Federal Realty Investment Trust (FRT) 10-K risk factor changes: FY2009 vs FY2008

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the [removed: Securities] Exchange Act [removed: of 1934] and the Private Securities Litigation Reform Act of 1995.

Also, documents that we “incorporate by reference” into this Annual Report on Form 10-K, including documents that we subsequently file with the [removed: Securities and Exchange Commission, which we refer to as the SEC,] [added: SEC] will contain forward-looking statements.

We have seen [added: some] tenants experiencing declining sales, vacating early, [added: failing to pay rent on a timely basis] or filing for bankruptcy, as well as seeking rent relief from us as landlord.

Any reduction in our tenants’ abilities to pay base rent, percentage rent or other [removed: charges,] [added: charges on a timely basis,] including the filing by any of our tenants for bankruptcy protection, [removed: may] [added: will] adversely affect our financial condition and results of operations.

As a result of the current downturn in the economy, we have seen a decrease in the number of tenants available to fill anchor spaces due to [removed: the] recent bankruptcies.

Therefore, tenant demand for certain of our anchor spaces may decrease and as a result, we may [removed: in certain categories] see an increase in vacancy and/or a decrease in rents for those spaces that could have a negative impact to our net income.

We are subject to the risks that, upon expiration or termination of leases, whether by their terms, as a result of a tenant [removed: bankruptcy] [added: bankruptcy, the downturn in the economy] or otherwise, leases for space in our properties may not be renewed, space may not be [removed: re-leased, or the terms of renewal or re-lease, including the cost of required renovations or concessions to tenants, may be less favorable than current lease terms.]

As of December 31, [removed: 2008,] [added: 2009,] we had approximately [removed: $1.7] [added: $1.8] billion of debt outstanding.

Of that outstanding debt, approximately [removed: $365.3] [added: $516.2] million was secured by [removed: 17] [added: all or a portion] of [added: 21 of] our [removed: properties] [added: real estate projects] and approximately [removed: $63.5] [added: $62.3] million represented capital lease obligations on four of our properties.

In addition, we own a 30% interest in a joint venture that had [added: $57.8 million of debt secured by four properties as of December 31, 2009.]

Approximately [removed: $1.4] [added: $1.5] billion [removed: (81%)] [added: (86%)] of our debt as of December 31, [removed: 2008,] [added: 2009,] which includes all of our property secured debt and our capital lease obligations, is fixed rate debt.

Our joint venture’s debt of [removed: $81.4] [added: $57.8] million is also fixed rate debt.

| | • | | require us to dedicate increased amounts of our cash flow from operations to payments on [removed: fixed rate] debt upon refinancing or on our variable rate, unhedged debt, if interest rates rise; |

Our [added: revolving] credit [removed: facility and] [added: facility,] term [removed: loans] [added: loan and certain series of notes] include financial covenants that may limit our operating activities in the future.

As of December 31, [removed: 2008,] [added: 2009,] we were in compliance with all of our financial covenants.

If we were to breach any of our debt covenants, including the covenants listed above, and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately [added: begin proceedings to take possession of the property securing the loan.]

Many of our debt arrangements, including our public notes and our [added: revolving] credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a [removed: covenant] [added: default] under certain of our other debt obligations.

We generally do not intend to undertake on our own construction of any new large-scale mixed-use, ground-up development projects; however, we do intend to complete the development and construction of remaining phases of projects we already have started, such as Santana Row in San Jose, [removed: California.][added: California and Assembly Square in Somerville, Massachusetts.]

| | • | | our estimate of the costs to improve, reposition or redevelop a property may prove to be too low, or the time we estimate to complete the improvement, repositioning or redevelopment may be too short. As [removed: a result, the property may fail to achieve the returns we have projected, either temporarily or for a longer time;] |

| | • | | our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs until after the property is acquired, which could significantly increase our total acquisition [removed: costs;] [added: costs or decrease cash flow from the property;] and |

We believe that it will be difficult to fund our expected growth with cash from operating activities because, in addition to other requirements, we are generally required to distribute to our shareholders at least 90% of our [removed: REIT] taxable income each year to continue to qualify as a [removed: real estate investment trust, or REIT,] [added: REIT] for federal income tax purposes.

[removed: The] [added: While we were able to consummate financings during 2009, the] current [removed: recession] [added: poor economic environment] and [removed: dislocation] [added: volatility] in the capital [removed: markets, however, has resulted] [added: markets could result] in less favorable terms and availability than in recent years for debt financings.

Depending on the outcome of these factors as well as the impact of the current [removed: recession,] [added: poor economic environment,] we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.

Of our approximately [removed: $1.7] [added: $1.8] billion of debt outstanding as of December 31, [removed: 2008,] [added: 2009,] approximately [removed: $332.9] [added: $259.4] million bears interest at variable rates and was unhedged.

Costs associated with real estate investment, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a [removed: reduction in income from the property.]

Additionally, new properties that we may acquire or [removed: develop] [added: redevelop] may not produce any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with such new properties until they are fully leased.

We believe these coverages are of the types and amounts customarily obtained for or by an owner of [added: similar types of real property assets located in the areas where our properties are located.]

[removed: If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the] capital we have invested in a property, as well as the anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property.

Our organizational documents do not limit the amount of funds that we may invest in properties and assets jointly with other persons or entities and as of December 31, [removed: 2008,] [added: 2009,] excluding our joint venture with affiliates of a discretionary fund created and advised by ING Clarion Partners (“Clarion”) and properties owned in a “downREIT” structure, we hold three predominantly retail real estate projects jointly with other persons.

Our existing and future joint investments may subject us to special risks, including the possibility that our partners or co-investors might become bankrupt, that those partners or co-investors might have economic or other business interests or goals which are unlike or incompatible with our business interests or goals, [removed: and] that those partners or co-investors might be in a position to take action contrary to our suggestions or instructions, or in opposition to our policies or [removed: objectives.][added: objectives, and that disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may result in litigation or arbitration or some other form of dispute resolution.]

Although we hold the managing general partnership or membership interest in all of our existing co-investments as of December 31, [removed: 2008,] [added: 2009,] we must obtain the consent of the co-investor or meet defined criteria to sell or to finance these properties.

As of December 31, [removed: 2008,] [added: 2009,] this joint venture owned seven properties.

[removed: Under various federal, state and local laws, ordinances and regulations, we and our tenants may be] required to investigate and clean up certain hazardous or toxic substances released on or in properties we own or operate, and also may be required to pay other costs relating to hazardous or toxic substances.

We believe that we are organized and qualified as a REIT for federal income tax purposes and currently intend to operate in a manner that will allow us to continue to qualify as a REIT under the [removed: Internal Revenue Code of 1986, as amended (the “Code”).][added: Code.]

As a REIT, we must generally make annual distributions to shareholders of at least 90% of our [removed: REIT] taxable income.

As a REIT, we must make generally annual distributions to shareholders of at least 90% of our [removed: REIT] taxable income.

We are subject to income tax on amounts of undistributed [removed: REIT] taxable income and net capital gain.

For example, not more than 50% in value of our outstanding shares of capital stock may be owned, [removed: actually] [added: directly] or [removed: constructively,] [added: indirectly,] by five or fewer individuals (as defined in the [removed: Code).][added: Code) during the last half of any taxable year.]

To protect our REIT status, our [removed: declaration of trust prohibits any one]

[added: declaration of trust prohibits any one] shareholder from owning (actually or constructively) more than 9.8% in value of the outstanding common shares or of any class or series of outstanding preferred shares.

In the event of default by a tenant, we may experience delays and unexpected costs in enforcing our rights as landlord under lease terms, which may also adversely affect our financial condition and results of operations.

We may be unable to collect balances due from tenants that filed for bankruptcy protection.

If a tenant or lease guarantor files for bankruptcy, we may not be able to collect all pre-petition amounts owed by that party.

In addition, a tenant that files for bankruptcy protection may terminate our lease in which event we would have a general unsecured claim that would likely be for less than the full amount owing to us for the remainder of the lease term, which could adversely affect our financial condition and results of operation.

re-leased, or the terms of renewal or re-lease, including the cost of required renovations or concessions to tenants, may be less favorable than current lease terms which may include decreases in rental rates.

We may also choose to delay completion of a project if market conditions do not allow an appropriate return.

If conditions arise and we are not able or decide not to complete a project or if the expected cash flows of our project do not exceed the book value, an impairment of the project may be required.

| | a result, the property may fail to achieve the returns we have projected, either temporarily or for a longer time; |

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Our term loan bears interest at LIBOR, subject to a 1.5% floor, plus 300 basis points.

The market value of our debt and equity securities is subject to various factors that may cause significant fluctuations or volatility.

As with other publicly traded securities, the market price of our debt and equity securities depends on various factors, which may change from time to time and/or may be unrelated to our financial condition, operating performance or prospects that may cause significant fluctuations or volatility in such prices.

These factors include, among others:

| | • | | general economic and financial market conditions, including the current poor economic environment; |

| | • | | level and trend of interest rates; |

| | • | | our ability to access the capital markets to raise additional capital; |

| | • | | the issuance of additional equity or debt securities; |

| | • | | changes in our funds from operations (“FFO”) or earnings estimates; |

| | • | | changes in our debt or analyst ratings; |

| | • | | our financial condition and performance; |

| | • | | market perception of our business compared to other REITs; and/or |

| | • | | market perception of REITs, in general, compared to other investment sectors. |

Each of these risks could result in decreases in market rental rates and increases in vacancy rates, which could adversely affect our financial condition and results of operation.

reduction in income from the property.

If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the

Our joint venture with Clarion is subject to a buy-sell provision which is customary for real estate joint venture agreements and the industry.

Either partner may initiate these provisions at any time, which could result in either the sale of our interest or the use of available cash or borrowings to acquire Clarion’s interest.

Under various federal, state and local laws, ordinances and regulations, we and our tenants may be

Current tax law also allows us to pay a portion of our distributions in shares instead of cash.

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$81.4 million of debt secured by six properties as of December 31, 2008.

begin proceedings to take possession of the property securing the loan.

similar types of real property assets located in the areas where our properties are located.

Alternatively, if we are unable to borrow funds at acceptable terms, we could choose to pay a portion of our distributions in shares instead of cash.

| | • | | a staggered, fixed-size Board of Trustees consisting of three classes of trustees; |

We are an equity real estate investment trust specializing in the ownership, [removed: management, development] [added: management] and redevelopment of high quality retail and mixed-use [removed: properties.][added: properties 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.]

As of December 31, [removed: 2008,] [added: 2009,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 84 predominantly retail real estate projects comprising approximately [removed: 18.1] [added: 18.2] million square feet.

In total, the real estate projects were [removed: 95.0%] [added: 94.5%] leased and [removed: 94.3%] [added: 93.2%] occupied at December 31, [removed: 2008.][added: 2009.]

A joint venture in which we own a 30% interest owned seven retail real estate projects totaling approximately 1.0 million square feet as of December 31, [removed: 2008.][added: 2009.]

In total, the joint venture properties in which we own an interest were [removed: 97.4%] [added: 85.0%] leased and occupied at December 31, [removed: 2008.][added: 2009.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 41] [added: 42] consecutive years.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, [removed: which we refer] [added: referred] to as [removed: GAAP,] [added: “GAAP”,] requires management to make estimates and assumptions that in [added: certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and]

[removed: The most] [added: Our] significant accounting [added: policies are more fully described in Note 1 to the Consolidated Financial Statements; however, the most critical accounting] policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result in actual amounts that differ from estimates, are as follows:

We make estimates of the [removed: collectibility] [added: collectability] of our [added: current] accounts receivable [removed: related to minimum rents, straight-line rents, expense reimbursements] and [removed: other revenue or income.][added: straight-line rents receivable which requires significant judgment by management.]

[removed: In some cases, primarily relating] [added: Due] to [added: the nature of the accounts receivable from] straight-line rents, the collection [added: period] of these amounts [added: typically] extends beyond one year.

[removed: 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.

At December 31, [removed: 2008] [added: 2009] and [removed: 2007,] [added: 2008,] accounts receivable include approximately [removed: $37.2] [added: $41.8] million and [removed: $32.0] [added: $37.2] million, respectively, related to straight-line rents.

[removed: These] [added: Correspondingly, these] estimates [added: of collectability] have a direct impact on our net income.

At December 31, [removed: 2008] [added: 2009] and [removed: 2007,] [added: 2008,] our allowance for doubtful accounts was [removed: $11.8] [added: $16.1] million and [removed: $7.0] [added: $11.8] million, respectively.

Historically, we have recognized bad debt expense between 0.4% and [removed: 1.4%] [added: 1.3%] of rental income and it was 1.2% in [removed: 2008.][added: 2009 reflecting economic changes and their impact to our tenants.]

[added: We capitalize real estate] investments and depreciate them [added: on a straight-line basis] in accordance with GAAP and consistent with industry standards based on our best estimates of the assets’ physical and economic useful lives.

A newly developed neighborhood shopping center building would typically have an economic useful life of 50 to 60 years, but since many of our assets are not newly developed buildings, estimating the useful lives of assets that are long-lived [removed: as well as their salvage value] requires significant management judgment.

Unamortized leasing costs are charged to [removed: operating] expense if the applicable tenant vacates before the expiration of its lease.

Undepreciated tenant work is [removed: charged to operations] [added: written-off] if the applicable tenant vacates and the tenant work is replaced or has no future value.

[removed: When applicable, as lessee, we classify our leases of land and building as operating or capital leases in accordance with the provisions of Statement of Financial Accounting Standard (SFAS) No. 13, “Accounting for Leases.”] We are required to use judgment and make estimates in determining the lease term, the estimated economic life of the property and the interest rate to be used in [removed: applying] [added: determining whether or not] the [removed: provisions] [added: lease meets the qualification] of [removed: SFAS No. 13.][added: a capital lease and is recorded as an asset.]

Upon acquisition of operating real estate properties, we estimate the fair value of acquired tangible assets (consisting of land, building and improvements), identified intangible assets and liabilities (consisting of above-market and below-market leases, in-place leases and tenant relationships), and assumed [removed: debt in accordance with][added: debt.]

[removed: SFAS No. 141, “Business Combinations.”] Based on these estimates, we allocate the purchase price to the applicable assets and liabilities.

_Long-Lived [removed: Assets_][added: Assets and Impairment_]

This includes the recoverability of long-lived assets, including our properties that have been acquired or [removed: developed.][added: redeveloped and our investment in certain joint ventures.]

[removed: Management must evaluate properties for possible impairment] [added: The calculation] of [removed: value and, for those properties where impairment may be indicated,] [added: both discounted and undiscounted cash flows requires management to] make estimates of future cash flows including revenues, operating expenses, required maintenance and development expenditures, market conditions, demand for space by tenants and rental rates over [removed: very] long periods.

Because our properties typically have a [removed: very] long life, the assumptions used to estimate the future recoverability of book value requires significant management judgment.

[removed: _New] [added: New] Accounting [removed: Pronouncements_][added: Pronouncements]

[removed: We adopted the recognition and disclosure provisions of SFAS No. 157 for financial assets and financial liabilities and for nonfinancial assets and nonfinancial liabilities that are re-measured at least annually] [added: The standard was] effective [added: on a prospective basis beginning on] January 1, [removed: 2008; the adoption] [added: 2009, and] did not have a material impact on our financial position, results of [removed: operations] [added: operations,] or cash flows.

[removed: SFAS No. 141 (R)] [added: Effective January 1, 2009, we adopted a new accounting standard that] broadens and clarifies the definition of a [removed: business] [added: business,] which will result in significantly more of our acquisitions being treated as business combinations rather than asset acquisitions.

[removed: Early adoption] [added: The new requirement] is [removed: not permitted] [added: effective for business combinations for which the acquisition date is on or after January 1, 2009,] and therefore, [removed: this] will only impact prospective acquisitions with no change to the accounting for acquisitions completed prior to or on December 31, 2008.

The new standard requires us to expense [removed: as incurred] all acquisition related transaction costs [added: as incurred] which could include broker fees, transfer taxes, legal, accounting, valuation, and other professional and consulting [removed: fees; for acquisitions prior to January 1, 2009, these costs were capitalized as part of the acquisition cost.][added: fees.]

[removed: The] [added: While the adoption did not have a material] impact [added: on our financial statements for 2009, the impact] to our [added: future consolidated] financial statements will vary significantly depending on the [added: timing and] number of [added: acquisitions or potential] acquisitions, size of the acquisitions, and location of the acquisitions.

Based on acquisitions in the [removed: last three] [added: past several] years, transaction costs for single asset acquisitions typically ranged from $0.1 million to $1.0 million with significantly higher transaction costs for an acquisition of a larger portfolio.

[removed: The] [added: Effective January 1, 2009, we adopted a] new [added: accounting] standard [added: that significantly changes the accounting and reporting of minority interests in the consolidated financial statements and] requires a [removed: non-controlling] [added: noncontrolling] interest, which [removed: is currently] [added: was previously] referred to as a minority interest, to be recognized as a component of equity rather than included in the mezzanine section of the balance sheet where it [removed: is currently] [added: was previously] presented.

The terminology “minority interest” [removed: is] [added: has been] changed to “noncontrolling interest”.

The “minority interest” caption on the statement of operations [removed: will be] [added: is now] reflected as “net income attributable to [removed: the] noncontrolling interests” and shown after consolidated net [removed: income and will be an adjustment to reconcile to net] income.

This is a presentation only change for minority interest on both the balance sheet and statement of operations and [removed: will have] [added: has] no impact to [removed: net income,] total liabilities and [added: shareholders’] equity, [removed: and] [added: net income available to common shareholders, or] earnings per share.

The statement also requires the recognition of 100% of the fair [removed: values] [added: value] of assets acquired and liabilities assumed in acquisitions of less than 100% controlling interest with subsequent acquisitions of the [removed: non-controlling] [added: noncontrolling] interest recorded as equity transactions.

[removed: Effective] [added: On] January 1, 2009, we [removed: will reclassify] [added: reclassified] $32.4 million from the mezzanine section of the balance sheet to shareholders’ equity.

[removed: The] [added: While there was no] additional impact on the [added: consolidated] financial statements [added: during 2009, the impact on our future consolidated financial statements] will vary depending on the level of transactions with entities involving [removed: non-controlling] [added: noncontrolling] interests.

liabilities, and revenues and expenses.

Current accounts receivable from tenants primarily relate to contractual minimum rent and percentage rent as well as real estate tax and other cost reimbursements.

Accounts receivable from straight-line rent is typically longer term in nature and relates to the cumulative amount by which straight-line rental income recorded to date exceeds cash rents billed to date under the contractual lease agreement.

The collectability of receivables is affected by numerous different factors including current economic conditions, bankruptcies, and the ability of the tenant to perform under the terms of their lease agreement.

While we make estimates of potentially uncollectible amounts and provide an allowance for them through bad debt expense, actual collectability could differ from those estimates which could affect our net income.

With respect to the allowance for current uncollectible tenant receivables, we assess the collectability of outstanding receivables by evaluating such factors as nature and age of the receivable, past history and current financial condition of the specific tenant including our assessment of the tenant’s ability to meet its contractual lease obligations, and the status of any pending disputes or lease negotiations with the tenant.

A change in the estimate of collectability of a receivable would result in a change to our allowance for doubtful accounts and correspondingly bad debt expense and net income.

For example, in the event our estimates were not accurate and we were required to increase our allowance by 1% of rental income, our bad debt expense would have increased and our net income would have decreased by $5.1 million.

Our experience relative to unbilled straight-line rents is that a portion of the

Additionally, we make estimates as to the probability of certain development and redevelopment projects being completed.

If we determine the redevelopment is no longer probable of completion, we immediately expense all capitalized costs which are not recoverable.

When applicable, as lessee, we classify our leases of land and building as operating or capital leases.

If the value of below market lease intangibles includes renewal option periods, we include such renewal periods in the amortization period utilized.

Management’s evaluation of impairment includes review for possible indicators of impairment as well as, in certain circumstances, undiscounted and discounted cash flow analysis.

We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated.

If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum within the range is accrued.

As further discussed in Note 8 to the Consolidated Financial Statements, we are party to a litigation matter related to a parcel of land adjacent to our Santana Row property.

During 2009, the judge awarded damages to the plaintiff including interest and costs of suit resulting in us increasing our litigation accrual to $16.4 million.

We and the plaintiff are both appealing the ruling and expect oral arguments on the appeal to be scheduled for later in 2010.

A change in the final ruling in our favor as part of the appeals process could result in a decrease to our litigation liability which would increase net income; however, an adverse change during the appeals process could result in an increase to the litigation accrual which would decrease our net income.

If changes in facts and circumstances indicate that warranty reserves are understated, we will accrue additional reserves at such time a liability has been incurred and the costs can be reasonably estimated.

Warranty reserves are released once the legal liability period has expired or all related work has been substantially completed.

_FASB Accounting Standards Codification_

In June 2009, the FASB issued new accounting requirements, which make the FASB Accounting Standards Codification (“Codification”) the single source of authoritative literature for U.S. accounting and reporting standards.

The Codification is not meant to change existing GAAP but rather provide a single source for all literature.

We adopted the standard during the quarter ended September 30, 2009, which required us to change certain disclosures in our financial statements to reflect Codification or “plain English” references rather than references to FASB Statements, Staff Positions or Emerging Issues Task Force Abstracts.

The adoption of this requirement impacted certain disclosures in the financial statements but did not have an impact on our consolidated financial position, results of operations, or cash flows.

_Recently Adopted Accounting Pronouncements_

For acquisitions prior to January 1, 2009, these costs were capitalized as part of the acquisition cost.

The new accounting standard was adopted effective January 1, 2009 and has been applied prospectively except for the presentation changes to the balance sheet and statement of operations which have been applied retrospectively in the 2008 and 2007 consolidated financial statements.

Effective January 1, 2009, we adopted a new accounting standard that requires enhanced disclosures about an entity’s derivative instruments and hedging activities.

Effective January 1, 2009, we adopted the new accounting standard and have calculated EPS for all periods presented under the two-class method.

The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating securities is calculated according to dividends declared and participation rights in undistributed earnings.

The implementation did not result in a significant change to basic or diluted EPS for all periods presented.

During the quarter ended June 30, 2009, we adopted a new accounting standard which requires disclosure regarding the fair value of financial instruments for interim reporting periods.

The adoption resulted in additional disclosures in our quarterly financial statements.

During the quarter ended June 30, 2009, we adopted a new accounting standard which establishes general standards of accounting and disclosure of events that occur after the balance sheet date but before the financial statements are issued or available to be issued and requires disclosure of the date through which subsequent events have been evaluated.

We have added disclosure in Note 1 under “Principles of Consolidation and Estimates” to the consolidated financial statements in this Form 10-K regarding the date through which we have evaluated subsequent events.

_Recently Issued Accounting Pronouncements_

In June 2009, the FASB issued a new accounting standard which provides certain changes to the evaluation of a VIE including requiring a qualitative rather than quantitative analysis to determine the primary beneficiary of a VIE, continuous assessments of whether an enterprise is the primary beneficiary of a VIE, and enhanced disclosures about an enterprise’s involvement with a VIE.

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These 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.

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certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses.

An increase in our bad debt expense would decrease our net income.

For example, if we had experienced an increase in bad debt of 0.5% of rental income in 2008, our net income would have been reduced by approximately $2.5 million.

We capitalize real estate

The cost of our real estate investments, less salvage value, if any, is charged to depreciation expense over the estimated life of the asset using straight-line rates for financial statement purposes.

These estimates determine whether or not the lease meets the qualification of a capital lease and is recorded as an asset.

SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires the presentation of discontinued operations to include components of an entity comprising operations and cash flows that can be distinguished operationally and for financial reporting purposes from the rest of the entity.

As a result, the sale of a property, or the classification of a property as held for sale, typically requires us to reclassify the revenues and expenses associated with the property from continuing operations to “discontinued operations” for all periods presented.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”).

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. 123(R).

In accordance with the FASB Staff Position (“FSP”) SFAS No. 157-2, “Effective Date of FASB Statement No. 157”, we are required to adopt the provisions of SFAS No. 157 for all other nonfinancial assets and nonfinancial liabilities effective January 1, 2009 and do not expect the adoption to have a material impact on our financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”).

This standard permits entities to choose to measure many financial instruments and certain other items at fair value and is effective for the first fiscal year beginning after November 15, 2007.

We did not make this fair value election when we adopted SFAS No. 159 effective January 1, 2008, and, therefore, it did not have an impact on our financial position, results of operations, or cash flows.

On December 4, 2007, the FASB issued Statement No. 141 (R), “Business Combinations” (“SFAS No. 141 (R)”).

FAS 141 (R) is effective for business combinations for which the acquisition date is on or after January 1, 2009.

On December 4, 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB 51” (“SFAS No. 160”).

The new standard significantly changes the accounting and reporting of minority interests in the consolidated financial statements.

SFAS No. 160 is effective January 1, 2009 and is to be applied prospectively except for the presentation changes to the balance sheet and income

statement which will be applied retrospectively in the 2009 financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS No. 161”).

SFAS No. 161 requires enhanced disclosures about an entity’s derivative instruments and hedging activities and is effective for fiscal years beginning after November 15, 2008.

In June 2008, the FASB issued FSP EITF No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF No. 03-6-1”).

We expect the adoption of FSP EITF No. 03-6-1 to result in a minimal decrease to our basic and diluted earnings per share calculations for all periods presented.

The FSP is effective for fiscal years beginning after December 15, 2008 and will require retrospective application to all prior period EPS data presented in the financial statements; early adoption is not permitted.

The consensus is effective on a prospective basis beginning on January 1, 2009; we do not expect EITF 08-6 to have a material impact on our financial position, results of operations, or cash flows.

| | | | | | | | | | | |

| | | | | | | | | | | |

| | | | | | | | | | | |

| Year ended December 31, 2007 | | | | | | | | | | |

| February 28 | | Crow Canyon Crest | | San Ramon, CA | | 17,000 | | $ | 10.9 | |

| March 8 | | The White Marsh Portfolio:(6) | | White Marsh, MD | | | | | 189.4 | |

| | | THE AVENUE at White Marsh | | | | 296,000 | | | | |

| | | The Shoppes at Nottingham Square | | | | 186,000 | | | | |

| | | White Marsh Plaza | | | | 79,000 | | | | |

| | | White Marsh Other | | | | 53,000 | | | | |

As of December 31, [removed: 2008,] [added: 2009,] we were not party to any open derivative financial instruments.

At December 31, [removed: 2008] [added: 2009] we had [removed: $1.4] [added: $1.5] billion of fixed-rate debt outstanding.

If interest rates on our fixed-rate debt instruments at December 31, [removed: 2008] [added: 2009] had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately [removed: $47.0] [added: $61.4] million.

If interest rates on our fixed-rate debt instruments at December 31, [removed: 2008] [added: 2009] had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately [removed: $49.5] [added: $65.4] million.

Based upon this amount of variable rate [removed: debt,] [added: debt and specific terms,] if interest rates increased by 1.0% our annual interest expense would increase by approximately [removed: $3.3] [added: $2.6] million, and our net income and cash flows for the year would decrease by approximately [removed: $3.3] [added: $2.6] million.

Conversely, if interest rates decreased by 1.0%, our annual interest expense would decrease by [removed: approximately $3.3 million, and] [added: less than $0.1 million with a corresponding increase in] our net income and cash flows for the [removed: year would increase by approximately $3.3 million.][added: year.]

At December 31, 2009, we had $259.4 million of variable rate debt outstanding, which consisted of a $250 million term loan that bears interest at LIBOR, subject to a 1.5% floor, plus 300 basis points, and $9.4 million of municipal bonds that bears interest at 0.4%.

At December 31, 2008, we had $332.9 million of variable rate debt outstanding.

We are an equity real estate investment trust (“REIT”) specializing in the ownership, management, [removed: development] and redevelopment of high quality retail and mixed-use properties located primarily in densely populated and affluent communities in strategically selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California.

As of December 31, [removed: 2008,] [added: 2009,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 84 predominantly retail real estate projects comprising approximately [removed: 18.1] [added: 18.2] million square feet.

In total, the real estate projects were [removed: 95.0%] [added: 94.5%] leased and [removed: 94.3%] [added: 93.2%] occupied at December 31, [removed: 2008.][added: 2009.]

A joint venture in which we own a 30% interest owned seven retail real estate projects totaling approximately 1.0 million square feet as of December 31, [removed: 2008.][added: 2009.]

In total, the joint venture properties in which we own an interest were [removed: 97.4%] [added: 85.0%] leased and occupied at December 31, [removed: 2008.][added: 2009.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 41] [added: 42] consecutive years.

We were founded in 1962 as a [removed: real estate investment trust] [added: REIT] under the laws of the District of Columbia and re-formed as a [removed: real estate investment trust] [added: REIT] in the state of Maryland in 1999.

Our principal executive offices are located at 1626 East Jefferson Street, Rockville, Maryland [removed: 20852 and our telephone number is (301) 998-8100.][added: 20852.]

Our [removed: Web site] [added: website] address is _www.federalrealty.com_.

The information contained on our website is not a part of this [removed: report.][added: report and is not incorporated herein by reference.]

Our primary business objective is to own, manage, acquire and redevelop a portfolio of high quality retail properties, with the [removed: dominant] [added: most prevalent] property type being grocery anchored community and neighborhood shopping centers, that will:

Late in 1994, recognizing a trend of increased consumer acceptance of retailer expansion to main streets, we expanded our investment strategy to include [removed: “street retail” and “mixed-use”] [added: mixed-use] properties.

Our core operating strategy is to actively manage our properties to maximize rents and maintain [removed: high] occupancy levels by attracting and retaining a strong and diverse base of tenants and replacing weaker, underperforming tenants with stronger ones.

These strong demographics help our tenants generate higher sales, which has enabled us to maintain [removed: high] [added: higher] occupancy rates, charge higher rental rates, and maintain steady rent growth, all of which increase the value of our portfolio.

Our investment strategy is to deploy capital at risk-adjusted rates of return that exceed our [added: long-term] weighted average cost of capital in projects that have potential for future income growth.

| | • | | acquiring community and neighborhood shopping [removed: centers,] [added: centers and other quality retail properties,] located in densely populated or affluent areas where barriers to entry for further development are high, and that have possibilities for enhancing operating performance through renovation, expansion, reconfiguration and/or retenanting; |

At February [removed: 24, 2009,] [added: 12, 2010,] we had [removed: 276] [added: 239] full-time employees and [removed: 133] [added: 137] part-time employees.

As a REIT, we are generally not subject to federal income tax on [removed: REIT] taxable income that we distribute to our shareholders.

Under the [removed: Internal Revenue Code of 1986, as amended, which we refer to as the] Code, REITs are subject to numerous organizational and operational requirements, [added: including the requirement to generally distribute at least 90% of taxable income each year.]

[removed: We will be subject to] federal income tax on our taxable income (including any applicable alternative minimum tax) at regular corporate rates if we fail to qualify as a REIT for tax purposes in any taxable year, or to the extent we distribute less than 100% of [removed: REIT] [added: our] taxable income.

We will also [added: generally] not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to certain state and local income and franchise taxes and to federal income and excise taxes on our undistributed [removed: REIT] taxable income.

In [added: 2009,] 2008, [removed: 2007,] and [removed: 2006,] [added: 2007,] our TRS incurred [added: net income taxes/(refunds) of] approximately [removed: $(0.8)] [added: $0.5] million, [removed: $1.5] [added: $(0.8)] million and [removed: $2.4] [added: $(0.3)] million, respectively, [removed: of income taxes,] primarily related to sales of condominiums at Santana Row, sales of three properties in 2007, and our investment in certain restaurant joint ventures at Santana Row.

Retailers at our properties also face increasing competition from outlet stores, discount shopping clubs, superstores, and other forms of marketing of goods and services, such as direct mail, [removed: electronic commerce] [added: internet marketing] and telemarketing.

Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 [added: (the “Exchange Act”)] are available free of charge through the Investor Information section of our website at _www.federalrealty.com_ as soon as reasonably practicable after we electronically file the material with, or furnish the material to, the Securities and Exchange Commission, or the SEC.

We operate in a manner intended to qualify as a REIT for tax purposes pursuant to provisions of the Internal Revenue Code of 1986, as amended (the “Code”).

Our telephone number is (301) 998-8100.

We elected to be taxed as a REIT under the federal income tax laws when we filed our 1962 tax return.

We will be subject to

In addition, because of the in-fill nature of our locations, our properties generally face less competition per capita than properties owned by our peers.

We elected to be taxed as a real estate investment trust for federal income tax purposes beginning with our taxable year ended December 31, 1962.

including the requirement to generally distribute at least 90% of REIT taxable income each year.

[removed: The complaint alleged] [added: In May 2003, a breach of contract action was filed against us alleging] that a one page document entitled “Final [removed: Proposal,” which included language that it was subject to approval of formal documentation,] [added: Proposal”] constituted a ground lease of a parcel of property located adjacent to our Santana Row property and gave [removed: First National Mortgage Company] the [added: plaintiff the] option to require that we acquire the property at a price determined in accordance with a formula included in the “Final Proposal.” [removed: A trial as to liability only] [added: The “Final Proposal” explicitly stated that it] was [removed: held in June 2006] [added: subject to approval of the terms] and [removed: a jury rendered] [added: conditions of] a [removed: verdict against us.][added: formal agreement.]

A trial as to liability only was held in June 2006 and a jury rendered a verdict against us.

A trial on the issue of damages was held in April 2008 and the court issued a tentative ruling in April 2009 awarding damages to the plaintiff of approximately $14.4 million plus interest.

Based on this tentative ruling, we estimated interest could range from $2.1 million to $8.4 million.

Accordingly, considering all the information available to us on May 6, 2009, when we filed our Form 10-Q for the three months ended March 31, 2009, our best estimate of damages, interest, and other costs was $21.4 million.

Accordingly, we increased our accrual for the matter from $0.8 million at December 31, 2008, to $21.4 million at March 31, 2009.

In June 2009, the court issued a final judgment awarding damages of $15.9 million (including interest) plus costs of suit.

In July 2009, we and the plaintiff both filed a notice of appeal.

The plaintiff also filed reimbursement motions for $2.1 million of legal fees, expert fees, and court costs of which $1.9 million was subsequently denied.

In December 2009, the plaintiff filed an “appellee’s principal and response brief” providing additional information regarding the issues the plaintiff is appealing.

The plaintiff’s appeal included only the denial of expert fees which totals approximately $0.4 million.

Given the additional information regarding the appeal, we lowered our accrual to $16.4 million, which reflects our best estimate of the litigation liability.

The net increase in our accrual of $15.6 million is included in “litigation provision” in our consolidated statement of operations, and the $16.4 million accrual is included in the “accounts payable and accrued expenses” line item in our consolidated balance sheet as of December 31, 2009.

During 2009, we incurred additional legal and other costs related to this lawsuit and appeal process which are also included in the “litigation provision” line item in the consolidated statement of operations.

We expect oral arguments on the appeal to be scheduled for later in 2010.

All judgments will be stayed until completion of the appeals.

Furthermore, we continue to believe that the “Final Proposal” which included express language that it was subject to formal documentation was not a binding contract and that we should have no liability whatsoever, and will vigorously defend our position as part of the appeal process.

In May 2003, First National Mortgage Company filed a complaint against us in the United States District Court for the Northern District of California.

A trial on the issue of damages was held in April 2008; however, the judge has not yet issued a ruling.

Reports from our experts and the plaintiff’s experts show potential damages ranging from $600,000 to $24 million.

Pending the judge’s ruling, we cannot make a reasonable estimate of potential damages.

We will evaluate whether to appeal the jury verdict after the judge issues his ruling on damages taking into account a variety of factors including the amount of damages awarded.

If we choose not to appeal or we appeal and are not successful in overturning the jury verdict, we will be liable for damages.

Depending on the amount of damages awarded, it is possible, there could be a material adverse impact on our net income in the period in which it becomes both probable that we will have to pay the damages and such damages can be reasonably estimated.

In any event, management does not believe this matter will have a material impact on our financial position.

We are also involved in a litigation matter relating to a shopping center in New Jersey where a former tenant has alleged that we and our management agent acted improperly by failing to disclose a condemnation action at the property that was pending when the lease was signed.

A trial as to liability only was concluded in April 2007, and in May 2008, a judgment was entered that ruled in our favor on certain legal issues and against us on other legal issues.

In December 2008, we reached a settlement with the plaintiff of those matters where the court ruled against us and determined that we are liable.

The total settlement was $2.3 million of which we paid $1.15 million and the third party management agent paid $1.15 million.

We are currently in the process of settling the amount of the portion of the plaintiff’s legal fees which we are required to pay; we expect the amount to be approximately $1.0 million of which we will pay 50% and the third party management agent will pay 50%.

Our share of the total estimated settlement of $1.6 million is included in “general and administrative expense” in the statement of operations.

For the fiscal year ended December 31, [removed: 2008][added: 2009]

The aggregate market value of the Registrant’s common shares held by non-affiliates of the Registrant, based upon the closing sales price of the Registrant’s common shares on June 30, [removed: 2008] [added: 2009] was [removed: $4.1] [added: $3.0] billion.

The number of Registrant’s common shares outstanding on February [removed: 24, 2009] [added: 12, 2010] was [removed: 59,075,627.][added: 61,258,482.]

FISCAL YEAR ENDED DECEMBER 31, [removed: 2008][added: 2009]

Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for [added: the] Registrant’s [removed: 2009] [added: 2010] annual meeting of shareholders to be held in May [removed: 2009] [added: 2010] will be incorporated by reference into Part III hereof.

| Item 1. | | [removed: [Business](#tx86578_2)] [added: [Business](#tx92260_2)] | | 3 |

| Item 1A. | | [Risk [removed: Factors](#tx86578_3)] [added: Factors](#tx92260_3)] | | 8 |

| Item 1B. | | [Unresolved Staff [removed: Comments](#tx86578_4)] [added: Comments](#tx92260_4)] | | [removed: 17] [added: 18] |

| Item 2. | | [removed: [Properties](#tx86578_5)] [added: [Properties](#tx92260_5)] | | [removed: 17] [added: 18] |

| Item 3. | | [Legal [removed: Proceedings](#tx86578_6)] [added: Proceedings](#tx92260_6)] | | [removed: 25] [added: 26] |

| Item 4. | | [Submission of Matters to a Vote of [removed: Shareholders](#tx86578_7)] [added: Shareholders](#tx92260_7)] | | [removed: 25] [added: 26] |

| Item 5. | | [Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity [removed: Securities](#tx86578_9)] [added: Securities](#tx92260_9)] | | [removed: 26] [added: 27] |

| Item 6. | | [Selected Financial [removed: Data](#tx86578_10)] [added: Data](#tx92260_10)] | | [removed: 28] [added: 29] |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx86578_11)] [added: Operations](#tx92260_11)] | | [removed: 30] [added: 31] |

| Item 7A. | | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#tx86578_12)] [added: Risk](#tx92260_12)] | | 56 |

| Item 8. | | [Financial Statements and Supplementary [removed: Data](#tx86578_13)] [added: Data](#tx92260_13)] | | 57 |

| Item 9. | | [Changes In and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#tx86578_14)] [added: Disclosure](#tx92260_14)] | | 57 |

| Item 9A. | | [Controls and [removed: Procedures](#tx86578_15)] [added: Procedures](#tx92260_15)] | | 57 |

| Item 9B. | | [Other [removed: Information](#tx86578_16)] [added: Information](#tx92260_16)] | | 59 |

| [PART [removed: III](#tx86578_17)] [added: III](#tx92260_17)] | | | | |

| Item 10. | | [Trustees, Executive Officers and Corporate [removed: Governance](#tx86578_18)] [added: Governance](#tx92260_18)] | | 60 |

| Item 11. | | [Executive [removed: Compensation](#tx86578_19)] [added: Compensation](#tx92260_19)] | | 60 |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder [removed: Matters](#tx86578_20)] [added: Matters](#tx92260_20)] | | 60 |

| Item 13. | | [Certain Relationships and Related Transactions, and Trustee [removed: Independence](#tx86578_21)] [added: Independence](#tx92260_21)] | | 60 |

| Item 14. | | [Principal Accountant Fees and [removed: Services](#tx86578_22)] [added: Services](#tx92260_22)] | | 60 |

| Item 15. | | [Exhibits and Financial Statement [removed: Schedules](#tx86578_24)] [added: Schedules](#tx92260_24)] | | 61 |

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

¨ Yes ¨ No

| [PART I](#tx92260_1) | | | | |

| [PART II](#tx92260_8) | | | | |

| [PART IV](#tx92260_23) | | | | |

| [SIGNATURES](#tx92260_25) | | | | 62 |

| [PART I](#tx86578_1) | | | | |

| [PART II](#tx86578_8) | | | | |

| [PART IV](#tx86578_23) | | | | |

| [SIGNATURES](#tx86578_25) | | | | 62 |

As of December 31, [removed: 2008,] [added: 2009,] we owned or had a majority ownership interest in community and neighborhood shopping centers and mixed-used properties which are operated as 84 predominantly retail real estate projects comprising approximately [removed: 18.1] [added: 18.2] million square feet.

These properties are located primarily in densely populated and affluent communities in strategic metropolitan markets in the Northeast and Mid-Atlantic regions of the [added: United States, as well as California.]

No single property accounted for over 10% of our [removed: 2008] [added: 2009] total revenue.

As of December 31, [removed: 2008,] [added: 2009,] we had approximately [removed: 2,450] [added: 2,400] leases, with tenants ranging from sole proprietors to major national [added: and international] retailers.

No one tenant or affiliated group of tenants accounted for more than 2.6% of our annualized base rent as of December 31, [removed: 2008.][added: 2009.]

As a result of our tenant diversification, we believe our exposure to any one [removed: recent or future] bankruptcy filing in the retail sector has not been and will not be significant, however, multiple filings by a number of retailers could have a significant impact.

The following table [removed: shows, by region and state within the region,] [added: shows] the number of projects, the gross leasable area of commercial space and the percentage of total portfolio gross leasable area of commercial space in each state as of December 31, [removed: 2008.][added: 2009.]

| [removed: Region and State] [added: State] | | Number of Projects | | Gross Leasable Area | | [removed: Percentage of] [added: Percentage of] Gross [removed: Leasable Area] [added: Leasable Area] | |

| Virginia | | 15 | | [removed: 3,602,000] [added: 3,612,000] | | 19.9 | % |

| Pennsylvania(1) | | 11 | | [removed: 2,405,000] [added: 2,409,000] | | 13.3 | % |

| Massachusetts | | 7 | | [removed: 1,378,000] [added: 1,381,000] | | 7.6 | % |

| New York | | 5 | | [removed: 1,109,000] [added: 1,124,000] | | [removed: 6.1] [added: 6.2] | % |

| [removed: Connecticut (1)] [added: Connecticut(1)] | | 2 | | 308,000 | | 1.7 | % |

| District of Columbia | | 2 | | [removed: 168,000] [added: 167,000] | | 0.9 | % |

| Total all [removed: regions] [added: states] | | 84 | | [removed: 18,119,000] [added: 18,169,000] | | 100.0 | % |

| (1) | Additionally, we own two participating mortgages totaling approximately [removed: $28.3] [added: $29.1] million secured by multiple buildings in Manayunk, Pennsylvania, and one [removed: $5.5] [added: $7.2] million loan secured by [removed: a property] [added: two properties] in Norwalk, Connecticut. |

Many of our leases contain tenant options that enable the tenant to extend the term of the lease at expiration at pre-established rental rates that often include fixed rent increases, consumer price index [added: adjustments or other market rate adjustments from the prior base rent.]

Leases on residential units are generally for a period of one year or less and, in [removed: 2008,] [added: 2009,] represented approximately [removed: 3.7%] [added: 4.1%] of total rental income.

The following table sets forth the schedule of lease expirations for our commercial leases in place as of December 31, [removed: 2008] [added: 2009] for each of the 10 years beginning with [removed: 2009] [added: 2010] and after [removed: 2018] [added: 2019] in the [removed: aggregate, in both cases,] [added: aggregate] assuming that none of the tenants exercise future renewal options.

Annualized base rents reflect in-place contractual rents as of December 31, [removed: 2008.][added: 2009.]

| [removed: 2009] [added: 2012] | | [removed: 1,128,000] [added: 2,128,000] | | [removed: 7] [added: 13] | % | | | [removed: 25,533,000] [added: 48,128,000] | | [removed: 7] [added: 13] | % |

The following table sets forth information concerning all real estate projects in which we owned an equity interest, had a leasehold interest, or [added: otherwise] controlled and are consolidated as of December 31, [removed: 2008.][added: 2009.]

| [added: Property, City, State, Zip Code] | | Year Completed | | Year Acquired | | Square Feet(1) /Apartment Units | | Average [removed: Rent Per] [added: Rent Per] Square Foot | | Percentage Leased(2) | | Principal Tenant(s) |

| 150 Post Street San Francisco, CA 94108 | | 1965 | | 1997 | | [removed: 102,000] [added: 101,000] | | [removed: $39.72] [added: $42.75] | | [removed: 98%] [added: 99%] | | Brooks Brothers H & M |

| Colorado Blvd Pasadena, [removed: CA(6)] [added: CA(3)] | | 1922 | | 1996-1998 | | [removed: 68,000] [added: 69,000] | | [removed: $36.63] [added: $37.07] | | [removed: 99%] [added: 97%] | | Pottery Barn Banana Republic |

| Crow Canyon Commons San Ramon, CA(3) | | 1980-2006 | | 2005-2007 | | 242,000 | | [removed: $19.40] [added: $19.24] | | 92% | | [removed: Save Mart] [added: Lucky] Loehmann’s Rite Aid |

| Escondido Promenade Escondido, CA [removed: 92029(8)] [added: 92029(4)] | | 1987 | | 1996 | | 222,000 | | [removed: $23.09] [added: $23.24] | | [removed: 95%] [added: 94%] | | Toys R Us TJ Maxx [removed: Cost Plus World Market] |

| Fifth Avenue San Diego, CA | | 1888-1995 | | 1996-1997 | | 51,000 | | [removed: $26.64] [added: $27.50] | | [removed: 100%] [added: 91%] | | Urban Outfitters |

| Hermosa Avenue Hermosa Beach, CA | | 1922 | | 1997 | | 22,000 | | [removed: $32.49] [added: $33.98] | | [removed: 100%] [added: 72%] | | |

| Hollywood Blvd Hollywood, [removed: CA(10)] [added: CA(5)] | | 1921-1991 | | 1999 | | 153,000 | | [removed: $21.30] [added: $21.84] | | [removed: 85%] [added: 75%] | | DSW L.A. Fitness [added: Fresh & Easy] |

| Kings Court Los Gatos, CA [removed: 95032(5)(6)] [added: 95032(3)(6)] | | 1960 | | 1998 | | 79,000 | | [removed: $25.83] [added: $28.27] | | [removed: 99%] [added: 100%] | | Lunardi’s Supermarket [removed: Longs Drug Store] [added: CVS] |

| Old Town Center Los Gatos, CA 95030 | | 1962, 1998 | | 1997 | | [removed: 95,000] [added: 96,000] | | [removed: $30.65] [added: $29.88] | | [removed: 95%] [added: 97%] | | Borders Books Gap Kids Banana Republic |

| Santana Row—Retail San Jose, CA 95128 | | 2002 | | 1997 | | [removed: 563,000] [added: 565,000] | | [removed: $44.07] [added: $42.97] | | 98% | | Crate & Barrel Borders Books Container Store Best Buy CineArts Theatre [added: Hotel Valencia] |

| Santana Row—Residential San Jose, CA 95128 | | 2003-2006 | | 1997 | | 295 units | | N/A | | [removed: 93%] [added: 96%] | | |

| Third Street Promenade Santa Monica, CA | | 1888-2000 | | 1996-2000 | | 211,000 | | [removed: $58.70] [added: $60.44] | | [removed: 99%] [added: 97%] | | Abercrombie & Fitch J. Crew Old Navy Banana Republic |

| Westgate San Jose, CA | | 1960-1966 | | 2004 | | 645,000 | | [removed: $13.31] [added: $13.14] | | [removed: 96%] [added: 95%] | | Safeway Target Burlington Coat Factory Barnes & Noble Ross [added: Michaels] |

| Bristol Bristol, CT 06010 | | 1959 | | 1995 | | 272,000 | | [removed: $12.06] [added: $12.32] | | [removed: 86%] [added: 85%] | | Stop & Shop TJ Maxx |

| Friendship Center Washington, D.C 20015 | | 1998 | | 2001 | | [removed: 119,000] [added: 118,000] | | [removed: $33.15] [added: $33.33] | | 66% | | Maggiano’s Borders Books |

| Sam’s Park & Shop Washington, DC 20008 | | 1930 | | 1995 | | 49,000 | | [removed: $35.90] [added: $36.28] | | [removed: 94%] [added: 100%] | | Petco |

| [added: Property, City, State, Zip Code] | | Year Completed | | Year Acquired | | Square Feet(1) /Apartment Units | | Average [removed: Rent Per] [added: Rent Per] Square Foot | | Percentage Leased(2) | | Principal Tenant(s) |

| Maryland | | 17 | | 3,701,000 | | 20.4 | % |

| California | | 12 | | 2,456,000 | | 13.5 | % |

| Illinois | | 4 | | 752,000 | | 4.1 | % |

| Texas | | 1 | | 196,000 | | 1.1 | % |

| 2010 | | 983,000 | | 6 | % | | | 23,394,000 | | 6 | % |

| 2011 | | 2,011,000 | | 12 | % | | | 45,894,000 | | 12 | % |

| 2013 | | 2,063,000 | | 12 | % | | | 48,464,000 | | 13 | % |

| 2014 | | 2,257,000 | | 13 | % | | | 51,032,000 | | 14 | % |

| 2015 | | 1,437,000 | | 8 | % | | | 29,542,000 | | 8 | % |

| 2016 | | 1,014,000 | | 6 | % | | | 24,588,000 | | 7 | % |

| 2017 | | 1,034,000 | | 6 | % | | | 23,126,000 | | 6 | % |

| 2018 | | 968,000 | | 6 | % | | | 17,993,000 | | 5 | % |

| 2019 | | 685,000 | | 4 | % | | | 16,554,000 | | 4 | % |

| Thereafter | | 2,317,000 | | 14 | % | | | 45,306,000 | | 12 | % |

| Total | | 16,897,000 | | 100 | % | | $ | 374,021,000 | | 100 | % |

| (6) | We own this property in a “downREIT” partnership, of which a wholly owned subsidiary of the Trust is the sole general partner, with third party partners holding operating partnership units. |

United States, as well as California.

| Maryland | | 17 | | 3,708,000 | | 20.5 | % |

| California | | 12 | | 2,453,000 | | 13.6 | % |

| Illinois | | 4 | | 757,000 | | 4.2 | % |

| Texas | | 1 | | 168,000 | | 0.9 | % |

| --- | --- |

adjustments or other market rate adjustments from the prior base rent.

| 2010 | | 1,587,000 | | 9 | % | | | 34,589,000 | | 9 | % |

| 2011 | | 1,972,000 | | 12 | % | | | 46,300,000 | | 13 | % |

| 2012 | | 2,109,000 | | 12 | % | | | 46,894,000 | | 13 | % |

| 2013 | | 2,070,000 | | 12 | % | | | 47,803,000 | | 13 | % |

| 2014 | | 1,862,000 | | 11 | % | | | 38,065,000 | | 10 | % |

| 2015 | | 914,000 | | 5 | % | | | 19,900,000 | | 5 | % |

| 2016 | | 800,000 | | 5 | % | | | 19,691,000 | | 5 | % |

| 2017 | | 1,056,000 | | 6 | % | | | 24,066,000 | | 7 | % |

| 2018 | | 941,000 | | 6 | % | | | 17,840,000 | | 5 | % |

| Thereafter | | 2,565,000 | | 15 | % | | | 49,213,000 | | 13 | % |

| Total | | 17,004,000 | | 100 | % | | $ | 369,894,000 | | 100 | % |

| --- | --- |

| (3) | We have a leasehold interest in this property. |

| (5) | We own this property in a “downREIT” structure. |

| (7) | This property contains nine buildings; six are owned 100% by us, one is subject to a leasehold interest, and two are subject to a ground lease. |

No matters were submitted to a vote of our shareholders during the fourth quarter of the fiscal year ended December 31, [removed: 2008.][added: 2009.]

| | [removed: |] High | | | Low | | | | | [added: |]

On February [removed: 24, 2009,] [added: 12, 2010,] there were [removed: 4,115] [added: 3,925] holders of record of our common shares.

Our ongoing operations generally will not be subject to federal income taxes as long as we maintain our REIT status and distribute to shareholders at least 100% of our [removed: REIT] taxable income.

Under the Code, REITs are subject to numerous organizational and operational requirements, including the requirement to generally distribute at least 90% of [removed: REIT] taxable income.

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our regular annual dividend rate for [removed: 41] [added: 42] consecutive years.

Our total annual dividends paid per common share for [removed: 2008] [added: 2009] and [removed: 2007] [added: 2008] were [removed: $2.480] [added: $2.61] per share and [removed: $2.335] [added: $2.48] per share, respectively.

No assurances can be given regarding what portion, if any, of distributions in [removed: 2009] [added: 2010] or subsequent years will constitute a return of capital for federal income tax purposes.

During a year in which a REIT earns a net long-term capital gain, the REIT can elect under [added: Section 857(b)(3) of the] Code [removed: Sec.][added: to designate a portion of dividends paid to shareholders as capital gain dividends.]

If this election is made, then the capital gain dividends are [added: generally] taxable to the shareholder as long-term capital gains.

| Ordinary dividend | | $ | [removed: 2.455] [added: 2.377] | | $ | [removed: 2.174] [added: 2.455] |

| Ordinary dividend eligible for 15% tax rate | | | [removed: 0.025] [added: 0.024] | | | [removed: 0.044] [added: 0.025] |

| Capital gain | | | [removed: —] [added: 0.026] | | | [removed: 0.117] [added: —] |

During the three months ended December 31, [removed: 2008, 3,000] [added: 2009, there were no] operating partnership [removed: units were redeemed for cash.][added: unit redemptions.]

All other equity securities sold by us during [removed: 2008] [added: 2009] that were not registered have been previously reported in a Quarterly Report on Form 10-Q.

No equity securities were purchased by us during [removed: 2008.][added: 2009.]

However, [removed: 13,961] [added: 1,495 restricted] common shares were [removed: placed into treasury as a result of restricted shares] forfeited by former employees.

| 2009 | | | | | | | | | |

| Fourth quarter | | $ | 70.49 | | $ | 57.49 | | $ | 0.660 |

| Third quarter | | $ | 66.03 | | $ | 48.24 | | $ | 0.660 |

| Second quarter | | $ | 59.28 | | $ | 45.51 | | $ | 0.650 |

| First quarter | | $ | 60.31 | | $ | 38.82 | | $ | 0.650 |

| | 2009 | | | 2008 | | |

| Return of capital | | | 0.183 | | | — |

| | | $ | 2.610 | | $ | 2.480 |

| 2007 | | | | | | | | | |

| Fourth quarter | | $ | 95.19 | | $ | 78.58 | | $ | 0.610 |

| Third quarter | | $ | 88.92 | | $ | 73.82 | | $ | 0.610 |

| Second quarter | | $ | 92.59 | | $ | 75.27 | | $ | 0.575 |

| First quarter | | $ | 97.12 | | $ | 81.93 | | $ | 0.575 |

857(b)(3) to designate a portion of dividends paid to shareholders as capital gain dividends.

| | | 2008 | | | 2007 | |

| | | $ | 2.480 | | $ | 2.335 |

Financial Statements and Supplementary Data.” Our selected operating data, other data and balance sheet data for the years ended [removed: 2004] [added: December 31, 2005] through [removed: 2007 has] [added: 2008 have] been reclassified to conform to the [removed: presentation for the year ended 2008.][added: 2009 presentation.]

| | [added: 2009] | [added: | | |] 2008 | | | | 2007 | | | | 2006 | | | | 2005 | | | | [removed: 2004 | | |]

| | [removed: |] (In thousands, except per share data and ratios) | | | | | | | | | | | | | | | | | | | [added: |]

| Rental income | | $ | [removed: 501,964] [added: 513,220] | | | $ | [removed: 465,728] [added: 501,627] | | | $ | [removed: 414,261] [added: 465,394] | | | $ | [removed: 375,655] [added: 414,261] | | | $ | [removed: 350,837] [added: 375,655] | |

| Property operating income(1) | | $ | [removed: 355,093] [added: 364,040] | | | $ | [removed: 336,862] [added: 354,989] | | | $ | [removed: 301,513] [added: 336,642] | | | $ | [removed: 273,398] [added: 301,513] | | | $ | [removed: 245,022] [added: 273,398] | |

| Gain on sale of real estate | | $ | [removed: 12,572] [added: 1,298] | | | $ | [removed: 94,768] [added: 12,572] | | | $ | [removed: 23,956] [added: 94,768] | | | $ | [removed: 30,748] [added: 23,956] | | | $ | [removed: 14,052] [added: 30,748] | |

| Net income [added: attributable to the Trust] | | $ | [removed: 129,787] [added: 98,304] | | | $ | [removed: 195,537] [added: 129,787] | | | $ | [removed: 118,712] [added: 195,537] | | | $ | [removed: 114,612] [added: 118,712] | | | $ | [removed: 84,156] [added: 114,612] | |

| Net income available for common shareholders | | $ | [removed: 129,246] [added: 97,763] | | | $ | [removed: 195,095] [added: 129,246] | | | $ | [removed: 103,514] [added: 195,095] | | | $ | [removed: 103,137] [added: 103,514] | | | $ | [removed: 72,681] [added: 103,137] | |

| Net cash provided by operating [removed: activities(2)] [added: activities] | | $ | [removed: 228,285] [added: 256,765] | | | $ | [removed: 214,209] [added: 228,285] | | | $ | [removed: 186,654] [added: 214,209] | | | $ | [removed: 174,941] [added: 186,654] | | | $ | [removed: 174,148] [added: 174,941] | |

| Net cash used in investing [removed: activities(2)] [added: activities] | | $ | [removed: (207,567] [added: (127,341] | ) | | $ | [removed: (151,439] [added: (207,567] | ) | | $ | [removed: (317,429] [added: (151,439] | ) | | $ | [removed: (152,730] [added: (317,429] | ) | | $ | [removed: (157,611] [added: (152,730] | ) |

| Net cash (used in) provided by financing [removed: activities(2)] [added: activities] | | $ | [removed: (56,186] [added: (9,258] | ) | | $ | [removed: (23,574] [added: (56,186] | ) | | $ | [removed: 133,631] [added: (23,574] | [added: )] | | $ | [removed: (44,047] [added: 133,631] | [removed: )] | | $ | [removed: (21,030] [added: (44,047] | ) |

| Dividends declared on common shares | | $ | [removed: 148,444] [added: 157,638] | | | $ | [removed: 135,102] [added: 148,444] | | | $ | [removed: 133,066] [added: 135,102] | | | $ | [removed: 124,928] [added: 133,066] | | | $ | [removed: 101,969] [added: 124,928] | |

| Basic | | | [removed: 58,665] [added: 59,704] | | | | [removed: 56,108] [added: 58,665] | | | | [removed: 53,469] [added: 56,108] | | | | [removed: 52,533] [added: 53,469] | | | | [removed: 51,008] [added: 52,533] | |

| Earnings per common share, [removed: basic:] [added: basic(2):] | | | | | | | | | | | | | | | | | | | | |

| Discontinued operations | | | [removed: 0.24] [added: 0.03] | | | | [removed: 1.81] [added: 0.25] | | | | [removed: 0.40] [added: 1.81] | | | | [removed: 0.60] [added: 0.40] | | | | [removed: 0.40] [added: 0.60] | |

| Gain on sale of real estate | | | — | | | | — | | | | [removed: 0.14] [added: —] | | | | [removed: —] [added: 0.14] | | | | — | |

| Earnings per common share, [removed: diluted:] [added: diluted(2):] | | | | | | | | | | | | | | | | | | | | |

| Continuing operations | | $ | [removed: 1.95] [added: 1.60] | | | $ | [removed: 1.65] [added: 1.94] | | | $ | [removed: 1.39] [added: 1.66] | | | $ | [removed: 1.35] [added: 1.39] | | | $ | [removed: 1.01] [added: 1.35] | |

| Discontinued operations | | | [removed: 0.24] [added: 0.03] | | | | [removed: 1.80] [added: 0.25] | | | | [removed: 0.39] [added: 1.80] | | | | [removed: 0.59] [added: 0.39] | | | | [removed: 0.40] [added: 0.59] | |

| Gain on sale of real estate | | | — | | | | — | | | | [removed: 0.14] [added: —] | | | | [removed: —] [added: 0.14] | | | | — | |

| Dividends declared per common share(3) | | $ | [removed: 2.52] [added: 2.62] | | | $ | [removed: 2.37] [added: 2.52] | | | $ | [removed: 2.46] [added: 2.37] | | | $ | [removed: 2.37] [added: 2.46] | | | $ | [removed: 1.99] [added: 2.37] | |

| [removed: EBITDA(7)] [added: EBITDA(5)(7)] | | $ | [removed: 339,099] [added: 322,923] | | | $ | [removed: 417,560] [added: 339,099] | | | $ | [removed: 316,783] [added: 417,560] | | | $ | [removed: 292,465] [added: 316,783] | | | $ | [removed: 258,143] [added: 292,465] | |

| Adjusted [removed: EBITDA(7)] [added: EBITDA(5)(7)] | | $ | [removed: 326,527] [added: 321,625] | | | $ | [removed: 322,792] [added: 326,527] | | | $ | [removed: 292,827] [added: 322,792] | | | $ | [removed: 261,717] [added: 292,827] | | | $ | [removed: 244,091] [added: 261,717] | |

| Ratio of EBITDA to combined fixed charges and preferred share [removed: dividends(7)(8)] [added: dividends(5)(7)(8)] | | | [removed: 3.2x] [added: 2.7x] | | | | [removed: 3.3x] [added: 3.2x] | | | | [removed: 2.6x] [added: 3.3x] | | | | [removed: 2.7x] [added: 2.6x] | | | | [removed: 2.5x] [added: 2.7x] | |

| Ratio of Adjusted EBITDA to combined fixed charges and preferred share [removed: dividends(7)(8)] [added: dividends(5)(7)(8)] | | | [removed: 3.1x] [added: 2.7x] | | | | [removed: 2.5x] [added: 3.1x] | | | | [removed: 2.4x] [added: 2.5x] | | | | 2.4x | | | | 2.4x | |

| | [added: 2009] | [added: | |] 2008 | | | 2007 | | | 2006 | | | 2005 | | | [removed: 2004 | |]

| | [removed: |] (In thousands, except per share data) | | | | | | | | | | | | | | [added: |]

| Real estate, at cost | | $ | [removed: 3,673,685] [added: 3,759,234] | | $ | [removed: 3,452,847] [added: 3,673,685] | | $ | [removed: 3,204,258] [added: 3,452,847] | | $ | [removed: 2,829,321] [added: 3,204,258] | | $ | [removed: 2,666,276] [added: 2,829,321] |

| Total assets | | $ | [removed: 3,092,776] [added: 3,222,309] | | $ | [removed: 2,989,297] [added: 3,092,776] | | $ | [removed: 2,688,606] [added: 2,989,297] | | $ | [removed: 2,350,852] [added: 2,688,606] | | $ | [removed: 2,266,896] [added: 2,350,852] |

| Mortgages payable and capital lease obligations | | $ | [removed: 452,810] [added: 601,884] | | $ | [removed: 450,084] [added: 452,810] | | $ | [removed: 460,398] [added: 450,084] | | $ | [removed: 419,713] [added: 460,398] | | $ | [removed: 410,885] [added: 419,713] |

| Notes payable | | $ | [removed: 336,391] [added: 261,745] | | $ | [removed: 210,820] [added: 336,391] | | $ | [removed: 109,024] [added: 210,820] | | $ | [removed: 316,755] [added: 109,024] | | $ | [removed: 325,051] [added: 316,755] |

| Senior notes and debentures | | $ | [removed: 956,584] [added: 930,219] | | $ | [removed: 977,556] [added: 956,584] | | $ | [removed: 1,127,508] [added: 977,556] | | $ | [removed: 653,675] [added: 1,127,508] | | $ | [removed: 568,121] [added: 653,675] |

| Preferred [removed: stock] [added: shares] | | $ | 9,997 | | $ | 9,997 | | $ | [removed: —] [added: 9,997] | | $ | [removed: 135,000] [added: —] | | $ | 135,000 |

| Number of common shares outstanding | | | [added: 61,242 | | |] 58,986 | | | 58,646 | | | 55,321 | | | 52,891 | [removed: | | 52,137 |]

| (1) | Property operating income [added: is a non-GAAP measure that] consists of rental income, other property income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally to evaluate the performance of property operations and we consider it to be a significant measure. [added: Property operating income should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP.] |

| (4) | [removed: Funds from Operations (“FFO”)] [added: FFO] is a supplemental non-GAAP financial measure of real estate companies’ operating performances. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as follows: net income, computed in accordance with [removed: the] U.S. GAAP, plus depreciation and amortization of real estate assets and excluding extraordinary items and gains on the sale of real estate. We compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO available for common shareholders in addition to our net income. |

| | | [removed: 2008] [added: 2009] | | | | [removed: 2007] [added: 2008] | | | | [removed: 2006] [added: 2007] | | | | [removed: 2005] [added: 2006] | | | | [removed: 2004] [added: 2005] | | |

| | [removed: |] (In thousands) | | | | | | | | | | | | | | | | | | | [added: |]

| Net income [added: attributable to the Trust] | | $ | [removed: 129,787] [added: 98,304] | | | $ | [removed: 195,537] [added: 129,787] | | | $ | [removed: 118,712] [added: 195,537] | | | $ | [removed: 114,612] [added: 118,712] | | | $ | [removed: 84,156] [added: 114,612] | |

| Gain on sale of real estate | | | [removed: (12,572] [added: (1,298] | ) | | | [removed: (94,768] [added: (12,572] | ) | | | [removed: (23,956] [added: (94,768] | ) | | | [removed: (30,748] [added: (23,956] | ) | | | [removed: (14,052] [added: (30,748] | ) |

| Income from continuing operations | | $ | 102,356 | | | $ | 120,600 | | | $ | 99,379 | | | $ | 94,305 | | | $ | 88,292 | |

| Net income | | $ | 103,872 | | | $ | 135,153 | | | $ | 201,127 | | | $ | 123,065 | | | $ | 119,846 | |

| Diluted | | | 59,830 | | | | 58,889 | | | | 56,473 | | | | 53,858 | | | | 53,050 | |

| Total | | $ | 1.63 | | | $ | 2.19 | | | $ | 3.47 | | | $ | 1.93 | | | $ | 1.95 | |

| Continuing operations | | $ | 1.60 | | | $ | 1.94 | | | $ | 1.65 | | | $ | 1.38 | | | $ | 1.34 | |

| Total | | $ | 1.63 | | | $ | 2.19 | | | $ | 3.45 | | | $ | 1.91 | | | $ | 1.93 | |

| Funds from operations available to common shareholders(2)(4)(5)(6) | | $ | 211,065 | | | $ | 228,397 | | | $ | 206,037 | | | $ | 176,419 | | | $ | 162,819 | |

| Shareholders’ equity | | $ | 1,209,063 | | $ | 1,146,954 | | $ | 1,146,450 | | $ | 806,269 | | $ | 794,040 |

| (2) | Effective January 1, 2009, we adopted a new accounting standard which requires us to calculate earnings per share (“EPS”) and funds from operations available for common shareholders (“FFO”) per share for all periods presented using the two-class method. EPS and FFO per share for prior periods have been restated to conform to the requirements of the new accounting standard which is further discussed in Note 16 to the consolidated financial statements. |

| Net income | | $ | 103,872 | | | $ | 135,153 | | | $ | 201,127 | | | $ | 123,065 | | | $ | 119,846 | |

| Net income attributable to noncontrolling interests | | | (5,568 | ) | | | (5,366 | ) | | | (5,590 | ) | | | (4,353 | ) | | | (5,234 | ) |

| Income attributable to unvested shares | | | (687 | ) | | | (779 | ) | | | (725 | ) | | | (694 | ) | | | (725 | ) |

| Funds from operations available for common shareholders | | $ | 211,065 | | | $ | 228,397 | | | $ | 206,037 | | | $ | 176,419 | | | $ | 162,819 | |

| (5) | Includes a charge of $16.4 million in 2009 for increasing the accrual for litigation regarding a parcel of land located adjacent to Santana Row as well as other costs related to the litigation and appeal process. The matter is further discussed in Note 8 to the consolidated financial statements. |

| Early extinguishment of debt | | | 2,639 | | | | — | | | | — | | | | — | | | | — | |

| Income from continuing operations | | $ | 115,338 | | | $ | 94,009 | | | $ | 89,952 | | | $ | 83,058 | | | $ | 63,566 | |

| Diluted | | | 58,914 | | | | 56,543 | | | | 53,962 | | | | 53,050 | | | | 51,547 | |

| Continuing operations | | $ | 1.96 | | | $ | 1.67 | | | $ | 1.40 | | | $ | 1.36 | | | $ | 1.02 | |

| Total | | $ | 2.20 | | | $ | 3.48 | | | $ | 1.94 | | | $ | 1.96 | | | $ | 1.42 | |

| Total | | $ | 2.19 | | | $ | 3.45 | | | $ | 1.92 | | | $ | 1.94 | | | $ | 1.41 | |

| Funds from operations available to common shareholders(4)(5)(6) | | $ | 229,176 | | | $ | 206,762 | | | $ | 177,113 | | | $ | 163,544 | | | $ | 148,671 | |

| Shareholders’ equity | | $ | 1,114,602 | | $ | 1,114,632 | | $ | 784,078 | | $ | 774,847 | | $ | 790,534 |

| (2) | Determined in accordance with Financial Accounting Standards Board (“FASB”) Statement No. 95, Statement of Cash Flows. |

| Funds from operations available for common shareholders | | $ | 229,176 | | | $ | 206,762 | | | $ | 177,113 | | | $ | 163,544 | | | $ | 148,671 | |

| (6) | Includes $3.1 million of insurance recoveries in 2004 attributable to rental income lost at Santana Row as a result of the August 2002 fire. Insurance recoveries received in 2005 were insignificant. |

| Net income | | $ | 129,787 | | | $ | 195,537 | | | $ | 118,712 | | | $ | 114,612 | | | $ | 84,156 | |

| [removed: ITEM] [added: ITEM 9A. CONTROLS] | [removed: 9A. CONTROLS AND] [added: AND] PROCEDURES |

We carried out an assessment as of December 31, [removed: 2008] [added: 2009] of the effectiveness of the design and operation of our disclosure controls and procedures and our internal control over financial reporting.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports, such as this report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and Senior Vice [removed: President and Chief] [added: President—Chief] Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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 Senior Vice [removed: President and Chief] [added: President—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 in the United States of America.

The evaluation by our Chief Executive Officer and our Chief Financial Officer of our disclosure controls and procedures and our internal control over financial reporting included a review of our procedures and procedures performed by internal audit, as well as discussions with our Disclosure [removed: Committee, independent public accountants] [added: Committee] and others in our organization, as appropriate.

This information is important both for the evaluation generally and because the Section 302 certifications require that our Chief Executive Officer and our [added: Chief Financial Officer disclose that information to the Audit Committee of our Board of Trustees and our]

[removed: Chief Financial Officer disclose that information to the Audit Committee of our Board of Trustees and our] independent auditors and also require us to report on related matters in this section of the Annual Report on Form 10-K.

[removed: In the Public Company Accounting Oversight Board’s Auditing Standard No. 5, a] [added: A] “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.

[removed: A] [added: In the Public Company Accounting Oversight Board’s Auditing Standard No. 5, a] “deficiency” in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

There was no change in our internal control over financial reporting during our fourth fiscal quarter of [removed: 2008] [added: 2009] that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Certain information required in Part III is omitted from this Report but is incorporated herein by reference from our Proxy Statement for the [removed: 2009] [added: 2010] Annual Meeting of Shareholders (the “Proxy Statement”).

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 [removed: 26th] [added: 17th] day of February, [removed: 2009.][added: 2010.]

| | | Donald C. Wood [removed: Chief] [added: President, Chief] Executive [removed: Officer] [added: Officer and Trustee] |

| /S/ DONALD C. WOOD Donald C. Wood | | [added: President,] Chief Executive [removed: Officer,] [added: Officer and] Trustee (Principal Executive Officer) | | February [removed: 26, 2009] [added: 17, 2010] |

| /S/ ANDREW P. BLOCHER Andrew P. Blocher | | Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | | February [removed: 26, 2009] [added: 17, 2010] |

| /S/ JOSEPH S. VASSALLUZZO Joseph S. Vassalluzzo | | Non-Executive Chairman | | February [removed: 26, 2009] [added: 17, 2010] |

| /S/ JON E. BORTZ Jon Bortz | | Trustee | | February [removed: 26, 2009] [added: 17, 2010] |

| /S/ DAVID W. FAEDER David W. Faeder | | Trustee | | February [removed: 26, 2009] [added: 17, 2010] |

| /S/ KRISTIN GAMBLE Kristin Gamble | | Trustee | | February [removed: 26, 2009] [added: 17, 2010] |

| /S/ GAIL P. STEINEL Gail P. Steinel | | Trustee | | February [removed: 26, 2009] [added: 17, 2010] |

| /S/ WARREN M. THOMPSON Warren M. Thompson | | Trustee | | February [removed: 26, 2009] [added: 17, 2010] |

| [Management Assessment Report on Internal Control over Financial [removed: Reporting](#fin86578_1)] [added: Reporting](#fin92260_1)] | | F-2 |

| [Report of Independent Registered Public Accounting [removed: Firm](#fin86578_2)] [added: Firm](#fin92260_2)] | | F-3 |

| [Report of Independent Registered Public Accounting [removed: Firm](#fin86578_3)] [added: Firm](#fin92260_3)] | | F-4 |

| [Consolidated Balance [removed: Sheets](#fin86578_4)] [added: Sheets](#fin92260_4)] | | F-5 |

| [Consolidated Statements of [removed: Operations](#fin86578_5)] [added: Operations](#fin92260_5)] | | F-6 |

| [Consolidated Statement of Shareholders’ [removed: Equity](#fin86578_6)] [added: Equity](#fin92260_6)] | | F-7 |

| [Consolidated Statements of Cash [removed: Flows](#fin86578_7)] [added: Flows](#fin92260_7)] | | F-8 |

| [Notes to Consolidated Financial [removed: Statements](#fin86578_8)] [added: Statements](#fin92260_8)] | | [removed: F-9-F-36] [added: F-9-F-32] |

| [Schedule III—Summary of Real Estate and Accumulated [removed: Depreciation](#fin86578_9)] [added: Depreciation](#fin92260_9)] | | [removed: F-37-F-43] [added: F-33-F-38] |

| [Schedule IV—Mortgage Loans on Real [removed: Estate](#fin86578_10)] [added: Estate](#fin92260_10)] | | [removed: F-44-F-45] [added: F-39-F-40] |

Management conducted an assessment of the effectiveness of the Trust’s internal control over financial reporting as of December 31, [removed: 2008.][added: 2009.]

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 December 31, [removed: 2008.][added: 2009.]

We have audited Federal Realty Investment Trust (a Maryland real estate investment trust) and subsidiaries’ (the Trust) internal control over financial reporting as of December 31, [removed: 2008,] [added: 2009,] based on criteria established in _Internal Control—Integrated Framework_ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, Federal Realty Investment Trust and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2008,] [added: 2009,] based on criteria established in [removed: _Internal Control—Integrated] [added: _Internal_ _Control—Integrated] Framework_ issued by [removed: COSO_._][added: 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 and subsidiaries as of December 31, [removed: 2008] [added: 2009] and [removed: 2007,] [added: 2008,] and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2008] [added: 2009] and our report dated February [removed: 25, 2009] [added: 17, 2010] expressed an unqualified opinion.

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, [removed: 2008] [added: 2009] and [removed: 2007,] [added: 2008,] and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2008.][added: 2009.]

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, [removed: 2008] [added: 2009] and [removed: 2007,] [added: 2008,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2008] [added: 2009] in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Trust’s internal control over financial reporting as of December 31, [removed: 2008,] [added: 2009,] 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 [removed: 25, 2009] [added: 17, 2010] expressed an unqualified opinion.

| | | [added: 2009 | | | |] 2008 | | | | 2007 | | |

| Assets held for sale [removed: (discontinued operations)] | | | — | | | | [removed: 39,902] [added: 20,706] | |

| Less accumulated depreciation and amortization | | | [removed: (846,258] [added: (938,087] | ) | | | [removed: (756,703] [added: (846,258] | ) |

| Net real estate | | | [removed: 2,827,427] [added: 2,821,147] | | | | [removed: 2,696,144] [added: 2,827,427] | |

| [removed: Cash and cash equivalents] [added: CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR] | | | 15,223 | | | | 50,691 | | [added: | | 11,495 | |]

| Accounts and notes [removed: receivable] [added: receivable, net] | | | [removed: 73,688] [added: 72,191] | | | | [removed: 61,108] [added: 73,688] | |

[removed: | Mortgage notes receivable | | | 45,780 | | | | 40,638 | |][added: _Mortgage Notes Receivable_]

| Investment in real estate partnership | | | [removed: 29,252] [added: 35,633] | | | | [removed: 29,646] [added: 29,252] | |

| Prepaid expenses and other assets | | | [removed: 95,344] [added: 99,265] | | | | [removed: 103,620] [added: 95,344] | |

| Debt issuance costs, net of accumulated amortization of [removed: $6,484] [added: $8,291] and [removed: $4,815,] [added: $6,484] respectively | | | [removed: 6,062] [added: 10,348] | | | | [removed: 7,450] [added: 6,062] | |

| TOTAL ASSETS | | $ | [removed: 3,092,776] [added: 3,222,309] | | | $ | [removed: 2,989,297] [added: 3,092,776] | |

| Mortgages payable | | $ | [removed: 389,318] [added: 539,609] | | | $ | [removed: 373,975] [added: 389,318] | |

February 17, 2010

February 17, 2010

| | | 2009 | | | | 2008 | | |

| Operating | | $ | 3,626,476 | | | $ | 3,537,790 | |

| Construction-in-progress | | | 132,758 | | | | 115,189 | |

| | | | 3,759,234 | | | | 3,673,685 | |

| Mortgage notes receivable, net | | | 48,336 | | | | 45,780 | |

| Additional paid-in capital | | | 1,653,177 | | | | 1,530,589 | |

| Noncontrolling interests | | | 31,726 | | | | 32,352 | |

| Total shareholders’ equity | | | 1,209,063 | | | | 1,146,954 | |

| Rental income | | $ | 513,220 | | | $ | 501,627 | | | $ | 465,394 | |

| Total revenue | | | 531,019 | | | | 520,188 | | | | 482,788 | |

| Real estate taxes | | | 58,173 | | | | 55,481 | | | | 46,783 | |

| Litigation provision | | | 16,355 | | | | — | | | | — | |

| Total operating expenses | | | 320,459 | | | | 302,953 | | | | 274,360 | |

| OPERATING INCOME | | | 210,560 | | | | 217,235 | | | | 208,428 | |

| Early extinguishment of debt | | | (2,639 | ) | | | — | | | | — | |

| INCOME FROM CONTINUING OPERATIONS | | | 102,356 | | | | 120,600 | | | | 99,379 | |

| NET INCOME | | | 103,872 | | | | 135,153 | | | | 201,127 | |

| Net income attributable to noncontrolling interests | | | (5,568 | ) | | | (5,366 | ) | | | (5,590 | ) |

| Continuing operations | | $ | 1.60 | | | $ | 1.94 | | | $ | 1.66 | |

| | | $ | 1.63 | | | $ | 2.19 | | | $ | 3.47 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Shareholders’ Equity of the Trust | | | | | | | | | | | | | | | | | | | | | | Noncontrolling Interests | | | | Total Shareholders’ Equity | | |

| BALANCE AT DECEMBER 31, 2006 | | — | | $ | — | | 55,320,537 | | $ | 553 | | $ | 1,252,425 | | | $ | (467,369 | ) | | $ | (1,531 | ) | | $ | 22,191 | | | $ | 806,269 | |

| Distributions declared to noncontrolling interests | | — | | | — | | — | | | — | | | — | | | | — | | | | — | | | | (6,733 | ) | | | (6,733 | ) |

| Acquisition of noncontrolling interests | | — | | | — | | — | | | — | | | — | | | | — | | | | — | | | | (1,421 | ) | | | (1,421 | ) |

| Contributions by noncontrolling interests | | — | | | — | | — | | | — | | | — | | | | — | | | | — | | | | 16,315 | | | | 16,315 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| BALANCE AT DECEMBER 31, 2007 | | 399,896 | | | 9,997 | | 58,645,665 | | | 586 | | | 1,512,228 | | | | (407,376 | ) | | | (803 | ) | | | 31,818 | | | | 1,146,450 | |

| Distributions declared to noncontrolling interests | | — | | | — | | — | | | — | | | — | | | | — | | | | — | | | | (4,788 | ) | | | (4,788 | ) |

| Contributions by noncontrolling interests | | — | | | — | | — | | | — | | | — | | | | — | | | | — | | | | 324 | | | | 324 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| BALANCE AT DECEMBER 31, 2008 | | 399,896 | | | 9,997 | | 58,985,678 | | | 590 | | | 1,530,589 | | | | (426,574 | ) | | | — | | | | 32,352 | | | | 1,146,954 | |

| Net income/comprehensive income | | — | | | — | | — | | | — | | | — | | | | 98,304 | | | | — | | | | 5,568 | | | | 103,872 | |

| Distributions declared to noncontrolling interests | | — | | | — | | — | | | — | | | — | | | | — | | | | — | | | | (6,139 | ) | | | (6,139 | ) |

| Common shares issued | | — | | | — | | 1,995,563 | | | 20 | | | 109,996 | | | | — | | | | — | | | | — | | | | 110,016 | |

| Exercise of stock options | | — | | | — | | 126,500 | | | 1 | | | 2,757 | | | | — | | | | — | | | | — | | | | 2,758 | |

| Share-based compensation expense, net | | — | | | — | | 83,421 | | | 1 | | | 7,138 | | | | — | | | | — | | | | — | | | | 7,139 | |

| --- | --- |

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

February 25, 2009

##### [Table of Contents](#toc)

February 25, 2009

Federal Realty Investment Trust

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Operating | | $ | 3,567,035 | | | $ | 3,265,020 | |

| Construction-in-progress | | | 106,650 | | | | 147,925 | |

| | | | 3,673,685 | | | | 3,452,847 | |

| Minority interests | | | 32,352 | | | | 31,818 | |

| Additional paid-in capital | | | 1,559,381 | | | | 1,541,020 | |

| Treasury shares at cost, 1,501,566 and 1,487,605 shares, respectively | | | (28,807 | ) | | | (28,807 | ) |

| Notes receivable from issuance of common shares | | | — | | | | (803 | ) |

| Rental income | | $ | 501,964 | | | $ | 465,728 | | | $ | 414,261 | |

| Total revenue | | | 520,525 | | | | 483,122 | | | | 426,816 | |

| Real estate taxes | | | 55,714 | | | | 46,897 | | | | 41,139 | |

| Total operating expenses | | | 303,186 | | | | 274,474 | | | | 239,975 | |

| OPERATING INCOME | | | 217,339 | | | | 208,648 | | | | 186,841 | |

| INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS | | | 120,704 | | | | 99,599 | | | | 94,305 | |

| Minority interests | | | (5,366 | ) | | | (5,590 | ) | | | (4,353 | ) |

| INCOME FROM CONTINUING OPERATIONS | | | 115,338 | | | | 94,009 | | | | 89,952 | |

| Discontinued operations—income | | | 1,877 | | | | 6,760 | | | | 4,804 | |

| INCOME BEFORE GAIN ON SALE OF REAL ESTATE | | | 129,787 | | | | 195,537 | | | | 111,271 | |

| Preferred stock redemption costs | | | — | | | | — | | | | (4,775 | ) |

| Continuing operations | | $ | 1.96 | | | $ | 1.67 | | | $ | 1.40 | |

| Gain on sale of real estate | | | — | | | | — | | | | 0.14 | |

| | | $ | 2.20 | | | $ | 3.48 | | | $ | 1.94 | |

| Gain on sale of real estate | | | — | | | | — | | | | 0.14 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| BALANCE AT DECEMBER 31, 2005 | | 5,400 | | | $ | 135,000 | | | 54,371,057 | | $ | 544 | | $ | 1,114,732 | | | $ | (437,817 | ) | | (1,480,360 | ) | | $ | (28,794 | ) | | $ | (9,704 | ) | | $ | (1,792 | ) | | $ | 2,678 | | | $ | 774,847 | |

| Comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net income | | — | | | | — | | | — | | | — | | | — | | | | 118,712 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 118,712 | |

| Change in valuation on interest rate swaps | | — | | | | — | | | — | | | — | | | — | | | | — | | | — | | | | — | | | | — | | | | — | | | | (1,493 | ) | | | (1,493 | ) |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 117,219 | |