Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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(a)(1) Financial Statements

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

(2) Financial Statement Schedules

Our financial statement schedules are included in a separate section of this Annual Report on Form 10-K commencing on page F-32.

(3) Exhibits

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

(b) See Exhibit Index

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized this 27 day of February, 2007.


Federal Realty Investment Trust

By:		/s/ DONALD C. WOOD
		Donald C. Wood Chief Executive Officer

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


Signature	Title	Date

/s/ DONALD C. WOOD Donald C. Wood	Chief Executive Officer, Trustee (Principal Executive Officer)	February 27, 2007

/s/ LARRY E. FINGER Larry E. Finger	Executive Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)	February 27, 2007

/s/ JOSEPH S. VASSALLUZZO Joseph S. Vassalluzzo	Non-Executive Chairman	February 27, 2007

/s/ JON E. BORTZ Jon Bortz	Trustee	February 27, 2007

/s/ DAVID W. FAEDER David W. Faeder	Trustee	February 27, 2007

/s/ KRISTIN GAMBLE Kristin Gamble	Trustee	February 27, 2007

/s/ WALTER F. LOEB Walter F. Loeb	Trustee	February 27, 2007

/s/ GAIL P. STEINEL Gail P. Steinel	Trustee	February 27, 2007

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

Index to Consolidated Financial Statements and Schedules


Consolidated Financial Statements		Page No.
Management Assessment Report on Internal Control over Financial Reporting		F-2
Report of Independent Registered Public Accounting Firm		F-3
Report of Independent Registered Public Accounting Firm		F-4
Consolidated Balance Sheets		F-5
Consolidated Statements of Operations		F-6
Consolidated Statements of Common Shareholders’ Equity		F-7
Consolidated Statements of Cash Flows		F-8
Notes to Consolidated Financial Statements		F-9-F-32

Financial Statement Schedules
Schedule III—Summary of Real Estate and Accumulated Depreciation		F-33-F-39
Schedule IV—Mortgage Loans on Real Estate		F-40-F-41

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

F-1

Management Assessment Report on Internal Control over Financial Reporting

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

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

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

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

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

Management conducted an assessment of the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2006. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on this assessment, management concluded that our internal control over financial reporting is effective based on those criteria, as of the end of our most recent fiscal year.

Our independent registered public accounting firm has issued an attestation report on management’s assessment of our internal control over financial reporting. This report appears on page F-3.

F-2

Report Of Independent Registered Public Accounting Firm

Trustees and shareholders of Federal Realty Investment Trust

We have audited management’s assessment, included in the accompanying Management Assessment Report on Internal Control over Financial Reporting, that Federal Realty Investment Trust (a Maryland real estate investment trust) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Trust’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

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

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

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

In our opinion, management’s assessment that the Trust maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, the Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Federal Realty Investment Trust (a Maryland real estate investment trust) and subsidiaries (the Trust) as of December 31, 2006 and 2005, and the related consolidated statements of operations, common shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006, and our report dated February 26, 2007 expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

McLean, Virginia

February 26, 2007

F-3

Report Of Independent Registered Public Accounting Firm

Trustees and shareholders of Federal Realty Investment Trust

We have audited the accompanying consolidated balance sheets of Federal Realty Investment Trust (a Maryland real estate investment trust) and subsidiaries (the Trust) as of December 31, 2006 and 2005, and the related consolidated statements of operations, common shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Trust as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The Schedules III and IV are presented for the purposes of additional analysis and are not a required part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

As discussed in Note 1 to the Notes to Consolidated Financial Statements, the Company adopted SFAS No. 123R, “Share-Based Payment,” effective January 1, 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 26, 2007 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

McLean, Virginia

February 26, 2007

F-4

Federal Realty Investment Trust

CONSOLIDATED BALANCE SHEETS


	December 31,
	2006			2005
	(In thousands)
ASSETS
Real estate, at cost
Operating	$	3,104,484		$	2,731,694
Construction-in-progress		99,774			50,593
Discontinued operations		—			47,034

		3,204,258			2,829,321
Less accumulated depreciation and amortization		(740,507	)		(663,750	)

Net real estate		2,463,751			2,165,571
Cash and cash equivalents		11,495			8,639
Accounts and notes receivable		47,493			38,161
Mortgage notes receivable		40,756			40,531
Investment in real estate partnership		10,322			9,375
Prepaid expenses and other assets		106,172			83,168
Debt issuance costs, net of accumulated amortization of $7,474 and $7,592, respectively		8,617			5,407

TOTAL ASSETS	$	2,688,606		$	2,350,852

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Mortgages payable	$	311,037		$	270,898
Obligations under capital leases		149,361			148,815
Notes payable		109,024			316,755
Senior notes and debentures		1,127,508			653,675
Accounts payable and accrued expenses		97,727			88,089
Dividends payable		31,809			31,268
Security deposits payable		10,126			8,807
Other liabilities and deferred credits		45,745			38,505

Total liabilities		1,882,337			1,556,812
Minority interests		22,191			19,193
Commitments and contingencies (Note 9)
Shareholders’ equity
Preferred stock, authorized 15,000,000 shares, $.01 par:
8.5% Series B Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25 per share), 0 and 5,400,000 shares, respectively		—			135,000
Common shares, $.01 par, 100,000,000 shares authorized, 56,805,816 and 54,371,057 issued, respectively		568			544
Additional paid in capital		1,281,217			1,114,732
Accumulated dividends in excess of net income		(467,369	)		(437,817	)
Treasury shares at cost, 1,485,279 and 1,480,360 respectively		(28,807	)		(28,794	)
Deferred compensation on restricted shares		—			(9,704	)
Notes receivable from issuance of common shares		(1,531	)		(1,792	)
Accumulated other comprehensive income		—			2,678

Total shareholders’ equity		784,078			774,847

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,688,606		$	2,350,852

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

F-5

Federal Realty Investment Trust

CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended December 31,
	2006			2005			2004
	(In thousands, except per share data)
REVENUE
Rental income	$	438,201		$	393,548		$	368,299
Other property income		7,726			9,551			10,398
Mortgage interest income		5,095			5,370			4,915

		451,022			408,469			383,612

EXPENSES
Rental		88,130			84,736			89,940
Real estate taxes		44,898			39,372			37,351
General and administrative		21,340			19,909			18,164
Depreciation and amortization		97,618			88,927			86,597

		251,986			232,944			232,052

OPERATING INCOME		199,036			175,525			151,560
Other interest income		2,545			2,215			1,504
Interest expense		(102,808	)		(88,566	)		(85,058	)
Income from real estate partnership		656			493			205
Minority interests		(4,353	)		(5,234	)		(4,170	)

INCOME FROM CONTINUING OPERATIONS		95,076			84,433			64,041
DISCONTINUED OPERATIONS
(Loss) income from discontinued operations		(320	)		(569	)		6,063
Gain on sale of real estate, net of taxes		23,956			30,748			14,052

Results from discontinued operations		23,636			30,179			20,115

NET INCOME		118,712			114,612			84,156
Dividends on preferred stock		(10,423	)		(11,475	)		(11,475	)
Preferred stock redemption costs		(4,775	)		—			—

NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS	$	103,514		$	103,137		$	72,681

EARNINGS PER COMMON SHARE, BASIC
Income from continuing operations available for common shareholders	$	1.50		$	1.39		$	1.03
(Loss) income from discontinued operations		(0.01	)		(0.01	)		0.12
Gain on sale of real estate		0.45			0.58			0.27

	$	1.94		$	1.96		$	1.42

Weighted average number of common shares, basic		53,469			52,533			51,008

EARNINGS PER COMMON SHARE, DILUTED
Income from continuing operations available for common shareholders	$	1.48		$	1.37		$	1.02
(Loss) income from discontinued operations		(0.01	)		(0.01	)		0.12
Gain on sale of real estate		0.45			0.58			0.27

	$	1.92		$	1.94		$	1.41

Weighted average number of common shares, diluted		53,962			53,050			51,547

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

F-6

Federal Realty Investment Trust

CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS’ EQUITY


	Year Ended December 31,
	2006								2005								2004
	Shares		Amount			Additional Paid-in Capital			Shares		Amount			Additional Paid-in Capital			Shares		Amount			Additional Paid-in Capital
	(In thousands, except share data)
Common shares
Balance, beginning of year	54,371,057		$	544		$	1,114,732		53,616,827		$	536		$	1,108,213		50,670,851		$	507		$	980,227
Cumulative effect of change in accounting principle	—			—			(6,416	)	—			—			—		—			—			—
Exercise of stock options	266,579			2			8,843		409,920			4			10,947		348,888			3			8,586
Shares issued under dividend reinvestment plan	44,077			—			3,101		62,579			1			3,424		82,391			1			3,439
Grants of common shares	—			—			—		78,591			1			4,061		84,617			1			3,632
Share-based compensation expense (SFAS No. 123 (R)	84,217			1			6,490
Reclassification for preferred stock redemption	—			—			4,775		—			—			—		—			—			—
Issuance of shares in public offering	2,002,670			20			149,077		—			—			—		2,186,749			22			99,011
Conversion and redemption of OP units	37,216			1			615		203,140			2			(12,806	)	203,130			2			8,686
Shares issued to purchase partnership interests	—			—			—		—			—			—		40,201			—			1,862
Deferred stock compensation associated with variable accounting (APB No. 25)	—			—			—		—			—			893		—			—			2,770

Balance, end of year	56,805,816		$	568		$	1,281,217		54,371,057		$	544		$	1,114,732		53,616,827		$	536		$	1,108,213

Accumulated dividends in excess of net income
Balance, beginning of year			$	(437,817	)						$	(416,026	)						$	(386,738	)
Net income				118,712								114,612								84,156
Dividends declared to common shareholders				(133,066	)							(124,928	)							(101,969	)
Preferred share dividends				(10,423	)							(11,475	)							(11,475	)
Preferred share redemption costs				(4,775	)							—								—

Balance, end of year			$	(467,369	)						$	(437,817	)						$	(416,026	)

Treasury shares
Balance, beginning of year	(1,480,360	)	$	(28,794	)				(1,480,202	)	$	(28,786	)				(1,470,275	)	$	(28,445	)
Unvested shares forfeited	(4,919	)		(13	)				(158	)		(8	)				(9,927	)		(341	)

Balance, end of year	(1,485,279	)	$	(28,807	)				(1,480,360	)	$	(28,794	)				(1,480,202	)	$	(28,786	)

Deferred compensation on unvested shares
Balance, beginning of year			$	(9,704	)						$	(8,641	)						$	(5,474	)
Cumulative effect of change in accounting principle				9,704
Shares issued, net of forfeitures				—								(3,494	)							(3,099	)
Vesting of shares				—								2,431								(68	)

Balance, end of year			$	—							$	(9,704	)						$	(8,641	)

Notes receivable from issuance of common shares
Balance, beginning of year			$	(1,792	)						$	(2,083	)						$	(3,615	)
Loans issued				—								—								(411	)
Loans paid				261								291								1,943

Balance, end of year			$	(1,531	)						$	(1,792	)						$	(2,083	)

Accumulated other comprehensive income (loss)
Balance, beginning of year			$	2,678							$	2,321							$	(87	)
Change due to recognizing gain on securities				—								60								27
Change in valuation on interest rate swaps				(1,493	)							297								2,381
Change due to termination of hedge relationship (included in income)				(1,185	)							—								—

Balance, end of year			$	—							$	2,678							$	2,321

Comprehensive income
Net income			$	118,712							$	114,612							$	84,156
Change due to recognizing gain on securities				—								60								27
Change in valuation on interest rate swaps				(1,493	)							297								2,381

Total comprehensive income			$	117,219							$	114,969							$	86,564

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

F-7

Federal Realty Investment Trust

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
	2006			2005			2004
	(In thousands)
OPERATING ACTIVITIES
Net income	$	118,712		$	114,612		$	84,156
Adjustment to reconcile net income to net cash provided by operating activities
Depreciation and amortization, including discontinued operations		97,879			91,503			90,438
Gain on sale of real estate		(23,956	)		(30,748	)		(14,052	)
Equity in income from real estate partnership		(656	)		(493	)		(205	)
Minority interests		4,353			5,234			4,170
Other, net		75			4,302			3,336
Changes in assets and liabilities net of effects of acquisitions and dispositions:
Increase in accounts receivable		(3,786	)		(3,274	)		(1,879	)
(Increase) decrease in prepaid expenses and other assets		(9,114	)		(3,964	)		4,255
(Decrease) increase in accounts payable, security deposits and prepaid rent		(1,118	)		(1,277	)		1,394
Increase (decrease) in accrued expenses		2,012			(954	)		2,535

Net cash provided by operating activities		184,401			174,941			174,148

INVESTING ACTIVITIES
Acquisition of real estate		(266,984	)		(96,920	)		(101,688	)
Capital expenditures—development and redevelopment		(95,718	)		(143,981	)		(53,374	)
Capital expenditures—other		(23,961	)		(25,676	)		(38,112	)
Proceeds from sale of real estate		82,345			113,141			56,125
Investment in real estate partnership		(4,960	)		(13	)		(9,426	)
Distribution from real estate partnership in excess of earnings		631			—			—
Leasing costs		(8,628	)		(8,628	)		(7,964	)
(Issuance) repayment of mortgage and other notes receivable, net		(154	)		9,347			(3,172	)

Net cash used in investing activities		(317,429	)		(152,730	)		(157,611	)

FINANCING ACTIVITIES
Net borrowings (repayment) under revolving credit facility, net of costs		43,457			500			(44,750	)
Issuance of senior debentures, net of costs		509,892			124,013			74,099
Issuance of note payable, net of costs		149,979			—			—
Repayment of senior debentures		(40,500	)		(40,000	)		(39,500	)
Repayment of mortgages, capital leases and notes payable		(405,552	)		(4,555	)		(3,623	)
Redemption of Series B preferred shares		(135,000	)		—			—
Issuance of common shares		158,190			11,234			109,051
Dividends paid to common and preferred shareholders		(139,845	)		(130,500	)		(108,756	)
Distributions to minority interests		(4,737	)		(4,739	)		(7,551	)

Net cash provided by (used in) financing activities		135,884			(44,047	)		(21,030	)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		2,856			(21,836	)		(4,493	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		8,639			30,475			34,968

CASH AND CASH EQUIVALENTS, END OF YEAR	$	11,495		$	8,639		$	30,475

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

F-8

Federal Realty Investment Trust

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006, 2005 and 2004

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Organization

Federal Realty Investment Trust (the “Trust”) is an equity real estate investment trust specializing in the ownership, management, development and redevelopment of retail and mixed-use properties. Our properties are located primarily in densely populated and affluent communities in strategic metropolitan markets in the Mid-Atlantic and Northeast regions of the United States, as well as in California.

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

We have elected to treat certain of our subsidiaries as taxable REIT subsidiaries, each of which we refer to as a TRS. In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Code. A TRS is subject to federal and state income taxes. The sales of condominiums at Santana Row beginning in August 2005 were conducted through a TRS. As a result of these condominium sales, our TRS incurred approximately $2.4 million and $3.5 million of income taxes in 2006 and 2005, respectively. Prior to 2005, our TRS activities were limited and they did not incur any significant income taxes.

Principles of Consolidation and Estimates

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

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

Revenue Recognition and Accounts Receivable

Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed escalations which occur at specified times during the term of the lease. Base rents are recognized on a straight-line basis from when the tenant controls the space through the term of the related lease, net of valuation adjustments, based on management’s assessment of credit, collection and other business risk. Percentage rents, which represent additional rents based upon the level of sales achieved by certain tenants, are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved and the percentage rents are collectible. Real estate tax and other cost reimbursements are recognized on an accrual basis over the periods in which the related expenditures are incurred. We make estimates of the collectibility of our accounts receivable related to minimum rents, straight-line rents, expense reimbursements and other revenue or income. In some cases, primarily relating to straight-line rents, the collection of these amounts extends beyond one year. Our experience relative to unbilled straight-line rents is that a certain portion of the amounts otherwise recognizable as revenue is never billed to or collected from tenants due to early lease terminations, lease modifications, bankruptcies and other factors. Accordingly, the extended collection period for straight-line rents along with our evaluation of

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tenant credit risk may result in the nonrecognition of a portion of straight-line rental income until the collection of such income is reasonably assured. At December 31, 2006 and 2005, accounts receivable include approximately $24.8 million and $19.1 million, respectively, related to straight-line rents. At December 31, 2006 and 2005 our allowance for doubtful accounts was $6.2 million and $6.3 million, respectively.

Real Estate

Land, buildings and improvements are recorded at cost. Depreciation is computed using the straight-line method. Estimated useful lives range generally from 35 years to a maximum of 50 years on buildings and major improvements. Minor improvements, furniture and equipment are capitalized and depreciated over useful lives ranging from three to 15 years. Maintenance and repairs that do not improve or extend the useful lives of the related assets are charged to operations as incurred. Tenant improvements are capitalized and depreciated over the life of the related lease or their estimated useful life, whichever is shorter. If a tenant vacates its space prior to contractual termination of its lease, the undepreciated balance of any tenant improvements are written off if they are replaced.

In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 66, “Accounting for Sales of Real Estate,” sales are recognized at closing only when sufficient down payments have been obtained, possession and other attributes of ownership have been transferred to the buyer and we have no significant continuing involvement. The application of SFAS No. 66 can be complex and requires us to make assumptions. We believe the criteria of SFAS No. 66 was met for all real estate sold during 2006, 2005 and 2004 and accordingly, the full gain related to these sales was recognized at the time of sale.

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

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

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

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

Cash and Cash Equivalents

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

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Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist primarily of lease costs, prepaid property taxes and acquired above market leases. Capitalized lease costs are direct costs incurred which were essential to originate a lease and would not have been incurred had the leasing transaction not taken place and include third party commissions and salaries and related costs of personnel directly related to time spent obtaining a lease. Capitalized lease costs are amortized over the life of the related lease. If a tenant vacates its space prior to the contractual termination of its lease, the unamortized balance of any lease costs are written off. Other assets also include the premiums paid for split dollar life insurance covering several officers and former officers which were approximately $4.6 million and $4.5 million at December 31, 2006 and December 31, 2005, respectively.

Debt Issuance Costs

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

Derivative Instruments

We enter into interest rate swaps and treasury rate locks that qualify as cash flow hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” We generally enter into interest rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising prior to the issuance of debt. We do not purchase derivatives for speculation. Our cash flow hedges are recorded at fair value. The effective portion of changes in fair value of our cash flow hedges is recorded in other comprehensive income and reclassified to earnings when the hedged item affects earnings. The ineffective portion of changes in fair value of our cash flow hedges is recognized in earnings in the period affected. We assess effectiveness of our cash flow hedges both at inception and on an ongoing basis. Hedge ineffectiveness did not have a significant impact on earnings in 2006, 2005 and 2004, and we do not anticipate it will have a significant effect in the future.

In January 2004, we entered into an interest rate swap to fix the LIBOR portion of our $150 million term loan issued in October of 2003. This swap fixed the LIBOR portion at 2.401% through October 2006. The full notional amount of this swap qualified as a cash flow hedge until we repaid the $150 million term loan on July 17, 2006. We did not redesignate this swap and the related $1.2 million included in accumulated other comprehensive income was recognized into earnings.

In August 2002, in anticipation of a $150 million senior unsecured note offering, we entered into a treasury lock that fixed the five year treasury rate at 3.472% through August 19, 2002. On August 16, 2002, we priced the senior unsecured notes with a scheduled closing date of August 21, 2002 and closed on the associated rate lock. Five-year treasury rates declined between the pricing period and the settlement if the rate lock and therefore, we paid $1.5 million to settle the rate lock. As a result of the August 19, 2002 fire at Santana Row, we did not proceed with the note offering at that time. However, we consummated a $150 million, 6.125% Senior Unsecured Note offering on November 2002, and thus, the hedge loss is being amortized into interest expense over the life of these notes.

We also purchased an interest rate swap that terminated March 2006, with a notional amount of $40.5 million upon issuance of our 6.99% Medium Term Notes, which reduced the effective interest rate from 6.99% to 6.894%.

Acquisition, Development and Construction Loan Arrangements

We have made certain mortgage loans that, because of their nature, qualify as loan receivables. At the time the loans were made, we did not intend for the arrangement to be anything other than a financing and did not contemplate a real estate investment. Using guidance set forth in the Third Notice to Practitioners issued by the AICPA in February 1986 entitled “ADC Arrangements” (“the Third Notice”), we evaluate each investment to determine whether the loan arrangement qualifies under the Third Notice as a loan, joint venture or real estate investment and the appropriate accounting thereon. Such determination affects our balance sheet classification of these investments and the recognition of interest income derived therefrom. Generally, we receive additional interest on these loans, however we never receive in excess of 50% of the residual profit in the project (as

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defined in the Third Notice) and because the borrower has either a substantial investment in the project or has guaranteed all or a portion of our loan (or a combination thereof) the loans qualify for loan accounting. The amounts under ADC arrangements are presented as mortgage notes receivable at December 31, 2006 and 2005.

Earnings Per Share

We calculate basic and diluted earnings per share in accordance with SFAS No. 128, “Earnings Per Share.” Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income available for common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares and then shared in our earnings. In 2006, 2005 and 2004, operating partnership units were excluded from diluted EPS as the conversion of these units would have resulted in an anti-dilutive effect.

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


	Year Ended December 31,
	2006			2005			2004
	(In thousands, except per share data)
NUMERATOR
Income from continuing operations	$	95,076		$	84,433		$	64,041
Preferred stock dividends		(10,423	)		(11,475	)		(11,475	)
Preferred stock redemption costs		(4,775	)		—			—

Income from continuing operations available for common shareholders		79,878			72,958			52,566
Loss (income) from discontinued operations		(320	)		(569	)		6,063
Gain on sale of real estate		23,956			30,748			14,052

Net income available for common shareholders, basic and dilutive	$	103,514		$	103,137		$	72,681

DENOMINATOR
Weighted average common shares outstanding—basic		53,469			52,533			51,008
Effect of dilutive securities:
Stock options		389			517			539
Unvested stock		104			—			—

Weighted average common shares outstanding—dilutive		53,962			53,050			51,547

EARNINGS PER COMMON SHARE, BASIC
Continuing operations	$	1.50		$	1.39		$	1.03
(Loss) income from discontinued operations		(0.01	)		(0.01	)		0.12
Gain on sale of real estate		0.45			0.58			0.27

	$	1.94		$	1.96		$	1.42

EARNINGS PER COMMON SHARE, DILUTED
Continuing operations	$	1.48		$	1.37		$	1.02
(Loss) income from discontinued operations		(0.01	)		(0.01	)		0.12
Gain on sale of real estate		0.45			0.58			0.27

	$	1.92		$	1.94		$	1.41

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Cumulative Effect of Change in Accounting Principle

Prior to January 1, 2006, we accounted for stock based compensation under the recognition and measurement provisions of Accounting Principle Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, as permitted by Financial Accounting Standard (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” Under APB No. 25, no stock based compensation costs were recognized in the Statement of Operations for stock options as our options granted had an exercise price equal to the market value of our common shares on the date of grant. Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based Payment,” using the modified-prospective-transition method. Under this transition method, compensation cost recognized beginning January 1, 2006 includes: (a) compensation costs for all share-based payments granted prior to, but not vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). Prior to January 1, 2006, we used the Black-Scholes model to value stock options and we intend to continue to use this model to value stock options issued subsequent to January 1, 2006.

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

Share-Based Compensation Subsequent to the Adoption of SFAS No. 123(R)

A summary of share-based compensation expense included in net income for the year ended December 31, 2006 is as follows:


	Year Ended December 31, 2006
	(In thousands)
Share-based compensation incurred
Grants of common shares	$	5,156
Grants of options		1,334

		6,490
Capitalized share-based compensation		(620	)

Share-based compensation expensed	$	5,870

If we had not adopted SFAS No. 123(R), our net income for the twelve and three months ended December 31, 2006 would have excluded share-based compensation related to options of $1.3 million and $0.5 million, respectively, and included variable stock compensation related to our performance shares of $1.5 million and $0.6 million, respectively. Under SFAS No. 123(R), the compensation associated with our unvested performance shares is now fixed at their grant-date fair value. Accordingly, if we had not adopted SFAS No. 123(R), our income from continuing operations, net income, basic earnings per share and dilutive earnings per share for the twelve and three months ended December 31, 2006 would not have been materially different. While there are certain differences between SFAS No. 123 and 123(R), we believe the pro forma disclosures under SFAS No. 123 presented below approximate the effect of SFAS No. 123(R) for the twelve and three months ended December 31, 2005.

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Pro Forma Information for Period Prior to Adoption of SFAS No. 123(R)

The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of SFAS No. 123 to our stock based compensation.


	2005			2004
		(In thousands, except per share data)
Net income, as reported	$	114,612		$	84,156
Stock-based employee compensation cost included in net income		3,992			3,497
Stock-based employee compensation cost under the fair value method for all rewards		(3,802	)		(2,800	)

Pro forma net income—basic	$	114,802		$	84,853

Earnings Per Share:
Basic, as reported	$	1.96		$	1.42
Basic, pro forma	$	1.97		$	1.44
Net income available for common shareholders, diluted	$	103,137		$	72,681
Stock-based employee compensation cost included in net income		3,992			3,497
Stock-based employee compensation cost under the fair value method for all rewards		(3,802	)		(2,800	)

Pro forma net income—diluted	$	103,327		$	73,378

Earnings Per Share:
Diluted, as reported	$	1.94		$	1.41
Diluted, pro forma	$	1.95		$	1.42

Redemption of Preferred Stock

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

Variable Interest Entities

In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46 (revised December 2003) (“FIN 46-R”), “Consolidation of Variable Interest Entities.” FIN 46-R clarifies the application of Accounting Research Bulletin 51, Consolidated Financial Statements, for certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties or in which equity investors do not have the characteristics of a controlling financial interest (“variable interest entities”). Variable interest entities within the scope of FIN 46-R are required to be consolidated by their primary beneficiary. The primary beneficiary of a variable interest entity is determined to be the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected returns, or both. We have evaluated the applicability of FIN 46-R to our investments in certain restaurant joint ventures and our real estate partnership with affiliates of Clarion Lion Properties Fund and determined that these joint ventures do not meet the requirements of a variable interest entity and, therefore, consolidation of these ventures is not required. These investments are accounted for using the equity method. We have also evaluated the applicability of FIN 46-R to our mortgage loans receivable and determined that they are not variable interest entities.

Our investment balance in these restaurant joint ventures was approximately $8.6 million and $6.8 million at December 31, 2006 and 2005, respectively. Our equity in earnings from these restaurant joint ventures was $1.5 million, $1.3 million and $1.1 million in 2006, 2005 and 2004, respectively. Our investment balances and earnings from mortgage notes receivable and our real estate partnership are presented in our consolidated balance sheets and consolidated statements of operations.

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

On October 16, 2006, we acquired the leasehold interest in Melville Mall under a 20 year master lease. Additionally, we loaned the owner of Melville Mall $34.2 million secured by a second mortgage on the property. We have an option to purchase the shopping center on or after October 16, 2021 for a price of $5.0 million plus the assumption of the first mortgage and repayment of the second mortgage. We have determined that this property is held in a variable interest entity for which we are the primary beneficiary. Accordingly, beginning October 16, 2006, we consolidated this property and its operations.

Consolidated Statements of Cash Flows – Supplemental Disclosures

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


	2006			2005			2004
	(In thousands)
SUPPLEMENTAL DISCLOSURES:
Total interest costs incurred	$	106,877		$	94,257		$	90,179
Interest capitalized		(4,069	)		(5,691	)		(5,121	)

Interest expense	$	102,808		$	88,566		$	85,058

Cash paid for interest	$	92,054		$	84,796		$	80,614

Cash paid for income taxes	$	5,979	(1)	$	82		$	181

NON-CASH FINANCING TRANSACTIONS:
Mortgage loans assumed with acquisitions	$	44,297		$	22,258		$	—

(1)	Cash paid for income taxes for 2006 includes $5.5 million related to the sales of condominiums at Santana Row which were conducted through a TRS.

New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”—an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 was issued to reduce the diversity in practice associated with certain aspects of recognition, disclosure and measurement related to accounting for uncertain income tax positions. We are required to adopt FIN 48 effective January 1, 2007. We do not believe the adoption of FIN 48 will have a material impact on our financial position, results of operations or cash flows.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108 (“SAB 108”), “Considering the Effects of Prior Year Misstatements in Current Year Financial Statements.” SAB 108 was issued to provide consistency between how registrants quantify financial statements misstatements. Historically, there have been two widely-used methods for quantifying the effects of financial statement misstatements. These methods are commonly referred to as the “roll-over” method and “iron curtain” method. The roll-over method quantifies the amount by which the current income statement is misstated. The iron curtain quantifies the error as the cumulative amount by which the current year balance sheet is misstated.

SAB 108 establishes an approach that requires quantification of financial statement misstatements based on the effects of the misstatement on each the income statement, balance sheet and the related disclosures. This approach is commonly referred to as the “dual approach.” We adopted SAB 108 during the fourth quarter of 2006 in connection with the preparation of our annual financial statements for the year ending December 31, 2006. The adoption of SAB 108 did not have a material impact on our financial positions, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies to accounting pronouncements that require or permit fair value measurements, except for share-based payments under SFAS No. 123R. We are required to

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adopt SFAS No. 157 effective January 1, 2008. We do not believe the adoption of SFAS No. 157 will have a material impact on our financial position, results of operations or cash flows.

NOTE 2. REAL ESTATE

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


	Cost		Accumulated Depreciation and Amortization		Encumbrances
	(In thousands)
December 31, 2006
Retail and mixed-use properties	$	2,885,451	$	630,600	$	311,073
Retail properties under capital leases		291,944		101,951		149,361
Residential		26,863		7,956		—

	$	3,204,258	$	740,507	$	460,434	(1)

December 31, 2005
Retail and mixed-use properties	$	2,540,395	$	563,391	$	270,898
Retail properties under capital leases		262,083		92,943		148,815
Residential		26,843		7,416		—

	$	2,829,321	$	663,750	$	419,713

(1)	The encumbrances as of December 31, 2006, differs from the balance sheet due to the net unamortized discount on mortgages payable.

Retail and mixed-use properties includes the residential portion of our Santana Row development property. The residential property investments are comprised of our investments in Rollingwood Apartments and Crest Apartments at Congressional Plaza.

A summary of our significant acquisitions in 2006 and 2005 is as follows:


Date	Property	City, State	Gross Leasable Area	Purchase Price (1)
			(In square feet)	(In millions)
Year ended December 31, 2006
January 20	4900 Hampden Lane	Bethesda, MD	35,000	$	12.0
January 27	7770 Richmond Hwy	Alexandria, VA	60,000	$	9.9
June 29	Town Center of New Britain	New Britain, PA	126,000	$	12.8
August 24	Key Road Plaza	Keene, NH	76,000	$	14.5
August 24	Riverside Plaza	Keene, NH	218,000	$	24.0	(2)
August 24	Bath Shopping Center	Bath, ME	101,000	$	22.8	(3)
August 24	Linden Square	Wellesley, MA	261,000	$	99.6	(4)
August 24	North Dartmouth	North Dartmouth, MA	183,000	$	27.5
August 25	Chelsea Commons	Chelsea, MA	180,000	$	20.1	(5)
Various after September 13	Rockville Town Square	Rockville, MD	152,000	$	5.9	(6)
October 16	Melville Mall	Huntington, NY	248,000	$	60.0	(7)

		Total	1,640,000	$	309.1


Year ended December 31, 2005
March 1	Assembly Sq./Sturtevant St.	Somerville, MA	551,000	$	66.4	(8)
December 29	Crow Canyon Commons	San Ramon, CA	228,000	$	47.5	(9)

		Total	779,000	$	113.9

(1)	If not specifically noted, the net assets acquired that were allocated to other assets for “above market leases” and liabilities for “below market leases” were not significant.

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(2)	Approximately $0.4 million and $3.9 million of the net assets acquired were allocated to other assets for “above market leases” and liabilities for “below market leases,” respectively.

(3)	Approximately $2.2 million of the net assets acquired were allocated to other assets for “above market leases.” Purchase price includes the assumption of debt with a fair value of approximately $11.1 million.

(4)	Approximately $2.2 million and $1.1 million of the net assets acquired were allocated to other assets for “above market leases” and liabilities for “below market leases,” respectively.

(5)	Approximately $2.5 million and $0.1 million of the net assets acquired were allocated to other assets for “above market leases” and liabilities for “below market leases,” respectively. Purchase price includes the assumption of debt with a fair value of approximately $8.0 million.

(6)	We intend to acquire an additional 32,000 square feet of gross leasable area. No square footage has been placed in service. The Grand Opening is scheduled for May 2007.

(7)

The Trust controls and consolidates Melville Mall at its approximate fair value of $60.0 million. We gained control of Melville Mall through a 20-year master lease and $34.1 million secondary financing to the owner. The master lease includes a purchase option in 2021 for $5.0 million plus the assumption of the owner’s $25.8 million first mortgage. Approximately $0.1 million and $4.5 million of the net assets acquired were allocated to other assets for “above market leases” and liabilities for “below market leases”, respectively.

(8)	Approximately $3.4 million and $5.1 million of the net assets acquired were allocated to other assets for “above market leases” and liabilities for “below market leases”, respectively.

(9)	Approximately $0.8 million and $3.1 million of the net assets acquired were allocated to other assets for “above market leases” and liabilities for “below market leases”, respectively. Additionally, the purchase price includes $22.3 million for an assumed mortgage.

A summary of our significant dispositions in 2006 and 2005 is as follows:


Sales Date	Property	Location	Year Acquired or Built	Gross Leasable Area	Sales Price		Gain
				(In square feet)	(In millions)
Year ended December 31, 2006
January-August	Santana Row Condominiums (89 units)(1)	San Jose, CA	2002	N/A	$	64.1	$	16.5	(2)
June 5	Greenlawn Plaza	Huntington, NY	2000	102,000	$	20.4	$	7.4	(3)

		Total		102,000	$	84.5	$	23.9

Year ended December 31, 2005
February 15	420 & 501 South Mill	Tempe, AZ	1998	40,000	$	13.7	$	4.0
June 2	Cone & Andary Buildings	Winter Park, FL	1996	28,000	$	11.1	$	3.5
July 12	Shaw’s Plaza	Carverm MA	2004	75,000	$	4.0		—
Various after August 26	Santana Row Condominiums (130 units)	San Jose, CA	2002	N/A	$	89.2	$	23.5	(4)

		Total		143,000	$	118.0	$	31.0

(1)	As of August 25, 2006, we had sold all of the 219 condominium units we currently intend to sell at Santana Row.

(2)	Gain of $16.5 million is net of $2.4 million in taxes.

(3)	This property was contributed to our real estate partnership in which we own a 30% interest. Accordingly, we recognized a partial gain of $7.4 million on this sale related to the 70% equity interest contributed.

(4)	Gain of $23.5 million is net of $3.4 million in taxes.

NOTE 3. MORTGAGE NOTES RECEIVABLE

At December 31, 2006 and 2005, we had mortgage notes receivable with an aggregate carrying amount of $40.8 million and $40.5 million, respectively, which are both net of a valuation allowance of $5.0 million. These mortgage notes are due over various terms from August 2016 to May 2021. At December 31, 2006 and 2005, our mortgages had a weighted average interest rate of 10.0% and 11.90%, respectively. Under the terms of certain of these mortgages, we receive additional interest based upon the gross income of the secured properties and, upon sale of the properties, we will share in the appreciation of the properties.

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On August 4, 2006, we amended the $17.7 million second mortgage note receivable which is secured by a hotel in San Jose, California. The amended note decreased the interest rate from 14% to 9% per annum, requires monthly payments of principal and interest based on a 15-year amortization schedule and matures on August 20, 2016.

We made a $5.9 million loan secured by a building in San Francisco, California in January 2001 that was originally due February 28, 2003 but was not repaid on the due date. The loan was renegotiated with an interest rate of 6.0% and repaid in full on August 23, 2005.

NOTE 4. REAL ESTATE PARTNERSHIP

In July 2004, we entered into a joint venture arrangement (“the Partnership”) by forming a limited partnership with affiliates of Clarion Lion Properties Fund (“Clarion”), a discretionary fund created and advised by ING Clarion Partners. We own 30% of the equity in the Partnership, and Clarion owns 70%. The Partnership plans to acquire up to $350 million of stabilized, supermarket-anchored shopping centers in the Trust’s East and West regions. Federal Realty and Clarion have committed to contribute to the Partnership up to $37 million and $86 million, respectively, of equity capital to acquire properties. No assurances can be made that we will identify properties that meet the acquisition requirements of the Partnership. We are the manager of the Partnership and its properties, earning fees for acquisitions, management, leasing, and financing. We also have the opportunity to receive performance-based earnings through our Partnership interest. In 2004, the venture acquired four shopping centers in the East for $75.8 million and in 2006, the venture acquired an additional two shopping centers in the East for $45.5 million. As of December 31, 2006, we have made total contributions of $14.4 million and received total distributions of $2.0 million. We account for our interest in the Partnership using the equity method.

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


	Year Ended December 31,				Period from Inception (July 1, 2004) to December 31,
	2006		2005		2004
	(In thousands)
OPERATING RESULTS
Revenue	$	10,523	$	8,384	$	2,489
Expenses
Depreciation and amortization		2,767		2,099		626
Other operating expenses		2,828		2,178		565
Interest expense		3,506		2,464		616
Total expenses		9,101		6,741		1,807
Net income	$	1,422	$	1,643	$	682

Our share of net income from real estate partnership	$	656	$	493	$	205


	December 31,
	2006		2005
	(In thousands)
BALANCE SHEETS
Real estate, net	$	123,478	$	79,050
Cash		2,116		1,452
Other assets		4,064		3,599

Total assets	$	129,658	$	84,101

Mortgages payable	$	77,425	$	47,225
Other liabilities		6,716		5,506
Partners’ capital		45,517		31,370

Total liabilities and partners’ capital	$	129,658	$	84,101

Our share of unconsolidated debt	$	23,228	$	14,168

Our investment in real estate partnership	$	10,322	$	9,375

F-18

For mortgage notes totaling $36.7 million at December 31, 2006 that are secured by three properties owned by subsidiaries of the Partnership, we are the guarantor for the obligations of the joint venture, which are commonly referred to as “non-recourse carve-outs.” We are not guaranteeing repayment of the debt itself. The Partnership indemnifies us for any loss we incur under these guarantees.

NOTE 5. ACQUIRED IN-PLACE LEASES

Acquired above market leases are included in prepaid expenses and other assets and had a balance, net of amortization, of $13.4 million and $6.0 million at December 31, 2006 and 2005, respectively. Acquired below market leases are included in other liabilities and deferred credits and had a balance, net of amortization, of $33.2 million and $25.7 million at December 31, 2006 and 2005, respectively. The value allocated to in-place leases is amortized over the related lease term and reflected as additional rental income for below market leases or a reduction of rental income for above market leases in the statement of operations. Rental income included net amortization from acquired in-place leases of $2.5 million, $1.6 million and $1.7 million in 2006, 2005 and 2004, respectively.

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


	Above Market Leases		Below Market Leases
	(In thousands)
Year ending December 31,
2007	$	1,632		4,636
2008		1,500		3,466
2009		1,295		2,336
2010		1,037		2,080
2011		889		1,859
Thereafter		7,011		18,824

	$	13,364	$	33,201

F-19

NOTE 6. DEBT

The following is a summary of our total debt outstanding as of December 31, 2006 and December 31, 2005:


	Principal Balance as of December 31,						Interest Rate as of December 31, 2006		Maturity Date
Description of Debt	2006			2005
	(Dollars in thousands)
Mortgage loans
Leesburg Plaza	$	9,760		$	9,881		6.510	%	October 1, 2008
164 E. Houston St.		98			145		7.500	%	October 6, 2008
Mercer Mall		4,512			4,578		8.375	%	April 1, 2009
Federal Plaza		34,192			34,675		6.750	%	June 1, 2011
Tysons Station		6,366			6,505		7.400	%	September 1, 2011
Crow Canyon		21,945			22,258		5.400	%	August 11, 2013
Melville Mall		25,702			—		5.250	%	September 1, 2014
Barracks Road		42,614			43,193		7.950	%	November 1, 2015
Hauppauge		16,065			16,283		7.950	%	November 1, 2015
Lawrence Park		30,205			30,615		7.950	%	November 1, 2015
Wildwood		26,550			26,910		7.950	%	November 1, 2015
Wynnewood		30,782			31,200		7.950	%	November 1, 2015
Brick Plaza		31,631			32,099		7.415	%	November 1, 2015
Mount Vernon		12,268			12,556		5.660	%	April 15, 2028
Bath		9,999			—		7.130	%	July 1, 2028
Chelsea		8,384			—		5.360	%	January 15, 2031

Subtotal		311,073			270,898
Net unamortized mortgage discount		(36	)		—

Total mortgage loans		311,037			270,898

Notes payable
Revolving credit facility		98,000			—		LIBOR+0.425	%	July 27, 2010
Revolving credit facility		—			55,500		—		October 8, 2006
Term note with banks		—			100,000		—		October 8, 2006
Term note with banks		—			150,000		—		October 8, 2008
Perring Plaza renovation		1,624			1,810		10.000	%	January 31, 2013
Escondido (Municipal bonds)		9,400			9,400		3.760	%	October 1, 2016
Other		—			45		—		Various

Total notes payable		109,024			316,755

Senior notes and debentures
6.99% medium term notes		—			40,500		—		March 10, 2006
6.125% notes		150,000			150,000		6.325	%	November 15, 2007
8.75% notes		175,000			175,000		8.750	%	December 1, 2009
4.50% notes		75,000			75,000		4.500	%	February 15, 2011
6.00% notes		175,000			—		6.000	%	July 15, 2012
5.40% notes		135,000			—		5.400	%	December 1, 2013
5.65% notes		125,000			125,000		5.650	%	June 1, 2016
6.20% notes		200,000			—		6.200	%	January 15, 2017
7.48% debentures		50,000			50,000		7.480	%	August 15, 2026
6.82% medium term notes		40,000			40,000		6.820	%	August 1, 2027

Subtotal		1,125,000			655,500
Net amortized debt premium (discount)		2,508			(1,825	)

Total senior notes and debentures		1,127,508			653,675

Capital lease obligations		149,361			148,815		Various		Various through 2077

Total debt and capital lease obligations	$	1,696,930		$	1,390,143

F-20

On March 10, 2006, we repaid our 6.99% medium term notes with a principal amount of $40.5 million. These notes were repaid with funds borrowed on our revolving credit facility.

On July 17, 2006 we issued $120.0 million of fixed rate notes, which mature on July 15, 2012 and bear interest at 6.0%, and $130.0 million of fixed rate notes, which mature on January 15, 2017 and bear interest at 6.2%. Our net proceeds from these note offerings after issuance discounts and underwriting fees were $247.9 million. These proceeds, along with $2.4 million borrowed on our revolving credit facility, were used to repay all the principal of our $150.0 million five-year term loan due October 2008 and $100.0 million three-year term loan due October 2006 and $0.3 million of related accrued interest on July 17, 2006.

In order to hedge our exposure to interest rate fluctuations on the $150.0 million five-year term loan due October 2008, we entered into an interest rate swap in January 2004, which fixed the LIBOR portion of the interest rate on this term loan at 2.401% through October 8, 2006. The full notional amount of this swap qualified as a cash flow hedge until we repaid this term loan on July 17, 2006. On July 17, 2006, we did not redesignate this swap and the related $1.2 million included in accumulated other comprehensive income was recognized into earnings.

On July 28, 2006, we replaced our existing revolving credit facility with a new $300.0 million unsecured revolving credit facility. The new revolving credit facility matures on July 27, 2010, subject to a one-year extension at our option, and initially bears interest at LIBOR plus 42.5 basis points. The spread over LIBOR is subject to adjustment based on our credit rating.

In connection with the acquisitions of Bath Shopping Center and Chelsea Commons on August 24, 2006 and August 25, 2006, we assumed two mortgage notes, one in connection with each property, with fair values of approximately $11.1 million and $8.0 million, respectively. The Bath Shopping Center and Chelsea Commons mortgages mature on July 1, 2028 and January 15, 2031, respectively, and bear interest at 7.13% and 5.36%, respectively. Both notes require monthly payments of principal and interest.

On August 24, 2006, we entered into a $150 million unsecured credit agreement (the “Bridge Loan”) bearing interest at LIBOR plus 42.5 basis points and maturing on December 29, 2006. The Bridge Loan was used to provide interim financing for the acquisition of properties and was fully repaid on September 19, 2006, using the proceeds from the issuance of common stock.

On September 28, 2006, we reopened the 6.0% and 6.2% fixed rate notes that were initially issued on July 17, 2006. We issued an additional $55.0 million of fixed rate notes, which mature on July 15, 2012 and bear interest at 6.0%, and an additional $70.0 million of fixed rate notes, which mature on January 15, 2017, and bear interest at 6.2%. The additional note issuances are fully fungible, rank equally with and form a single issue and series with the initial notes issued on July 17, 2006. Our net proceeds from the September 2006 note offerings after issuance premiums, underwriting fees and accrued interest were $130.1 million. These proceeds were used to reduce the borrowings under our unsecured credit facility and for general corporate purposes.

On October 16, 2006, we acquired the leasehold interest in Melville Mall which had an existing mortgage note with a fair value of approximately $25.2 million. This mortgage note bears interest at 5.25% per annum, requires monthly payments of interest and principal based on a 25-year amortization schedule and matures on September 1, 2014. Because we control this property and retain substantially all of the economic benefits and risks associated with it, we consolidate it, its operations and this mortgage.

On December 1, 2006, we issued $135.0 million of fixed rate notes, which mature on December 1, 2013 and bear interest at 5.4%. Our net proceeds from these note offerings after underwriting fees were $134.2 million. The proceeds were used for general corporate purposes, including repaying amounts outstanding under our revolving credit facility.

F-21

The maximum amount of borrowings outstanding under our revolving credit facility during 2006, 2005 and 2004 was $297.0 million, $159.7 million and $165.0 million, respectively and the average amount of borrowings outstanding was $106.0 million , $105.1 million and $74.4 million, respectively. Our revolving credit facility had a weighted average interest rate, before amortization of debt fees, of 5.6%, 3.7% and 2.2%.

Our credit facility and certain notes require us to comply with various financial covenants, including the maintenance of minimum shareholder’s equity and debt coverage ratios and a maximum ratio of debt to net worth. As of December 31, 2006, we were in compliance with all loan covenants.

Scheduled principal payments on mortgage loans, notes payable, senior notes and debentures as of December 31, 2006 are as follows:


	Mortgage Notes			Notes Payable			Senior Notes and Debentures			Total Principal
	(In thousands)
Year ending December 31,
2007	$	4,793		$	204		$	150,000		$	154,997
2008		14,968			226			—			15,194
2009		9,972			249			175,000			185,221
2010		6,016			98,275	(1)		—			104,291
2011		43,245			304			75,000			118,549
Thereafter		232,079			9,766			725,000			966,845

	$	311,073	(2)	$	109,024		$	1,125,000	(2)	$	1,545,097

(1)	Maturities in 2010 include $98 million drawn under the Trust’s $300 million four-year revolving credit facility.

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

Future minimum lease payments and their present value for property under capital leases as of December 31, 2006, are as follows:


	(In thousands)
Year Ending December 31,
2007	$	14,182
2008		14,260
2009		14,334
2010		14,335
2011		14,335
Thereafter		433,305

		504,751
Less amount representing interest		(355,390	)

Present value	$	149,361

The minimum payments under certain capital leases are revised every ten years when the owner refinances its debt related to these properties. In December 2005, our minimum payments were reduced in connection with the owner’s refinancing. As a result of the reduction in our minimum payments, we decreased both the related capital lease obligations and the carrying amounts of the related buildings by $9.0 million.

Certain of our capital lease obligations require payments based on the performance of the related properties in addition to the minimum payment amounts set forth above. The additional performance based payments were $5.6 million, $4.6 million and $3.9 million in 2006, 2005 and 2004, respectively.

F-22

NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS

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


	December 31, 2006				December 31, 2005
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(In thousands)
Mortgages and notes payable	$	420,061	$	449,130	$	587,653	$	599,667
Senior notes	$	1,127,508	$	1,146,767	$	653,675	$	675,278

NOTE 8. COMMITMENTS AND CONTINGENCIES

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

We are also involved in a litigation matter relating to a shopping center in New Jersey where a former tenant has alleged that we, through our management agent, engaged in fraud by failing to disclose a condemnation action at the property that was pending when the lease was signed. A trial as to liability only began on February 26, 2007 and if we are found liable, a trial will be held to determine the amount of damages. Based on the evidence and information available to us, we believe there is a reasonable possibility that a verdict may be rendered against us. If a verdict is rendered against us, we will seek indemnification from the third party management company that negotiated the lease on our behalf. We cannot assess with any certainty at this time the potential damages for which we would be liable if a verdict is rendered against us or the potential amounts we would recover against the third party management company; however, if a verdict is rendered against us, there may be a material adverse impact on our net income in the period during which our indemnification claim is pending.

We also have one litigation matter filed against us in May 2003 which alleges that a one page document entitled “Final Proposal,” which included language that it was subject to approval of formal documentation, constituted a ground lease of a parcel of property located adjacent to our Santana Row property and gave the plaintiff the option to require that we acquire the property at a price determined in accordance with a formula included in the “Final Proposal.” The plaintiff is seeking an unspecified amount of monetary damages. A trial as to liability only was held and on June 27, 2006, a jury rendered a verdict against us. A case management conference has been scheduled for March 23, 2007, at which time we expect a schedule to be set for additional discovery and a trial date on the issue of damages. The complaint did not specify the amount of damages claimed and we cannot make a reasonable estimate of potential damages until experts are retained and additional discovery is completed on the damages issue. If we are not successful in overturning the jury verdict, there likely will be a material adverse impact on our net income in the period in which it is both probable that we will have to pay the damages and such damages can be reasonably estimated.

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

F-23

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

At December 31, 2006 and 2005, our reserves for warranties and general liability costs were $10.4 million and $6.2 million, respectively. Any potential losses which exceed our estimates would result in a decrease in our net income. During 2006 and 2005, we made payments related to warranty claims of $0.5 million and $0, respectively.

Under the terms of the Congressional Plaza partnership agreement, from and after January 1, 1986, an unaffiliated third party has the right to require us and the two other minority partners to purchase between one-half to all of its 29.47% interest in Congressional Plaza at the interest’s then-current fair market value. Based on management’s current estimate of fair market value as of December 31, 2006, our estimated maximum liability upon exercise of the put option would range from approximately $40 million to $45 million. In conjunction with the construction of the apartments at the property that were completed in 2003, 8.03% of the third party’s interest in Congressional Plaza was re-allocated to us, effective January 1, 2004, thereby lowering the third party’s ownership percentage from 37.50% to its current level of 29.47%, as a result of our having funded approximately $7 million of the third party’s share of the redevelopment cost.

Under the terms of various other partnership agreements for entities, the partners have the right to exchange their operating units for cash or the same number of our common shares, at our option. As of December 31, 2006, a total of 377,210 operating units are outstanding.

Street Retail San Antonio LP, a wholly owned subsidiary of the Trust, entered into a Development Agreement (the “Agreement”) in 2000 with the City of San Antonio, Texas (the “City”) related to the redevelopment of land and buildings that we own along Houston Street. Under the Agreement, we are required to issue an annual letter of credit, commencing on October 1, 2002 and ending on September 30, 2014, that covers our designated portion of the debt service should the incremental tax revenue generated in the Zone not cover the debt service. We posted a letter of credit with the City on September 25, 2002 for $0.8 million, and the letter of credit remains outstanding. As of December 31, 2006, we have funded approximately $1.3 million related to this obligation. In anticipation of further shortfalls of incremental tax revenues to the City, we have accrued approximately $0.3 million as of December 31, 2006 to cover additional payments we may be obligated to make as part of the project costs.

We have three leases in which the lessor has a put option, which would require us to purchase the properties during the remaining lease term. If the lessor were to exercise this option in 2007, the purchase price would be approximately $63.0 million.

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

As of December 31, 2006 in connection with renovation and development projects, the Trust has contractual obligations of approximately $101.0 million.

F-24

We are obligated under ground lease agreements on several shopping centers requiring minimum annual payments as follows, as of December 31, 2006:


	(In thousands)
Year Ending December 31,
2007	$	4,598
2008		4,584
2009		4,529
2010		4,537
2011		4,574
Thereafter		257,967

	$	280,789

NOTE 9. DIVIDENDS

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


	Year Ended December 31, 2006				Year Ended December 31, 2005				Year Ended December 31, 2004
	Declared		Paid		Declared		Paid		Declared		Paid
Common shares	$	2.460	$	2.440	$	2.370	$	2.320	$	1.990	$	1.975
8.5% Series B Cumulative Redeemable Preferred	$	1.753	$	2.284	$	2.125	$	2.125	$	2.125	$	2.125

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


	Year Ended December 31,
	2006		2005		2004
Common shares
Ordinary dividend	$	1.813	$	1.601	$	1.876
Ordinary dividend eligible for 15% rate		0.066		0.093		—
Return of capital		0.561		—		—
Capital gain		—		0.626		0.099

	$	2.440	$	2.320	$	1.975

8.5% Series B Cumulative Redeemable Preferred
Ordinary dividend	$	2.284	$	1.551	$	2.019
Capital gain		—		0.574		0.106

	$	2.284	$	2.125	$	2.125

On November 6, 2006, the Trustees declared a quarterly cash dividend of $0.575 per common share, payable January 16, 2007 to common shareholders of record on January 2, 2007. Dividends declared in 2006 include a $0.20 special dividend paid on March 30, 2006. On November 27, 2006, the Trust redeemed all 5,400,000 outstanding shares of its Series B Cumulative Redeemable Preferred Shares. Dividends on the Series B Preferred Shares ceased to accrue on November 27, 2006.

NOTE 10. SHAREHOLDERS’ EQUITY

On September 19, 2006, we issued 2.0 million common shares at $74.51 per share (after deducting underwriting discounts and fees) netting approximately $149.1 million in cash proceeds before other expenses of the offering. The proceeds were used on an interim basis to repay debt from the acquisition of three properties in New England and for general corporate purposes. Ultimately, the proceeds were used to redeem the Series B preferred shares on November 27, 2006.

F-25

On November 27, 2006, we redeemed all 5,400,000 outstanding shares of our 8.5% Series B Cumulative Redeemable Preferred Shares, no par value. The Series B Preferred Shares were redeemed at their redemption price of $25.00 per share, plus accrued and unpaid dividends through the redemption date of approximately $0.16 per share, for an aggregate redemption price of approximately $25.16 per share or $135.9 million in total. The redemption also resulted in a deemed dividend of $4.8 million for the difference between the redemption amount and carrying cost. Dividends on the Series B Preferred Shares ceased to accrue on November 27, 2006.

We have a Dividend Reinvestment Plan, whereby shareholders may use their dividends and optional cash payments to purchase shares. In 2006, 2005 and 2004, 44,077 shares, 62,579 shares and 82,391 shares, respectively, were issued under the Plan.

NOTE 11. OPERATING LEASES

Our 111 shopping center and mixed use properties at December 31, 2006 are located in 14 states and the District of Columbia. There are approximately 2,300 tenants providing a wide range of retail products and services. These tenants range from sole proprietorships to national retailers; no one tenant or corporate group of tenants accounts for more than 2.5% of annualized base rent.

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

Minimum future commercial property rentals from noncancelable operating leases, before any reserve for uncollectible amounts and assuming no early lease terminations, at our operating properties as of December 31, 2006 are as follows:


	(In thousands)
Year Ending December 31,
2007	$	337,417
2008		317,799
2009		287,047
2010		253,132
2011		214,736
Thereafter		1,548,439

	$	2,958,570

NOTE 12. COMPONENTS OF RENTAL INCOME AND EXPENSE

The principal components of rental income are as follows:


	Year Ended December 31,
	2006		2005		2004
	(In thousands)
Minimum rents	$	341,457	$	306,287	$	284,904
Cost reimbursement		83,387		75,649		71,456
Percentage rent		7,142		6,211		5,531
Other		6,215		5,401		6,408

	$	438,201	$	393,548	$	368,299

F-26

Minimum rents include $5.7 million, $7.6 million and $3.6 million for 2006, 2005 and 2004, respectively, to recognize minimum rents on a straight-line basis. Straight-line rental income in 2005 includes the impact of changes in estimates of the collectibility of certain long-term receivables which increased straight-line rental income by $1.2 million. In addition, minimum rents include $2.5 million, $1.6 million and $1.7 million for 2006, 2005 and 2004, respectively, to recognize income from the amortization of in-place leases in accordance with SFAS No. 141.

The principal components of rental expense are as follows:


	Year Ended December 31,
	2006		2005		2004
	(In thousands)
Repairs and maintenance	$	29,756	$	27,410	$	23,897
Management fees and costs		13,175		11,976		13,251
Utilities		15,210		14,121		15,220
Payroll—properties		6,935		7,260		7,757
Ground rent		6,138		5,281		5,389
Insurance		6,034		6,197		7,512
Other		10,882		12,491		16,914

	$	88,130	$	84,736	$	89,940

NOTE 13. DISCONTINUED OPERATIONS

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


	Year Ended December 31,
	2006			2005			2004
	(In thousands)
Rental revenue from discontinued operations	$	824		$	7,367		$	13,120
(Loss) income from discontinued operations	$	(320	)	$	(569	)	$	6,063

NOTE 14. SHARE-BASED COMPENSATION PLANS

As of December 31, 2006, we have grants outstanding under two share-based compensation plans. Our 1993 Long Term Incentive Plan (‘the 1993 Plan”) authorized the grant of share options, common shares and other share-based awards for up to 5,500,000 shares of common stock. The 1993 Plan expired in May 2003. In May 2001, our shareholders approved our 2001 Long Term Incentive Plan (“the 2001 Plan”) which authorized the grant of share options, common shares and other share-based awards for an additional 1,750,000 shares of common stock.

Option awards under the 2001 Plan and the 1993 Plan are required to have an exercise price at least equal to the closing trading price of our common shares on the date of grant. Options and share awards under these plans generally vest over 3 to 5 years and option awards typically have a 10-year contractual term. We pay dividends on unvested shares. Certain options and share awards provide for accelerated vesting if there is a change in control. Additionally, the vesting on certain option and share awards can accelerate in part or in full upon retirement based on the age of the retiree.

As a result of the exercise of options, we had notes outstanding from our officers and employees for $1.5 million and $1.8 million at December 31, 2006 and 2005, respectively. These notes bear interest at LIBOR plus a market-rate spread with the rate adjusted annually on the anniversary date. These notes are collateralized by the shares with recourse to the borrower and have five-year terms. Options awards made in 2001 and later do not provide for employees to be able to exercise their options with a loan from the Trust.

F-27

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

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


	Year Ended December 31, 2006		Year Ended December 31, 2005		Year Ended December 31, 2004
Volatility	18.7	%	18.0	%	20.0	%
Expected dividend yield	4.9	%	3.8	%	4.6	%
Expected term (in years)	3.8		5.0		5.3
Risk free interest rate	4.6	%	4.1	%	4.5	%

The following table provides a summary of option activity for 2006, 2005, 2004:


	Shares Under Option		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
					(In years)	(In thousands)
Outstanding at December 31, 2003	1,462,040		$	24.86
Granted	187,500			42.86
Exercised	(348,868	)		24.62
Forfeited or expired	(69,331	)		30.58

Outstanding at December 31, 2004	1,231,341		$	27.34
Granted	164,500			58.46
Exercised	(409,889	)		26.71
Forfeited or expired	(27,497	)		41.78

Outstanding at December 31, 2005	958,455		$	32.52
Granted	366,966			69.01
Exercised	(266,539	)		33.18
Forfeited or expired	(149,801	)		36.86

Outstanding at December 31, 2006	909,081		$	46.36	6.7	$	35,127

Exercisable at December 31, 2006	439,644		$	25.89	4.2	$	25,988

The weighted-average grant-date fair value of options granted during 2006, 2005 and 2004 was $7.97 per share, $7.01 per share and $6.13 per share, respectively. The total cash received from options exercised during 2006, 2005 and 2004 was $8.8 million, $10.9 million and $8.6 million, respectively. The total intrinsic value of options exercised during the year ended December 31, 2006 was $10.9 million.

In 2004 and 2003, tax loans were made in connection with restricted share grants to certain of our officers and in connection with the Share Purchase Plans. The balance of these loans was $300,000 at December 31, 2004. These loans were paid in full in May, 2005.

In 2005 and 2004, 78,591 common shares and 84,617 common shares, respectively, were awarded to key employees, under various incentive compensation programs designed to directly link a significant portion of their current and long term compensation to the prosperity of the Trust and its shareholders.

F-28

The following table provides a summary of share activity for 2006:


	Shares		Weighted- Average Grant-Date Fair Value
Unvested at December 31, 2005	227,407		$	38.28
Granted	84,217			68.18
Vested	(103,453	)		40.10
Forfeited	(4,477	)		51.18

Unvested at December 31, 2006	203,694		$	49.43

The weighted-average grant-date fair value of stock awarded in 2006, 2005 and 2004 was $68.18, $51.35 and $42.94, respectively. The total vesting-date fair value of shares vested during the year ended December 31, 2006 was $7.0 million.

We recorded stock compensation expense of $6.5 million, $3.9 million and $3.5 million for 2006, 2005 and 2004, respectively, under our long term incentive plans. As of December 31, 2006, there was $8.6 million of total unrecognized compensation cost related to unvested share-based compensation arrangements (i.e. options and unvested shares) granted under our plans. This cost is expected to be recognized over the next 4.9 years with a weighted-average period of 1.2 years.

On February 12, 2007, common shares and options were awarded under various incentive compensation plans as follows:


Award	Vesting Term	Beneficiary
89,183 Restricted shares	3 years	Officers and key employees
42,404 Options	5 years	Officers and key employees
2,637 Shares	Immediate	Trustees

All of the restricted share awards granted on February 12, 2007, were made under our 2001 Plan.

NOTE 15. SAVINGS AND RETIREMENT PLANS

We have a savings and retirement plan in accordance with the provisions of Section 401(k) of the Internal Revenue Code. Generally, employees can elect, at their discretion, to contribute a portion of their compensation up to a maximum of $15,000, $14,000 and $13,000 for 2006, 2005 and 2004, respectively. Under the plan, we contribute 50% of each employee’s first 5% of contributions. In addition, we may make discretionary contributions within the limits of deductibility set forth by the Code. Our employees are immediately eligible to become plan participants. Effective as of January 1, 2005 employees are eligible to receive matching contributions immediately on their participation, however, these matching payments will not vest until their first anniversary of employment. Our expense for the years ended December 31, 2006, 2005 and 2004 was approximately $342,000, $333,000 and $252,000, respectively.

A non-qualified deferred compensation plan for our officers and certain other employees was established in 1994. The plan allows the participants to defer income until the earlier of age 65 or termination of employment. As of December 31, 2006, we are liable to participants for approximately $5.5 million under this plan. Although this is an unfunded plan, we have purchased certain investments to match this obligation. Our obligation under this plan and the related investments are both included in the accompanying financial statements.

F-29

NOTE 16. SUBSEQUENT EVENTS

On January 30, 2007, we acquired 1020 Revere Beach Parkway, a 17,000 square foot vacant building for $2.5 million. This property is located in the Boston suburb of Chelsea, Massachusetts adjacent to our Chelsea Commons property. The Trust’s leasing and development teams are currently evaluating re-tenanting scenarios.

On February 13, 2007, the Trustees declared a quarterly dividend of $0.575 per common share payable on April 16, 2007 to shareholders of record on March 13, 2007.

NOTE 17. SEGMENT INFORMATION

We operate our portfolio of properties in two geographic operating regions: East and West, which constitute our segments under Statement of Financial Accounting Standard No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Based on changes in our property management structure in 2004, we determined that our portfolio should be divided into two operating regions (East and West), rather than three (Northeast, Mid-Atlantic and West) as previously reported.

A summary of our operations by geographic region is presented below:


	Year Ended December 31, 2006
	East			West			Other			Total
	(In thousands)
Rental income	$	340,968		$	97,233		$	—		$	438,201
Other property income		4,763			2,963			—			7,726
Mortgage interest income		3,163			1,932			—			5,095
Rental expenses		(60,606	)		(27,524	)		—			(88,130	)
Real estate taxes		(35,863	)		(9,035	)		—			(44,898	)

Property operating income		252,425			65,569			—			317,994
General and administrative expense		—			—			(21,340	)		(21,340	)
Depreciation and amortization		(66,427	)		(29,433	)		(1,758	)		(97,618	)
Other interest income		2,152			393			—			2,545
Interest expense		—			—			(102,808	)		(102,808	)
Income from real estate partnership		—			—			656			656

Income before continuing operations and minority interests	$	188,150		$	36,529		$	(125,250	)	$	99,429
Minority interests		—			—			(4,353	)		(4,353	)
(Loss) income from discontinued operations		—			—			(320	)		(320	)
Gain on sale of real estate		—			—			23,956			23,956

Net income	$	188,150		$	36,529		$	(105,967	)	$	118,712

Total assets	$	1,725,790		$	876,400		$	86,416		$	2,688,606

F-30


	Year Ended December 31, 2005
	East			West			Other			Total
	(In thousands)
Rental income	$	310,063		$	83,485		$	—		$	393,548
Other property income		4,163			5,388			—			9,551
Mortgage interest income		2,818			2,552			—			5,370
Rental expenses		(58,348	)		(26,388	)		—			(84,736	)
Real estate taxes		(32,610	)		(6,762	)		—			(39,372	)

Property operating income		226,086			58,275			—			284,361
General and administrative expense		—			—			(19,909	)		(19,909	)
Depreciation and amortization		(62,395	)		(25,063	)		(1,469	)		(88,927	)
Other interest income		2,121			94			—			2,215
Interest expense		—			—			(88,566	)		(88,566	)
Income from real estate partnership		—			—			493			493

Income before continuing operations and minority interests	$	165,812		$	33,306		$	(109,451	)	$	89,667
Minority interests		—			—			(5,234	)		(5,234	)
(Loss) income from discontinued operations		—			—			(569	)		(569	)
Gain on sale of real estate		—			—			30,748			30,748

Net income	$	165,812		$	33,306		$	(84,506	)	$	114,612

Total assets	$	1,368,925		$	908,621		$	73,306		$	2,350,852


	Year Ended December 31, 2004
	East			West			Other			Total
	(In thousands)
Rental income	$	293,291		$	75,008		$	—		$	368,299
Other property income		3,882			6,516			—			10,398
Mortgage interest income		2,839			2,076			—			4,915
Rental expenses		(60,453	)		(29,487	)		—			(89,940	)
Real estate taxes		(31,619	)		(5,732	)		—			(37,351	)

Property operating income		207,940			48,381			—			256,321
General and administrative expense		—			—			(18,164	)		(18,164	)
Depreciation and amortization		(62,590	)		(22,581	)		(1,426	)		(86,597	)
Other interest income		1,397			107			—			1,504
Interest expense		—			—			(85,058	)		(85,058	)
Income from real estate partnership		—			—			205			205

Income before continuing operations and minority interests	$	146,747		$	25,907		$	(104,443	)	$	68,211
Minority interests		—			—			(4,170	)		(4,170	)
(Loss) income from discontinued operations		—			—			6,063			6,063
Gain on sale of real estate		—			—			14,052			14,052

Net income	$	146,747		$	25,907		$	(88,498	)	$	84,156

Total assets	$	1,264,135		$	911,136		$	91,625		$	2,266,896

F-31

NOTE 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data is as follows:


	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(In thousands, except per share data)
2006
Rental income (1)	$	104,964	$	105,533	$	110,511	$	117,193
Net income	$	31,031	$	38,256	$	24,984	$	24,441
Net income available for common shareholders	$	28,162	$	35,387	$	22,115	$	17,850
Earnings per common share — basic	$	0.53	$	0.67	$	0.42	$	0.32
Earnings per common share — diluted	$	0.53	$	0.66	$	0.41	$	0.32

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(In thousands, except per share data)
2005
Rental income (1)	$	97,783	$	95,762	$	96,772	$	103,231
Net income	$	23,997	$	24,807	$	30,680	$	35,128
Net income available for common shareholders	$	21,128	$	21,938	$	27,811	$	32,260
Earnings per common share — basic	$	0.40	$	0.42	$	0.53	$	0.61
Earnings per common share — diluted	$	0.40	$	0.41	$	0.52	$	0.61

(1)	As required by SFAS No. 144, rental income has been reduced to reflect the results of discontinued operations. Rental income from these discontinued assets, by quarter, is summarized as follows:


	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
	(In thousands)
2006 rental income (loss) from discontinued operations	$	569	$	304	$	(64	)	$	15
2005 rental income from discontinued operations	$	2,314	$	2,415	$	1,577		$	1,061

F-32

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATION

December 31, 2006

(Dollars in thousands)


COLUMN A		COLUMN B		COLUMN C				COLUMN D			COLUMN E						COLUMN F		COLUMN G	COLUMN H	COLUMN I
Descriptions		Encumbrance		Initial cost to company				Cost Capitalized Subsequent to Acquisition			Gross amount at which carried at close of period						Accumulated Depreciation and Amortization		Date of Construction	Date Acquired	Life on which depreciation in latest income statements is computed
		Land		Building and Improvements			Land		Building and Improvements		Total
150 POST STREET (San Francisco)	CA	$		$	11,685	$	9,181	$	15,356		$	11,685	$	24,537	$	36,222	$	6,167	1908	10/23/97	35 years
7770 RICHMOND HIGHWAY (Virginia)	VA				1,025		9,018		—			1,025		9,018		10,043		258	1974	01/27/06	35 years
ALLWOOD (New Jersey)	NJ		3,048				3,920		(36	)		—		3,884		3,884		2,244	1958	12/12/88	35 years
ANDORRA (Pennsylvania)	PA				2,432		12,346		8,245			2,432		20,591		23,023		10,604	1953	01/12/88	35 years
ASSEMBLY SQUARE (Massachusetts)	MA				35,268		34,196		42,586			35,268		76,782		112,050		2,979	2005	03/01/05	35 years
BALA CYNWYD (Pennsylvania)	PA				3,565		14,466		8,250			3,566		22,715		26,281		8,699	1955	09/22/93	35 years
BARRACKS ROAD (Virginia)	VA		42,615		4,363		16,459		21,494			4,363		37,953		42,316		25,797	1958	12/31/85	35 years
BATH SHOPPING CENTER (Maine)	ME		9,999		2,264		17,489		—			2,264		17,489		19,753		176	1978	08/24/06	35 years
BETHESDA ROW (Maryland)	MD		12,576		17,448		24,944		73,552			15,750		98,496		114,246		20,590	1945-2000	12/31/93 & 1/20/06	35 -50 years
BLUESTAR (New Jersey)	NJ		23,261		—		29,922		7,162			—		37,084		37,084		20,844	1959	12/12/88	35 years
BRICK PLAZA (New Jersey)	NJ		31,631		—		24,715		31,155			3,788		52,082		55,870		27,056	1958	12/28/89	35 years
BRISTOL (Connecticut)	CT				3,856		15,959		4,401			3,856		20,360		24,216		7,049	1959	9/22/95	35 years
BRUNSWICK (New Jersey)	NJ		9,683		—		12,456		10,094			—		22,550		22,550		11,541	1957	12/12/88	35 years
CHELSEA COMMONS (Massachusetts)	MA		8,384		3,779		14,254		1			3,779		14,255		18,034		134	1962	08/25/06	35 years
CLIFTON (New Jersey)	NJ		2,834		—		3,646		1,373			—		5,019		5,019		2,999	1959	12/12/88	35 years
CONGRESSIONAL PLAZA (Maryland)	MD				2,793		7,424		59,541			1,020		66,965		67,985		30,448	1965	04/01/65	35 years
COURTHOUSE CENTER (Maryland)	MD				1,750		1,869		979			1,750		2,848		4,598		1,073	1975	12/17/97	35 years
CROSSROADS (Illinois)	IL				4,635		11,611		6,565			4,635		18,176		22,811		8,149	1959	07/19/93	35 years
CROW CANYON COMMONS (California)	CA		21,945		—		50,585		720			—		51,305		51,305		1,470	Late 1970's	12/29/05	35 years

F-33

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATION—CONTINUED

December 31, 2006

(Dollars in thousands)


COLUMN A		COLUMN B		COLUMN C			COLUMN D			COLUMN E				COLUMN F	COLUMN G	COLUMN H	COLUMN I
		Encumbrance		Initial cost to company			Cost Capitalized Subsequent to Acquisition			Gross amount at which carried at close of period				Accumulated Depreciation and Amortization	Date of Construction	Date Acquired	Life on which depreciation in latest income statements is computed
Descriptions			Land		Building and Improvements		Land		Building and Improvements		Total
DEDHAM PLAZA (Massachusetts)	MA			12,287		12,918	4,579			12,287		17,497	29,784	7,617	1959	12/31/93	35 years
EASTGATE (North Carolina)	NC			1,608		5,775	9,953			1,608		15,728	17,336	9,114	1963	12/18/86	35 years
ELLISBURG CIRCLE (New Jersey)	NJ			4,028		11,309	11,577			4,013		22,886	26,899	11,491	1959	10/16/92	35 years
ESCONDIDO PROMENADE (California)	CA			11,505		12,147	2,828			11,505		14,975	26,480	4,202	1987	12/31/96	35 years
FALLS PLAZA (Virginia)	VA			1,260		735	6,172			1,260		6,907	8,167	2,690	1962	09/30/67	22 3/4 years
FALLS PLAZA East (Virginia)	VA			538		535	2,266			559		2,780	3,339	3,033	1960	10/05/72	25 years
FEASTERVILLE (Pennsylvania)	PA			1,431		1,600	8,643			1,402		10,243	11,645	6,511	1958	07/23/80	20 years
FEDERAL PLAZA (Maryland)	MD	34,192		10,216		17,895	34,211			10,216		52,106	62,322	24,795	1970	06/29/89	35 years
FIFTH AVENUE (4)	CA			3,844		1,352	7,502			3,844		8,854	12,698	2,382	1888-1995	1996-1997	35 years
FINLEY SQUARE (Illinois)	IL			9,252		9,544	10,281			9,252		19,825	29,077	8,688	1974	04/27/95	35 years
FLOURTOWN (Pennsylvania)	PA			1,345		3,943	4,374			1,345		8,317	9,662	5,999	1957	04/25/80	35 years
FOREST HILLS (3)	NY			5,891		6,051	12,113			6,197		17,858	24,055	4,509	1937-1987	12/16/97	35 years
FRESH MEADOWS (New York)	NY			24,625		25,255	17,512			24,627		42,765	67,392	13,389	1946-1949	12/05/97	35 years
FRIENDSHIP CTR (District of Columbia)	DC			12,696		20,803	(190	)		12,696		20,613	33,309	3,158	1998	09/21/01	35 years
GAITHERSBURG SQUARE (Maryland)	MD			7,701		5,271	12,573			5,973		17,844	23,817	9,923	1966	04/22/93	35 years
GARDEN MARKET (Illinois)	IL			2,677		4,829	3,769			2,677		8,598	11,275	3,285	1958	07/28/94	35 years
GOVERNOR PLAZA (Maryland)	MD			2,068		4,905	14,373			2,068		19,278	21,346	10,647	1963	10/01/85	35 years

F-34

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATION—CONTINUED

December 31, 2006

(Dollars in thousands)


COLUMN A		COLUMN B		COLUMN C			COLUMN D	COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
		Encumbrance		Initial cost to company			Cost Capitalized Subsequent to Acquisition	Gross amount at which carried at close of period			Accumulated Depreciation and Amortization	Date of Construction	Date Acquired	Life on which depreciation in latest income statements is computed
Descriptions			Land		Building and Improvements		Land	Building and Improvements	Total
GRATIOT PLAZA (Michigan)	MI			525		1,601	15,935	525	17,536	18,061	8,303	1964	03/29/73	25 3/4 years
GREENWICH AVENUE (2)	CT			8,064		6,866	1,068	8,064	7,934	15,998	2,563	1900-1991	1994- 1996	35 years
HAMILTON (New Jersey)	NJ	4,201		—		5,405	2,453	—	7,858	7,858	5,001	1961	12/12/88	35 years
HAUPPAUGE (New York)	NY	16,064		8,791		15,262	3,336	8,791	18,598	27,389	4,476	1963	08/06/98	35 years
HOUSTON STREET (Texas) (9)	TX	97		14,680		1,976	45,816	14,778	47,694	62,472	9,597	var	1998- 1999	35 years
HUNTINGTON (New York)	NY	12,434		—		16,008	5,349	—	21,357	21,357	13,279	1962	12/12/88	35 years
IDYLWOOD PLAZA (Virginia)	VA			4,308		10,026	672	4,308	10,698	15,006	4,039	1991	04/15/94	35 years
KEY ROAD (New Hampshire)	NH			1,319		13,331	—	1,319	13,331	14,650	127	1968	08/24/06	35 years
KINGS COURT (California)	CA			—		10,714	808	—	11,522	11,522	3,771	1960	08/24/98	26 years
LANCASTER (Pennsylvania)	PA	4,907		—		2,103	8,749	—	10,852	10,852	5,340	1958	04/24/80	22 years
LANGHORNE SQUARE (Pennsylvania)	PA			720		2,974	14,455	720	17,429	18,149	8,553	1966	01/31/85	35 years
LAUREL (Maryland)	MD			7,458		22,525	16,130	7,459	38,654	46,113	23,617	1956	08/15/86	35 years
LAWRENCE PARK (Pennsylvania)	PA	30,205		5,723		7,160	15,796	5,734	22,945	28,679	17,810	1972	07/23/80	22 years
LEESBURG PLAZA (Virginia)	VA	9,760		8,184		10,722	11,792	8,184	22,514	30,698	3,386	1967	09/15/98	35 years
LINDEN SQUARE (Massachusetts)	MA			79,382		19,247	11,902	79,382	31,149	110,531	146	1950-1990	08/24/06	35 years
LOEHMANN'S PLAZA (Virginia)	VA			1,237		15,096	13,600	1,248	28,685	29,933	15,998	1971	07/21/83	35 years
MELVILLE MALL (New York)	NY	25,702		35,622		32,882	—	35,622	32,882	68,504	235	1974	10/16/06	35 years

F-35

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATION—CONTINUED

December 31, 2006

(Dollars in thousands)


COLUMN A		COLUMN B		COLUMN C			COLUMN D	COLUMN E			COLUMN F	COLUMN G	COLUMN H	COLUMN I
		Encumbrance		Initial cost to company			Cost Capitalized Subsequent to Acquisition	Gross amount at which carried at close of period			Accumulated Depreciation and Amortization	Date of Construction	Date Acquired	Life on which depreciation in latest income statements is computed
Descriptions			Land		Building and Improvements		Land	Building and Improvements	Total
MERCER MALL (New Jersey)	NJ	57,894		4,488		70,076	27,364	4,932	96,996	101,928	10,578	1975	10/14/03	25 - 35 years
MID PIKE PLAZA (Maryland)	MD	10,041		—		10,335	7,510	—	17,845	17,845	9,247	1963	05/18/82	50 years
MOUNT VERNON PLAZA (Virginia)	VA	12,268		—		19,401	22,962	—	42,363	42,363	3,202	2003	03/31/03	35 years
NORTH DARTMOUTH (Massachusetts)	MA			27,214		—	—	27,214	—	27,214	—	2004	08/24/06	35 years
NORTHEAST (Pennsylvania)	PA			1,152		10,596	10,433	1,153	21,028	22,181	13,630	1959	08/30/83	35 years
NORTH LAKE COMMONS (Illinois)	IL			2,782		8,604	2,031	2,628	10,635	13,263	3,929	1989	04/27/94	35 years
OLD KEENE MILL (Virginia)	VA			638		998	3,755	638	4,753	5,391	4,171	1968	06/15/76	33 1/3 years
OLD TOWN CENTER (California)	CA			3,420		2,765	27,191	3,420	29,956	33,376	9,689	1997-1998	10/22/97	35 years
OTHER (California) (5)	CA			19,496		25,752	16,731	14,678	42,483	57,161	7,568	var	1996-1999	35 years
PAN AM SHOPPING CENTER (Virginia)	VA			8,694		12,929	5,969	8,695	18,897	27,592	8,149	1979	02/05/93	35 years
PENTAGON ROW (Virginia)	VA			—		2,955	85,004	—	87,959	87,959	16,304	1999-2002	1998	35 years
PERRING PLAZA (Maryland)	MD			2,800		6,461	17,060	2,800	23,521	26,321	13,978	1963	10/01/85	35 years
PIKE 7 (Virginia)	VA			9,709		22,799	1,324	9,709	24,123	33,832	7,452	1968	03/31/97	35 years
QUEEN ANNE PLAZA (Massachusetts)	MA			3,319		8,457	3,241	3,319	11,698	15,017	5,328	1967	12/23/94	35 years
QUINCE ORCHARD PLAZA (Maryland)	MD			3,197		7,949	9,206	2,928	17,155	20,083	8,999	1975	04/22/93	35 years
RIVERSIDE (New Hampshire)	NH			2,426		26,456	—	2,426	26,456	28,882	242	1966	08/24/06	35 years
ROCKVILLE TOWN SQUARE (Maryland)	MD			—		5,255	9,030	—	14,285	14,285	2	2005-2007	2006 -2007	N/A

F-36

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATION—CONTINUED

December 31, 2006

(Dollars in thousands)


COLUMN A		COLUMN B		COLUMN C					COLUMN D			COLUMN E							COLUMN F		COLUMN G	COLUMN H	COLUMN I
		Encumbrance		Initial cost to company					Cost Capitalized Subsequent to Acquisition			Gross amount at which carried at close of period							Accumulated Depreciation and Amortization		Date of Construction	Date Acquired	Life on which depreciation in latest income statements is computed
Descriptions			Land		Building and Improvements			Land			Building and Improvements			Total
ROLLINGWOOD APTS. (Maryland)	MD				552		2,246			4,028			572			6,254		6,826		6,154	1960	01/15/71	25 years
RUTGERS (New Jersey)	NJ		11,217		—		14,429			2,995			—			17,424		17,424		8,628	1973	12/12/88	35 years
SAM’S PARK & SHOP (District of Columbia)	DC				4,840		6,319			1,047			4,840			7,366		12,206		2,633	1930	12/01/95	35 years
SANTANA ROW (California)-PIS	CA				41,969		1,161			419,912			49,844			413,198		463,042		36,291	1999-2002	03/05/97	40 - 50 years
SAUGUS (Massachusetts)	MA				4,383		8,291			923			4,383			9,214		13,597		2,902	1976	10/01/96	35 years
SHIRLINGTON (Virginia)	VA		1,777		9,761		14,808			18,616			5,798			33,424		39,222		7,895	1940	12/21/95	35 years
SOUTH VALLEY SHOPPING CENTER (Virginia)	VA				9,043		5,082			8,052			9,043			13,134		22,177		1,038	2003	3/21/03	35 years
THIRD STREET PROMENADE (9)	CA				22,645		12,709			38,717			22,644			51,427		74,071		14,892	1888-2000	1996-2000	35 years
TOWER (Virginia)	VA				7,170		10,518			1,362			7,129			11,880		19,009		3,350	1953-1960	08/24/98	35 years
TOWN CENTER OF NEW BRITAIN (Pennsylvania)	PA				1,282		12,285			256			1,282			12,541		13,823		179	1969	06/29/06	35 years
TROY (New Jersey)	NJ				3,126		5,193			13,273			3,126			18,466		21,592		13,408	1966	07/23/80	22 years
TYSONS STATION (Virginia)	VA		6,366		388		453			2,612			475			2,978		3,453		2,786	1954	01/17/78	17 years
WESTGATE MALL (California)	CA				6,319		107,284			1,949			6,319			109,233		115,552		7,365	1960-1966	03/31/04	35 years
WILDWOOD (Maryland)	MD		26,550		9,111		1,061			7,384			9,111			8,445		17,556		6,890	1958	05/05/69	33 1/3 years
WILLOW GROVE (Pennsylvania)	PA				1,499		6,643			18,537			1,499			25,180		26,679		15,787	1953	11/20/84	35 years
WILLOW LAWN (Virginia)	VA				3,192		7,723			62,879			7,790			66,004		73,794		31,936	1957	12/05/83	35 years
WYNNEWOOD (Pennsylvania)	PA		30,783		8,055		13,759			14,063			8,055			27,822		35,877		9,954	1948	10/29/96	35 years

TOTALS		$	460,434	$	606,518	$	1,124,977		$	1,487,251		$	609,294		$	2,594,964	$	3,204,258	$	740,507

F-37

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATION—CONTINUED

Three Years Ended December 31, 2006

Reconciliation of Total Cost

(in thousands)


Balance, December 31, 2003	$	2,470,150
Additions during period
Acquisitions		118,066
Improvements		131,986
Deduction during period—disposition and retirements of property		(53,926	)

Balance, December 31, 2004		2,666,276
Additions during period
Acquisitions		119,194
Improvements		157,104
Deduction during period—disposition and retirements of property		(113,253	)

Balance, December 31, 2005		2,829,321
Additions during period
Acquisitions		317,287
Improvements		112,930
Deduction during period—disposition and retirements of property		(55,280	)

Balance, December 31, 2006	$	3,204,258

(A)	For Federal tax purposes, the aggregate cost basis is approximately $2.8 billion as of December 31, 2006.

F-38

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE III

SUMMARY OF REAL ESTATE AND ACCUMULATED

DEPRECIATION—CONTINUED

Three Years Ended December 31, 2006

Reconciliation of Accumulated

Depreciation and Amortization

(in thousands)


Balance, December 31, 2003	$	514,177
Additions during period—depreciation and amortization expense		82,551
Deductions during period—disposition and retirements of property		(1,390	)

Balance, December 31, 2004		595,338
Additions during period—depreciation and amortization expense		83,656
Deductions during period—disposition and retirements of property		(15,244	)

Balance, December 31, 2005		663,750
Additions during period—depreciation and amortization expense		89,564
Deductions during period—disposition and retirements of property		(12,807	)

Balance, December 31, 2006	$	740,507

F-39

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE IV

MORTGAGE LOANS ON REAL ESTATE

Year Ended December 31, 2006

(Dollars in thousands)


Column A	Column B	Column C	Column D	Column E	Column F		Column G
Description of Lien	Interest Rate	Maturity Date	Periodic Payment Terms	Prior Liens	Face Amount of Mortgages		Carrying Amount of Mortgages (1)
Mortgage on Hotel in San Jose, CA	9%	August 2016	Principal and interest; balloon payment due at maturity (2)	—	$	17,495	$	12,451

Mortgage on retail buildings in Philadelphia, PA	Greater of prime plus 2% or 10% plus participation	May 2021	Interest only monthly; balloon payment due at maturity	—		19,055		19,055	(3)

Mortgage on retail buildings in Philadelphia, PA	10% plus participation	May 2021	Interest only; balloon payment due at maturity	—		9,250		9,250

					$	45,800	$	40,756

(1)	For Federal tax purposes, the aggregate tax basis is approximately $45.8 million as of December 31, 2006. No payments are delinquent on these mortgages.

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

(3)	This mortgage is available for up to $25.0 million.

F-40

FEDERAL REALTY INVESTMENT TRUST

SCHEDULE IV

MORTGAGE LOANS ON REAL ESTATE—CONTINUED

Three Years Ended December 31, 2006

Reconciliation of Carrying Amount

(in thousands)


Balance, December 31, 2003	$	41,500
Additions during period:
Issuance of loans		6,153
Deductions during period:
Collection and satisfaction of loans		(223	)
Allowance for collectibility		(4,521	)

Balance, December 31, 2004		42,909
Additions during period:
Issuance of loans		4,974
Deductions during period:
Collection and satisfaction of loans		(6,871	)
Allowance for collectibility		(481	)

Balance, December 31, 2005		40,531
Additions during period:
Issuance of loans		4,321
Deductions during period:
Collection and satisfaction of loans		(4,055	)
Allowance for collectibility		(280	)
Amortization of discount		239

Balance, December 31, 2006	$	40,756

F-41

EXHIBIT INDEX


Exhibit No.		Description
3.1		Declaration of Trust of Federal Realty Investment Trust dated May 5, 1999 as amended by the Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated May 6, 2004, as corrected by the Certificate of Correction of Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated June 17, 2004 (previously filed as Exhibit 3.1 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 1-07533) (the “2005 2Q Form 10-Q”) and incorporated herein by reference)

3.2		Amended and Restated Bylaws of Federal Realty Investment Trust dated February 12, 2003, as amended October 29, 2003, May 5, 2004 and February 17, 2006 (previously filed as Exhibit 3.2 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-07533) (the “2005 Form 10-K”) and incorporated herein by reference)

4.1		Specimen Common Share certificate (previously filed as Exhibit 4(i) to the Trust’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-07533) (the “1999 Form 10-K”) and incorporated herein by reference)

4.2		Articles Supplementary relating to the 8 1/2% Series B Cumulative Redeemable Preferred Shares (previously filed as Exhibit 4.1 to the Trust’s Registration Statement on Form 8-A filed on November 26, 2001 (File No. 1-07533) (the “2001 Form 8-A”) and incorporated herein by reference)

4.3		Specimen 8 1/2% Series B Cumulative Redeemable Preferred Share certificate (previously filed as Exhibit 4.2 to the 2001 Form 8-A and incorporated herein by reference)

4.4		Amended and Restated Rights Agreement, dated March 11, 1999, between the Trust and American Stock Transfer & Trust Company (previously filed as Exhibit 1 to the Trust’s Registration Statement on Form 8-A/A filed on March 11, 1999 (File No. 1-07533) and incorporated herein by reference)

4.5		First Amendment to Amended and Restated Rights Agreement, dated as of November , 2003, between the Trust and American Stock Transfer & Trust Company (previously filed as Exhibit 4.5 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-07533) and incorporated herein by reference)

4.6		Indenture dated December 13, 1993 related to the Trust’s 7.48% Debentures due August 15, 2026; and 6.82% Medium Term Notes due August 1, 2027 (previously filed as Exhibit 4(a) to the Trust’s Registration Statement on Form S-3 (File No. 33-51029), and amended on Form S-3 (File No. 33-63687), filed on December 13, 1993 and incorporated herein by reference)

4.7		Indenture dated September 1, 1998 related to the Trust’s 8.75% Notes due December 1, 2009; 6 1/8% Notes due November 15, 2007; 4.50% Notes due 2011; 5.65% Notes due 2016; 6.00% Notes due 2012; 6.20% Notes due 2017; and 5.40% Notes due 2013 (previously filed as Exhibit 4(a) to the Trust’s Registration Statement on Form S-3 (File No. 333-63619) filed on September 17, 1998, as incorporated by reference as Exhibit 4.7 to the Trust’s Registration Statement on Form S-3 (File No. 333-135159) filed on June 20, 2006, and incorporated herein by reference)

4.8		Pursuant to Regulation S-K Item 601(b)(4)(iii), the Trust by this filing agrees, upon request, to furnish to the Securities and Exchange Commission a copy of other instruments defining the rights of holders of long-term debt of the Trust

10.1		Amended and Restated 1983 Stock Option Plan and 1985 Non-Qualified Stock Option Plan of Federal Realty Investment Trust (previously filed as exhibits to the Trust’s Registration Statement on Form S-8 (File No. 33-55111), filed on August 17, 1994 and incorporated herein by reference)

EXHIBIT INDEX


Exhibit No.		Description
10.2		1985 Non-Qualified Stock Option Plan (previously filed as a portion of Exhibit 10 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 1985 (File No. 1-07533) and incorporated herein by reference)

10.3		1991 Share Purchase Plan (previously filed as a portion of Exhibit 10 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 1-07533) and incorporated herein by reference)

10.4		Amended and Restated 1993 Long-Term Incentive Plan, as amended on October 6, 1997 and further amended on May 6, 1998 (previously filed as Exhibit 10.26 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-07533) and incorporated herein by reference)

10.5		Fiscal Agency Agreement dated as of October 28, 1993 between the Trust and Citibank, N.A. (previously filed as an exhibit to the Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 (File No. 1-07533) and incorporated herein by reference)

10.6		Form of Severance Agreement between the Trust and Certain of its Officers dated December 31, 1994 (previously filed as a portion of Exhibit 10 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-07533) and incorporated herein by reference)

10.7		* Performance Share Award Agreement dated as of February 9, 2000 between the Trust and Donald C. Wood (previously filed as a portion of Exhibit 10 to the 1999 Form 10-K and incorporated herein by reference)

10.8		* Restricted Share Award Agreement dated as of February 9, 2000 between the Trust and Donald C. Wood (previously filed as a portion of Exhibit 10 to the 1999 Form 10-K and incorporated herein by reference)

10.9		* Severance Agreement between the Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of Exhibit 10 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (File No. 1-07533) (the “1999 1Q Form 10-Q”) and incorporated herein by reference)

10.10		* Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of Exhibit 10 to the 1999 1Q Form 10-Q and incorporated herein by reference)

10.11		* Amendment to Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 16, 2005 (previously filed as Exhibit 10.12 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 1-07533) (the “2004 Form 10-K”) and incorporated herein by reference)

10.12		* Amendment to Restricted Share Award Agreement dated December 8, 2000 between the Trust and Donald C. Wood (previously filed as a portion of Exhibit 10 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 1-07533) (the “2000 Form 10-K”) and incorporated herein by reference)

10.13		* Split Dollar Life Insurance Agreement dated August 12, 1998 between the Trust and Donald C. Wood (previously filed as a portion of Exhibit 10 to the 2000 Form 10-K and incorporated herein by reference)

10.14		* Restricted Share Award Agreement dated as of February 15, 2000 between the Trust and Jeffrey S. Berkes (previously filed as a portion of Exhibit 10 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 1-07533) (the “2001 Form 10-K”) and incorporated herein by reference)

EXHIBIT INDEX


Exhibit No.		Description
10.15		* Severance Agreement between the Trust and Jeffrey S. Berkes dated March 1, 2000 (previously filed as a portion of Exhibit 10 to the 2001 Form 10-K and incorporated herein by reference)

10.16		* Amendment to Severance Agreement between Federal Realty Investment Trust and Jeffrey S. Berkes dated February 16, 2005 (previously filed as Exhibit 10.17 to the 2004 Form 10-K and incorporated herein by reference)

10.17		* Severance Agreement dated March 1, 2002 between the Trust and Larry E. Finger (previously filed as a portion of Exhibit 10 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 1-07533) (the “2002 2Q Form 10-Q”) and incorporated herein by reference)

10.18		* Amendment to Severance Agreement between Federal Realty Investment Trust and Larry E. Finger dated February 16, 2005 (previously filed as Exhibit 10.19 to the 2004 Form 10-K and incorporated herein by reference)

10.19		* Combined Incentive and Non-Qualified Stock Option Agreement dated February 28, 2002 between the Trust and Larry E. Finger (previously filed as a portion of Exhibit 10 to the 2002 2Q Form 10-Q and incorporated herein by reference)

10.20		* Performance Share Award Agreement between the Trust and Donald C. Wood dated February 28, 2002 (previously filed as a portion of Exhibit 10 to the 2002 2Q Form 10-Q and incorporated herein by reference)

10.21		* Performance Share Award Agreement between the Trust and Jeffrey S. Berkes dated February 28, 2002 (previously filed as a portion of Exhibit 10 to the 2002 2Q Form 10-Q and incorporated herein by reference)

10.22		* Amendment to Stock Option Agreement dated August 15, 2002 between the Trust and Dawn M. Becker (previously filed as a portion of Exhibit 10 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 1-075330 (the “2002 3Q Form 10-Q”) and incorporated herein by reference)

10.23		* Amendment to Stock Option Agreement dated August 15, 2002 between Federal Realty Investment Trust and Jeffrey S. Berkes (previously filed as a portion of Exhibit 10 to the 2002 3Q Form 10-Q and incorporated herein by reference)

10.24		2001 Long-Term Incentive Plan (previously filed as Exhibit 99.1 to the Trust’s Registration Statement on Form S-8 (File No. 333-60364) filed on May 7, 2001 and incorporated herein by reference)

10.25		* Health Coverage Continuation Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 16, 2005 (previously filed as Exhibit 10.26 to the 2004 Form 10-K and incorporated herein by reference)

10.26		* Severance Agreement between the Trust and Dawn M. Becker dated April 19, 2000 (previously filed as Exhibit 10.26 to the Trust’s 2005 2Q Form 10-Q and incorporated herein by reference)

10.27		* Amendment to Severance Agreement between the Trust and Dawn M. Becker dated February 16, 2005 (previously filed as Exhibit 10.27 to the 2004 Form 10-K and incorporated herein by reference)

10.28		Form of Restricted Share Award Agreement for awards made under the Trust’s 2003 Long-Term Incentive Award Program for shares issued out of 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.28 to the 2004 Form 10-K and incorporated herein by reference)

EXHIBIT INDEX


Exhibit No.		Description
10.29		Form of Restricted Share Award Agreement for awards made under the Trust’s Annual Incentive Bonus Program for shares issued out of 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.29 to the 2004 Form 10-K and incorporated herein by reference)

10.30		Form of Option Award Agreement for options awarded under 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.30 to the 2004 Form 10-K and incorporated herein by reference)

10.31		Form of Option Award Agreement for awards made under the Trust’s 2003 Long-Term Incentive Award Program for shares issued out of the 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.28 to the 2004 Form 10-K and incorporated herein by reference)

10.32		Form of Option Award Agreement for awards made under the Trust’s 2003 Long-Term Incentive Award Program for shares issued out of the 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.32 to the 2005 Form 10-K and incorporated herein by reference)

10.33		Credit Agreement dated as of July 28, 2006, by and between the Trust, Wachovia Capital Markets LLC, Wachovia Bank, National Association and various other financial institutions (previously filed as Exhibit 10.1) to the Trust’s Current Report on Form 8-K (File No. 1-07533), filed on July 31, 2006 and incorporated herein by reference)

21.1		Subsidiaries of Federal Realty Investment Trust (filed herewith)

23.1		Consent of Grant Thornton LLP (filed herewith)

24.1		Power of Attorney (included on signature page)

31.1		Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith)

31.2		Rule 13a-14(a) Certification of Chief Financial Officer (filed herewith)

32.1		Section 1350 Certification of Chief Executive Officer (filed herewith)

32.2		Section 1350 Certification of Chief Financial Officer (filed herewith)

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

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