 | ) |   | (459,897 | ) |
| Return      of capital from equity investees                              |   |                          | 254      |   |   | 240 |   |   | 16,667 |   |
| Loan      to AMAC                                                         |   |                          | (2,191   | ) |   | (62,685 | ) |   | (15,000 | ) |
| Other      investments                                                    |   |                          | --       |   |   | (4,045 | ) |   | 21,806 |   |
| Net      cash flows from investing activities                             |   |                          | (116,095 | ) |   | (77,975 | ) |   | (442,202 | ) |
|  CASH      FLOWS FROM FINANCING ACTIVITIES:                          |   |                          |     |   |   |   |   |   |   |   |
| Distributions      to shareholders                                        |   |                          | (38,506  | ) |   | (104,436 | ) |   | (104,168 | ) |
| (Decrease)      increase in notes payable                                 |   |                          | --       |   |   | (84,351 | ) |   | 84,375 |   |
| Proceeds      from financing arrangements and secured financing           |   |                          | 62,424   |   |   | 3,049 |   |   | -- |   |
| Distributions      to minority interest in consolidated subsidiaries      |   |                          | (15,299  | ) |   | -- |   |   | -- |   |
| Proceeds      from 11.0% Preferred Shares                                 |   |                          | 131,235  |   |   | -- |   |   | -- |   |
| Proceeds      from 11.0% Preferred Shares rights offering                 |   |                          | 4,365    |   |   | -- |   |   | -- |   |
| Proceeds      from stock options exercised                                |   |                          | --       |   |   | 678 |   |   | 756 |   |
| Retirement      of special preferred voting shares                        |   |                          | 960      |   |   | (6) |   |   | 1,889 |   |
| Treasury      stock purchases                                             |   |                          | (4,365   | ) |   | (36,294 | ) |   | (20,447 | ) |
| Deferred      financing costs                                             |   |                          | (1,830   | ) |   | -- |   |   | (1,450 | ) |
|  Net      cash flows from financing activities                       |   |                          | 138,984  |   |   | (221,360 | ) |   | (39,045 | ) |
|  Net      increase (decrease) in cash and cash equivalents           |   |                          | (1,628   | ) |   | (23,997 | ) |   | (27,153 | ) |
|  Cash      and cash equivalents at the beginning of the period       |   |                          | 1,641    |   |   | 25,638 |   |   | 52,791 |   |
|  Cash      and cash equivalents at the end of the period             |   | $                             | 13       |   | $ | 1,641 |   | $ | 25,638 |   |
|  Supplemental      information                                       |   |                          |     |   |   |   |   |   |   |   |
|  Supplemental      disclosure of non-cash activities:                |   |                          |     |   |   |   |   |   |   |   |
| Contribution      of mortgage revenue bonds to subsidiaries               |   | $                             | --       |   | $ | 3,336 |   | $ | 35,413 |   |
|  Distribution      of mortgage revenue bonds from subsidiaries       |   | $                             | 36,670   |   | $ | -- |   | $ | 37,155 |   |
|  Non-cash      investing and financing activities:                   |   |                          |     |   |   |   |   |   |   |   |
| Recognized      sale of re-securitized mortgage revenue bonds:            |   |                          |     |   |   |   |   |   |   |   |
| Reductions      in secured financing liability                            |   | $                             | (2,790   | ) | $ | -- |   | $ | -- |   |
| Reduction      in mortgage revenue bonds                                  |   | $                             | 2,790    |   | $ | -- |   | $ | -- |   |
| Collection      of advances to partnerships                               |   | $                             | 2,605    |   | $ | -- |   | $ | -- |   |
| (Decrease)      in notes payable                                          |   | $                             | (2,605   | ) | $ | -- |   | $ | -- |   |

----

| (In      thousands)               |   | 2008   |   | 2007   |   | 2006   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                              |   |   |   |   |   |   |   |   |   |   |
| Centerline      Investors, L.L.C. |   |   | --     |   |   | --     |   |   | 15,957 |   |
| AMAC                              |   |   | 254    |   |   | 240    |   |   | -- |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   | Additions                             |   |                               |   |          |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|---------------------------------------|--------|------------------------------------|--------|---------------|--------|
| (in      thousands)                                                                                                                                                                                                                                                                                                                                                                        |   | Balance      atBeginning      ofPeriod |   | Charged      toCosts      andExpenses |   |  Charged      toOtherAccounts |   | Deductions(1) |   | Balance      atEnd      ofPeriod |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   |   |                                  |   |                               |   |          |   |   |   |   |   |   |   |   |
| 2008                                                                                                                                                                                                                                                                                                                                                                                       |   | $                                      | 18,350 |                                  | $      | 9,779                              |   | $             | (170   | ) | $ | (6,724 | ) | $ | 21,235 |   |
| 2007                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   | 10,408 |                                  |   | 17,450                             |   |          | --     |   |   | (9,508 | ) |   | 18,350 |   |
| 2006                                                                                                                                                                                                                                                                                                                                                                                       |   |                                   | 15,083 |                                  |   | 4,953                              |   |          | (373   | )(2) |   | (9,255 | ) |   | 10,408 |   |
|  (1)           Relates to either (a) receipt of previously reserved receivables      related to tax credit fund sponsorship or (b) receipt of previously      reserved interest receivable balances for mortgage revenue      bonds.(2)           Receipt of previously reserved interest amounts, net of additional      reserves. |

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