Federal Realty Investment Trust (FRT) 10-K risk factor changes: FY2010 vs FY2009

The current [removed: downturn in the economy] [added: economic conditions] may impact the success of our tenants’ retail operations and therefore the amount of rent and expense reimbursements we receive from our tenants.

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

We may be unable to collect balances due from tenants that [removed: filed] [added: file] for bankruptcy protection.

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 [removed: owing] [added: owed] to us for the remainder of the lease term, which could adversely affect our financial condition and results of operation.

We are subject to the risks that, upon expiration or termination of leases, whether by their terms, as a result of a tenant bankruptcy, [removed: the downturn in the economy or otherwise, leases for space in our properties may not be renewed, space may not be]

[added: general economic conditions or otherwise, leases for space in our properties may not be renewed, space may not be] 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.

As of December 31, [removed: 2009,] [added: 2010,] we had approximately $1.8 billion of debt outstanding.

Of that outstanding debt, approximately [removed: $516.2] [added: $506.7] million was secured by all or a portion of 21 of our real estate projects and approximately [removed: $62.3] [added: $59.9] million represented capital lease obligations on [removed: four] [added: three] of our properties.

In addition, we own a 30% interest in a joint venture that had [removed: $57.8] [added: $57.6] million of debt secured by four properties as of December 31, [removed: 2009.][added: 2010.]

Approximately [removed: $1.5] [added: $1.7] billion [removed: (86%)] [added: (95%)] of our debt as of December 31, [removed: 2009,] [added: 2010,] which includes all of our property secured debt and our capital lease obligations, is fixed rate debt.

Our joint venture’s debt of [removed: $57.8] [added: $57.6] million is also fixed rate debt.

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

As of December 31, [removed: 2009,] [added: 2010,] we were in compliance with all of our financial covenants.

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, California and Assembly [removed: Square] [added: Row] in Somerville, [removed: Massachusetts.][added: Massachusetts, as well as any future redevelopment of Mid-Pike Plaza in Rockville, Maryland.]

Our investment strategy includes the redevelopment and acquisition of community and neighborhood shopping centers [added: and other properties] in densely populated areas with high average household incomes and significant barriers to adding competitive retail supply.

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

[removed: The debt] [added: Debt] could include [removed: mortgage loans from third parties or] the sale of debt [removed: securities.][added: securities and mortgage loans from third parties.]

While we were able to consummate financings during [removed: 2009, the current poor] [added: 2009 and 2010, if] economic [removed: environment] [added: conditions] and [removed: volatility] [added: conditions] in the capital markets [removed: could result in] [added: are not favorable at the time we need to raise capital, we may need to obtain capital on] less favorable terms [removed: and availability] than in recent years for debt financings.

Depending on the outcome of these factors as well as the impact of the [removed: current 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 $1.8 billion of debt outstanding as of December 31, [removed: 2009,] [added: 2010,] approximately [removed: $259.4] [added: $86.4] million bears interest at variable rates and was unhedged.

Although we have in the past and may in the future enter into hedging arrangements or other transactions as to [added: all or] a portion of our variable rate debt to limit our exposure to rising interest rates, the amounts we are required to pay under the variable rate debt to which the hedging or similar arrangements relate may increase in the event of non-performance by the counterparties to any of our hedging arrangements.

| | • | | general economic and financial market [removed: conditions, including the current poor economic environment;] [added: conditions;] |

| | • | | market perception of REITs, in general, compared to other investment [removed: sectors.] [added: alternatives.] |

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 [added: reduction in income from the property.]

Additionally, new properties that we may acquire or 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 [removed: leased.][added: occupied.]

We may not be able to alter our portfolio promptly in response to changes in economic or other conditions including being unable to sell a property at a return we believe is appropriate due to the [removed: current] economic environment.

We also currently carry earthquake insurance on all of our properties in [removed: California and environmental insurance on most of our properties.]

[added: 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.

[removed: Our organizational documents do not limit the amount] [added: As] of [removed: funds that] [added: December 31, 2010,] we [removed: may invest in properties and assets] [added: held three predominantly retail real estate projects] jointly with other persons [removed: or entities and as of December 31, 2009, excluding] [added: in addition to] our joint venture with affiliates of a discretionary fund created and advised by ING Clarion Partners [removed: (“Clarion”)] [added: (“Clarion”), Taurus Newbury Street JV II Limited Partnership (“Newbury Street Partnership”)] and properties owned in a “downREIT” [removed: structure, we hold three predominantly retail real estate projects jointly with other persons.][added: structure.]

Although [added: as of December 31, 2010,] we [removed: hold] [added: held] the managing general partnership or membership interest in all of our existing [removed: co-investments as of December 31, 2009,] [added: co-investments, except Newbury Street Partnership,] we must obtain the consent of the co-investor or meet defined criteria to sell or to finance these properties.

[removed: In addition, on] [added: On] July 1, 2004, we entered into a joint venture with Clarion for purposes of acquiring properties.

As of December 31, [removed: 2009,] [added: 2010,] this joint venture owned seven properties.

Under various federal, state and local laws, ordinances and regulations, we and our tenants may be [added: 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.]

The presence of contamination or the failure [removed: properly] to [added: properly] remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to borrow funds by using those properties as collateral.

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

[added: To protect our REIT status, our] 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.

If we do not maintain or increase the dividend [removed: rate] on our common shares, it could have an adverse effect on the market price of our common shares and other securities.

The current business plan adopted by our Board of Trustees focuses on our investment in [added: quality retail based properties that are frequently] neighborhood and community shopping centers, principally through redevelopments and acquisitions.

A key component of our development at Assembly Row is the development of public infrastructure.

This includes the roads throughout the project as well as the building of a “T-Stop”, which is a stop on the greater Boston area’s subway system, adjacent to our property.

While we will contribute significantly to the infrastructure development, we also expect to receive substantial public funding for the project.

The final funding decision and amount, however, is out of our control and therefore, there can be no assurance that we will receive the public funding.

If we do not receive adequate public funding or necessary government approval for a T-Stop at the property, the project may not provide a justifiable risk- adjusted return resulting in a temporary or permanent hold on the project and a write-off of a portion of the project.

| | • | | failure or inability to obtain public funding from governmental agencies to fund infrastructure projects; |

California and environmental insurance on most of our properties.

Further, we may be unable to collect insurance proceeds if our insurers are unable to pay or contest a claim.

Our organizational documents do not limit the amount of funds that we may invest in properties and assets owned jointly with other persons or entities.

In addition, in May 2010, we formed Newbury Street Partnership, a joint venture limited partnership with an affiliate of Taurus Investment Holdings, LLC (“Taurus”), which plans to acquire, operate and redevelop up to $200 million of properties located primarily in the Back Bay section of Boston, Massachusetts.

We do not serve as general partner or manager for this joint venture; however, Taurus must obtain our consent for certain major decisions.

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

The buy-sell can be exercised only in certain circumstances through May 2014 and may be initiated by either party at anytime thereafter, which could result in either the sale of our interest or the use of available cash or borrowings to acquire Taurus’ interest.

As of December 31, 2010, Newbury Street Partnership owned two mixed-use buildings on Newbury Street.

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

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

| --- | --- |

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

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

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.

To protect our REIT status, our

As of December 31, [removed: 2009,] [added: 2010,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as [removed: 84] [added: 85] predominantly retail real estate projects comprising approximately [removed: 18.2] [added: 18.3] million square feet.

In total, the real estate projects were [removed: 94.5%] [added: 93.9%] leased and 93.2% occupied at December 31, [removed: 2009.][added: 2010.]

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: 2009.][added: 2010.]

In total, the joint venture properties in which we own an interest were [removed: 85.0%] [added: 91.0%] leased and [added: 90.4%] occupied at December 31, [removed: 2009.][added: 2010.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 42] [added: 43] consecutive years.

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

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

At December 31, [removed: 2009] [added: 2010] and [removed: 2008,] [added: 2009,] our allowance for doubtful accounts was [removed: $16.1] [added: $18.7] million and [removed: $11.8] [added: $16.1] million, respectively.

Historically, we have recognized bad debt expense between 0.4% and 1.3% of rental income and it was 1.2% in [removed: 2009] [added: 2010] reflecting economic changes and their impact to our tenants.

[removed: 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 [removed: $5.1] [added: $5.3] million.

[added: Our experience relative to unbilled straight-line rents is that a 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: 2009] [added: 2010] and [removed: 2008,] [added: 2009,] accounts receivable include approximately [removed: $41.8] [added: $45.6] million and [removed: $37.2] [added: $41.8] million, respectively, related to straight-line rents.

The longer the economic useful life, the lower the depreciation [removed: charged to] [added: expense will be for] that asset in a fiscal [removed: period will be,] [added: period,] which in turn will increase our net income.

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

We and the plaintiff [removed: are] both [removed: appealing] [added: appealed] the ruling and [removed: expect] oral arguments on the appeal [removed: to be scheduled for later] [added: were heard] in [added: December] 2010.

[removed: New] [added: Recently Adopted] Accounting Pronouncements

The adoption did not have [removed: an] [added: a material] impact [removed: on] [added: to] our [removed: consolidated] financial [removed: statements as we currently have no derivative instruments outstanding.][added: statements.]

In June 2009, the [removed: FASB] [added: Financial Accounting Standards Board (“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.

On October 16, 2009, we acquired 16.6 acres of riverfront property at Assembly [removed: Square] [added: Row] in Somerville, Massachusetts, for use in future development, in exchange for the sale of 12.4 acres of adjacent inland land, $3 million in cash, and the assumption of a $5 million liability.

A summary of our significant acquisitions in [removed: 2008] [added: 2010] is as follows:

| Date | | Property | | City, State | | Gross Leasable Area | | [added: | |] Purchase Price | | |

| | | | | | | (In square feet) | | [added: | |] (In millions) | | |

[removed: The change in the reserve of $5.2 million is included in “Gain] [added: _Discontinued Operations—Gain] on [removed: sale] [added: Sale] of [removed: real estate from discontinued operations” in 2008.][added: Real Estate_]

In May 2003, a breach of contract action was filed against us [added: in the United States District Court for the Northern District of California, San Jose Division,] alleging that a one page document entitled “Final Proposal” constituted a ground lease of a parcel of property located adjacent to our Santana Row property and gave the plaintiff the option to require that we acquire the property at a price determined in accordance with a formula included in the “Final Proposal.” The “Final Proposal” explicitly stated that it was subject to approval of the terms and conditions of a formal agreement.

Accordingly, considering all the information available to us [removed: on May 6, 2009,] when we filed our [removed: Form 10-Q for the three months ended] March 31, [removed: 2009,] [added: 2009 Form 10-Q,] our best estimate of damages, interest, and other costs was $21.4 [added: million resulting in an increase in our accrual for this matter of $20.6] million.

In June 2009, the court issued a final judgment awarding damages of $15.9 million (including [added: interest) plus costs of suit and in July 2009, we and the plaintiff both filed a notice of appeal with the United States Court of Appeals for the Ninth Circuit.]

Given the additional information regarding the appeal, we lowered our accrual to $16.4 [removed: million,] [added: million in the fourth quarter 2009,] which [removed: reflects] [added: reflected] our best estimate of the litigation liability.

The [removed: net increase in our] [added: litigation] accrual of [removed: $15.6] [added: $16.2] million [removed: is included in “litigation provision” in our consolidated statement of operations,] and [removed: the] $16.4 million [removed: accrual] [added: at December 31, 2010 and 2009, respectively,] is included in the “accounts payable and accrued expenses” line item in our consolidated balance [removed: sheet as of December 31, 2009.][added: sheets.]

During [added: 2010 and] 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 [removed: statement] [added: statements] of operations.

[removed: We expect oral] [added: Oral] arguments on the appeal [removed: to be scheduled for later] [added: were heard] in [added: December] 2010.

[removed: 2009] [added: 2010] Significant [removed: Debt and] [added: Debt,] Equity [added: and Other] Transactions

On [removed: August 13, 2009,] [added: March 1, 2010,] we issued $150.0 million of fixed rate senior notes that mature on [removed: August 15, 2014] [added: April 1, 2020] and bear interest at [removed: 5.95%.][added: 5.90%.]

The net proceeds from this note offering after issuance discounts, underwriting fees and other costs were [removed: $147.5] [added: $148.5] million.

The term loan [removed: has] [added: had] an original maturity date of July 27, 2011, however, the loan agreement [removed: includes] [added: included] an [added: option to prepay the loan, in whole or in part, at any time without premium or penalty.]

Due to these repayments, approximately [removed: $1.7] [added: $2.8] million of unamortized debt fees were recorded as additional interest expense in [removed: 2009] [added: 2010] and are included in “early extinguishment of debt” in the consolidated statement of operations.

The term loan was [removed: partially] repaid using [removed: available] cash [added: on hand and cash] from the [removed: 2009 debt and equity issuances.][added: $150.0 million note issuance.]

In [removed: 2010] [added: 2011] and [removed: 2011,] [added: 2012,] we expect to have redevelopment projects stabilizing with projected costs of approximately [removed: $28] [added: $48] million and [removed: $53] [added: $50] million, respectively.

[removed: The] [added: Additionally, we continue to invest in the] development at Assembly [removed: Square] [added: Row which] is a long-term development project [removed: which] we expect to be involved in over the coming years.

The project currently has zoning entitlements to [removed: add] [added: build] 2.3 million square feet of commercial-use buildings, 2,100 residential units, and a 200 room hotel.

We expect that we will structure any future development in a manner designed to mitigate our risk which may include [removed: selling] [added: transfers of] entitlements or co-developing with other real estate companies.

Certain statements in this section or elsewhere in this report may be deemed “forward-looking statements”.

See “Item 1A.

Risk Factors” in this report for important information regarding these forward-looking statements and certain risk and uncertainties that may affect us.

For example, in the event our estimates were not accurate and

Since most of our investments in real estate are wholly-owned or controlled assets which are held for use, a property with impairment indicators is first tested for impairment by comparing the undiscounted cash flows, including residual value, to the current net book value of the property.

If the undiscounted cash flows are less than the net book value, the property is written down to expected fair value.

and the amount of loss can be reasonably estimated.

A final ruling on the appeal was issued in February 2011 which rejected both appeals and consequently, affirmed the final judgment against us.

Therefore, in December 2010, we adjusted our accrual to $16.2 million which reflects the amount we expect to pay in first quarter 2011.

Under the new standard, the primary beneficiary has both the power to direct the activities that most significantly impact economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

We adopted the standard effective January 1, 2010.

The newly required balance sheet disclosures regarding assets and liabilities of a consolidated VIE have been parenthetically included in our balance sheet.

These parenthetical amounts relate to Melville Mall in Huntington, New York, a shopping center and adjacent commercial building in Norwalk, Connecticut, which is further discussed in Note 3 to the consolidated financial statements in this Form 10-K, and Huntington Square in East Northport, New York, which is further discussed in Note 1 to the consolidated financial statements in this Form 10-K.

Although the adoption of this standard did not have a material impact to our financial statements, this standard could impact future consolidation of entities based on the specific facts and circumstances of those entities.

In July 2010, the FASB issued a new accounting standard that requires enhanced disclosures about financing receivables, including the allowance for credit losses, credit quality, and impaired loans.

This standard is effective for fiscal years ending after December 15, 2010.

We adopted the standard in the fourth quarter 2010 and it did not have a material impact to our financial statements.

_2010 Significant Acquisitions_

| August 16 | | Huntington Square | | East Northport, NY | | | 74,000 | | | $ | 17.6 | (1) |

| November 10 | | Former Mervyn’s Parcel (Escondido Promenade) | | Escondido, CA | | | 75,000 | | | | 11.2 | (2) |

| November 22 | | Pentagon Row | | Arlington, VA | | | N/A | | | | 8.5 | (3) |

| December 27 | | Bethesda Row | | Bethesda, MD | | | N/A | | | | 9.4 | (4) |

| | | | | Total | | | 149,000 | | | $ | 46.7 | |

| (1) | We acquired the leasehold interest in this property. Approximately $9.2 million of net assets acquired were allocated to other assets for “above market leases” and a “below market ground lease” for which we are the lessee. Approximately $1.7 million of net assets acquired were allocated to liabilities for “below market leases”. We incurred approximately $0.3 million of acquisition costs which are included in “general and administrative expenses”. |

| (2) | This property is adjacent to and operated as part of Escondido Promenade which is owned through a partnership in which we own the controlling interest. |

| (3) | We and a subsidiary of Post Properties, Inc. (“Post”) purchased the fee interest in the land under Pentagon Row. The land was purchased as a result of a favorable outcome to litigation. In September 2008, we and Post sued Vornado Realty Trust and related entities (“Vornado”) for breach of contract in the Circuit Court of Arlington County, Virginia. The breach of contract was a result of Vornado’s acquiring in transactions in 2005 and 2007 the fee interest in the land under our Pentagon Row project without first giving us and Post the opportunity to purchase the fee interest in that land as required by the right of first offer (“ROFO”) provisions included in the documentation relating to the Pentagon Row project. On April 30, 2010, the judge in this case issued a ruling that Vornado failed to comply with the ROFO and as a result, breached the contract, and ordered Vornado to sell to us and Post, collectively, the land under Pentagon Row. Vornado appealed the ruling, however, the appeal was denied in November 2010. As part of the acquisition of the land and termination of the respective ground lease, we were relieved of our deferred ground rent liability for approximately $8.8 million. The liability was offset against the net purchase price with the excess of the liability over the purchase price of $0.3 million included in the statement of operations as an adjustment to rental expense. |

| (4) | We acquired the fee interest in approximately 2.1 acres of land under Bethesda Row. Prior to the transaction, the land parcel was owned pursuant to a ground lease and encumbered by a capital lease obligation which were terminated as part of the transaction. |

_2010 Assets Held for Sale_

In December 2010, we committed to a plan of sale for two buildings on Fifth Avenue in San Diego, California.

As the buildings met the criteria to be classified as held for sale, we recognized a $0.4 million loss to write down one of the buildings to its expected sales price less cost to sell.

We expect the sales will be completed in 2011.

The operations of the buildings have been reclassified as discontinued operations in the consolidated statements of operations for all years presented and included in “assets held for sale” in our consolidated balance sheets.

On January 28, 2010, we delivered notice exercising our option to extend the maturity date by one year to July 27, 2011 on our revolving credit facility, which bears interest at LIBOR plus 42.5 basis points.

We paid an extension fee of $0.5 million which is being amortized over the remaining term of the revolving credit facility.

On various dates from February 25, 2010 to March 2, 2010, we repaid the remaining $250.0 million balance of our term loan.

On March 30, 2010, we acquired the first mortgage loan on a shopping center located in Norwalk, Connecticut.

The first mortgage loan bears interest at 7.25%, matures on September 1, 2032, and as of December 31, 2010, had an outstanding contractual principal balance of $11.3 million.

Since November 5, 2008, we have held the second mortgage on this shopping center and a first mortgage on an adjacent commercial building which had an outstanding balance of $7.4 million at December 31, 2010.

All of these loans are currently in default and foreclosure proceedings have been filed.

We reached an agreement with the borrower whereby the borrower would repay the loans by March 29, 2011, and are currently in negotiations with the borrower to modify the loans.

| --- | --- |

liabilities, and revenues and expenses.

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

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.

_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_

Effective January 1, 2009, we adopted a new accounting standard that broadens and clarifies the definition of a business, which will result in significantly more of our acquisitions being treated as business combinations rather than asset acquisitions.

The new requirement is effective for business combinations for which the acquisition date is on or after January 1, 2009, and therefore, 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 all acquisition related transaction costs as incurred which could include broker fees, transfer taxes, legal, accounting, valuation, and other professional and consulting fees.

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

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

Based on acquisitions in the 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.

The new standard includes several other changes to the accounting for business combinations including requiring contingent consideration to be measured at fair value at acquisition and subsequently remeasured through the income statement if accounted for as a liability as the fair value changes, any adjustments during the purchase price allocation period to be “pushed back” to the acquisition date with prior periods being adjusted for any changes, and the business combination to be accounted for on the acquisition date or the date control is obtained.

During 2008, we expensed all acquisition related costs for acquisitions which did not close prior to December 31, 2008.

Effective January 1, 2009, we adopted a new accounting standard that significantly changes the accounting and reporting of minority interests in the consolidated financial statements and requires a noncontrolling interest, which 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 was previously presented.

On January 1, 2009, we reclassified $32.4 million from the mezzanine section of the balance sheet to shareholders’ equity.

The terminology “minority interest” has been changed to “noncontrolling interest”.

The “minority interest” caption on the statement of operations is now reflected as “net income attributable to noncontrolling interests” and shown after consolidated net income.

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

The statement also requires the recognition of 100% of the fair value of assets acquired and liabilities assumed in acquisitions of less than 100% controlling interest with subsequent acquisitions of the noncontrolling interest recorded as equity transactions.

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.

While there was no additional impact on the consolidated financial statements during 2009, the impact on our future consolidated financial statements will vary depending on the level of transactions with entities involving noncontrolling interests.

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 a new accounting standard that defines unvested share-based payment awards that contain non-forfeitable rights to receive dividends (whether paid or unpaid) as participating securities that should be included in the computation of EPS pursuant to the two-class method.

As part of our stock based compensation program, we issue restricted shares which typically vest over a three to six year period; these shares have non-forfeitable rights to dividends immediately after issuance.

Prior to January 1, 2009, we excluded the unvested shares from the basic EPS calculation and included them using the treasury stock method in diluted EPS.

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.

Effective January 1, 2009, we adopted a new accounting standard which clarifies the accounting for certain transactions and impairment considerations involving equity method investments.

The new accounting standard clarifies that equity method investments should initially be measured at cost, the issuance of shares by the investee would result in a gain or loss on issuance of shares reflected in the income statement of the equity investor, and that a loss in value of an equity investment which is other than a temporary decline should be recognized.

The standard was effective on a prospective basis beginning on January 1, 2009, and did not have a material impact on our financial position, results of operations, or cash flows.

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.

As of December 31, [removed: 2009,] [added: 2010,] we were not party to any open derivative financial instruments.

Quoted market prices were used to estimate the fair value of our marketable senior notes and debentures and discounted cash flow analysis is generally used to estimate the fair value of our [removed: mortgages] [added: mortgage] and notes payable.

If [added: market] interest rates on our fixed-rate debt instruments at December 31, [removed: 2009] [added: 2010] had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately [removed: $61.4] [added: $67.2] million.

If [added: market] interest rates on our fixed-rate debt instruments at December 31, [removed: 2009] [added: 2010] had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately [removed: $65.4] [added: $71.7] million.

[removed: We] [added: Generally, we] believe that our primary interest rate risk is due to fluctuations in interest rates on our variable rate debt.

Based upon this amount of variable rate debt and [added: the] specific terms, if [added: market] interest rates increased [removed: by 1.0%] [added: 1.0%,] our annual interest expense would increase by approximately [removed: $2.6] [added: $0.9] million, and our net income and cash flows for the year would decrease by approximately [removed: $2.6] [added: $0.9] million.

Conversely, if [added: market] interest rates decreased [removed: by] 1.0%, our annual interest expense would decrease by [removed: less than $0.1] [added: approximately $0.6] million with a corresponding increase in our net income and cash flows for the year.

At December 31, 2010, we had $1.6 billion of fixed-rate debt outstanding and $59.9 million of capital lease obligations.

At December 31, 2010, we had $86.4 million of variable rate debt outstanding which consisted of $77.0 million outstanding on our revolving credit facility and $9.4 million of municipal bonds.

At December 31, 2009 we had $1.5 billion of fixed-rate debt outstanding.

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%.

As of December 31, [removed: 2009,] [added: 2010,] we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as [removed: 84] [added: 85] predominantly retail real estate projects comprising approximately [removed: 18.2] [added: 18.3] million square feet.

In total, the real estate projects were [removed: 94.5%] [added: 93.9%] leased and 93.2% occupied at December 31, [removed: 2009.][added: 2010.]

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: 2009.][added: 2010.]

In total, the joint venture properties in which we own an interest were [removed: 85.0%] [added: 91.0%] leased and [added: 90.4%] occupied at December 31, [removed: 2009.][added: 2010.]

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for [removed: 42] [added: 43] consecutive years.

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

| | • | | generate higher internal growth than our peers; [added: and] |

| | • | | provide increasing cash flow for [removed: distributions] [added: distribution] to shareholders; [removed: and] |

Our traditional focus has been and remains on [removed: grocery anchored] [added: regional] community and neighborhood shopping [removed: centers.][added: centers that generally are anchored by grocery stores.]

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

The mixed-use properties are typically centered around a retail component but [added: may] also include office, residential and/or hotel components.

| | • | | maintaining a diversified tenant base, thereby limiting exposure to any one tenant’s financial [added: or operating] difficulties; |

Our investments primarily fall into one of the following [removed: five] [added: four] categories:

| | • | | acquiring [removed: community and neighborhood shopping centers] [added: quality retail properties] and other quality [added: properties that have a significant] retail [removed: properties,] [added: component] 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; [added: and] |

| | • | | developing the retail portions of mixed-use properties and developing [added: or otherwise investing in] other portions of mixed-use properties we already [removed: own; and] [added: own in order to capitalize on the overall value created in the mixed-use properties.] |

When we evaluate potential redevelopment, retenanting, [removed: expansion and] [added: expansion,] acquisition [added: and development] opportunities, we consider such factors as:

| | • | | the expected returns in relation to our [added: short and long-term] cost of capital as well as the anticipated risk we will face in achieving the expected returns; |

| | • | | competitive conditions in the vicinity of the property, including competition for tenants and the ability [added: of others] to create competing properties through redevelopment, new construction or renovation; |

Our financing strategies are designed to enable us to maintain [removed: a strong] [added: an investment grade] balance sheet while retaining sufficient flexibility to fund our operating and investing activities in the most cost-efficient way possible.

| | • | | maintaining an available line of credit to fund [removed: short-term] operating [removed: needs;] [added: and investing needs on a short-term basis;] |

| | • | | the incurrence of indebtedness through [removed: secured or] unsecured [added: or secured] borrowings, |

At February [removed: 12, 2010,] [added: 9, 2011,] we had [removed: 239] [added: 238] full-time employees and [removed: 137] [added: 123] part-time employees.

In [added: 2010,] 2009, [removed: 2008,] and [removed: 2007,] [added: 2008,] our TRS incurred net income taxes/(refunds) of approximately [removed: $0.5] [added: $0.4] million, [removed: $(0.8)] [added: $0.5] million and [removed: $(0.3)] [added: $(0.8)] million, respectively, primarily related to sales of condominiums at Santana [removed: Row, sales of three properties in 2007,] [added: Row] and our investment in certain restaurant joint ventures at Santana Row.

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 (the “Exchange Act”) are available free of charge through the [removed: Investor Information] [added: Investors] 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.

Our Corporate Governance Guidelines, Code of Business Conduct, Code of Ethics applicable to our Chief Executive Officer and senior financial officers, Whistleblower Policy, organizational documents and the charters of our audit committee, compensation committee and nominating and corporate governance committee are all available in the Corporate Governance section of the [removed: Investor Information] [added: Investors] section of our website.

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

| | • | | acquiring, in partnership with longer term investors who contribute a substantial portion of the equity needed to acquire those properties, stabilized community and neighborhood shopping centers, located in densely populated or affluent areas where barriers to entry for further development are high. |

In May 2003, a breach of contract action was filed against us [added: in the United States District Court for the Northern District of California, San Jose Division,] alleging that a one page document entitled “Final Proposal” constituted a ground lease of a parcel of property located adjacent to our Santana Row property and gave the plaintiff the option to require that we acquire the property at a price determined in accordance with a formula included in the “Final Proposal.” The “Final Proposal” explicitly stated that it was subject to approval of the terms and conditions of a formal agreement.

Accordingly, considering all the information available to us [removed: on May 6, 2009,] when we filed our [removed: Form 10-Q for the three months ended] March 31, [removed: 2009,] [added: 2009 Form 10-Q,] our best estimate of damages, interest, and other costs was $21.4 [added: million resulting in an increase in our accrual for this matter of $20.6] million.

In June 2009, the court issued a final judgment awarding damages of $15.9 million (including interest) plus costs of [removed: suit.][added: suit and in July 2009, we and the plaintiff both filed a notice of appeal with the United States Court of Appeals for the Ninth Circuit.]

Given the additional information regarding the appeal, we lowered our accrual to $16.4 [removed: million,] [added: million in the fourth quarter 2009,] which [removed: reflects] [added: reflected] our best estimate of the litigation liability.

The [removed: net increase in our] [added: litigation] accrual of [removed: $15.6] [added: $16.2] million [removed: is included in “litigation provision” in our consolidated statement of operations,] and [removed: the] $16.4 million [removed: accrual] [added: at December 31, 2010 and 2009, respectively,] is included in the “accounts payable and accrued expenses” line item in our consolidated balance [removed: sheet as of December 31, 2009.][added: sheets.]

During [added: 2010 and] 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 [removed: statement] [added: statements] of operations.

[removed: We expect oral] [added: Oral] arguments on the appeal [removed: to be scheduled for later] [added: were heard] in [added: December] 2010.

A final ruling on the appeal was issued in February 2011 which rejected both appeals and consequently, affirmed the final judgment against us.

Therefore, in December 2010, we adjusted our accrual to $16.2 million which reflects the amount we expect to pay in first quarter 2011.

The net change in our accrual in 2010 and 2009 is included in “litigation provision” in our consolidated statements of operations.

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

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

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.

For the fiscal year ended December 31, [removed: 2009][added: 2010]

[removed: ¨] [added: þ] Yes [removed: ¨ No][added: ¨No]

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: 2009] [added: 2010] was [removed: $3.0] [added: $4.3] billion.

The number of Registrant’s common shares outstanding on February [removed: 12, 2010] [added: 9, 2011] was [removed: 61,258,482.][added: 61,537,817.]

FISCAL YEAR ENDED DECEMBER 31, [removed: 2009][added: 2010]

Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission for the Registrant’s [removed: 2010] [added: 2011] annual meeting of shareholders to be held in May [removed: 2010] [added: 2011] will be incorporated by reference into Part III hereof.

| Item 1. | | [removed: [Business](#tx92260_2)] [added: [Business](#tx124940_2)] | | [added: |] 3 | [added: |]

| Item 1A. | | [Risk [removed: Factors](#tx92260_3)] [added: Factors](#tx124940_3)] | | [added: |] 8 | [added: |]

| Item 1B. | | [Unresolved Staff [removed: Comments](#tx92260_4)] [added: Comments](#tx124940_4)] | | [removed: 18] | [added: 19 | |]

| Item 2. | | [removed: [Properties](#tx92260_5)] [added: [Properties](#tx124940_5)] | | [removed: 18] | [added: 19 | |]

| Item 3. | | [Legal [removed: Proceedings](#tx92260_6)] [added: Proceedings](#tx124940_6)] | | [removed: 26] | [added: 28 | |]

| Item 5. | | [Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity [removed: Securities](#tx92260_9)] [added: Securities](#tx124940_9)] | | [removed: 27] | [added: 29 | |]

| Item 6. | | [Selected Financial [removed: Data](#tx92260_10)] [added: Data](#tx124940_10)] | | [removed: 29] | [added: 31 | |]

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx92260_11)] [added: Operations](#tx124940_11)] | | [removed: 31] | [added: 33 | |]

| Item 7A. | | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#tx92260_12)] [added: Risk](#tx124940_12)] | | [removed: 56] | [added: 58 | |]

| Item 8. | | [Financial Statements and Supplementary [removed: Data](#tx92260_13)] [added: Data](#tx124940_13)] | | [removed: 57] | [added: 59 | |]

| Item 9. | | [Changes In and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#tx92260_14)] [added: Disclosure](#tx124940_14)] | | [removed: 57] | [added: 59 | |]

| Item 9A. | | [Controls and [removed: Procedures](#tx92260_15)] [added: Procedures](#tx124940_15)] | | [removed: 57] | [added: 59 | |]

| Item 9B. | | [Other [removed: Information](#tx92260_16)] [added: Information](#tx124940_16)] | | [removed: 59] | [added: 61 | |]

| [PART [removed: III](#tx92260_17)] [added: III](#tx124940_17)] | | | | | [added: | |]

| Item 10. | | [Trustees, Executive Officers and Corporate [removed: Governance](#tx92260_18)] [added: Governance](#tx124940_18)] | | [removed: 60] | [added: 62 | |]

| Item 11. | | [Executive [removed: Compensation](#tx92260_19)] [added: Compensation](#tx124940_19)] | | [removed: 60] | [added: 62 | |]

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder [removed: Matters](#tx92260_20)] [added: Matters](#tx124940_20)] | | [removed: 60] | [added: 62 | |]

| Item 13. | | [Certain Relationships and Related Transactions, and Trustee [removed: Independence](#tx92260_21)] [added: Independence](#tx124940_21)] | | [removed: 60] | [added: 62 | |]

| Item 14. | | [Principal Accountant Fees and [removed: Services](#tx92260_22)] [added: Services](#tx124940_22)] | | [removed: 60] | [added: 62 | |]

| Item 15. | | [Exhibits and Financial Statement [removed: Schedules](#tx92260_24)] [added: Schedules](#tx124940_24)] | | [removed: 61] | [added: 63 | |]

| | | | | | | |

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

| [PART I](#tx124940_1) | | | | | | |

| Item 4. | | [\[Removed and Reserved\]](#tx124940_7) | | | 28 | |

| | | | | | | |

| [PART II](#tx124940_8) | | | | | | |

| | | | | | | |

| | | | | | | |

| [PART IV](#tx124940_23) | | | | | | |

| | | | | | | |

| [SIGNATURES](#tx124940_25) | | | | | 64 | |

| | | | | |

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

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

| Item 4. | | [Submission of Matters to a Vote of Shareholders](#tx92260_7) | | 26 |

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

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

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

As of December 31, [removed: 2009,] [added: 2010,] we owned or had a majority ownership interest in community and neighborhood shopping centers and mixed-used properties which are operated as [removed: 84] [added: 85] predominantly retail real estate projects comprising approximately [removed: 18.2] [added: 18.3] million square feet.

No single property accounted for over 10% of our [removed: 2009] [added: 2010] total revenue.

As of December 31, [removed: 2009,] [added: 2010,] we had approximately 2,400 leases, with tenants ranging from sole proprietors to major national 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: 2009.][added: 2010.]

Our [removed: 84] [added: 85] real estate projects are located in 13 states and the District of Columbia.

The following table shows the number of projects, the gross leasable area [added: (“GLA”)] of commercial space and the percentage of total portfolio gross leasable area of commercial space in each state as of December 31, [removed: 2009.][added: 2010.]

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

| | | (In square feet) | | | | | | [added: | | | | |]

| New Jersey | | [added: |] 4 | | [removed: 1,385,000] | | [added: 1,383,000 | | | |] 7.6 | % |

| Massachusetts | | [added: |] 7 | | [removed: 1,381,000] | | [added: 1,382,000 | | | |] 7.6 | % |

| New York | | [removed: 5] | [added: 6] | [removed: 1,124,000] | | [removed: 6.2] | [added: 1,198,000 | | | | 6.5 |] % |

| Illinois | | [added: |] 4 | | [added: | |] 752,000 | | [added: | |] 4.1 | % |

| Connecticut(1) | | [added: |] 2 | | [removed: 308,000] | | [added: 305,000 | | | |] 1.7 | % |

| Florida | | [added: |] 2 | | [added: | |] 308,000 | | [added: | |] 1.7 | % |

| Michigan | | [added: |] 1 | | [added: | |] 217,000 | | [added: | |] 1.2 | % |

| Texas | | [added: |] 1 | | [added: | |] 196,000 | | [added: | |] 1.1 | % |

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

| North Carolina | | [added: |] 1 | | [added: | |] 153,000 | | [added: | |] 0.8 | % |

| [removed: Total all states] [added: Total] | | [removed: 84] | [added: 85] | [removed: 18,169,000] | | [added: | 18,286,000 | | | |] 100.0 | % |

| (1) | Additionally, we own two participating mortgages totaling approximately [removed: $29.1] [added: $29.4] million secured by multiple buildings in Manayunk, Pennsylvania, and [removed: one $7.2] [added: $18.3] million [removed: loan] [added: of loans] secured by two properties in Norwalk, Connecticut. |

Leases on residential units are generally for a period of one year or less and, in [removed: 2009,] [added: 2010,] represented approximately 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: 2009] [added: 2010] for each of the 10 years beginning with [removed: 2010] [added: 2011] and after [removed: 2019] [added: 2020] in the aggregate assuming that none of the tenants exercise future renewal options.

Annualized base rents reflect in-place contractual rents as of December 31, [removed: 2009.][added: 2010.]

| Year of Lease Expiration | | Leased Square Footage Expiring | | [added: | |] Percentage of Leased Square Footage Expiring | | | [added: |] Annualized Base Rent Represented by Expiring Leases | | | [added: |] Percentage of Annualized Base Rent Represented by Expiring Leases | | [added: |]

| 2012 | | [removed: 2,128,000] | [added: 2,242,000] | [added: | | |] 13 | % | | | [removed: 48,128,000] [added: 50,088,000] | | [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 otherwise controlled and are consolidated as of December 31, [removed: 2009.][added: 2010.]

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

| 150 Post Street San Francisco, CA 94108 | | [added: 1908,] 1965 | | 1997 | | [removed: 101,000] [added: 102,000] | | [removed: $42.75] [added: $42.36] | | [removed: 99%] [added: 100%] | | Brooks Brothers H & M |

| Colorado Blvd Pasadena, CA(3) | | [removed: 1922] [added: 1905-1988] | | [removed: 1996-1998] [added: 1996/1998] | | 69,000 | | [removed: $37.07] [added: $37.58] | | [removed: 97%] [added: 99%] | | Pottery Barn Banana Republic |

| Crow Canyon Commons San Ramon, [removed: CA(3)] [added: CA(3)(12)] | | 1980-2006 | | [removed: 2005-2007] [added: 2005/2007] | | 242,000 | | [removed: $19.24] [added: $19.02] | | [removed: 92%] [added: 89%] | | Lucky Loehmann’s Rite Aid |

| Escondido Promenade Escondido, CA [removed: 92029(4)] [added: 92029(4)(13)] | | 1987 | | [removed: 1996] [added: 1996/2010] | | 222,000 | | [removed: $23.24] [added: $23.76] | | [removed: 94%] [added: 98%] | | Toys R Us TJ Maxx |

| Fifth Avenue San Diego, CA | | 1888-1995 | | 1996-1997 | | 51,000 | | [removed: $27.50] [added: $27.46] | | [removed: 91%] [added: 93%] | | Urban Outfitters |

| Hermosa Avenue Hermosa Beach, CA | | 1922 | | 1997 | | [removed: 22,000] [added: 23,000] | | [removed: $33.98] [added: $31.59] | | [removed: 72%] [added: 100%] | | |

| Hollywood Blvd Hollywood, CA(5) | | 1921-1991 | | 1999 | | 153,000 | | [removed: $21.84] [added: $21.90] | | 75% | | DSW L.A. Fitness Fresh & Easy |

| Kings Court Los Gatos, CA 95032(3)(6) | | 1960 | | 1998 | | 79,000 | | [removed: $28.27] [added: $28.43] | | [removed: 100%] [added: 97%] | | Lunardi’s Supermarket CVS |

| Old Town Center Los Gatos, CA 95030 | | 1962, 1998 | | 1997 | | [removed: 96,000] [added: 95,000] | | [removed: $29.88] [added: $30.04] | | 97% | | Borders Books Gap Kids Banana Republic |

| Santana Row—Retail San Jose, CA 95128 | | [removed: 2002] [added: 2002, 2009] | | 1997 | | [removed: 565,000] [added: 608,000] | | [removed: $42.97] [added: $44.31] | | [removed: 98%] [added: 99%] | | Crate & Barrel Borders Books Container Store Best Buy CineArts Theatre Hotel Valencia |

| Third Street Promenade Santa Monica, CA | | 1888-2000 | | 1996-2000 | | [removed: 211,000] [added: 209,000] | | [removed: $60.44] [added: $61.59] | | 97% | | Abercrombie & Fitch J. Crew Old Navy Banana Republic |

| Westgate San Jose, CA | | 1960-1966 | | 2004 | | [removed: 645,000] [added: 644,000] | | [removed: $13.14] [added: $12.96] | | 95% | | Safeway Target Burlington Coat Factory Barnes & Noble Ross [added: Dress For Less] Michaels |

| Bristol Bristol, CT 06010 | | 1959 | | 1995 | | [removed: 272,000] [added: 269,000] | | [removed: $12.32] [added: $12.24] | | [removed: 85%] [added: 94%] | | Stop & Shop TJ Maxx |

| Maryland | | | 17 | | | | 3,706,000 | | | | 20.2 | % |

| Virginia | | | 15 | | | | 3,616,000 | | | | 19.8 | % |

| California | | | 12 | | | | 2,497,000 | | | | 13.7 | % |

| Pennsylvania(1) | | | 11 | | | | 2,405,000 | | | | 13.1 | % |

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

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

| 2011 | | | 1,412,000 | | | | 8 | % | | | 34,881,000 | | | | 9 | % |

| 2013 | | | 2,070,000 | | | | 12 | % | | | 49,733,000 | | | | 13 | % |

| 2014 | | | 2,244,000 | | | | 13 | % | | | 51,217,000 | | | | 13 | % |

| 2015 | | | 1,789,000 | | | | 11 | % | | | 41,035,000 | | | | 11 | % |

| 2016 | | | 1,397,000 | | | | 8 | % | | | 34,708,000 | | | | 9 | % |

| 2017 | | | 1,125,000 | | | | 7 | % | | | 24,705,000 | | | | 6 | % |

| 2018 | | | 965,000 | | | | 6 | % | | | 19,015,000 | | | | 5 | % |

| 2019 | | | 718,000 | | | | 4 | % | | | 17,658,000 | | | | 4 | % |

| 2020 | | | 705,000 | | | | 4 | % | | | 19,185,000 | | | | 5 | % |

| Thereafter | | | 2,358,000 | | | | 14 | % | | | 45,448,000 | | | | 12 | % |

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

| Total | | | 17,025,000 | | | | 100 | % | | $ | 387,673,000 | | | | 100 | % |

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

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

| Free State Shopping Center Bowie, MD 20715(10) | | 1970 | | 2007 | | 279,000 | | $15.21 | | 88% | | Giant Food TJ Maxx Ross Dress For Less Office Depot |

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

| Plaza Del Mercado Silver Spring, MD 20906(10)(12) | | 1969 | | 2004 | | 96,000 | | $19.64 | | 93% | | Giant Food CVS |

| Atlantic Plaza North Reading, MA 01864(10)(12) | | 1960 | | 2004 | | 123,000 | | $17.05 | | 87% | | Stop & Shop Sears |

| Campus Plaza Bridgewater, MA 02324(10) | | 1970 | | 2004 | | 117,000 | | $12.74 | | 94% | | Roche Brothers Burlington Coat Factory |

| Newbury Street Boston, MA 02116(10) | | 1877-1929 | | 2010 | | 32,000 | | $80.37 | | 55% | | Pierre Deux Jonathan Adler |

| Pleasant Shops Weymouth, MA 02190(10) | | 1974 | | 2004 | | 129,000 | | $13.60 | | 94% | | Foodmaster Marshalls |

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

| Greenlawn Plaza Greenlawn, NY 11743(10)(12) | | 1975, 2004 | | 2006 | | 106,000 | | $16.00 | | 99% | | Waldbaum’s Tuesday Morning |

| Huntington Square East Northport, NY 11731(3) | | 1980, 2007 | | 2010 | | 74,000 | | $24.98 | | 89% | | Barnes & Noble |

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

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

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

| Barcroft Plaza Falls Church, VA 22041(10)(12) | | 1963, 1972 & 1990 | | 2006-2007 | | 101,000 | | $22.48 | | 88% | | Harris Teeter Bank of America |

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

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

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

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

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

| (10) | Properties acquired through the Taurus Newbury Street JV II Limited Partnership or a joint venture arrangement with affiliates of a discretionary fund created and advised by ING Clarion Partners. |

| | | | | | | | |

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

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

| Virginia | | 15 | | 3,612,000 | | 19.9 | % |

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

| Pennsylvania(1) | | 11 | | 2,409,000 | | 13.3 | % |

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

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

| 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 | % |

Retail and Residential Properties—continued

No matters were submitted to a vote of our shareholders during the fourth quarter of the fiscal year ended December 31, 2009.

| | | Price Per Share | | | | | | [added: | |] Dividends Declared Per Share | | [added: |]

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

| 2009 | | | | | | | | | | [added: | | |]

| Fourth quarter | | $ | 70.49 | | [added: |] $ | 57.49 | | [added: |] $ | 0.660 | [added: |]

| Third quarter | | $ | 66.03 | | [added: |] $ | 48.24 | | [added: |] $ | 0.660 | [added: |]

| Second quarter | | $ | 59.28 | | [added: |] $ | 45.51 | | [added: |] $ | 0.650 | [added: |]

| First quarter | | $ | 60.31 | | [added: |] $ | 38.82 | | [added: |] $ | 0.650 | [added: |]

On February [removed: 12, 2010,] [added: 9, 2011,] there were [removed: 3,925] [added: 3,666] holders of record of our common shares.

We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our regular annual dividend rate for [removed: 42] [added: 43] consecutive years.

Our total annual dividends paid per common share for [removed: 2009] [added: 2010] and [removed: 2008] [added: 2009] were [removed: $2.61] [added: $2.65] per share and [removed: $2.48] [added: $2.61] per share, respectively.

No assurances can be given regarding what portion, if any, of distributions in [removed: 2010] [added: 2011] or subsequent years will constitute a return of capital for federal income tax purposes.

| | | Year Ended December 31, | | | | | [added: | |]

| Ordinary dividend | | $ | [removed: 2.377] [added: 2.519] | | [added: |] $ | [removed: 2.455] [added: 2.377] | [added: |]

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

| Return of capital | | | [removed: 0.183] [added: 0.106] | | | [removed: —] | [added: 0.183 | |]

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

All other equity securities sold by us during [removed: 2009] [added: 2010] 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: 2009.][added: 2010.]

However, [removed: 1,495] [added: 495] restricted common shares were forfeited by former employees.

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

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

| 2010 | | | | | | | | | | | | |

| Fourth quarter | | $ | 84.32 | | | $ | 74.87 | | | $ | 0.670 | |

| Third quarter | | $ | 83.32 | | | $ | 68.91 | | | $ | 0.670 | |

| Second quarter | | $ | 79.52 | | | $ | 68.35 | | | $ | 0.660 | |

| First quarter | | $ | 74.11 | | | $ | 63.07 | | | $ | 0.660 | |

| | | | | | | | | |

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

| | 2010 | | | | 2009 | | | |

| | | | | | | | | |

| | | $ | 2.650 | | | $ | 2.610 | |

| | | | | | | | | |

On October 8, 2010 and November 16, 2010, we redeemed 3,473 operating partnership units each for the equivalent number of our common shares.

| --- | --- |

| | | | | | | | | | |

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

| 2008 | | | | | | | | | |

| Fourth quarter | | $ | 84.96 | | $ | 43.46 | | $ | 0.650 |

| Third quarter | | $ | 95.00 | | $ | 61.87 | | $ | 0.650 |

| Second quarter | | $ | 85.00 | | $ | 68.25 | | $ | 0.610 |

| First quarter | | $ | 83.41 | | $ | 61.60 | | $ | 0.610 |

| | | | | | | |

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

| | 2009 | | | 2008 | | |

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

During the three months ended December 31, 2009, there were no operating partnership unit redemptions.

Financial Statements and Supplementary Data.” Our selected operating data, other data and balance sheet data for the years ended December 31, [removed: 2005] [added: 2006] through [removed: 2008] [added: 2009] have been reclassified to conform to the [removed: 2009] [added: 2010] presentation.

| | | [removed: For the Year] [added: Year] Ended December 31, | | | | | | | | | | | | | | | | | | |

| | [removed: 2009] [added: 2010] | | | | [removed: 2008] [added: 2009] | | | | [removed: 2007] [added: 2008] | | | | [removed: 2006] [added: 2007] | | | | [removed: 2005] [added: 2006] | | | |

| Income from continuing operations | | $ | [removed: 102,356] [added: 127,107] | | | $ | [removed: 120,600] [added: 102,379] | | | $ | [removed: 99,379] [added: 120,616] | | | $ | [removed: 94,305] [added: 99,430] | | | $ | [removed: 88,292] [added: 94,276] | |

| Gain on sale of real estate | | $ | [removed: 1,298] [added: 1,410] | | | $ | [removed: 12,572] [added: 1,298] | | | $ | [removed: 94,768] [added: 12,572] | | | $ | [removed: 23,956] [added: 94,768] | | | $ | [removed: 30,748] [added: 23,956] | |

| Net income | | $ | [removed: 103,872] [added: 128,237] | | | $ | [removed: 135,153] [added: 103,872] | | | $ | [removed: 201,127] [added: 135,153] | | | $ | [removed: 123,065] [added: 201,127] | | | $ | [removed: 119,846] [added: 123,065] | |

| Net income attributable to the Trust | | $ | [removed: 98,304] [added: 122,790] | | | $ | [removed: 129,787] [added: 98,304] | | | $ | [removed: 195,537] [added: 129,787] | | | $ | [removed: 118,712] [added: 195,537] | | | $ | [removed: 114,612] [added: 118,712] | |

| Net income available for common shareholders | | $ | [removed: 97,763] [added: 122,249] | | | $ | [removed: 129,246] [added: 97,763] | | | $ | [removed: 195,095] [added: 129,246] | | | $ | [removed: 103,514] [added: 195,095] | | | $ | [removed: 103,137] [added: 103,514] | |

| Net cash provided by operating activities | | $ | [removed: 256,765] [added: 256,735] | | | $ | [removed: 228,285] [added: 256,765] | | | $ | [removed: 214,209] [added: 228,285] | | | $ | [removed: 186,654] [added: 214,209] | | | $ | [removed: 174,941] [added: 186,654] | |

| Net cash used in investing activities | | $ | [removed: (127,341] [added: (187,088] | ) | | $ | [removed: (207,567] [added: (127,341] | ) | | $ | [removed: (151,439] [added: (207,567] | ) | | $ | [removed: (317,429] [added: (151,439] | ) | | $ | [removed: (152,730] [added: (317,429] | ) |

| Net cash (used in) provided by financing activities | | $ | [removed: (9,258] [added: (189,239] | ) | | $ | [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: )] |

| Dividends declared on common shares | | $ | [removed: 157,638] [added: 163,382] | | | $ | [removed: 148,444] [added: 157,638] | | | $ | [removed: 135,102] [added: 148,444] | | | $ | [removed: 133,066] [added: 135,102] | | | $ | [removed: 124,928] [added: 133,066] | |

| Basic | | | [removed: 59,704] [added: 61,182] | | | | [removed: 58,665] [added: 59,704] | | | | [removed: 56,108] [added: 58,665] | | | | [removed: 53,469] [added: 56,108] | | | | [removed: 52,533] [added: 53,469] | |

| Diluted | | | [removed: 59,830] [added: 61,324] | | | | [removed: 58,889] [added: 59,830] | | | | [removed: 56,473] [added: 58,889] | | | | [removed: 53,858] [added: 56,473] | | | | [removed: 53,050] [added: 53,858] | |

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

| Continuing operations | | $ | [removed: 1.60] [added: 1.97] | | | $ | [removed: 1.94] [added: 1.60] | | | $ | [removed: 1.66] [added: 1.94] | | | $ | [removed: 1.39] [added: 1.66] | | | $ | [removed: 1.35] [added: 1.39] | |

| Discontinued operations | | | [removed: 0.03] [added: 0.01] | | | | [removed: 0.25] [added: 0.03] | | | | [removed: 1.81] [added: 0.25] | | | | [removed: 0.40] [added: 1.81] | | | | [removed: 0.60] [added: 0.40] | |

| Gain on sale of real estate | | | [removed: —] [added: 0.01] | | | | — | | | | — | | | | [removed: 0.14] [added: —] | | | | [removed: —] [added: 0.14] | |

| Total | | $ | [removed: 1.63] [added: 1.99] | | | $ | [removed: 2.19] [added: 1.63] | | | $ | [removed: 3.47] [added: 2.19] | | | $ | [removed: 1.93] [added: 3.47] | | | $ | [removed: 1.95] [added: 1.93] | |

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

| Continuing operations | | $ | [removed: 1.60] [added: 1.96] | | | $ | [removed: 1.94] [added: 1.60] | | | $ | [removed: 1.65] [added: 1.94] | | | $ | [removed: 1.38] [added: 1.65] | | | $ | [removed: 1.34] [added: 1.38] | |

| Discontinued operations | | | [removed: 0.03] [added: 0.01] | | | | [removed: 0.25] [added: 0.03] | | | | [removed: 1.80] [added: 0.25] | | | | [removed: 0.39] [added: 1.80] | | | | [removed: 0.59] [added: 0.39] | |

| Total | | $ | [removed: 1.63] [added: 1.98] | | | $ | [removed: 2.19] [added: 1.63] | | | $ | [removed: 3.45] [added: 2.19] | | | $ | [removed: 1.91] [added: 3.45] | | | $ | [removed: 1.93] [added: 1.91] | |

| Dividends declared per common [removed: share(3)] [added: share(2)] | | $ | [removed: 2.62] [added: 2.66] | | | $ | [removed: 2.52] [added: 2.62] | | | $ | [removed: 2.37] [added: 2.52] | | | $ | [removed: 2.46] [added: 2.37] | | | $ | [removed: 2.37] [added: 2.46] | |

| Funds from operations available to common [removed: shareholders(2)(4)(5)(6)] [added: shareholders(3)(4)(5)] | | $ | [removed: 211,065] [added: 239,210] | | | $ | [removed: 228,397] [added: 211,065] | | | $ | [removed: 206,037] [added: 228,397] | | | $ | [removed: 176,419] [added: 206,037] | | | $ | [removed: 162,819] [added: 176,419] | |

| Ratio of EBITDA to combined fixed charges and preferred share [removed: dividends(5)(7)(8)] [added: dividends(4)(6)(7)] | | | [removed: 2.7x] [added: 3.1] | [added: x] | | | [removed: 3.2x] [added: 2.8] | [added: x] | | | [removed: 3.3x] [added: 3.2] | [added: x] | | | [removed: 2.6x] [added: 3.3] | [added: x] | | | [removed: 2.7x] [added: 2.6] | [added: x] |

| Ratio of Adjusted EBITDA to combined fixed charges and preferred share [removed: dividends(5)(7)(8)] [added: dividends(4)(6)(7)] | | | [removed: 2.7x] [added: 3.1] | [added: x] | | | [removed: 3.1x] [added: 2.7] | [added: x] | | | [removed: 2.5x] [added: 3.1] | [added: x] | | | [removed: 2.4x] [added: 2.6] | [added: x] | | | [removed: 2.4x] [added: 2.4] | [added: x] |

| | | As of December 31, | | | | | | | | | | | | | | [added: | | | | |]

| | [added: 2010 | | | |] 2009 | | | [added: |] 2008 | | | [removed: 2007] | [added: 2007] | | [removed: 2006] | | [added: 2006] | [removed: 2005] | | |

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

| Balance Sheet Data: | | | | | | | | | | | | | | | | [added: | | | | |]

| Real estate, at cost | | $ | [added: 3,895,942 | | | $ |] 3,759,234 | | [added: |] $ | 3,673,685 | | [added: |] $ | 3,452,847 | | [added: |] $ | 3,204,258 | | [removed: $ | 2,829,321 |]

| Total assets | | $ | [added: 3,159,553 | | | $ |] 3,222,309 | | [added: |] $ | 3,092,776 | | [added: |] $ | 2,989,297 | | [added: |] $ | 2,688,606 | | [removed: $ | 2,350,852 |]

| Mortgages payable and capital lease obligations | | $ | [added: 589,441 | | | $ |] 601,884 | | [added: |] $ | 452,810 | | [added: |] $ | 450,084 | | [added: |] $ | 460,398 | | [removed: $ | 419,713 |]

| Notes payable | | $ | [added: 97,881 | | | $ |] 261,745 | | [added: |] $ | 336,391 | | [added: |] $ | 210,820 | | [added: |] $ | 109,024 | | [removed: $ | 316,755 |]

| Senior notes and debentures | | $ | [added: 1,079,827 | | | $ |] 930,219 | | [added: |] $ | 956,584 | | [added: |] $ | 977,556 | | [added: |] $ | 1,127,508 | | [removed: $ | 653,675 |]

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

| Shareholders’ equity | | $ | [added: 1,181,130 | | | $ |] 1,209,063 | | [added: |] $ | 1,146,954 | | [added: |] $ | 1,146,450 | | [added: |] $ | 806,269 | | [removed: $ | 794,040 |]

| Number of common shares outstanding | | | [added: 61,526 | | | |] 61,242 | | | [added: |] 58,986 | | | [removed: 58,646] | [added: 58,646] | | [removed: 55,321] | | [added: 55,321] | [removed: 52,891] |

| [removed: (3)] [added: (2)] | The 2006 [removed: and 2005] dividends declared per common share [removed: each] include a special dividend of $0.20 resulting from the sales of condominiums at Santana Row. |

| Rental income | | $ | 525,528 | | | $ | 512,725 | | | $ | 501,055 | | | $ | 464,884 | | | $ | 413,719 | |

| Property operating income(1) | | $ | 374,532 | | | $ | 363,782 | | | $ | 354,731 | | | $ | 336,434 | | | $ | 301,229 | |

| Gain on sale of real estate | | | 0.01 | | | | — | | | | — | | | | — | | | | 0.14 | |

| EBITDA(4)(6) | | $ | 352,481 | | | $ | 328,491 | | | $ | 344,465 | | | $ | 423,150 | | | $ | 321,136 | |

| Adjusted EBITDA(4)(6) | | $ | 351,071 | | | $ | 327,193 | | | $ | 331,893 | | | $ | 328,382 | | | $ | 297,180 | |

| Net income | | $ | 128,237 | | | $ | 103,872 | | | $ | 135,153 | | | $ | 201,127 | | | $ | 123,065 | |

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

| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | | |

| Net income | | $ | 128,237 | | | $ | 103,872 | | | $ | 135,153 | | | $ | 201,127 | | | $ | 123,065 | |

| EBITDA | | | 352,481 | | | | 328,491 | | | | 344,465 | | | | 423,150 | | | | 321,136 | |

| Gain on sale of real estate | | | (1,410 | ) | | | (1,298 | ) | | | (12,572 | ) | | | (94,768 | ) | | | (23,956 | ) |

| Adjusted EBITDA | | $ | 351,071 | | | $ | 327,193 | | | $ | 331,893 | | | $ | 328,382 | | | $ | 297,180 | |

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

| Rental income | | $ | 513,220 | | | $ | 501,627 | | | $ | 465,394 | | | $ | 414,261 | | | $ | 375,655 | |

| Property operating income(1) | | $ | 364,040 | | | $ | 354,989 | | | $ | 336,642 | | | $ | 301,513 | | | $ | 273,398 | |

| EBITDA(5)(7) | | $ | 322,923 | | | $ | 339,099 | | | $ | 417,560 | | | $ | 316,783 | | | $ | 292,465 | |

| Adjusted EBITDA(5)(7) | | $ | 321,625 | | | $ | 326,527 | | | $ | 322,792 | | | $ | 292,827 | | | $ | 261,717 | |

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

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

| --- | --- |

| (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. |

| EBITDA | | | 322,923 | | | | 339,099 | | | | 417,560 | | | | 316,783 | | | | 292,465 | |

| Adjusted EBITDA | | $ | 321,625 | | | $ | 326,527 | | | $ | 322,792 | | | $ | 292,827 | | | $ | 261,717 | |

| ITEM 9A. CONTROLS | AND PROCEDURES |

| --- | --- |

Quarterly Assessment

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

This assessment was done under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer.

Rules adopted by the SEC require that we present the conclusions of our principal executive officer and our principal financial officer about the effectiveness of our disclosure controls and procedures and the conclusions of our management about the effectiveness of our internal control over financial reporting as of the end of the period covered by this annual report.

Principal Executive Officer and Principal Financial Officer Certifications

Included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are forms of “Certification” of our principal executive officer and our principal financial officer.

The forms of Certification are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.

This section of this Annual Report on Form 10-K that you currently are reading is the information concerning the assessment referred to in the Section 302 certifications and this information should be read in conjunction with the Section 302 certifications for a more complete understanding of the topics presented.

Disclosure Controls and Procedures

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 President—Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

These controls and procedures are based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) promulgated under the Exchange Act.

Rules adopted by the SEC require that we present the conclusions of the Chief Executive Officer and Chief Financial Officer about the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report.

Internal Control over Financial Reporting

Establishing and maintaining internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and Senior Vice 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.

This process includes policies and procedures that:

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

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

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

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

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

Limitations on the Effectiveness of Controls

Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud.

In designing and evaluating our control system, management recognized that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Over time, controls may become inadequate because of changes in conditions that cannot be anticipated at the present time, or the degree of compliance with the policies or procedures may deteriorate.

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Scope of the Evaluations

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 Committee and others in our organization, as appropriate.

In conducting this evaluation, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in _Internal Control—Integrated Framework._ In the course of the evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were being undertaken.

The evaluation of our disclosure controls and procedures and our internal control over financial reporting is done on a quarterly basis, so that the conclusions concerning the effectiveness of such controls can be reported in our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

Our internal control over financial reporting is also assessed on an ongoing basis by personnel in our accounting department and by our independent auditors in connection with their audit and review activities.

The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and our internal control over financial reporting and to make modifications as necessary.

Our intent in this regard is that the disclosure controls and procedures and internal control over financial reporting will be maintained and updated (including with improvements and corrections) as conditions warrant.

Among other matters, we sought in our evaluation to determine whether there were any “significant deficiencies” or “material weaknesses” in our internal control over financial reporting, or whether we had identified any acts of fraud involving personnel who have a significant role in our internal control over financial reporting.

Quarterly Assessment

We carried out an assessment as of December 31, 2010 of the effectiveness of the design and operation of our disclosure controls and procedures and our internal control over financial reporting.

This assessment was done under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer.

Rules adopted by the SEC require that we present the conclusions of our principal executive officer and our principal financial officer about the effectiveness of our disclosure controls and procedures and the conclusions of our management about the effectiveness of our internal control over financial reporting as of the end of the period covered by this annual report.

Principal Executive Officer and Principal Financial Officer Certifications

Included as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K are forms of “Certification” of our principal executive officer and our principal financial officer.

The forms of Certification are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.

This section of this Annual Report on Form 10-K that you are currently reading is the information concerning the assessment referred to in the Section 302 certifications and this information should be read in conjunction with the Section 302 certifications for a more complete understanding of the topics presented.

Disclosure Controls and Procedures

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 President-Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

These controls and procedures are based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e) promulgated under the Exchange Act.

Rules adopted by the SEC require that we present the conclusions of the Chief Executive Officer and Chief Financial Officer about the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report.

Internal Control over Financial Reporting

Establishing and maintaining internal control over financial reporting is a process designed by, or under the supervision of, our President and Chief Executive Officer and Senior Vice 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.

This process includes policies and procedures that:

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

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

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

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

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

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

Limitations on the Effectiveness of Controls

Management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud.

In designing and evaluating our control system, management recognized that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, that may affect our operation have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management’s override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Over time, controls may become inadequate because of changes in conditions that cannot be anticipated at the present time, or the degree of compliance with the policies or procedures may deteriorate.

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Scope of the Evaluations

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 Committee and others in our organization, as appropriate.

In conducting this evaluation, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in _Internal Control—Integrated Framework._ In the course of the evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were being undertaken.

The evaluation of our disclosure controls and procedures and our internal control over financial reporting is done on a quarterly basis, so that the conclusions concerning the effectiveness of such controls can be reported in our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

Our internal control over financial reporting is also assessed on an ongoing basis by personnel in our accounting department and by our independent auditors in connection with their audit and review activities.

The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and our internal control over financial reporting and to make modifications as necessary.

Our intent in this regard is that the disclosure controls and procedures and internal control over financial reporting will be maintained and updated (including with improvements and corrections) as conditions warrant.

Among other matters, we sought in our evaluation to determine whether there were any “significant deficiencies” or “material weaknesses” in our internal control over financial reporting, or whether we had identified any acts of fraud involving personnel who have a significant role in 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: 2010] [added: 2011] Annual Meeting of Shareholders [removed: (the] [added: (as amended or supplemented, the] “Proxy Statement”).

[removed: a.)] The tables and narrative in the Proxy Statement identifying our Trustees and Board committees under the caption “Election of Trustees” and “Corporate [removed: Governance” and] [added: Governance”,] the [removed: section] [added: sections] of the Proxy Statement entitled “Executive Officers” [added: and “Section 16(a) Beneficial Ownership Reporting Compliance” and other information included in the Proxy Statement required by this Item 10] are incorporated herein by reference.

[removed: c.)] We have adopted a Code of Ethics, which is applicable to our Chief Executive Officer and senior financial officers.

The Code of Ethics is available in the Corporate Governance section of the [removed: Investor Information] [added: Investors] section of our website at _www.federalrealty.com_.

| --- | --- |

b.) The information included under the section of the Proxy Statement entitled “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference.

The sections of the Proxy Statement entitled “Summary Compensation Table,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report,” “Trustee Compensation” and “Compensation Discussion and Analysis” [added: and other information included in the Proxy Statement required by this Item 11] are incorporated herein by reference.

| --- | --- |

The sections of the Proxy Statement entitled “Share Ownership” and “Equity Compensation Plan Information” [added: and other information included in the Proxy Statement required by this Item 12] are incorporated herein by reference.

| --- | --- |

The sections of the Proxy Statement entitled “Certain Relationship and Related Transactions” and “Independence of Trustees” [added: and other information included in the Proxy Statement required by this Item 13] are incorporated herein by reference.

| --- | --- |

The sections of the Proxy Statement entitled “Ratification of Independent Registered Public Accounting Firm” and “Relationship with Independent Registered Public Accounting Firm” [added: and other information included in the Proxy Statement required by this Item 14] are incorporated herein by reference.

| --- | --- |

Our financial statement schedules are included in a separate section of this Annual Report on Form 10-K commencing on page [removed: F-37.][added: F-34.]

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: 17th] [added: 15th] day of February, [removed: 2010.][added: 2011.]

| /S/ DONALD C. WOOD Donald C. Wood | | President, Chief Executive Officer and Trustee (Principal Executive Officer) | | February [removed: 17, 2010] [added: 15, 2011] |

| /S/ ANDREW P. BLOCHER Andrew P. Blocher | | Senior Vice [removed: President, Chief] [added: President-Chief] Financial Officer and Treasurer (Principal Financial and Accounting Officer) | | February [removed: 17, 2010] [added: 15, 2011] |

| /S/ JOSEPH S. VASSALLUZZO Joseph S. Vassalluzzo | | Non-Executive Chairman | | February [removed: 17, 2010] [added: 15, 2011] |

| /S/ JON E. BORTZ Jon [added: E.] Bortz | | Trustee | | February [removed: 17, 2010] [added: 15, 2011] |

| /S/ DAVID W. FAEDER David W. Faeder | | Trustee | | February [removed: 17, 2010] [added: 15, 2011] |

| /S/ KRISTIN GAMBLE Kristin Gamble | | Trustee | | February [removed: 17, 2010] [added: 15, 2011] |

| /S/ GAIL P. STEINEL Gail P. Steinel | | Trustee | | February [removed: 17, 2010] [added: 15, 2011] |

| /S/ WARREN M. THOMPSON Warren M. Thompson | | Trustee | | February [removed: 17, 2010] [added: 15, 2011] |

| --- | --- |

| _Consolidated Financial Statements_ | | Page No. | [added: | |]

| [Management Assessment Report on Internal Control over Financial [removed: Reporting](#fin92260_1)] [added: Reporting](#fin124940_1)] | | [added: |] F-2 | [added: |]

| [Report of Independent Registered Public Accounting [removed: Firm](#fin92260_2)] [added: Firm](#fin124940_2)] | | [added: |] F-3 | [added: |]

| [Report of Independent Registered Public Accounting [removed: Firm](#fin92260_3)] [added: Firm](#fin124940_3)] | | [added: |] F-4 | [added: |]

| [Consolidated Balance [removed: Sheets](#fin92260_4)] [added: Sheets](#fin124940_4)] | | [added: |] F-5 | [added: |]

| [Consolidated Statements of [removed: Operations](#fin92260_5)] [added: Operations](#fin124940_5)] | | [added: |] F-6 | [added: |]

| [Consolidated Statement of Shareholders’ [removed: Equity](#fin92260_6)] [added: Equity](#fin124940_6)] | | [added: |] F-7 | [added: |]

| [Consolidated Statements of Cash [removed: Flows](#fin92260_7)] [added: Flows](#fin124940_7)] | | [added: |] F-8 | [added: |]

| [Notes to Consolidated Financial [removed: Statements](#fin92260_8)] [added: Statements](#fin124940_8)] | | [removed: F-9-F-32] | [added: F-9-F-33 | |]

| _Financial Statement Schedules_ | | | [added: | |]

| [Schedule III—Summary of Real Estate and Accumulated [removed: Depreciation](#fin92260_9)] [added: Depreciation](#fin124940_9)] | | [removed: F-33-F-38] | [added: F-34-F-39 | |]

| [Schedule IV—Mortgage Loans on Real [removed: Estate](#fin92260_10)] [added: Estate](#fin124940_10)] | | [removed: F-39-F-40] | [added: F-40-F-41 | |]

Management conducted an assessment of the effectiveness of the Trust’s internal control over financial reporting as of December 31, [removed: 2009.][added: 2010.]

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: 2009.][added: 2010.]

We have audited Federal Realty Investment Trust (a Maryland real estate investment trust) and subsidiaries’ [removed: (the] [added: (collectively, the] Trust) internal control over financial reporting as of December 31, [removed: 2009,] [added: 2010,] 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: 2009,] [added: 2010,] based on criteria established in _Internal_ _Control—Integrated Framework_ issued by 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: 2009] [added: 2010] and [removed: 2008,] [added: 2009,] 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: 2009] [added: 2010] and our report dated February [removed: 17, 2010] [added: 15, 2011] 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 [removed: (the] [added: (collectively, the] Trust) as of December 31, [removed: 2009] [added: 2010] and [removed: 2008,] [added: 2009,] 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: 2009.][added: 2010.]

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: 2009] [added: 2010] and [removed: 2008,] [added: 2009,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2009] [added: 2010] 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: 2009,] [added: 2010,] 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: 17, 2010] [added: 15, 2011] expressed an unqualified opinion.

| | | [added: 2010 | | | |] 2009 | | | | 2008 | | |

| Construction-in-progress | | | [removed: 132,758] [added: 163,200] | | | | [removed: 115,189] [added: 132,758] | |

| Assets held for sale [added: (discontinued operations)] | | | [removed: —] [added: 6,519] | | | | [removed: 20,706] [added: 6,914] | |

| Net real estate | | | [removed: 2,821,147] [added: 2,860,738] | | | | [removed: 2,827,427] [added: 2,821,147] | |

| Cash and cash equivalents | | | [removed: 135,389] [added: 15,797] | | | | [removed: 15,223] [added: 135,389] | |

| Accounts and notes receivable, net | | | [removed: 72,191] [added: 68,997] | | | | [removed: 73,688] [added: 72,191] | |

| Mortgage notes receivable, net | | | [removed: 48,336] [added: 44,813] | | | | [removed: 45,780] [added: 48,336] | |

| [removed: Investment] [added: Our investment] in real estate partnership | | [added: $] | [removed: 35,633] [added: 35,504] | | | [added: $] | [removed: 29,252] [added: 35,633] | |

| Prepaid expenses and other assets | | | [removed: 99,265] [added: 110,686] | | | | [removed: 95,344] [added: 99,265] | |

| Debt issuance costs, net of accumulated amortization of [removed: $8,291] [added: $9,075] and [removed: $6,484] [added: $8,291,] respectively | | | [removed: 10,348] [added: 6,916] | | | | [removed: 6,062] [added: 10,348] | |

| TOTAL ASSETS | | $ | [removed: 3,222,309] [added: 3,159,553] | | | $ | [removed: 3,092,776] [added: 3,222,309] | |

| [removed: Mortgages] [added: Total mortgages] payable | | [removed: $] | [added: 529,501 | | | |] 539,609 | | | [removed: $] | [removed: 389,318] | | [added: | |]