FORM 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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


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

For the fiscal year ended December 31, 2008


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

For the transition period from to

Commission File Number 0-20707

COLONIAL REALTY LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)


Delaware		63-1098468
(State or other jurisdiction		(IRS Employer
of incorporation)		Identification Number)

2101 Sixth Avenue North, Suite 750, Birmingham, Alabama 35203
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (205) 250-8700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Not applicable		Not applicable

Securities registered pursuant to Section 12(g) of the Act: Class A Units of Limited Partnership Interest

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO þ

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

The aggregate market value of common units of partnership interest held by non-affiliates of the Registrant as of June 30, 2008 (the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $71,762,170, based on the last reported sale price of the common shares of Colonial Properties Trust into which common units are exchangeable.

TABLE OF CONTENTS


PART I
	Item 1. Business.
	Item 1A. Risk Factors
	Item 1B. Unresolved Staff Comments.
	Item 2. Operating Properties.
	Item 3. Legal Proceedings.
	Item 4. Submission of Matters to a Vote of Security Holders.
PART II
	Item 5. Market for Registrant’s Common Equity and Related Shareholder Matters.
	Item 6. Selected Financial Data.
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
	Item 9A. Controls and Procedures.
	Item 9B. Other Information.
PART III
	Item 10. Trustees, Executive Officers and Corporate Governance.
	Item 11. Executive Compensation.
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
	Item 13. Certain Relationships and Related Transactions, and Director Independence.
	Item 14. Principal Accountant Fees and Services.
Part IV
	Item 15. Exhibits and Financial Statement Schedules
SIGNATURES
Colonial Realty Limited Partnership Index to Exhibits
EX-12.1
EX-21.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Documents Incorporated by Reference

Portions of Colonial Properties Trust’s proxy statement for the annual shareholders meeting to be held on April 22, 2009 are incorporated by reference into Part III of this report. Colonial Properties Trust expects to file its proxy statement within 120 days after December 31, 2008.

PART I

This annual report on Form 10-K contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “estimates,” “predicts,” “potential,” or the negative of these terms or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our and our affiliates, or the industry’s actual results, performance, achievements or transactions to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements including, but not limited to, the risks described herein. Such factors include, among others, the following:

	•		the weakening economy and mounting job losses in the U.S., together with the downturn in the overall U.S. housing market resulting in increased supply and all leading to deterioration in the multifamily market;

	•		national and local economic, business and real estate conditions generally, including, but not limited to, the effect on demand for multifamily units, office and retail rental space or the creation of new multifamily and commercial developments, the extent, strength and duration of the current recession or recovery, the availability and creditworthiness of tenants, the level of lease rents, and the availability of financing for both tenants and us;

	•		adverse changes in real estate markets, including, but not limited to, the extent of tenant bankruptcies, financial difficulties and defaults, the extent of future demand for multifamily units and office and retail space in our core markets and barriers of entry into new markets which we may seek to enter in the future, the extent of decreases in rental rates, competition, our ability to identify and consummate attractive acquisitions on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns;

	•		the Trust’s focus as a multifamily real estate investment trust (“REIT”), which increases our exposure to risks inherent in investments in a single industry;

	•		risks associated with having to perform under various financial guarantees that we have provided with respect to certain of our joint ventures and retail developments;

	•		ability to obtain financing on reasonable rates, if at all;

	•		actions, strategies and performance of affiliates that we may not control or companies, including joint ventures, in which we have made investments;

	•		changes in operating costs, including real estate taxes, utilities, and insurance;

	•		higher than expected construction costs;

	•		uncertainties associated with our ability to sell our existing inventory of condominium and for-sale residential assets, including timing, volume and terms of sales;

	•		uncertainties associated with the timing and amount of real estate dispositions and the resulting gains/losses associated with such dispositions;

	•		legislative or other regulatory decisions, including government approvals, actions and initiatives, including the need for compliance with environmental and safety requirements, and changes in laws and regulations or the interpretation thereof;

	•		effects of tax legislative action;

	•		our general partner’s ability to continue to maintain its status as a REIT for federal income tax purposes, our ability to maintain our status as a partnership for federal income tax purposes, the ability of certain of our subsidiaries to maintain their status as taxable REIT subsidiaries for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;

	•		price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on availability of financing;

	•		effect of any rating agency actions on the cost and availability of new debt financing;

	•		level and volatility of interest or capitalization rates or capital market conditions;

	•		effect of any terrorist activity or other heightened geopolitical crisis;

	•		other factors affecting the real estate industry generally; and

	•		other risks identified in this annual report on Form 10-K and, from time to time, in other reports we file with the Securities and Exchange Commission (the “SEC”) or in other documents that we publicly disseminate.

Colonial Realty Limited Partnership undertakes no obligation to publicly update or revise these forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.

Item 1. Business.

As used herein, the terms “CRLP”, “we”, “us” and “our” refer to Colonial Realty Limited Partnership, a Delaware limited partnership, and its subsidiaries and other affiliates, including, Colonial Properties Services Limited Partnership (“CPSLP”), Colonial Properties Services, Inc (“CPSI”), CLNL Acquisition Sub, LLC and Colonial VRS L.L.C. or, as the context may require, Colonial Realty Limited Partnership only. As used herein, the term the “Trust” refers to Colonial Properties Trust, an Alabama real estate investment trust, and one or more of its subsidiaries and other affiliates, including CRLP, CPSLP and Colonial Properties Services, Inc. (“CPSI”), CLNL Acquisition Sub, LLC and Colonial VRS L.L.C. or, as the context may require, Colonial Properties Trust only.

We are the operating partnership of the Trust, our general partner, which is a publically traded, multifamily-focused real estate investment trust (“REIT”) that owns, develops and operates multifamily communities primarily located in the Sunbelt region of the United States. Also, we create additional value for our unitholders by managing commercial assets through joint venture investments and pursuing development opportunities. The Trust is a fully-integrated real estate company, which means that it is engaged in the acquisition, development, ownership, management and leasing of multifamily communities and other commercial real estate properties. The Trust’s assets are owned by, and substantially all of its business is conducted through, us and our subsidiaries and other affiliates. The Trust holds approximately 84.6% of the interests in us.

Our activities include full or partial ownership and operation of 192 properties as of December 31, 2008, located in Alabama, Arizona, Florida, Georgia, North Carolina, South Carolina, Tennessee, Texas, and Virginia, development of new properties, acquisition of existing properties, build-to-suit development and the provision of management, leasing and brokerage services for commercial real estate.

As of December 31, 2008, we owned or maintained a partial ownership in 116 multifamily apartment communities containing a total of 35,504 apartment units (consisting of 103 wholly-owned consolidated properties and 13 properties partially-owned through unconsolidated joint venture entities aggregating 31,258 and 4,246 units, respectively) (the “multifamily apartment communities”), 48 office properties containing a total of approximately 16.2 million square feet of office space (consisting of three wholly-owned consolidated properties and 45 properties partially-owned through unconsolidated joint-venture entities aggregating 0.5 million and 15.7 million square feet, respectively) (the “office properties”), 28 retail properties containing a total of approximately 5.4 million square feet of retail space, excluding anchor-owned square-footage (consisting of six wholly-owned properties and 22 properties partially-owned through unconsolidated joint venture entities aggregating 1.2 million and 4.2 million square feet, respectively) (the “retail properties”), and certain parcels of land adjacent to or near certain of these properties (the “land”). The multifamily apartment communities, the office properties, the retail properties and the land are referred to herein collectively as the “properties”. As of December 31, 2008, consolidated multifamily, office and retail properties that had achieved stabilized occupancy (which we have defined as having occurred once the property has attained 93% physical occupancy) were 94.1%, 89.7% and 91.8% leased, respectively.

As a lessor, the majority of our revenue is derived from residents under existing leases at our properties. Therefore, our operating cash flow is dependent upon the rents that we are able to charge to our residents, and the ability of these residents to make their rental payments. We also receive third-party management fees generated from third party management agreements related to management of properties held in joint ventures.

We were formed in Delaware on August 6, 1993. Our executive offices are located at 2101 Sixth Avenue North, Suite 750, Birmingham, Alabama, 35203 and our telephone number is (205) 250-8700.

Formation of the Trust and CRLP

The Trust and CRLP were formed to succeed to substantially all of the interests of Colonial Properties, Inc., an Alabama corporation, its affiliates and certain other entities in a diversified portfolio of multifamily, office, and retail properties located in Alabama, Florida, and Georgia and to the development, acquisition, management, leasing, and brokerage businesses of Colonial Properties, Inc.

Business Strategy

In June and July 2007, we completed the following transactions to implement our strategic initiative to become a multifamily focused REIT.

	•		In June 2007, we completed the office joint venture transaction with DRA G&I Fund VI Real Estate Investment Trust, an entity advised by DRA Advisors LLC (“DRA”). The Trust sold to DRA its 69.8% interest in the newly formed joint venture (the “DRA/CLP JV”) that became the owner of 24 office properties and two retail properties that were previously wholly-owned by CRLP. Total sales proceeds from the sale of this 69.8% interest were approximately $379.0 million. CRLP retained a 15% minority interest in the DRA/CLP JV (see Notes 2 and 10 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K), as well as management and leasing responsibilities for the 26 properties;

	•		In June 2007, we completed the retail joint venture transaction with OZRE Retail, LLC (“OZRE”). The Trust sold to OZRE its 69.8% interest in the newly formed joint venture (the “OZRE JV”) that became the owner of 11 retail properties that were previously wholly-owned by CRLP. Total sales proceeds from the sale of this 69.8% interest were approximately $115.0 million. CRLP retained a 15% minority interest in the OZRE JV (see Notes 2 and 10 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K), as well as management and leasing responsibilities for the 11 properties; and

	•		In July 2007, we completed the outright sale of an additional 12 retail assets and the sale of our interests in one other retail asset. As a result of the sale of one of these wholly-owned assets, we recorded an impairment charge of approximately $2.5 million during 2007. This charge is included in “Income from discontinued operations” in the Consolidated Statements of Operations and Comprehensive Income (Loss) included in Item 8 of this Form 10-K.

As a result of the joint venture transactions discussed above, the Trust paid a special distribution of $10.75 per share on June 27, 2007. The remaining proceeds from these transactions were used to pay down a portion of our outstanding indebtedness (see Note 12 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K). During June 2007, we incurred approximately $29.2 million in prepayment penalties, which was partially offset by the write-off of approximately $16.7 million of debt intangibles. These amounts are included in “Losses on retirement of debt” in the Consolidated Statements of Operations and Comprehensive Income (Loss) included in Item 8 of this Form 10-K.

The execution of the aforementioned strategic initiative allows the Trust to concentrate its resources primarily on our multifamily business.

The United States economy is believed to have entered a recession sometime during 2008. In addition, the United States stock and credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in some cases have resulted in the unavailability of financing even for companies who are otherwise qualified to obtain financing. In addition, the weakening economy in the U.S., together with the downturn in the overall U.S. housing market, resulting in increased supply, has led to deterioration in the multifamily market. With the turmoil in the credit and capital markets, continuing job losses and our expectation that the economy will to continue to remain weak or weaken further before we see any improvements, improving our balance sheet is one of our priorities for 2009.

In light of the ongoing recession and credit crisis, our priorities are focusing on liquidity, maintaining a strong balance sheet, addressing our near term debt maturities, managing our existing properties and operating our portfolio efficiently and reducing our overhead. To help implement our plans to strengthen the balance sheet and deleverage the company, in January 2009, the Board of Trustees of the Trust decided to accelerate plans to dispose of our for-sale residential assets including condominium conversions and land held for future sale and for-sale residential and mixed-use developments. We significantly reduced our development pipeline during 2008, and in January 2009, we also decided to postpone future development activities (including development projects identified in Item 1 — “Future Development Activity”) until we determine that the current economic environment has sufficiently improved. We expect to invest approximately $30.0 million to $40.0 million to complete projects currently under construction. As a result of these changes to our business strategy, we incurred a non-cash impairment charge of $116.9 million during the fourth quarter of 2008.

In addition, the Board of Trustees of the Trust reduced the quarterly dividend rate to $0.25 per share and per common partnership unit beginning with the dividend declared for the fourth quarter of 2008. In light of recent Internal Revenue procedure changes, the Board of Trustees of the Trust is currently considering paying future distributions to its shareholders, beginning in May 2009, in a combination of common shares and cash. No decisions have been made at this time as to the manner in which distributions will be paid to unitholders in the event Trust shareholders receive distributions in cash and stock, as described above. This dividend and the alternative dividend structure are intended to allow us to retain additional capital, thereby strengthening our balance sheet. However, the Board of Trustees of the Trust reserves the right to pay any future distribution entirely in cash. We will also look for opportunities to repurchase our outstanding unsecured senior notes and the Trust will look for opportunities to repurchase its Series D preferred depositary shares, as discussed below, at appropriate prices and as circumstances warrant. These decisions were taken to streamline the business and allow us to further concentrate on our multifamily focused strategy.

We believe that our business strategy, the availability of borrowings under our credit facilities, limited debt maturities in 2009, the number of unencumbered properties in our multifamily portfolio and the additional financing through Fannie Mae expected to be obtained during the first quarter of 2009 (as discussed below) has us positioned to work through this challenging economic environment. However, the ongoing recession and continued uncertainty in the stock and credit markets may negatively impact our ability to access additional financing for capital needs at reasonable terms, or at all, which may negatively affect our business. A prolonged downturn in the financial markets may cause us to seek alternative sources of financing on less favorable terms, and may require us to further adjust our business plan accordingly. These events may also make it more difficult or costly for us to raise capital through the issuance of the Trust’s common or preferred shares, subordinated notes or through private financings. For additional discussion regarding management’s assessment of the current economic environment, see “Business Strategy and Outlook” in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.

Operating Strategy

Our general partner’s business objective as a multifamily focused REIT is to generate stable and increasing cash flow and portfolio value for its shareholders through a strategy of:

	•		realizing growth in income from our existing portfolio of properties;

	•		selectively acquiring and developing multifamily properties to grow our core portfolio and improve the age and quality of our multifamily apartment communities in growth markets located in the Sunbelt region of the United States;

	•		employing a comprehensive capital maintenance program to maintain properties in first-class condition, including recycling capital by selectively disposing of assets that are approaching or have reached their maximum investment potential and reinvesting the proceeds into opportunities with more perceived growth potential;

	•		managing our own properties, including our assets through joint venture arrangements, which enables us to better control our operating expenses and establish and maintain long-term relationships with our office and retail tenants; maintaining our third-party property management business, which increases cash flow through management fee income stream and establishes additional relationships with investors and tenants; and

	•		executing our plan to dispose of our for-sale residential assets including condominium conversions and land held for future sale and for-sale residential and mixed-use developments.

Financing Strategy

We seek to maintain a well-balanced, conservative and flexible capital structure by:

	•		targeting conservative debt service and fixed charge coverage ratios;

	•		extending and sequencing the maturity dates of our debt;

	•		borrowing primarily at fixed rates; and

	•		pursuing long-term debt financings and refinancings on a secured or unsecured basis subject to market conditions.

We believe that these strategies have enabled, and should continue to enable, us to access the debt and equity capital markets to fund debt refinancings and the acquisition and development of additional properties. As further discussed under “Liquidity and Capital Resources” in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K, our availability under our existing unsecured credit facility, minimal debt maturities in 2009, the number of unencumbered properties in our multifamily portfolio and the additional financing through Fannie Mae expected to be obtained in the first quarter of 2009 will provide sufficient liquidity to execute our business plan. This liquidity, along with our projected asset sales is expected to allow us to execute our plan in the short-term, without the dependency on the

capital markets. However, no assurance can be given that we will retain our investment grade rating. See Item IA — “Risk Factors — Risks Associated with Our Indebtedness and Financing Activities — A Downgrade in Our Credit Ratings Could Adversely Affect Our Performance.”

As discussed further below under “Recent Events”, in the first quarter of 2009, we anticipate completing a $350 million secured credit facility to be originated by PNC ARCS LLC and repurchased by Fannie Mae (NYSE:FNM). This credit facility is expected to mature in 2019 and will have a fixed interest rate of 6.04%. The credit facility will be collateralized by 19 multifamily properties.

In addition to the Fannie Mae facility, we are continuing negotiations with Fannie Mae and Freddie Mac (NYSE: FRE) to provide additional secured financing of up to an additional $150 million with respect to certain of our existing other multifamily properties. Any proceeds from these financing arrangements are expected to be used to pay down outstanding borrowings on our unsecured credit facility, provide additional liquidity that can be used toward completion of our remaining ongoing developments, provide additional funding for our unsecured bond repurchase program and provide liquidity for our debt maturities through 2010. However, no assurance can be given that we will be able to consummate any of these additional financing arrangements.

Certain of our long-term unsecured debt is trading at a discount to the current debt amount. The Board of Trustees of the Trust has approved a $500 million unsecured senior note repurchase program. We repurchased $195.0 million principal amount of our unsecured senior notes during 2008 at a weighted-average discount of 9.1% to par value. We will continue to selectively repurchase our unsecured debt at a discount as funds are available and as current market conditions permit.

We may modify our borrowing policy and may increase or decrease our ratio of debt to gross asset value in the future. To the extent that the Board of Trustees of the Trust determines to seek additional capital, we may raise such capital through additional asset dispositions, equity offerings, secured financings, debt financings or retention of cash flow (subject to provisions in the Internal Revenue Code of 1986, as amended, requiring a distribution by the Trust of a certain percentage of taxable income and taking into account taxes that would be imposed on undistributed taxable income) or a combination of these methods.

Property Management

We are experienced in the management and leasing of multifamily and commercial properties and believe that the management and leasing of our own portfolio has helped maintain consistent income growth and has resulted in reduced operating expenses from the properties.

Operational Structure and Segments

We manage our business activities through, and based on the performance of four operating segments: multifamily, office, retail and for-sale residential. We have centralized administrative functions that are common to each segment, including accounting, information technology and administrative services. We also have expertise appropriate to each specific product type, which is responsible for acquiring, developing, managing and leasing properties within such segment.

As a result of the impairment charge recorded during the third quarter of 2007 and the fourth quarter of 2008 related to our for-sale residential projects, our for-sale residential operating segment met the quantitative threshold to be considered a reportable segment. Prior to 2007, the results of operations and assets of the for-sale residential activities were previously included in other income (expense) and in unallocated corporate assets, respectively, due to the insignificance of these activities in prior periods. See Note11 — “Segment Information” in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for information on our four segments and the reconciliation of total segment revenues to total revenues, total segment net operating income to income from continuing operations and minority interest for the years ended December 31, 2008, 2007 and 2006, and total segment assets to total assets as of December 31, 2008 and 2007. Information regarding our segments contained in such Note 11 — “Segment Information” in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K is incorporated by reference herein.

Additional information with respect to each operating segment is set forth below:

Multifamily Apartment Communities — Multifamily management is responsible for all aspects of multifamily operations, including day-to-day management and leasing of our 116 multifamily apartment communities (103 of which are wholly-owned properties and 13 of which are partially-owned through unconsolidated joint venture entities), as well as providing third-party management services for apartment communities in which we do not have an ownership interest or have a non-controlling ownership interest.

For-Sale Residential — For-sale management is also responsible for all aspects of our for-sale residential development and disposition activities. As of December 31, 2008, we had six for-sale properties, five of which are residential and one of which is a lot development project. The Board of Trustees of the Trust has decided to accelerate our plans to dispose of our for-sale residential assets including condominium conversions and land held for future sale and for-sale residential and mixed-use developments, incurring a non-cash impairment charge of $116.9 million during the fourth quarter of 2008.

Office Properties — Office management is responsible for all aspects of our office property operations, including the management and leasing services for our 48 office properties (three of which are wholly-owned properties and 45 of which are partially-owned through unconsolidated joint venture entities), as well as third-party management services for office properties in which we do not have an ownership interest and for brokerage services in other office property transactions.

Retail Properties — Retail management is responsible for all aspects of our retail property operations, including the management and leasing services for our 28 retail properties (six of which are wholly-owned properties and 22 of which are partially-owned through unconsolidated joint venture entities), as well as third-party management services for retail properties in which we do not have an ownership interest and for brokerage services in other retail property transactions. Additionally, all of our for-sale retail developments are managed by Retail management.

Acquisitions and Developments

The following table summarizes our acquisitions and developments that were completed in 2008. For the purposes of the following table and throughout this Form 10-K, the size of a multifamily property is measured by the number of units and the size of an office property and retail property is measured in square feet.


				Total
		Total Units/		Cost
	Location	Square Feet (1)		(in thousands)
Consolidated Acquisitions:
Multifamily Properties
Colonial Village at Matthews (2)(3)	Charlotte, NC		270	$	18,400

Total Consolidated Acquisitions			270	$	18,400


Completed Developments:

Multifamily Property
Colonial Grand at Traditions (4)	Gulf Shores, AL		324	$	13,938
Colonial Village at Cypress Village (5)(6)	Gulf Shores, AL		96		26,235
Colonial Village at Godley Lake	Savannah, GA		288		26,668
Colonial Grand at Arysley	Charlotte, NC		368		35,803
Colonial Grand at Huntersville	Charlotte, NC		250		26,031
Colonial Grand at Matthews Commons	Charlotte, NC		216		21,262
Enclave (5)(7)	Charlotte, NC		85		25,353
Colonial Grand at Shelby Farms II (8)	Memphis, TN		154		12,758

			1,781		188,048


Office Properties
Colonial Center TownPark 400 (9)	Orlando, FL		176		27,031
Metropolitan Midtown (9)(10)	Charlotte, NC		162		34,569

			338		61,600


Retail Properties
Colonial Promenade Fultondale (11)	Birmingham, AL		159		21,220
Metropolitan Midtown (9)(10)	Charlotte, NC		172		39,501
Colonial Promenade Smyrna (12)	Nashville, TN		148		17,507

			479		78,228


For-Sale Properties
Grander (13)	Gulf Shores, AL		26		11,061
Whitehouse Creek (14)	Mobile, AL		59		2,543
Regents Park (15)	Atlanta, GA		23		35,271
Metropolitan Midtown (9)(10)	Charlotte, NC		101		36,197

			209		85,072

Total Completed Developments				$	412,948


(1)		Square footage is presented in thousands and excludes anchor-owned square footage.

(2)		Prior to our acquisition of the remaining 75% interest in this property in January 2008, we owned a 25% interest in this property through one of our unconsolidated joint ventures.

(3)		Amount represents our portion of the acquisition cost, including mortgage debt assumed.

(4)		Represents 35% of development costs, as we are a 35% equity partner in this unconsolidated development.

(5)		These properties, formerly for-sale residential properties, are now multifamily apartment communities.

(6)		Total costs are presented net of $16.8 million impairment charge recorded during 2007. (7) Total costs are presented net of a $5.4 million impairment charge recorded during 2007. (8) This property was sold during June 2008. (9) These projects are part of mixed-use developments.

(10)		Total costs for Metropolitan Midtown are presented net of economic grant proceeds of approximately $12.3 million (present value). Total costs for the for-sale Metropolitan Midtown development are presented net of a $9.1 million impairment charge recorded during 2008.

(11)		This property was sold during February 2009.

(12)		Represents 50% of the development costs, as we are a 50% equity partner in this unconsolidated development.

(13)		Total costs are presented net of a $6.7 million and $4.3 million impairment charge recorded during 2008 and 2007, respectively.

(14)		Residential lot development.

(15)		Total costs are presented net of a $14.8 million and $1.2 million impairment charge recorded during 2008 and 2007, respectively. We began consolidating this project in our financial statements in 2008. See Note 3 — “Summary of Significant Accounting Policies” under Notes Receivable in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.

Acquisitions

Multifamily Property

Colonial Village at Matthews — On January 16, 2008, we acquired the remaining 75% interest in a 270-unit multifamily apartment community, Colonial Village at Matthews, located in Charlotte, North Carolina. We acquired our initial 25% interest in March 2006. The remaining interest was acquired for $18.4 million, consisting of assumption of $14.7 million of existing mortgage debt ($3.7 million of which was previously unconsolidated by us as a 25% partner) and $7.4 million of cash. The cash portion was funded through proceeds from asset sales. The results of operations have been included in the consolidated financial statements since the date of acquisition of the remaining 75% interest.

Completed Developments

Multifamily Properties

Colonial Grand at Traditions — During the first quarter of 2008, we completed the development of Colonial Grand at Traditions, a joint venture project in which we own a 35% interest. Colonial Grand at Traditions is a 324-unit multifamily apartment community located in Gulf Shores, Alabama. Our portion of the project development costs, including land acquisition costs, was approximately $13.9 million and was funded primarily through a secured construction loan.

Colonial Village at Cypress Village — During the first quarter of 2008, we completed the development of Colonial Village at Cypress Village located in Gulf Shores, Alabama. This development was initially planned as a 96-unit residential townhome community but is now leased as a multifamily apartment community. Project development costs, including land acquisition costs, were approximately $26.7 million, net of a $16.8 million impairment charge recorded in 2007, and were funded through our unsecured credit facility.

Colonial Village at Godley Lake — During the fourth quarter of 2008, we completed the development of Colonial Village at Godley Lake, a 288-unit multifamily apartment community located in Savannah, Georgia. Project development costs, including land acquisition costs, were approximately $26.7 million and were funded through our unsecured credit facility.

Colonial Grand at Arysley — During the third quarter of 2008, we completed the development of Colonial Grand at Arysley, a 368-unit multifamily apartment community located in Charlotte, North Carolina. Project development costs, including land acquisition costs, were approximately $35.8 million and were funded through our unsecured credit facility.

Colonial Grand at Huntersville — During the first quarter of 2008, we completed the development of Colonial Grand at Huntersville, a 250-unit multifamily apartment community located in Charlotte, North Carolina. Project development costs, including land acquisition costs, were approximately $26.0 million and were funded through our unsecured credit facility.

Colonial Village at Matthews Commons — During the fourth quarter of 2008, we completed the development of Colonial Village at Matthews Commons, a 216-unit multifamily apartment community located in Charlotte, North Carolina. Project development costs, including land acquisition costs, were approximately $21.3 million and were funded through our unsecured credit facility.

Enclave — During the second quarter of 2008, we completed the development of Enclave located in Charlotte, North Carolina. This development was initially planned as an 85-unit for-sale residential community but is now leased as a multifamily apartment community. Project development costs, including land acquisition costs, were approximately $25.4 million, net of a $5.4 million impairment charge recorded in 2007, and were funded through our unsecured credit facility.

Colonial Grand at Shelby Farms II — During the first quarter of 2008, we completed the development of Colonial Grand at Shelby Farms II, a 154-unit multifamily apartment community located in Memphis, Tennessee. Project development costs, including land acquisition costs, were approximately $12.8 million and were funded through our unsecured credit facility. This property was sold in June 2008.

Office Properties

Colonial Center TownPark 400 — During the second quarter of 2008, we completed the development of Colonial Center TownPark 400, a 176,000 square foot office property located in Orlando, Florida. Project development costs, including land acquisition costs, were approximately $27.0 million and were funded through our unsecured credit facility.

Metropolitan Midtown — During the fourth quarter of 2008, we completed the development of the office portion of Metropolitan Midtown, a mixed-use development located in Charlotte, North Carolina. The office portion of this development contains 162,000 square feet. Project development costs were approximately $34.6 million and were funded through our unsecured credit facility. Total project cost of $110.3 million for this mixed-use development, including 101 condominium units, 162,000 square feet of office space and 172,000 square feet of retail space, are presented net of $12.3 million of economic grant proceeds.

Retail Properties

Colonial Promenade Fultondale — During the third quarter of 2008, we completed the development of Colonial Promenade Fultondale, a 159,000 square foot development, excluding anchor-owned square-footage (369,000 square feet including anchor-owned square footage), located in Birmingham, Alabama. Project costs, including land acquisition costs, were approximately $21.2 million and were funded through our unsecured credit facility. This property was sold during February 2009.

Colonial Promenade Smyrna — During the second quarter of 2008, we completed the development of Colonial Promenade at Smyrna, a 50% joint venture development. The center is approximately 148,000 square feet, excluding anchor-owned square-footage (416,000 square feet, including anchor-owned square footage), and is located in Smyrna, Tennessee. Our portion of project development costs, including land acquisition costs, was approximately $17.5 million and was funded primarily through a secured construction loan.

Metropolitan Midtown — During the fourth quarter of 2008, we completed the development of the retail portion of Metropolitan Midtown, a mixed-use development located in Charlotte, North Carolina. The retail portion of this development contains 172,000 square feet. Project development costs were approximately $39.5 million and were funded through our unsecured credit facility. Total project cost of $110.3 million for this mixed-use development, including 162,000 square feet of office space, 172,000 square feet of retail space and 101 condominium units, are presented net of $12.3 million of economic grant proceeds.

For-Sale Properties

Grander — During the second quarter of 2008, we completed the development of Grander, a 26-unit residential development located in Gulf Shores, Alabama. Project costs, including land acquisition costs, were approximately $11.1 million, net of a $6.7 million and $4.3 million impairment charge recorded during 2008 and 2007, respectively, and were funded through our unsecured credit facility.

Whitehouse Creek (formerly Spanish Oaks) — During the second quarter of 2008, we completed the development of 59 land parcels at Whitehouse Creek, a residential lot development located in Mobile, Alabama. Project development costs for these 59 parcels, including land acquisition costs, were approximately $2.5 million. This development was initially planned to be a 200-lot residential development. Project costs, including land acquisition costs, of approximately $13.3 million for the remaining undeveloped lots are included in “For-sale Residential” in the “Future Development Activity” table below.

Regents Park — During the second quarter of 2008, we completed the development of Regents Park, a 23-unit townhouse development located in Atlanta, Georgia. Project development costs, including land acquisition costs, were approximately $35.3 million and were funded through our unsecured credit facility. Project costs are presented net of a $14.8 million and a $1.2 million impairment charge recorded during 2008 and 2007, respectively.

Metropolitan Midtown — During the fourth quarter of 2008, we completed the development of Metropolitan, a 101-unit condominium development located in Charlotte, North Carolina. Project development costs, including land acquisition costs, were approximately $36.2 million. Total project cost of $110.3 million for this mixed-use development, including 162,000 square feet of office space, 172,000 square feet of retail space and 101 condominium units, are presented net presented net of $12.3 million of economic grant proceeds and a $9.1 million impairment charge recorded during 2008.

Ongoing Development Activity

The following table summarizes our properties that are under construction, including undeveloped land, at December 31, 2008. As discussed below under “Future Development Activity,” the Board of Trustees of the Trust decided to postpone future development activities (including future development projects identified below) until the Trust determines that the current economic environment has sufficiently improved. Unless otherwise noted, all developments will be funded through our unsecured credit facility (discussed in this Form 10-K below under the heading “Management’s Discussion and Analysis — Liquidity and Capital Resources”):


		Total
		Units/						Costs
		Square				Estimated		Capitalized
		Feet (1)		Estimated		Total Costs		to Date
	Location	(unaudited)		Completion		(in thousands)		(in thousands)
Multifamily Projects:
Colonial Grand at Desert Vista	Las Vegas, NV		380		2009		53,000		42,463
Colonial Grand at Ashton Oaks	Austin, TX		362		2009		35,300		28,316
Colonial Grand at Onion Creek	Austin, TX		300		2009		32,300		32,000

Retail Projects:
Colonial Promenade Tannehill (2)	Birmingham, AL		350		2009		8,900		5,633


Construction in Progress for Active Developments								$	108,412


*Unconsolidated (3) :*
Colonial Pinnacle Turkey Creek III (4)	Knoxville, TN		160		2009		14,900		11,300


Unconsolidated Construction in Progress for Active Developments								$	11,300


(1)		Square footage is presented in thousands and excludes anchor-owned square-footage.

(2)		Total cost and development costs recorded through December 31, 2008 have been reduced by $44.7 million for the portion of the development that was placed into service during 2008. Total cost for this project is expected to be approximately $53.6 million, of which, $6.4 million is expected to be received from the city as reimbursement for infrastructure costs.

(3)		Units and square feet for these unconsolidated projects represent the entire number of units/total square footage for the development.

(4)		Development costs represent 50% of total development costs, as we are a 50% partner in this project.

Multifamily Development Activity

Colonial Grand at Desert Vista — During 2008, we began the development of Colonial Grand at Desert Vista, a 380-unit multifamily apartment community located in Las Vegas, Nevada, in the first quarter of 2008. Project development costs, including land acquisition costs, are expected to be approximately $53.0 million. The development is expected to be completed in the third quarter of 2009.

Colonial Grand at Ashton Oaks — During 2008, we began the development of Colonial Grand at Ashton Oaks, a 362-unit multifamily apartment community located in Austin, Texas, in the first quarter of 2008. Project development costs, including land acquisition costs, are expected to be approximately $35.3 million. The development is expected to be completed in the third quarter of 2009.

Colonial Grand at Onion Creek — During 2008, we continued with the development of Colonial Grand at Onion Creek, a 300-unit multifamily apartment community located in Austin, Texas. Project development costs, including land acquisition costs, are expected to be approximately $32.3 million. The development is expected to be completed in the first quarter of 2009.

All of the new multifamily communities listed above will have numerous amenities, including a cyber café, a fitness center, a resort style swimming pool and a resident business center.

Retail Development Activity

Colonial Promenade Tannehill — During 2008, we continued the development of Colonial Promenade at Tannehill, a 350,000 square foot development, excluding anchor-owned square-footage (474,400 square feet, including anchor-owned square footage), located in Birmingham, Alabama. Project development costs, including land acquisition costs, are expected to total approximately $53.6 million, which was net of $6.4 million of funds to be received from the city as reimbursement for infrastructure costs. During 2008, we placed 200,616 square feet, representing $44.7 million of the total cost, into service. We expect to complete the final phase of the project in the second quarter of 2010.

Colonial Pinnacle Turkey Creek III — During 2008, we continued the development of Colonial Pinnacle at Turkey Creek III, a 50% joint venture development with Turkey Creek Land Partners. The center is expected to total approximately 130,000 square feet, excluding anchor-owned square-footage (160,000 square feet, including anchor-owned square footage), and is located in Knoxville, Tennessee. Our portion of project development costs, including land acquisition costs, is expected to be approximately $14.9 million and will be funded primarily through a construction loan. We expect to complete the project in the second quarter of 2009.

Future Development Activity

As discussed above, in January 2009, the Board of Trustees of the Trust made a strategic decision to accelerate our plan to dispose of our for-sale residential assets and land held for future sale and for-sale residential and mixed-use developments and postpone future development activities (including the future development projects identified below). As discussed below under “Impairment”, we recorded a non-cash impairment charge of $116.9 million in the fourth quarter of 2008. We also incurred $4.4 million of abandoned pursuit costs as a result of the decision to postpone future development activities (including future development projects identified below) and $1.0 million of restructuring charges related to a reduction in our development staff and other overhead personnel. We plan to complete the developments described above but do not intend to start new developments until we determine that the current economic environment has sufficiently improved. The following table lists the consolidated development projects that we had planned to pursue, but that we have suspended indefinitely. While we currently anticipate developing these projects in the future, given the current economic uncertainties, we can give no assurance that we will pursue any of these particular development projects in the future.


				Costs
		Total Units/		Capitalized
		Square Feet (1)		to Date
	Location	(unaudited)		(in thousands)
Multifamily Projects:
Colonial Grand at Sweetwater	Phoenix, AZ		195	$	7,281
Colonial Grand at Thunderbird	Phoenix, AZ		244		8,368
Colonial Grand at Randal Park (2)	Orlando, FL		750		13,604
Colonial Grand at Hampton Preserve	Tampa, FL		486		14,320
Colonial Grand at South End	Charlotte, NC		353		12,046
Colonial Grand at Wakefield	Raleigh, NC		369		7,210
Colonial Grand at Azure	Las Vegas, NV		188		7,728
Colonial Grand at Cityway	Austin, TX		320		4,967

Retail
Colonial Pinnacle Craft Farms II (2)	Gulf Shores, AL		74		2,027
Colonial Promenade Huntsville	Huntsville, AL		111		9,527
Colonial Promenade Nor du Lac (3)	Covington, LA		497		34,029

*Other Projects and Undeveloped Land*
Multifamily					6,714
Office					2,880
Retail					5,502
For-Sale Residential (4)					43,119
Mixed-Use (5)					92,942


Consolidated Construction in Progress				$	272,264


(1)		Square footage is presented in thousands and excludes anchor-owned square-footage.

(2)		These projects are part of mixed-use developments.

(3)		Costs capitalized to date are net of a $19.3 million impairment charge (see discussion under “Impairment” below) and excludes $24.0 million of community development district special assessment bonds.

(4)		Costs capitalized to date are net of a $6.5 million impairment charge recorded during 2008 and a $14.8 million impairment charge recorded during 2007.

(5)		Costs capitalized to date are net of a $29.7 million impairment charge recorded during 2008.

Dispositions

During 2008, we disposed of all or a portion of our interests in 13 multifamily apartment communities, and eight commercial assets, including two office properties and six retail properties, for an aggregate sales price of approximately $202.2 million. These dispositions are summarized below.

Consolidated Dispositions

During 2008, we disposed of six wholly-owned multifamily apartment communities representing an aggregate of 1,746 units and one wholly-owned office property representing approximately 37,000 square feet.

The following table is a summary of our operating property disposition activity in 2008:


		Units/Square				Gain on
Property	Location	Feet		Sales Price (1)		Sales of Property
				(in thousands)		(in thousands)
Multifamily
Colonial Grand at Hunter’s Creek	Orlando, FL		496		57,700		33,530
Colonial Grand at Shelby Farms I&II	Memphis, TN		450		41,000		3,716
Colonial Village at Pear Ridge	Dallas, TX		242		15,500		1,378
Colonial Village at Bear Creek	Fort Worth, TX		120		5,950		747
Colonial Village at Bedford	Fort Worth, TX		238		12,000		1,170
Cottonwood Crossing	Fort Worth, TX		200		7,300		648

Office
250 Commerce Center	Montgomery, AL		37,000		3,050		2,576


Total				$	142,500	$	43,765

Unconsolidated Dispositions

During 2008, we disposed of our interests in seven partially-owned multifamily apartment communities representing an aggregate of 1,751 units, our 15% interest in one partially-owned office property representing approximately 0.2 million square feet and our 10% interest in a retail joint venture containing six retail malls totaling 3.9 million square feet for an aggregate sales price of $59.7 million. We recognized an aggregate gain on these unconsolidated dispositions of $13.3 million during 2008. These gains are presented in “Income from partially-owned unconsolidated entities” on our Consolidated Statements of Operations and Comprehensive Income (Loss).

In addition, throughout 2008, we sold various parcels of land located adjacent to our existing properties for an aggregate sales price of approximately $18.2 million. We recognized an aggregate gain of approximately $3.6 million on the sale of these parcels of land.

The proceeds from the 2008 dispositions were used to repay a portion of the borrowings under our unsecured credit facility, fund development activities and for general corporate purposes.

In some cases, we use disposition proceeds to fund investment activities through tax-deferred exchanges under Section 1031 of the Internal Revenue Code. Certain of the proceeds described above were received into temporary cash accounts pending the fulfillment of Section 1031 exchange requirements. Subsequently, a portion of the funds were utilized to fund investment activities. We incurred an income tax indemnity payment in the fourth quarter of 2008 of approximately $1.3 million with respect to the decision not to reinvest sales proceeds from a previously tax deferred property exchange that was originally expect to occur in the fourth quarter of 2008. The payment was a requirement under a contribution agreement between us and our existing unitholders.

For-Sale Projects

During 2008, through CPSI, we sold three condominium units at our condominium conversion properties, one residential lot and 76 condominium units at our for-sale residential development properties. During 2008, “Gains from sales of property” on the Consolidated Statements of Operations and Comprehensive Income (Loss) included $1.7 million ($1.1 million net of income taxes) from these condominium conversion and for-sale residential sales. A summary of the revenues and costs from these sales of for-sale projects are set forth in the table below.


	Year Ended
	December 31,
(amounts in thousands)	2008
Condominium conversion revenues	$	448
Condominium conversion costs		(401	)

Gains on condominium conversion sales, before minority interest and income taxes		47


For-sale residential revenues		17,851
For-sale residential costs		(16,226	)

Gains on for-sale residential sales, before minority interest and income taxes		1,625


Minority interest		—
Provision for income taxes		(552	)

Gains on condominium conversion and for-sale residential sales, net of minority interest and income taxes	$	1,120

The net gains on condominium conversion sales are classified in discontinued operations if we previously operated the related condominium property as an apartment community. For 2008, gains on condominium sales, net of income taxes, of $0.1 million are included in discontinued operations. Condominium conversion properties are reflected in the accompanying Consolidated Balance Sheet as part of real estate assets held for sale, and totaled $0.8 million as of December 31, 2008. Completed for-sale residential projects of approximately $64.7 million are reflected in real estate assets held for sale as of December 31, 2008.

For cash flow statement purposes, we classify capital expenditures for newly developed for-sale residential communities and for other condominium conversion communities in investing activities. Likewise, the proceeds from the sales of condominium conversion units and for-sale residential sales are also included in investing activities.

Impairment

The ongoing recession and significant deterioration in the stock and credit markets continue to adversely affect the condominium and single family housing markets. During 2008, the for-sale real estate markets continued to remain unstable due to the limited availability of lending and other types of mortgages, the tightening of the credit standards and an oversupply of such assets, resulting in reduced sales velocity and reduced pricing in the real estate market. As discussed above, in light of the ongoing recession and credit crisis, we have renewed our focus on liquidity, maintaining a strong balance sheet, addressing our near term debt maturities, managing our existing properties and operating our portfolio efficiently and reducing our overhead. To help implement our plans to strengthen the balance sheet and deleverage the company, in January 2009, the Board of Trustees of the Trust decided to accelerate our plan to dispose of our for-sale residential assets including condominium conversions and land held for future sale and for-sale residential and mixed use developments and to postpone future development activities (including previously identified future development projects) until we determine that the current economic environment has sufficiently improved.

Accordingly, during the fourth quarter 2008, we recorded an impairment charge of $116.9 million ($114.9 million in continuing operations, $2.0 million in discontinued operations). Of this total, $37.9 million is attributable to certain of our completed for-sale residential properties and condominium conversions, $23.5 million relates to properties originally planned as condominiums but were subsequently placed into the multifamily rental pool, $36.2 million is attributable to land held for future mixed-use and for-sale residential developments, and $19.3 million is attributable to a retail development. The

impairment charge was calculated as the difference between the estimated fair value of each property and our current book value plus the estimated costs to complete. We also incurred $4.4 million of abandoned pursuit costs as a result of our decision to postpone future development activities (including previously identified future development projects) and $1.0 million of restructuring charges related to a reduction in our development staff and other overhead personnel.

With respect to our retail development, Colonial Promenade Nord du Lac, we are reviewing various alternatives for this development, and have reclassified the amount spent to date from an active development to a future development. The estimated fair value of this asset was calculated based upon the company’s intent to sell this property upon stabilization, current assumptions regarding rental rates, costs to complete, lease-up, holding period and the estimated sales price.

We calculate the fair values of each property and development project evaluated for impairment under SFAS No. 144 based on current market conditions and assumptions made by management, which may differ materially from actual results if market conditions continue to deteriorate or improve. Specific facts and circumstances of each project are evaluated, including local market conditions, traffic, sales velocity, relative pricing, and cost structure. We will continue to monitor the specific facts and circumstances at our for-sale properties and development projects. If market conditions do not improve or if there is further market deterioration, it may impact the number of projects we can sell, the timing of the sales and/or the prices at which we can sell them in future periods. If we are unable to sell projects, we may incur additional impairment charges on projects previously impaired as well as on projects not currently impaired but for which indicators of impairment may exist, which would decrease the value of our assets as reflected on our balance sheet and adversely affect net income and partners’ and partners’ equity. There can be no assurances of the amount or pace of future for-sale residential sales and closings, particularly given current market conditions.

See Item IA — “Risk Factors — Risks Associated with Our Operations — Our ability to dispose of our existing inventory of condominium and for-sale residential assets could adversely affect our results of operations.”

Recent Events

Management Changes

Effective December 30, 2008, Thomas H. Lowder, Chairman of the Board of Trustees of the Trust, was appointed to the position of Chief Executive Officer of the Trust and C. Reynolds Thompson, III, formerly the Trust’s Chief Executive Officer, was appointed to the positions of President and Chief Financial Officer of the Trust. Mr. Lowder served as the Trust’s Chief Executive Officer from July 1993 until April 2006 and has been the Chairman of the Board of Trustees of the Trust since its formation in July 1993. Mr. Thompson had served as the Chief Executive Officer of the Trust since April 2006 and served as the Chief Operating Officer of the Trust from September 1999 to April 2006.

Property Disposition

On February 2, 2009, we disposed of Colonial Promenade at Fultondale, a 159,000 square-foot (excluding anchor-owned square-feet) retail asset, located in Birmingham, Alabama. We sold this asset for approximately $30.7 million, which included $16.9 million of seller-financing for a term of five years at an interest rate of 5.6%. The net proceeds were used to reduce the amount outstanding on our unsecured credit facility.

Financing Activity

In the first quarter of 2009, we anticipate completing a $350 million secured credit facility to be originated by PNC ARCS LLC and repurchased by Fannie Mae (NYSE:FNM). This credit facility is expected to mature in 2019 and will have a fixed interest rate of 6.04%. The credit facility will be collateralized by 19 multifamily properties. The proceeds are expected to be used to pay down outstanding borrowings on our unsecured line of credit, provide additional liquidity that can be used toward completion of our remaining ongoing developments and provide additional funding for our unsecured bond repurchase program.

In addition to the Fannie Mae facility, we are continuing negotiations with Fannie Mae and Freddie Mac to provide additional secured financing of up to an additional $150 million. However, no assurance can be given that we will be able to consummate these additional financing arrangements. Any proceeds received from these financing transactions would be used to provide additional liquidity for our unsecured bond repurchase program and to provide liquidity for our debt maturities through 2010.

During February 2009, we repurchased $71.3 million of our outstanding unsecured senior notes in separate transactions under our previously announced $500 million unsecured senior note repurchase program at an average 28.7% discount to par value, which represents an 12.7% yield to maturity. As a result of the repurchases, we recognized an aggregate gain of approximately $19.7 million.

Restructuring Charges

During the first quarter of 2009, in an ongoing effort to focus on maintaining efficient operations of the current portfolio, we reduced our workforce by an additional 32 employees through the elimination of certain positions resulting in an aggregate of approximately $0.6 million in termination benefits and severance related charges. We anticipate costs savings related to this reduction in force to be approximately $2.5 million in 2009.

Distribution

During January 2009, the Board of Trustees of the Trust declared a cash distribution to its shareholders and our partners in the amount of $0.25 per share and per partnership unit, totaling approximately $14.3 million. The distribution was made to shareholders and partners of record as of February 9, 2009 and was paid on February 17, 2009. Moreover, in light of recent Internal Revenue procedure changes, the Board of Trustees of the Trust is currently considering paying future distributions to its shareholders, beginning in May 2009, in a combination of common shares and cash. No decisions have been made at this time as to the manner in which distributions will be paid to unitholders in the event Trust shareholders receive distributions in cash and stock, as described above. This dividend and the alternative dividend structure are intended to allow us to retain additional capital, thereby strengthening our balance sheet. However, the Board of Trustees of the Trust reserves the right to pay any future distribution entirely in cash.

Competition

The ownership, development, operation and leasing of multifamily, office and retail properties are highly competitive. We compete with domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships and individual investors for the acquisition of properties. See Item 1A — “Risk Factors — Risks Associated with Our Operations — Competition for acquisitions could reduce the number of acquisition opportunities available to us and result in increased prices for properties, which could adversely affect our return on properties we purchase” in this Form 10-K for further discussion. In addition, we compete for tenants in our markets primarily on the basis of property location, rent charged, services provided and the design and condition of improvements. With respect to our multifamily business, we also compete with other quality apartment and for-sale (condominium) projects owned by public and private companies. The number of competitive multifamily properties in a particular market could adversely affect our ability to lease our multifamily properties and develop and lease or sell new properties, as well as the rents we are able to charge. In addition, other forms of residential properties, including single family housing and town homes, provide housing alternatives to potential residents of quality apartment communities or potential purchasers of for-sale (condominium) units. With respect to the multifamily business we compete for residents in our apartment communities based on our high level of resident service, the quality of our apartment communities (including our landscaping and amenity offerings) and the desirability of our locations. Resident leases at our apartment communities are priced competitively based on market conditions, supply and demand characteristics, and the quality and resident service offerings of its communities. We do not seek to compete on the basis of providing a low-cost solution for all residents.

Environmental Matters

We believe that our properties are in material compliance in all material respects with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. We are not aware of any environmental condition that we believe would have a material adverse effect on our capital expenditures, earnings or competitive position (before consideration of any potential insurance coverage). Nevertheless, it is possible that there are material environmental conditions and liabilities of which we are unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations or future interpretations of existing requirements will not impose any material environmental liability or (ii) the current environmental condition of our properties has not been or will not be affected by tenants and occupants of our properties, by the condition of properties in the vicinity of our properties or by third parties unrelated to us. See “Risk Factors—Risks Associated with Our Operations—We could incur significant costs related to environmental issues which could adversely affect our results of operations through increased compliance costs or our financial condition if we become subject to a significant liability” in this Form 10-K for further discussion.

Insurance

We carry comprehensive liability, fire, extended coverage and rental loss insurance on all of our majority-owned properties. We believe the policy specifications, insured limits of these policies and self insurance reserves are adequate and appropriate. There are, however, certain types of losses, such as lease and other contract claims, which generally are not insured. We anticipate that we will review our insurance coverage and policies from time to time to determine the appropriate levels of coverage, but we cannot predict at this time if we will be able to obtain or maintain full coverage at reasonable costs in the future. In addition, as of December 31, 2008, we are self insured up to $0.8 million, $1.0 million and $1.8 million for general liability, workers’ compensation and property insurance, respectively. We are also self insured for health insurance and responsible for claims up to $125,000 per claim and up to $1.0 million per person. Our policy for all self insured risk is to accrue for expected losses on reported claims and for estimated losses related to claims incurred but not reported as of the end of the reporting period. See “Risk Factors — Risks Associated with Our Operations — Uninsured or underinsured losses could adversely affect our financial condition.”

Employees

As of December 31, 2008, CRLP employed 1,166 persons, including on-site property employees who provide services for the properties that we own and/or manage.

Tax Status

We are a partnership for federal income tax purposes. As a partnership, all of our taxable income or loss or tax credits are passed through to our partners; therefore, our provision for income taxes is limited to the taxes payable by our taxable REIT subsidiaries. The Trust has made an election to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with its taxable year ending December 31, 1993. If the Trust qualifies for taxation as a REIT, the Trust generally will not be subject to federal income tax to the extent it distributes at least 90% of its REIT taxable income to its shareholders. Even if the Trust qualifies for taxation as a REIT, the Trust may be subject to certain state and local taxes on its income and property and to federal income and excise taxes on its undistributed income.

Our consolidated financial statements include the operations of our taxable REIT subsidiary, CPSI, which is not entitled to a dividends paid deduction and is subject to federal, state and local income taxes. CPSI provides property management, construction management and development services for third-party owned properties and administrative services to us. In addition, we perform all of our for-sale residential and condominium conversion activities through CPSI. We generally reimburse CPSI for payroll and other costs incurred in providing services to us. All inter-company transactions are eliminated in the accompanying consolidated financial statements. We recognized an income tax expense (benefit) of $0.8 million, ($7.4) million and $12.2 million in 2008, 2007 and 2006, respectively, related to the taxable income of CPSI.

Available Information

Our general partner’s website address is www.colonialprop.com. The information contained on the Trust’s website is not incorporated by reference into this report and such information should not be considered a part of this report. You can obtain on the Trust’s website in the “Investor Relations” section, free of charge, a copy of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Also available on the website, free of charge, are the Trust’s corporate governance guidelines, the charters of the Trust’s governance, audit and executive compensation committees and the Trust’s code of ethics (which applies to all of the Trustees of the Trust and all employees, including the Trust’s principal executive officer, principal financial officer and principal accounting officer). If you are not able to access the Trust’s website, the information is available in print form to any partner who should request the information directly from us at 1-800-645-3917.

Executive Officers of the Company

We are managed by the Trust, our general partner. The following is a biographical summary of the executive officers of the Trust:

Thomas H. Lowder, 59, was re-appointed Chief Executive Officer of the Trust effective December 30, 2008. Mr. Lowder has served as Chairman of the Board of Trustees of the Trust since the Trust’s formation in July 1993. Additionally he served as President and Chief Executive Officer of the Trust from July 1993 until April 2006. Mr. Lowder became President and Chief Executive Officer of Colonial Properties, Inc., the Trust’s predecessor, in 1976, and has been actively engaged in the acquisition, development, management, leasing and sale of multifamily, office and retail properties for the Trust and its predecessors. He presently serves as a member of the Board of the following organizations: Birmingham-Southern College, Crippled Children’s Foundation, Children’s Hospital of Alabama and United Way of Central Alabama. Mr. Lowder is a past board member of the National Association of Real Estate Investment Trusts (“NAREIT”), past board member of The Community Foundation of Greater Birmingham, past chairman of the Birmingham Area Chapter of the American Red Cross, past chairman of Children’s Hospital of Alabama and he served as chairman of the 2001 United Way Campaign for Central Alabama and Chairman of the Board in 2007. He graduated with honors from Auburn University with a Bachelor of Science Degree. Mr. Lowder holds an honorary Doctorate of Humanities from University of Alabama at Birmingham and a honorary Doctorate of Law from Birmingham Southern College. Mr. Lowder is the brother of James K. Lowder, a trustee of the Trust.

C. Reynolds Thompson, III, 45, has served as a trustee of the Trust since 2007 and was appointed President and Chief Financial Officer of the Trust effective December 30, 2008. Mr. Thompson previously served as the Trust’s Chief Executive Officer since April 2006 and in the following additional positions within the Trust since being hired in February 1997: Chief Operating Officer, Chief Investment Officer, Executive Vice President, Office Division, and Senior Vice President, Office Acquisitions. Responsibilities within these positions included overseeing management, leasing, acquisitions, and development within operating divisions; investment strategies; market research; due diligence; merger and acquisitions; joint venture development and cross-divisional acquisitions. Prior to joining the Trust, Mr. Thompson worked for CarrAmerica Realty Corporation, a then-publicly traded office REIT, in office building acquisitions and due diligence. Mr. Thompson is currently a member of the NAREIT Board of Governors, the Executive Committee of the Metropolitan Development Board, and the International Council of Shopping Centers. In addition, Mr. Thompson serves on the Board of Visitors for the University of Alabama Culverhouse College of Commerce and Business Administration and the Board of Directors of United Way of Central Alabama. Mr. Thompson holds a Bachelor of Science Degree from Washington and Lee University.

Paul F. Earle, 51, has been the Trust’s Chief Operating Officer since January 2008, and is responsible for all operations of the properties owned and/or managed by the Trust. From May 1997 to January 2008, Mr. Earle served as Executive Vice President-Multifamily Division and was responsible for management of all multifamily properties owned and/or managed by the Trust. He joined the Trust in 1991 and has previously served as Vice President — Acquisitions, as well as Senior Vice President — Multifamily Division. Mr. Earle is past Chairman of the Alabama Multifamily Council and is an active member of the National Apartment Association. He also is a board member and is on the Executive Committee of the National Multifamily Housing Council. He is past President and current Board member of Big Brothers/Big Sisters. Before joining the Trust, Mr. Earle was the President and Chief Operating Officer of American Residential Management, Inc., Executive Vice President of Great Atlantic Management, Inc. and Senior Vice President of Balcor Property Management, Inc.

Ray Hutchinson, 39, has been the Trust’s Executive Vice President, Multifamily since January 2008, and is responsible for the operations of all multifamily properties owned/or managed by the Trust. Mr. Hutchinson previously served as Senior Vice President, Multifamily since joining the Trust in 2004, in which he was responsible for overseeing the operations of all the Company’s multifamily properties throughout the Southeast. With over 18 years of experience in the multifamily industry, Mr. Hutchinson came to the Trust from Summit Properties, (now known as Camden Property Trust), where he held the title of Vice President from 1991 until joining the Trust in 2004. He previously served as Chairman of the Residential Housing Management Advisory Board at Florida State University and is currently on the Board of Directors of the National Multi-Housing Council, Big Brothers/Big Sisters of Birmingham, Alabama Apartment Association and President-Elect of the Greater Birmingham Apartment Association. Mr. Hutchinson is a graduate of the University of Central Florida and holds a Bachelor of Science in Business Administration — Human Resources.

John P. Rigrish, 60, has been the Trust’s Chief Administrative Officer since August 1998, and is responsible for the supervision of Corporate Governance, Information Technology, Human Resources and Employee Services. Prior to joining the Trust, Mr. Rigrish worked for BellSouth Corporation in Corporate Administration and Services. Mr. Rigrish holds a Bachelor’s degree from Samford University and did his postgraduate study at Birmingham-Southern College. He previously served on the Edward Lee Norton Board of Advisors for Management and Professional Education at Birmingham-Southern College and the

Board of Directors of Senior Citizens, Inc. in Nashville, Tennessee. Mr. Rigrish currently serves as the Chairman of the Board of the American Red Cross Board of Directors-Alabama Chapter, City of Hoover Veteran’s Committee and John Carroll Educational Foundation Board of Directors.

Jerry A. Brewer, 37, has been the Trust’s Executive Vice President, Finance since January 2008, and is responsible for all Corporate Finance and Investor Relations activities of the Trust. Mr. Brewer previously served as the Trust’s Senior Vice President — Corporate Treasury since September 2004. Mr. Brewer joined the Trust in February 1999 and served as Vice President of Financial Reporting for the Trust until September 2004 and was responsible for overseeing all filings with the Securities and Exchange Commission, and internal and external consolidated financial reporting. Prior to joining the Trust, Mr. Brewer worked for Arthur Andersen LLP, serving on independent audits of public and private entity financial statements, mergers and acquisitions due diligence, business risk assessment and registration statement work for public debt and stock offerings. Mr. Brewer is a member of the American Institute of Certified Public Accountants and the Alabama State Board of Public Accountancy. He is a Certified Public Accountant, and holds a Bachelor of Science degree in Accounting from Auburn University and a Masters of Business Administration from the University of Alabama at Birmingham.

Bradley P. Sandidge, 39, was appointed Executive Vice President, Accounting of the Trust effective January 30, 2009, and is responsible for all accounting operations of the Trust to include Internal Control functions, compliance with generally accepted accounting principles, SEC financial reporting, regulatory agency compliance and reporting and management reporting. Mr. Sandidge previously served as the Trust’s Senior Vice President, Multifamily Accounting and Finance, since joining the Trust in 2004, and was responsible for overseeing the accounting operations of the Trust’s multifamily operations. Mr. Sandidge is a Certified Public Accountant with over 14 years of real estate experience. Prior to joining the Trust, Mr. Sandidge served as Tax Manager for the North American and Asian portfolios of Archon Group, L.P. / Goldman Sachs from January 2001 through June 2004, and worked in the tax real estate practice of Deloitte & Touche LLP from January 1994 through October 1999. Mr. Sandidge holds a Bachelor’s degree in accounting and a Master’s degree in tax accounting from the University of Alabama.

Item 1A. Risk Factors

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, set forth below are cautionary statements identifying important factors that could cause actual events or results to differ materially from any forward-looking statements made by or on behalf of us, whether oral or written. We wish to ensure that any forward-looking statements are accompanied by meaningful cautionary statements in order to maximize to the fullest extent possible the protections of the safe harbor established in the Private Securities Litigation Reform Act of 1995. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause actual events or results to differ materially from our forward-looking statements. If any of the following risks actually occur, our business, financial condition or results of operations could be negatively affected, and the value of units could decline.

These forward-looking statements are based on management’s present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. There may be additional risks and uncertainties not presently known to us or that we currently deem immaterial that also may impair our business operations. You should not consider this list to be a complete statement of all potential risks or uncertainties.

We have separated the risks into the following categories:

•		Risks associated with real estate;

•		Risks associated with our operations;

•		Risks associated with our indebtedness and financing activities;

•		Risks associated with our organization and structure; and

•		Risks associated with income tax laws.

Risks Associated with Real Estate

Recession in the United States and the related downturn in the housing and real estate markets have adversely affected and may continue to adversely affect our financial condition and results of operations.

The United States economy is believed to have entered a recession sometime during 2008. The trends in both the real estate industry and the broader United States economy continue to be unfavorable and continue to adversely affect our revenues. The ongoing recession and related reduction in spending, falling home prices and mounting job losses, together with the price volatility, dislocations and liquidity disruptions in the financial and credit markets could, among other things, impede the ability of our residents at our multifamily properties and our tenants at our commercial properties and other parties with which we conduct business to perform their contractual obligations, which could lead to an increase in defaults by our residents, tenants and other contracting parties, which could adversely affect our revenues. Furthermore, our ability to lease our properties at favorable rates, or at all, is adversely affected by the increase in supply and deterioration in the multifamily market stemming from ongoing recession and is dependent upon the overall level of spending in the economy, which is adversely affected by, among other things, job losses and unemployment levels, recession, personal debt levels, the downturn in the housing market, stock market volatility and uncertainty about the future. With regard to our ability to lease our multifamily properties, the increasing rental of excess for-sale condominiums, which increases the supply of multifamily units and housing alternatives, may further reduce our ability to lease our multifamily units and further depress rental rates in certain markets. With regard to for-sale residential properties, the market for our for-sale residential properties depends on an active demand for new for-sale housing and high consumer confidence. Continuing decline in demand, exacerbated by tighter credit standards for home buyers and foreclosures, has further contributed to an oversupply of housing alternatives adversely affecting the timing of sales and price at which we are able to sell our for-sale residential properties and thereby adversely affecting our profits from for-sale residential properties. We cannot predict how long demand and other factors in the real estate market will remain unfavorable, but if the markets remain weak or deteriorate further, our ability to lease our properties, our ability to increase or maintain rental rates in certain markets and the pace of condominium sales and closings and/or the related sales prices may continue to weaken during 2009.

We face numerous risks associated with the real estate industry that could adversely affect our results of operations through decreased revenues or increased costs.

As a real estate company, we are subject to various changes in real estate conditions, particularly in the Sunbelt region where our properties are concentrated, and any negative trends in such real estate conditions may adversely affect our results of operations through decreased revenues or increased costs. These conditions include:

	•		worsening of national and regional economic conditions, such as those we are currently experiencing as a result of the ongoing recession as described above, as well as the deteriorating local economic conditions in our principal market areas;

	•		availability of financing;

	•		the inability of tenants to pay rent;

	•		the existence and quality of the competition, such as the attractiveness of our property as compared to our competitors’ properties based on considerations such as convenience of location, rental rates, amenities and safety record;

	•		increased operating costs, including increased real property taxes, maintenance, insurance and utilities costs;

	•		weather conditions that may increase or decrease energy costs and other weather-related expenses;

	•		oversupply of multifamily, office, retail space, or single-family housing or a reduction in demand for real estate in the markets in which our properties are located;

	•		a favorable interest rate environment that may result in a significant number of potential tenants of our multifamily properties deciding to purchase homes instead of renting;

	•		rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs; and

	•		changing trends in the demand by consumers for merchandise offered by retailers conducting business at our retail properties.

Moreover, other factors may affect our results of operations adversely, including changes in government regulations and other laws, rules and regulations governing real estate, zoning or taxes, changes in interest rate levels, the availability of financing and potential liability under environmental and other laws and other unforeseen events, most of which are discussed elsewhere in the following risk factors. Any or all of these factors could materially adversely affect our results of operations through decreased revenues or increased costs.

Increased competition and increased affordability of residential homes could limit our ability to retain our residents, lease apartment homes or increase or maintain rents.

Our multifamily communities compete with numerous housing alternatives in attracting residents, including other multifamily and apartment communities and single-family rental homes, as well as owner occupied single- and multi-family homes. Competitive housing in a particular area and an increase in the affordability of owner occupied single and multi-family homes due to, among other things, declining housing prices, mortgage interest rates and tax incentives and government programs to promote home ownership, could adversely affect our ability to retain residents, lease apartment homes and increase or maintain rents.

We are subject to significant regulation, which could adversely affect our results of operations through increased costs and/or an inability to pursue business opportunities.

Local zoning and use laws, environmental statutes and other governmental requirements may restrict our development, expansion, rehabilitation and reconstruction activities. These regulations may prevent or delay us from taking advantage of economic opportunities. Failure to comply with these requirements could result in the imposition of fines, awards to private litigants of damages against us, substantial litigation costs and substantial costs of remediation or compliance. In addition, we cannot predict what requirements may be enacted in the future or that such a requirement will not increase our costs of regulatory compliance or prohibit us from pursuing business opportunities that could be profitable to us.

Real estate investments are illiquid, and therefore we may not be able to sell our properties in response to economic changes which could adversely affect our results of operations or financial condition.

Real estate investments are relatively illiquid generally, and may become even more illiquid during periods of economic downturn. As a result, we may not be able to sell a property or properties quickly or on favorable terms in response to changes in the economy or other conditions when it otherwise may be prudent to do so. This inability to respond quickly to changes in the performance of our properties could adversely affect our results of operations if we cannot sell an unprofitable property. In the case of our for-sale residential properties and condominiums, our inability to sell units in a timely manner could adversely affect our financial condition, among other things, by causing us to hold properties for a longer period than is otherwise desirable and requiring us to record impairment charges in connection with the properties (see Note 5 to our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K). Our financial condition could also be adversely affected if we were, for example, unable to sell one or more of our properties in order to meet our debt obligations upon maturity. In addition, the tax laws applicable to the Trust as a REIT requires that it hold its properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of properties that otherwise would be in our best interest. Therefore, we may be unable to vary our portfolio promptly in response to market conditions, which may adversely affect our financial position.

Compliance or failure to comply with the Americans with Disabilities Act and Fair Housing Act could result in substantial costs.

Under the Americans with Disabilities Act of 1990, or ADA, and the Fair Housing Amendment Act of 1988, or FHAA, and various state and local laws, all public accommodations and commercial facilities, including office buildings, must meet certain federal requirements related to access and use by disabled persons. Compliance with these requirements could involve removal of structural barriers from certain disabled persons’ entrances. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such means of access. Noncompliance with the ADA, FHAA or related laws or regulations could result in the imposition of fines by government authorities, awards to private litigants of damages against us, substantial litigation costs and the incurrence of additional costs associated with bringing the properties into compliance.

Risks Associated with Our Operations

Our revenues are significantly influenced by demand for multifamily properties generally, and a decrease in such demand will likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.

During 2007, we changed the asset mix of our portfolio to focus predominately on multifamily properties. As a result of this change in strategy, we are subject to a greater extent to risks inherent in investments in a single industry. A decrease in the demand for multifamily properties would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio. Resident demand at multifamily properties has been and could continue to be adversely affected by the ongoing recession and the related reduction in spending, falling home prices and mounting job losses, together with the price volatility, dislocations and liquidity disruptions the in financial and credit markets, as well as the rate of household formation or population growth in our markets, changes in interest rates or changes in supply of, or demand for, similar or competing multifamily properties in an area. To the extent that any of these conditions occur and continue to occur, they are likely to affect occupancy and market rents at multifamily properties, which could cause a decrease in our rental revenue. Any such decrease could impair our ability to satisfy our substantial debt service obligations or make distributions to our unitholders.

Our ability to dispose of our existing inventory of condominium and for-sale residential assets could adversely affect our results of operations.

To help implement our plans to strengthen the balance sheet and deleverage the company, in January 2009, the Board of Trustees of the Trust decided to accelerate plans to dispose of our for-sale residential assets including condominium conversions and land held for future for-sale residential and mixed-use developments until we determine that the current economic environment has sufficiently improved. Exiting these markets may expose us to the following risks:

	•		local real estate market conditions, such as oversupply or reduction in demand, may result in reduced or fluctuating sales;

	•		for-sale properties under development or acquired for development usually generate little or no cash flow until completion of development and sale of a significant number of homes or condominium units and may experience operating deficits after the date of completion and until such homes or condominium units are sold;

	•		we may abandon development or conversion opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring any such opportunities;

	•		we may be unable to close on sales of individual units under contract;

	•		buyers may be unable to qualify for financing;

	•		sales prices may be lower than anticipated;

	•		competition from other condominiums and other types of residential housing may result in reduced or fluctuating sales;

	•		we could be subject to liability claims from condominium associations or others asserting that construction performed was defective, resulting in litigation and/or settlement discussions; and

	•		we may be unable to attract sales prices with respect to our for-sale assets that compensate us for our costs.

After reevaluating our operating strategy in light of the ongoing recession and credit crisis, we recorded a non cash impairment charge of $116.9 million in the fourth quarter of 2008 largely attributable to our condominium and for-sale residential assets. See Item 1, “Impairment,” of this Annual Report on Form 10-K for additional information regarding this impairment charge. If market conditions do not improve or if there is further market deterioration, it may impact the number of projects we can sell, the timing of the sales and/or the prices at which we can sell them. If we are unable to sell projects, we may incur additional impairment charges on projects previously impaired as well as on projects not currently impaired but for

which indicators of impairment may exist, which would decrease the value of our assets as reflected on our balance sheet and adversely affect our partners’ equity. There can be no assurances of the amount or pace of future for-sale residential sales and closings, particularly given current market conditions.

Our properties may not generate sufficient rental income to pay our expenses if we are unable to lease our new properties or renew leases or re-lease space at our existing properties as leases expire, which may adversely affect our operating results.

We derive the majority of our income from residents and tenants who lease space from us at our properties. A number of factors may adversely affect our ability to attract tenants at favorable rental rates and generate sufficient income, including:

	•		local conditions such as an oversupply of, or reduction in demand for, multifamily, office or retail properties;

	•		the attractiveness of our properties to residents, shoppers and tenants;

	•		decreases in market rental rates; and

	•		our ability to collect rent from our residents and tenants.

If we cannot generate sufficient income to pay our expenses, maintain our properties and service our debt as a result of any of these factors, our operating results may be adversely affected. Furthermore, the ongoing recession and related reduction in spending, falling home prices and mounting job losses, together with the price volatility, dislocations and liquidity disruptions in the financial and credit markets could, among other things, impede the ability of our residents or tenants to perform their contractual obligations, which could lead to an increase in defaults by residents and tenants.

The residents at our multifamily properties generally enter into leases with an initial term ranging from six months to one year. Tenants at our office properties generally enter into leases with an initial term ranging from three to ten years and tenants at our retail properties generally enter into leases with an initial term ranging from one to ten years. As leases expire at our existing properties, residents and tenants may elect not to renew them. Even if our residents and tenants do renew or if we can release the space, the terms of renewal or re-leasing, including the cost of required renovations may be less favorable than current lease terms. In addition, for new properties, we may be unable to attract enough residents and tenants and the occupancy rates and rents may not be sufficient to make the property profitable. If we are unable to renew the leases or re-lease the space at our existing properties promptly and/or lease the space at our new properties, or if the rental rates upon renewal or re-leasing at existing properties are significantly lower than expected rates, or if there is an increase in tenant defaults, our operating results will be negatively affected.

We may not be able to control our operating costs or our expenses may remain constant or increase, even if our revenues decrease, causing our results of operations to be adversely affected.

Factors that may adversely affect our ability to control operating costs include:

	•		the need to pay for insurance and other operating costs, including real estate taxes, which could increase over time;

	•		the need periodically to repair, renovate and re-lease space;

	•		the cost of compliance with governmental regulation, including zoning and tax laws;

	•		the potential for liability under applicable laws;

	•		interest rate levels; and

	•		the availability of financing.

If our operating costs increase as a result of any of the foregoing factors, our results of operations may be adversely affected.

The expense of owning and operating a property is not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from the property. As a result, if revenues drop, we may not be able to reduce our expenses accordingly. Costs associated with real estate investments, such as real estate taxes, loan payments and maintenance generally will not be reduced even if a property is not fully occupied or other circumstances cause our revenues to decrease. If a property is mortgaged and we are unable to meet the mortgage payments, the lender could foreclose on the mortgage and take the property, resulting in a further reduction in net income.

We are subject to increased exposure to economic and other factors due to the concentration of our properties in the Sunbelt region, and economic downturns, natural disasters or acts of terrorism in the Sunbelt region could adversely affect our results of operations or financial condition.

Substantially all of our properties are located in the Sunbelt region of the United States. In particular, we derived approximately 92.3% of our net operating income in 2008 from top quartile cities located in the Sunbelt region. We are therefore subject to increased exposure to economic and other factors specific to these geographic areas. If the Sunbelt region of the United States, and in particular the areas of or near Birmingham, Charlotte, Orlando, Atlanta, Dallas or Fort Worth, experiences a recession or other slowdown in the economy, a natural disaster or an act of terrorism, our results of operations

and financial condition may be negatively affected as a result of decreased revenues, increased costs or damage or loss of assets.

Tenant bankruptcies and downturns in tenants’ businesses may adversely affect our operating results by decreasing our revenues.

At any time, a tenant may experience a downturn in its business that may weaken its financial condition. Additionally, the ongoing recession and related reduction in spending, falling home prices and mounting job losses, together with the price volatility, dislocations and liquidity disruptions in the financial and credit markets could, among other things, adversely affect our tenants financially and impede their ability to perform their contractual obligations. As a result, our tenants may delay lease commencement, cease or defer making rental payments or declare bankruptcy. A bankruptcy filing by or relating to one of our tenants would bar all efforts by us to collect pre-bankruptcy debts from that tenant, or their property, unless we receive an order permitting us to do so from the bankruptcy court. A tenant bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims, and there are restrictions under bankruptcy laws that limit the amount of the claim we can make if a lease is rejected. As a result, it is likely that we will recover substantially less than the full value of any unsecured claims we hold from a bankrupt tenant. The bankruptcy or financial difficulties of any of our tenants may negatively affect our operating results by decreasing our revenues.

Risks associated with the property management, leasing and brokerage businesses could adversely affect our results of operations by decreasing our revenues.

In addition to the risks we face as a result of our ownership of real estate, we face risks relating to the property management, leasing and brokerage businesses of CPSI, including risks that:

	•		management contracts or service agreements with third-party owners will be terminated and lost to competitors;

	•		contracts will not be renewed upon expiration or will not be available for renewal on terms consistent with current terms; and

	•		leasing and brokerage activity generally may decline.

Each of these developments could adversely affect our results of operations by decreasing our revenues.

We could incur significant costs related to environmental issues which could adversely affect our results of operations through increased compliance costs or our financial condition if we become subject to a significant liability.

Under federal, state and local laws and regulations relating to the protection of the environment, a current or previous owner or operator of real property, and parties that generate or transport hazardous substances that are disposed of on real property, may be liable for the costs of investigating and remediating hazardous substances on or under or released from the property and for damages to natural resources. The federal Comprehensive Environmental Response, Compensation & Liability Act, and similar state laws, generally impose liability on a joint and several basis, regardless of whether the owner, operator or other responsible party knew of or was at fault for the release or presence of hazardous substances. In connection with the ownership or operation of our properties, we could be liable in the future for costs associated with investigation and remediation of hazardous substances released at or from such properties. The costs of any required remediation and related liability as to any property could be substantial under these laws and could exceed the value of the property and/or our assets. The presence of hazardous substances, or the failure to properly remediate those substances may result in our being liable for damages suffered by a third party for personal injury, property damage, cleanup costs, or otherwise and may adversely affect our ability to sell or rent a property or to borrow funds using the property as collateral. In addition, environmental laws may impose restrictions on the manner in which we use our properties or operate our business, and these restrictions may require expenditures for compliance. The restrictions themselves may change from time to time, and these changes may result in additional expenditures in order to achieve compliance. We cannot assure you that a material environmental claim or compliance obligation will not arise in the future. The costs of defending against any claims of liability, of remediating a contaminated property, or of complying with future environmental requirements could be substantial and affect our operating results. In addition, if a judgment is obtained against us or we otherwise become subject to a significant environmental liability, our financial condition may be adversely affected.

During 2007, we engaged in the expansion of our Wal-Mart center at Colonial Promenade Winter Haven in Orlando, Florida. We received notice that the property that was purchased for the expansion contained environmental contamination that required remediation. We agreed to pay $0.9 million towards the remediation, which was paid during 2007. The expansion was completed in 2008, but we are still awaiting a “no further action” letter from the relevant regulatory agency.

Costs associated with addressing indoor air quality issues, moisture infiltration and resulting mold remediation may be costly.

As a general matter, concern about indoor exposure to mold or other air contaminants has been increasing as such exposure has been alleged to have a variety of adverse effects on health. As a result, there have been a number of lawsuits in our industry against owners and managers of apartment communities relating to indoor air quality, moisture infiltration and resulting mold. The terms of our property and general liability policies generally exclude certain mold-related claims. Should an uninsured loss arise against us, we would be required to use our funds to resolve the issue, including litigation costs. We make no assurance that liabilities resulting from indoor air quality, moisture infiltration and the presence of or exposure to mold will not have a future impact on our business, results of operations and financial condition.

As the owner or operator of real property, we could become subject to liability for asbestos-containing building materials in the buildings on our properties.

Some of our properties may contain asbestos-containing materials. Environmental laws typically require that owners or operators of buildings with asbestos-containing building materials properly manage and maintain these materials, adequately inform or train those who may come in contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements. In addition, third parties may be entitled to seek recovery from owners or operators for personal injury associated with exposure to asbestos-containing building materials.

Uninsured or underinsured losses could adversely affect our financial condition.

As of December 31, 2008, we are self insured up to $0.8 million, $1.0 million and $1.8 million for general liability, workers’ compensation and property insurance, respectively. We are also self insured for health insurance and responsible for claims up to $125,000 per claim and up to $1.0 million per person, according to plan policy limits. If the actual costs incurred to cover such uninsured claims are significantly greater than our budgeted costs, our financial condition will be adversely affected.

We carry comprehensive liability, fire, extended coverage and rental loss insurance in amounts that we believe are in line with coverage customarily obtained by owners of similar properties and appropriate given the relative risk of loss and the cost of the coverage. There are, however, certain types of losses, such as lease and other contract claims, acts of war or terrorism, acts of God, and in some cases, earthquakes, hurricanes and flooding that generally are not insured because such coverage is not available or it is not available at commercially reasonable rates. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in the damaged property, as well as the anticipated future revenue from the property. The costs associated with property and casualty renewals may be higher than anticipated. We cannot predict at this time if in the future we will be able to obtain full coverage at a reasonable cost. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it impractical or undesirable to use insurance proceeds to replace a property after it has been damaged or destroyed. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.

We may be unable to develop new properties or redevelop existing properties successfully, which could adversely affect our results of operations due to unexpected costs, delays and other contingencies.

Our operating strategy historically has included development of new properties, as well as expansion and/or redevelopment of existing properties. Even though we decided in January 2009 to postpone future development activities (including previously identified future development projects) until we determine that the current economic environment has sufficiently improved, we expect to complete our developments currently in process and may engage in additional developments as opportunities arise. Development activity may be conducted through wholly-owned affiliates or through joint ventures. However, there are significant risks associated with such development activities in addition to those generally associated with the ownership and operation of developed properties. These risks include the following:

	•		we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations, which could result in increased development costs and/or lower than expected leases;

	•		local real estate market conditions, such as oversupply or reduction in demand, may result in reduced or fluctuating rental rates;

	•		we may incur development costs for a property that exceed original estimates due to increased materials, labor or other costs or unforeseen environmental conditions, which could make completion of the property uneconomical;

	•		land, insurance and construction costs continue to increase in our markets and may continue to increase in the future and we may be unable to attract rents that compensate for these increases in costs;

	•		we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring any such opportunities;

	•		rental rates and occupancy levels may be lower than anticipated;

	•		changes in applicable zoning and land use laws may require us to abandon projects prior to their completion, resulting in the loss of development costs incurred up to the time of abandonment; and

	•		we may experience late completion because of construction delays, delays in the receipt of zoning, occupancy and other approvals or other factors outside of our control.

In addition, if a project is delayed, certain tenants may have the right to terminate their leases. Furthermore, from time to time we may utilize tax-exempt bond financing through the issuance of community development and special assessment district bonds to fund development costs. Under the terms of such bond financings, we may be responsible for paying assessments on the underlying property to meet debt service obligations on the bonds until the underlying property is sold. Accordingly, if we are unable to complete or sell a development property subject to such bond financing and we are forced to hold the property longer than we originally projected, we may be obligated to continue to pay assessments to meet debt service obligations under the bonds. If we are unable to pay the assessments, a default will occur under the bonds and the property could be foreclosed upon. Any one or more of these risks may cause us to incur unexpected development costs, which would negatively affect our results of operations.

Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on our joint venture partners’ financial condition, any disputes that may arise between us and our joint venture partners and our exposure to potential losses from the actions of our joint venture partners.

As of December 31, 2008, we had ownership interests in 35 joint ventures. Our investments in these joint ventures involve risks not customarily associated with our wholly-owned properties, including the following:

	•		we share decision-making authority with some of our joint venture partners regarding major decisions affecting the ownership or operation of the joint venture and the joint venture properties, such as the acquisition of properties, the sale of the properties or the making of additional capital contributions for the benefit of the properties, which may prevent us from taking actions that are opposed by those joint venture partners;

	•		prior consent of our joint venture partners is required for a sale or transfer to a third party of our interests in the joint venture, which restricts our ability to dispose of our interest in the joint venture;

	•		our joint venture partners might become bankrupt or fail to fund their share of required capital contributions, which may delay construction or development of a joint venture property or increase our financial commitment to the joint venture;

	•		our joint venture partners may have business interests or goals with respect to the joint venture properties that conflict with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of such properties;

	•		disputes may develop with our joint venture partners over decisions affecting the joint venture properties or the joint venture, which may result in litigation or arbitration that would increase our expenses and distract our officers and/or trustees from focusing their time and effort on our business, and possibly disrupt the day-to-day operations of the property such as by delaying the implementation of important decisions until the conflict or dispute is resolved (see, for example, the discussion under Note 20 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K);

	•		we may suffer losses as a result of the actions of our joint venture partners with respect to our joint venture investments; and

	•		our joint venture partner may elect to sell or transfer its interests in the joint venture to a third party, which may result in our loss of management and leasing responsibilities and fees that we currently receive from the joint venture properties.

Our results of operations could be adversely affected if we or the Trust are required to perform under various financial guarantees that we and the Trust have provided with respect to certain of our joint ventures and retail developments.

From time to time, we guarantee portions of the indebtedness of certain of our unconsolidated joint ventures. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Guarantees and Other Arrangements” of this Annual Report on Form 10-K, for a description of the guarantees that we have provided with respect to the indebtedness of certain of our joint ventures as of December 31, 2008. From time to time, in connection with certain retail developments, we receive funding from municipalities for infrastructure costs through the issuance of bonds that are repaid primarily from sales tax revenues generated from the tenants at each respective development. In some instances, we guarantee the shortfall, if any, of tax revenues to the debt service requirements on these bonds. If we are required to fund any amounts related to any of these guarantees, our results of operations and cash flows could be adversely affected. In addition, we may not be able to ultimately recover funded amounts.

Competition for acquisitions could reduce the number of acquisition opportunities available to us and result in increased prices for properties, which could adversely affect our return on properties we purchase.

We compete with other major real estate investors with significant capital for attractive investment opportunities in multifamily, office and retail properties. These competitors include publicly traded REITs, private REITs, domestic and foreign financial institutions, life insurance companies, pension trusts, trust funds, investment banking firms, private institutional investment funds and national, regional and local real estate investors. This competition could increase the demand for multifamily properties, and therefore reduce the number of suitable acquisition opportunities available to us and increase the prices paid for such acquisition properties. As a result, our expected return from investment in these properties would deteriorate.

Acquired properties may expose us to unknown liability.

We may acquire properties subject to liabilities and without any recourse, or with only limited recourse, against the prior owners or other third parties with respect to unknown liabilities. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operations and cash flow. Unknown liabilities with respect to acquired properties might include:

	•		liabilities for clean-up of undisclosed environmental contamination;

	•		claims by tenants, vendors or other persons against the former owners of the properties;

	•		liabilities incurred in the ordinary course of business; and

	•		claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.

We may be unable to successfully integrate and effectively manage the properties we acquire, which could adversely affect our results of operations.

So long as we are able to obtain capital on commercially reasonable terms, and as economic conditions warrant, we intend to selectively acquire multifamily properties that meet our criteria for investment opportunities, are consistent with our business strategies and that we believe will be profitable or will enhance the value of our portfolio, as a whole. The success of these acquisitions will depend, in part, on our ability to efficiently integrate the acquired properties into our organization, and apply our business, operating, administrative, financial and accounting strategies and controls to these acquired properties. Depending on the rate of growth of our portfolio, we cannot assure you that we will be able to adapt our management, administrative, accounting and operational systems or hire and retain sufficient operational staff to integrate these properties into our portfolio and manage any future acquisitions of additional properties without operating disruptions or unanticipated costs. As we develop or acquire additional properties, we will be subject to risks associated with managing new properties, including tenant retention and mortgage default. In addition, acquisitions or developments may cause disruptions in our operations and divert management’s attention away from day-to-day operations, which could impair our relationships with our current tenants and employees. In addition, our profitability may suffer because of acquisition-related costs or amortization costs for acquired goodwill and other intangible assets. If we are unable to successfully integrate the acquired properties into our operations, our results of operations may be adversely affected.

We may not be able to achieve the anticipated financial and operating results from our acquisitions, which would adversely affect our operating results.

We will acquire multifamily properties only if they meet our criteria and we believe that they will enhance our future financial performance and the value of our portfolio. Our belief, however, is based on and is subject to risks, uncertainties and other factors, many of which are forward-looking and are uncertain in nature or are beyond our control. In addition, some of these properties may have unknown characteristics or deficiencies or may not complement our portfolio of existing properties. As a result, some properties may be worth less or may generate less revenue than, or simply not perform as well as, we believed at the time of the acquisition, thereby negatively affecting our operating results.

Failure to succeed in new markets may limit our growth.

We may from time to time commence development activities or make acquisitions outside of our existing market areas if economic conditions warrant and appropriate opportunities arise. Our historical experience in our existing markets does not ensure that we will be able to operate successfully in new markets. We may be exposed to a variety of risks if we choose to enter new markets. These risks include, among others:

	•		an inability to evaluate accurately local apartment or for-sale residential housing market conditions and local economies;

	•		an inability to obtain land for development or to identify appropriate acquisition opportunities;

	•		an inability to hire and retain key personnel; and

•

lack of familiarity with local governmental and permitting procedures.

Risks Associated with Our Indebtedness and Financing Activities

We have substantial indebtedness and our cash flow may not be sufficient to make required payments on our indebtedness or repay our indebtedness as it matures.

We rely on debt financing for our business. As of December 31, 2008, the amount of our total debt was approximately $2.3 billion, consisting of $1.8 billion of consolidated debt and $0.5 billion of our pro rata share of joint venture debt. Due to our high level of debt, we may be required to dedicate a substantial portion of our funds from operations to servicing our debt, and our cash flow may be insufficient to meet required payments of principal and interest.

If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose upon that property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies.

In addition, if principal payments due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow will not be sufficient in all years to repay all maturing debt. Most of our indebtedness does not require significant principal payments prior to maturity. However, we will need to raise additional equity capital, obtain collateralized or unsecured debt financing, issue private or public debt, or sell some of our assets to either refinance or repay our indebtedness as it matures. We cannot assure you that these sources of financing or refinancing will be available to us at reasonable terms or at all. Our inability to obtain financing or refinancing to repay our maturing indebtedness, and our inability to refinance existing indebtedness on reasonable terms, may require us to make higher interest and principal payments, issue additional equity securities, or sell some of our assets on disadvantageous terms, all or any of which may result in foreclosure of properties, partial or complete loss on our investment and otherwise adversely affect our financial conditions and results of operation.

Our degree of leverage could limit our ability to obtain additional financing and have other adverse effects which would negatively impact our results of operation and financial condition.

As of December 31, 2008, our consolidated borrowings and pro rata share of unconsolidated borrowings totaled approximately $1.8 billion of consolidated borrowings and $0.5 billion of unconsolidated borrowings, which represented approximately 76.7% of our total market capitalization. Total market capitalization represents the sum of the outstanding indebtedness (including our share of joint venture indebtedness), the total liquidation preference of all our preferred units and the total market value of our common units based on the closing price of the Trust’s common shares as of December 31, 2008. Our organizational documents do not contain any limitation on the incurrence of debt. Our leverage and any future increases in our leverage could place us at a competitive disadvantage compared to our competitors that have less debt, make us more vulnerable to economic and industry downturns, reduce our flexibility in responding to changing business and economic conditions, and adversely affect our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, development or other general corporate purposes which would negatively impact our results of operation and financial condition.

Due to the amount of our variable rate debt, rising interest rates would adversely affect our results of operation.

As of December 31, 2008, we had approximately $435.8 million of variable rate debt outstanding, consisting of $325.3 million of our consolidated debt and $110.5 million of our pro rata share of variable rate unconsolidated joint venture debt. While we have sought to refinance our variable rate debt with fixed rate debt or cap our exposure to interest rate fluctuations by using interest rate swap agreements where appropriate, failure to hedge effectively against interest rate changes may adversely affect our results of operations. Furthermore, interest rate swap agreements and other hedging arrangements may expose us to additional risks, including a risk that a counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. In addition, as opportunities arise, we may borrow additional money with variable interest rates in the future. As a result, a significant increase in interest rates would adversely affect our results of operations.

We have entered into debt agreements with covenants that restrict our operating activities, which could adversely affect our results of operations, and violation of these restrictive covenants could adversely affect our financial condition through debt defaults or acceleration.

Our unsecured credit facility contains numerous customary restrictions, requirements and other limitations on our ability to incur debt, including the following financial ratios:

	•		collateralized debt to total asset value ratio;

	•		fixed charge coverage ratio;

	•		total liabilities to total asset value ratio;

	•		total permitted investments to total asset value ratio; and

	•		unencumbered leverage ratio.

The indenture under which our senior unsecured debt is issued also contains financial and operating covenants including coverage ratios. Our indenture also limits our ability to:

	•		incur collateralized and unsecured indebtedness;

	•		sell all or substantially all or our assets; and

	•		engage in mergers, consolidations and acquisitions.

These restrictions, as well as any additional restrictions which we may become subject to in connection with additional financings or refinancings, will continue to hinder our operational flexibility through limitations on our ability to incur additional indebtedness, pursue certain business initiatives or make other changes to our business. These limitations could adversely affect our results of operations. In addition, violations of these covenants could cause the declaration of defaults and any related acceleration of indebtedness, which would result in adverse consequences to our financial condition. As of December 31, 2008, we were in compliance with all of the financial and operating covenants under our existing credit facility and indenture, and we believe that we will continue to remain in compliance with these covenants. However, given the ongoing recession and continued uncertainty in the stock and credit markets, there can be no assurance that we will be able to maintain compliance with these ratios and other debt covenants in the future, particularly if conditions worsen.

Our inability to obtain sufficient third party financing could adversely affect our results of operations and financial condition because we depend on third party financing for our capital needs, including development, expansion, acquisition and other activities.

To qualify as a REIT, the Trust must distribute to its shareholders each year at least 90% of its REIT taxable income, excluding any net capital gain. Because of these distribution requirements, it is not likely that we will be able to fund all future capital needs from income from operations. As a result, when we engage in the development or acquisition of new properties or expansion or redevelopment of existing properties, we will continue to rely on third-party sources of capital, including lines of credit, collateralized or unsecured debt (both construction financing and permanent debt), and equity issuances of the Trust. These sources, however, may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of factors, including the market’s perception of our growth potential and our current and potential future earnings. Moreover, additional equity offerings of the Trust may result in substantial dilution of our partners’ interests, and additional debt financing may substantially increase our leverage. There can be no assurance that we will be able to obtain the financing necessary to fund our current or new development or project expansions or our acquisition activities on terms favorable to us or at all. If we are unable to obtain a sufficient level of third party financing to fund our capital needs, our results of operations and financial condition may be adversely affected.

Disruptions in the financial markets could adversely affect our ability to obtain sufficient third party financing for our capital needs, including development, expansion, acquisition and other activities, on reasonable terms or at all and could have other adverse effects on us and the market price of the Trust’s common shares.

The United States stock and credit markets have recently experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in some cases have resulted in the unavailability of financing, even for companies who are otherwise qualified to obtain financing. Continued volatility and uncertainty in the stock and credit markets may negatively impact our ability to access additional financing for our capital needs, including development, expansion, acquisition activities and other purposes at reasonable terms or at all, which may negatively affect our business. Additionally, due to this uncertainty, we may be unable to refinance or extend our existing indebtedness or the terms of any refinancing may not be as favorable as the terms of our existing indebtedness. If we are not successful in refinancing this debt when it becomes due, we may be forced to dispose of properties on disadvantageous terms, which might adversely affect our ability to service other debt and to meet our other obligations. In addition, we may be unable to obtain permanent financing on development projects we financed with construction loans or mezzanine debt. Our inability to obtain such permanent financing on favorable terms, if at all, could delay the completion of our development projects and/or cause us to incur additional capital costs in connection with completing such projects, either of which could have an adverse affect on our business. A prolonged downturn in the financial markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to further adjust our business plan accordingly. These events also may make it more difficult or costly for us to raise capital through the issuance of the Trust’s common or preferred shares or our subordinated notes. The disruptions in the financial markets have had and may continue to have a material adverse effect on the market value of the Trust’s common shares and other adverse effects on us and our business.

Our senior notes do not have an established trading market, therefore, holders of our notes may not be able to sell their notes.

Each series of our senior notes is a new issue of securities with no established trading market. We do not intend to apply for listing of any series of notes on any national securities exchange. The underwriters in an offering of senior notes may advise us that they intend to make a market in the notes, but they are not obligated to do so and may discontinue market making at any time without notice. We can give no assurance as to the liquidity of or any trading market for any series of our notes.

A Downgrade in Our Credit Ratings Could Adversely Affect Our Performance

In February 2009, Standard & Poor’s placed our credit ratings, including our “BBB-” corporate credit rating, on CreditWatch with negative implications based on weaker than expected fourth quarter 2008 results. A downgrade in our credit ratings by both Standard & Poor’s and Moody’s, while not affecting our ability to draw proceeds under our existing credit facility, could cause our borrowing costs to increase under the facility and also would impact our ability to borrow secured and unsecured debt by increasing borrowing costs and causing shorter borrowing periods, or otherwise limit our access to capital.

Risks Associated with Our Organization and Structure

Some of the Trust’s trustees and officers have conflicts of interest and could exercise influence in a manner inconsistent with the interests of our unitholders.

As a result of their substantial ownership of common shares and units, Messrs. Thomas Lowder, the Trust’s Chairman and Chief Executive Officer, James Lowder and Harold Ripps, each of whom is a trustee of the Trust, could seek to exert influence over our decisions as to sales or re-financings of particular properties we own. Any such exercise of influence could produce decisions that are not in the best interest of all of the holders of interests in us.

The Lowder family and their affiliates hold interests in a company that has performed insurance brokerage services with respect to our properties. This company may perform similar services for us in the future. As a result, the Lowder family may realize benefits from transactions between this company and us that are not realized by other holders of interests in us. In addition, given their positions with us, Thomas Lowder, as the Trust’s Chairman and Chief Executive Officer, and James Lowder, as a trustee of the Trust, may be in a position to influence us to do business with companies in which the Lowder family has a financial interest.

Other than a specific procedure for reviewing and approving related party construction activities, we have not adopted a formal policy for the review and approval of conflict of interest transactions generally. Pursuant to its charter, the Trust’s audit committee reviews and discusses with the Trust’s management and our independent registered public accounting firm any such transaction if deemed material and relevant to an understanding of our financial statements. Our policies and practices may not be successful in eliminating the influence of conflicts. Moreover, transactions with companies controlled by the Lowder family, if any, may not be on terms as favorable to us as we could obtain in an arms-length transaction with a third party.

Restrictions on the acquisition and change in control of the Trust may have adverse effects on the value of our common units.

Various provisions of the Trust’s Declaration of Trust restrict the possibility for acquisition or change in control of the Trust, even if the acquisition or change in control were in the unitholders’ interest. As a result, the value of our common units may be less than they would otherwise be in the absence of such restrictions.

The Trust’s Declaration of Trust contains ownership limits and restrictions on transferability. The Trust’s Declaration of Trust contains certain restrictions on the number of Trust common shares and preferred shares that individual shareholders may own, which is intended to ensure that the Trust maintain its qualification as a REIT. In order for the Trust to qualify as a REIT, no more than 50% of the value of the Trust’s outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year and the shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. To help avoid violating these requirements, the Trust’s Declaration of Trust contains provisions restricting the ownership and transfer of shares in certain circumstances. These ownership limitations provide that no person may beneficially own, or be deemed to own by virtue of the attribution provisions of the Code, more than:

	•		9.8%, in either number of shares or value (whichever is more restrictive), of any class of the Trust’s outstanding shares;

	•		5% in number or value (whichever is more restrictive), of the Trust’s outstanding common shares and any outstanding excess shares of the Trust; and

•

in the case of certain excluded holders related to the Lowder family: 29% by one individual; 34% by two individuals; 39% by three individuals; or 44% by four individuals.

These ownership limitations may be waived by the Board of Trustees of the Trust if it receives representations and undertakings of certain facts for the protection of our REIT status, and if requested, an IRS ruling or opinion of counsel.

The Trust’s Declaration of Trust permits the Board of Trustees to issue preferred shares with terms that may discourage a third party from acquiring the Trust. The Trust’s Declaration of Trust permits the Board of Trustees of the Trust to issue up to 20,000,000 preferred shares, having those preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, or terms or conditions of redemption as determined by the Board of Trustees of the Trust. Thus, the Board of Trustees of the Trust could authorize the issuance of preferred shares with terms and conditions that could have the effect of discouraging a takeover or other transaction in which some or a majority of shareholders might receive a premium for their shares over the then-prevailing market price of shares.

The Trust’s Declaration of Trust and Bylaws contain other possible anti-takeover provisions. The Trust’s Declaration of Trust and Bylaws contain other provisions that may have the effect of delaying, deferring or preventing an acquisition or change in control of the Trust, and, as a result could prevent our unitholders from being paid a premium for their common units over the then-prevailing market prices. These provisions include:

	•		a prohibition on shareholder action by written consent;

	•		the ability to remove trustees only at a meeting of shareholders called for that purpose, by the affirmative vote of the holders of not less than two-thirds of the shares then outstanding and entitled to vote in the election of trustees;

	•		the limitation that a special meeting of shareholders can be called only by the president or chairman of the board or upon the written request of shareholders holding outstanding shares representing at least 25% of all votes entitled to be cast at the special meeting;

	•		the advance written notice requirement for shareholders to nominate a trustee or submit other business before a meeting of shareholders; and

	•		the requirement that the amendment of certain provisions of the Trust’s Declaration of Trust relating to the removal of trustees, the termination of the Trust and any provision that would have the effect of amending these provisions, require the affirmative vote of the holders of two-thirds of the shares then outstanding.

We may change our business policies in the future, which could adversely affect our financial condition or results of operations.

Our major policies, including our policies with respect to development, acquisitions, financing, growth, operations, debt capitalization and distributions, are determined by the Board of Trustees of the Trust. A change in these policies could adversely affect our financial condition or results of operations, including our ability to service debt. For example, in January 2009, the Board of Trustees of the Trust decided to accelerate our plan to dispose of our for-sale residential assets and land held for future for-sale residential and mixed-use developments and postpone future development activities (including previously identified future development projects) until we determine that the current economic environment has sufficiently improved. As a result of this decision, in the fourth quarter of 2008, we recorded a non-cash impairment charge of $116.9 million, $4.4 million of abandoned pursuit costs and $1.0 million of restructuring charges related to a reduction in our development staff and other overhead personnel. The Board of Trustees of the Trust may amend or revise these and other policies from time to time in the future, and no assurance can be given that additional amendments or revisions to these or other policies will not result in additional charges or otherwise materially adversely affect our financial condition or results of operations.

We may change our dividend policy.

The Trust intends to continue to declare quarterly distributions on its common shares and our partnership units. Future distributions will be declared and paid at the discretion of the Trust’s Board of Trustees and the amount and timing of distributions will depend upon cash generated by operating activities, our financial condition, capital requirements, the Trust’s annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as the Board of Trustees of the Trust deems relevant. In light of recent Internal Revenue procedure changes, the Board of Trustees of the Trust is currently considering paying future distributions to its shareholders, beginning in May 2009, in a combination of common shares and cash. No decisions have been made at this time as to the manner in which distributions will be paid to unitholders in the event Trust shareholders receive distributions in cash and stock, as described above. The Board of Trustees of the Trust reviews the dividend quarterly and there can be no assurance as to the manner in which future dividends will be paid or that the current dividend level will be maintained in future periods.

Risks Associated with Income Tax Laws

The Trust’s failure to qualify as a REIT could have adverse tax consequences.

We believe that the Trust has qualified for taxation as a REIT for federal income tax purposes commencing with the taxable year ended December 31, 1993. The Trust intends to continue to meet the requirements for taxation as a REIT, but we cannot assure that the Trust will qualify as a REIT. We have not requested and do not plan to request a ruling from the IRS that the Trust qualifies as a REIT and the statements in this Form 10-K are not binding on the IRS or any court. As a REIT, the Trust generally will not be subject to federal income tax on the income that the Trust distributes currently to its shareholders. Many of the REIT requirements are highly technical and complex. The determination that the Trust is a REIT requires an analysis of various factual matters and circumstances that may not be totally within its control. For example, to qualify as a REIT, at least 95% of the Trust’s gross income must come from sources that are itemized in the REIT tax laws. The Trust is generally prohibited from owning more than 10% of the voting securities or more than 10% of the value of the outstanding securities of any one issuer, subject to certain exceptions, including an exception with respect to certain debt instruments and corporations electing to be “taxable REIT subsidiaries.” The Trust is also required to distribute to shareholders at least 90% of its REIT taxable income (excluding capital gains). The fact that the Trust holds most of its assets through CRLP further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize the Trust’s REIT status. Furthermore, Congress or the Internal Revenue Service might make changes to the tax laws and regulations, or the courts might issue new rulings that make it more difficult, or impossible, for the Trust to remain qualified as a REIT.

If the Trust fails to qualify as a REIT for federal income tax purposes, and is unable to avail itself of certain savings provisions set forth in the Internal Revenue Code, it would be subject to federal income tax at regular corporate rates. If the Trust failed to qualify as a REIT, the Trust would have to pay significant income taxes, which would reduce net earnings available for investment or distribution to its shareholders. This would likely have a significant adverse affect on the value of the Trust’s securities and, as a result, on the redemption value of our units. In addition, the Trust would no longer be required to make any distributions to its shareholders, but we would still be required to distribute quarterly substantially all of our net cash revenues (other than capital contributions) to our unitholders, including the Trust. If the Trust fails to qualify as a REIT for federal income tax purposes and is able to avail itself of one or more of the statutory savings provisions in order to maintain its REIT status, the Trust would nevertheless be required to pay penalty taxes of $50,000 or more for each such failure. Moreover, the Trust’s failure to qualify as a REIT also would cause an event of default under our credit facility and may adversely affect our ability to raise capital and to service our debt.

Even if the Trust qualifies as a REIT, we and our subsidiaries will be required to pay some taxes.

Any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded for federal income tax purposes as entities separate from the Trust’s taxable REIT subsidiaries, will be subject to federal and possibly state corporate income tax. The Trust has elected to treat Colonial Properties Services, Inc. as a taxable REIT subsidiary, and may elect to treat other subsidiaries as taxable REIT subsidiaries in the future. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by the taxable REIT subsidiaries if the economic arrangements between the REIT, the REIT’s tenants, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of the Trust’s income even though as a REIT it is not subject to federal income tax on that income because not all states and localities treat REITs the same as they are treated for federal income tax purposes. To the extent that we and our affiliates, including the Trust, are required to pay federal, state and local taxes, less cash will be available for distributions to our unitholders and the Trust’s shareholders.

If the IRS were to challenge successfully our status as a partnership for federal income tax purposes, the Trust would cease to qualify as a REIT and suffer other adverse consequences.

We believe that we qualify to be treated as a partnership for federal income tax purposes. As a partnership, we are not subject to federal income tax on our income. Instead, each of our partners, including the Trust, is required to pay tax on such partner’s allocable share of its income. However, we will be treated as a corporation for federal income tax purposes if we are a “publicly traded partnership,” unless at least 90% of our income is qualifying income as defined in the Internal Revenue Code. We believe that we are not a publicly traded partnership and, in addition, we believe that we would have sufficient qualifying income, which includes real property rents and other passive income, to ensure that we would be taxed as a partnership even if we were a publicly traded partnership. No assurance can be provided, however, that the IRS will not challenge our status as a partnership for federal income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating us as a corporation for federal income tax purposes, we would be required to pay corporate income tax and the Trust would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, cease to qualify as a REIT. If we fail to qualify as a partnership for federal income tax purposes or the Trust fails to qualify as a REIT, either

failure would cause an event of default under our credit facility and may adversely affect our ability to raise capital and to service our debt. As a result of the foregoing, our failure to qualify as a partnership would reduce significantly the amount of cash available for debt service and for distribution to our partners, including the Trust.

REIT Distribution Requirements May Increase our Indebtedness.

We may be required from time to time, under certain circumstances, to accrue as income for tax purposes interest and rent earned but not yet received. In such event, or upon our repayment of principal on debt, we could have taxable income without sufficient cash to enable us to make distributions to the Trust’s in an amount necessary to allow the Trust to make its required REIT distributions. Accordingly, we could be required to borrow funds or liquidate investments on adverse terms in order to make the necessary distribution.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Operating Properties.

General

As of December 31, 2008, our consolidated real estate portfolio consisted of 112 consolidated operating properties. In addition, we maintain non-controlling partial interests ranging from 5% to 50% in an additional 80 properties held through unconsolidated joint ventures. These 192 properties, including consolidated and unconsolidated properties, are located in ten states in the Sunbelt region of the United States.

Multifamily Properties

Our multifamily segment is comprised of 116 multifamily apartment communities, including those properties in lease-up, consisting of 103 wholly-owned consolidated properties and 13 properties held through unconsolidated joint ventures, which properties contain, in the aggregate, a total of 34,599 garden-style apartments and range in size from 80 to 586 units. Of the 116 multifamily communities, 13 multifamily properties (containing a total of 4,296 apartment units) are located in Alabama, four multifamily properties (containing a total of 952 units) are located in Arizona, ten multifamily properties (containing a total of 2,913 units) are located in Florida, 17 multifamily properties (containing a total of 5,077 units) are located in Georgia, 32 multifamily properties (containing a total of 9,006 units) are located in North Carolina, 6 multifamily properties (containing a total of 1,578 units) are located in South Carolina, two multifamily properties (containing a total of 603 units) are located in Tennessee, 22 multifamily properties (containing a total of 7,294 units) are located in Texas and 10 multifamily properties (containing a total of 2,880 units) are located in Virginia. Each of the multifamily properties is established in its local market and provides residents with numerous amenities, which may include a swimming pool, exercise room, jacuzzi, clubhouse, laundry room, tennis court(s) and/or a playground. We manage all of the multifamily properties.

The following table sets forth certain additional information relating to the consolidated multifamily properties as of and for the year ended December 31, 2008.

Consolidated Multifamily Properties


											Average
				Number		Approximate					Rental
			Year	of		Rentable Area		Percent			Rate
Consolidated Multifamily Property (1)		Location	Completed (2)	Units (3)		(Square Feet)		Occupied			Per Unit (4)

Alabama:
CG at Liberty Park		Birmingham	2000		300		338,684		98.0	%	$	948
CV at Inverness II & III		Birmingham	1986/1987/1990/1997		586		508,472		97.1	%		604
CV at Trussville		Birmingham	1996		376		410,340		95.5	%		707
CV at Cypress Village		Gulf Shores	2008		96		205,992		93.8	%		983
CG at Edgewater I		Huntsville	1990/1999		500		542,892		98.0	%		720
CG at Madison		Huntsville	2000		336		354,592		96.1	%		816
CV at Ashford Place		Mobile	1983		168		145,600		95.8	%		636
CV at Huntleigh Woods		Mobile	1978		233		198,861		92.7	%		570

Subtotal — Alabama					2,595		2,705,433		96.4	%		722

Arizona:
CG at Inverness Commons		Scottsdale	2002		300		201,569		94.7	%		804
CG at OldTown Scottsdale North		Scottsdale	1995		208		264,728		93.8	%		898
CG at OldTown Scottsdale South		Scottsdale	1994		264		205,984		88.3	%		923
CG at Scottsdale		Scottsdale	1999		180		305,904		97.2	%		1,069

Subtotal — Arizona					952		978,185		93.2	%		908

Florida:
CG at Heather Glen		Orlando	2000		448		523,228		94.9	%		970
CG at Heathrow		Orlando	1997		312		353,040		93.9	%		966
CG at Town Park Reserve		Orlando	2004		80		77,416		96.3	%		1,134
CG at Town Park(Lake Mary)		Orlando	2002		456		535,340		95.8	%		1,014
CV at Twin Lakes		Orlando	2004		460		417,808		93.5	%		871
Portofino at Jensen Beach	(5)	Port St. Lucie	2002		118		136,670		89.0	%		840
CG at Lakewood Ranch		Sarasota	1999		288		301,656		99.3	%		978
CG at Seven Oaks		Tampa	2004		318		301,684		97.2	%		885
Murano at Delray Beach	(5)	West Palm Beach	2002		93		112,273		95.7	%		1,157

Subtotal — Florida					2,573		2,759,115		95.3	%		956

Georgia:
CG at Barrett Creek		Atlanta	1999		332		309,962		92.8	%		803
CG at Berkeley Lake		Atlanta	1998		180		244,217		97.2	%		933
CG at McDaniel Farm		Atlanta	1997		425		450,696		94.1	%		785
CG at McGinnis Ferry		Atlanta	1997		434		509,455		91.7	%		876
CG at Mount Vernon		Atlanta	1997		213		257,180		96.7	%		1,080
CG at Pleasant Hill		Atlanta	1996		502		501,816		94.0	%		794
CG at River Oaks		Atlanta	1992		216		276,208		96.8	%		888
CG at River Plantation		Atlanta	1994		232		310,364		95.3	%		893
CG at Shiloh		Atlanta	2002		498		533,243		97.8	%		841
CG at Sugarloaf		Atlanta	2002		250		328,558		96.4	%		903
CG at Godley Station I		Savannah	2005		312		337,344		93.9	%		858
CG at Hammocks		Savannah	1997		308		323,844		92.9	%		929
CV at Godley Lake	(6)	Savannah	2008		288		269,504	LU				700
CV at Greentree		Savannah	1984		194		165,216		88.1	%		717
CV at Huntington		Savannah	1986		147		121,112		88.4	%		735
CV at Marsh Cove		Savannah	1983		188		197,200		91.0	%		784

Subtotal — Georgia					4,719		5,135,919		94.1	%		851

Nevada:
CG at Desert Vista	(7)	Las Vegas	Dev		—		—		—			—

Subtotal — Nevada					—		—		—			—


											Average
				Number		Approximate					Rental
			Year	of		Rentable Area		Percent			Rate
Consolidated Multifamily Property (1)		Location	Completed (2)	Units (3)		(Square Feet)		Occupied			Per Unit (4)

North Carolina:
CV at Pinnacle Ridge		Asheville	1948/1985		166		146,856		98.2	%		695
CG at Ayrsley		Charlotte	2008		368		371,652		92.9	%		877
CG at Beverly Crest		Charlotte	1996		300		278,685		95.3	%		746
CG at Huntersville		Charlotte	2008		250		247,908		94.8	%		848
CG at Legacy Park		Charlotte	2001		288		300,768		96.2	%		762
CG at Mallard Creek		Charlotte	2004		252		232,646		98.0	%		798
CG at Mallard Lake		Charlotte	1998		302		300,806		96.7	%		765
CG at Matthews Commons	(6)	Charlotte	2008		216		205,200	LU				—
CG at University Center		Charlotte	2006		156		167,051		96.8	%		768
CV at Chancellor Park		Charlotte	1996		340		326,560		90.9	%		727
CV at Charleston Place		Charlotte	1986		214		172,405		94.4	%		577
CV at Greystone		Charlotte	1998/2000		408		386,988		87.5	%		637
CV at Matthews		Charlotte	1990		270		255,712		95.2	%		751
CV at Meadow Creek		Charlotte	1984		250		230,430		92.4	%		631
CV at South Tryon		Charlotte	2002		216		236,088		85.2	%		729
CV at Stone Point		Charlotte	1986		192		172,992		93.2	%		685
CV at Timber Crest		Charlotte	2000		282		273,408		94.3	%		675
Enclave	(6)	Charlotte	2008		85		109,179	LU				—
Heatherwood		Charlotte	1980		476		438,563		89.1	%		616
Autumn Park I & II		Greensboro	2001/2004		402		403,776		93.5	%		755
CG at Arringdon		Raleigh	2003		320		311,200		95.6	%		781
CG at Crabtree Valley		Raleigh	1997		210		209,670		92.4	%		746
CG at Patterson Place		Raleigh	1997		252		236,756		95.6	%		807
CG at Trinity Commons		Raleigh	2000/2002		462		484,404		93.3	%		779
CV at Deerfield		Raleigh	1985		204		198,180		97.1	%		721
CV at Highland Hills		Raleigh	1987		250		262,639		96.8	%		697
CV at Woodlake	(8)	Raleigh	1996		266		255,124		93.6	%		678
CG at Wilmington		Wilmington	1998/2002		390		355,896		90.0	%		726
CV at Mill Creek		Winston-Salem	1984		220		209,680		90.9	%		594
Glen Eagles I & II		Winston-Salem	1990/2000		310		312,320		91.0	%		651

Subtotal — North Carolina					8,317		8,093,542		93.2	%		724

South Carolina:
CG at Cypress Cove		Charleston	2001		264		303,996		93.6	%		879
CG at Quarterdeck		Charleston	1987		230		218,880		93.5	%		886
CV at Hampton Pointe		Charleston	1986		304		314,600		86.8	%		765
CV at Waters Edge		Charleston	1985		204		187,640		95.6	%		698
CV at Westchase		Charleston	1985		352		258,170		90.6	%		656
CV at Windsor Place		Charleston	1985		224		213,440		90.2	%		714

Subtotal — South Carolina					1,578		1,496,726		91.4	%		761

Tennessee:
CG at Bellevue		Nashville	1996		349		344,954		96.0	%		879

Subtotal — Tennessee					349		344,954		96.0	%		879

Texas:
Ashton Oaks	(7)	Austin	Dev		—		—		—			—
CG at Onion Creek	(7)	Austin	Dev		—		—		—			—
CG at Round Rock		Austin	2006		422		429,645		94.3	%		808
CG at Silverado		Austin	2004		238		239,668		94.1	%		781
CG at Silverado Reserve		Austin	2006		256		266,146		95.3	%		837
CV at Canyon Hills		Austin	1996		229		183,056		94.3	%		701
CV at Quarry Oaks		Austin	1996		533		469,899		96.6	%		709
CV at Sierra Vista		Austin	1999		232		205,604		94.4	%		687
Brookfield		Dallas	1984		232		165,672		94.8	%		551
CG at Valley Ranch		Dallas	1997		396		462,104		93.4	%		1,039
CV at Main Park		Dallas	1984		192		180,258		95.8	%		757
CV at Oakbend		Dallas	1996		426		382,751		94.4	%		738
CV at Vista Ridge		Dallas	1985		300		237,468		98.3	%		606
Paces Cove		Dallas	1982		328		219,726		92.4	%		514
Remington Hills		Dallas	1984		362		346,592		95.3	%		759
Summer Tree		Dallas	1980		232		136,272		97.8	%		508
CG at Bear Creek		Fort Worth	1998		436		395,137		96.8	%		849
CV at Grapevine I & II		Fort Worth	1985		450		387,244		96.2	%		708
CV at North Arlington		Fort Worth	1985		240		190,540		94.2	%		611
CV at Shoal Creek		Fort Worth	1996		408		381,756		95.3	%		792
CV at Willow Creek		Fort Worth	1996		478		426,764		96.4	%		782

Subtotal — Texas					6,390		5,706,302		95.4	%		738


											Average
				Number		Approximate					Rental
			Year	of		Rentable Area		Percent			Rate
Consolidated Multifamily Property (1)		Location	Completed (2)	Units (3)		(Square Feet)		Occupied			Per Unit (4)

Virginia:
Autumn Hill	(9)	Charlottesville	1970		425		369,664		72.5	%		751
CV at Harbour Club		Norfolk	1988		213		193,163		93.4	%		879
CV at Tradewinds		Norfolk	1988		284		279,884		91.2	%		819
Ashley Park		Richmond	1988		272		194,464		88.2	%		728
CR at West Franklin	(10)	Richmond	1964/1965		332		169,854		95.8	%		764
CV at Chase Gayton		Richmond	1984		328		311,266		97.0	%		827
CV at Hampton Glen		Richmond	1986		232		177,760		99.1	%		865
CV at Waterford		Richmond	1989		312		288,840		96.8	%		861
CV at West End		Richmond	1987		224		156,332		99.1	%		799
CV at Greenbrier		Washington DC	1980		258		217,245		97.7	%		914

Subtotal — Virginia					2,880		2,358,472		91.9	%		815

TOTAL					30,353		29,578,648		94.1	%	$	784


(1)		All properties are 100% owned by us, including three properties that are in lease-up and three that are currently being developed. In the listing of multifamily property names, CG has been used as an abbreviation for Colonial Grand, CV as an abbreviation for Colonial Village and CR as an abbreviation for Colonial Reserve.

(2)		Represents year initially completed or, where applicable, year(s) in which additional phases were completed at the property.

(3)		Units (in this table only) refer to multifamily apartment units. Number of units includes all apartment units occupied or available for occupancy at December 31, 2008.

(4)		Represents weighted average rental rate per unit of the 100 consolidated multifamily properties, excluding the three properties in lease-up, at December 31, 2008.

(5)		These properties were previously condominium projects. During the second quarter of 2008, the Company made the decision to lease all remaining unsold units.

(6)		These properties are currently in lease-up and are not included in the Percent Occupied and Average Rental Rate per Unit Totals.

(7)		These properties are currently in development and are not included in the Percent Occupied and Average Rental Rate per Unit Totals.

(8)		This property was renamed during 2008 from Parkside at Woodlake to CV at Woodlake.

(9)		This property was renamed during 2008 from Trophy Chase I & II to Autumn Hill

(10)		This property was renamed during 2008 from Trolley Square East & West to CR at West Franklin.

The following table sets forth certain additional information relating to the unconsolidated multifamily properties as of and for the year ended December 31, 2008.

Unconsolidated Multifamily Properties


											Average
				Number		Approximate					Rental
			Year	of		Rentable Area		Percent			Rate
Unconsolidated Multifamily Property (1)		Location	Completed (2)	Units (3)		(Square Feet)		Occupied			Per Unit (4)

Alabama:
CG at Mountain Brook		Birmingham	1987/1991		392		392,700		95.9	%	$	720
Colony Woods		Birmingham	1988		414		450,682		98.1	%		685
CV at Rocky Ridge		Birmingham	1984		226		258,900		95.1	%		693
The Grove at Riverchase		Birmingham	1996		345		327,223		94.8	%		742
CG at Traditions	(5)	Gulf Shores	2007		324		321,744	LU				—

Subtotal — Alabama					1,701		1,751,249		96.2	%		711

Florida:
CG at Palma Sola		Sarasota	1992		340		293,272		95.3	%		777

Subtotal — Florida					340		293,272		95.3	%		777

Georgia:
CG at Huntcliff		Atlanta	1997		358		364,633		96.4	%		902

Subtotal — Georgia					358		364,633		96.4	%		902

North Carolina:
CG at Research Park (Durham)		Raleigh	2002		370		377,050		94.3	%		775
CV at Cary		Raleigh	1995		319		400,127		91.2	%		868

Subtotal — North Carolina					689		777,177		92.9	%		818

Tennessee:
CG at Brentwood		Nashville	1995		254		286,922		96.1	%		983

Subtotal — Tennessee					254		286,922		96.1	%		983

Texas:
CG at Canyon Creek		Austin	2007		336		348,960		93.5	%		872
Cunningham		Austin	2000		280		258,294		92.5	%		754
Belterra		Fort Worth	2006		288		278,292		91.0	%		882

Subtotal — Texas					904		885,546		92.4	%		839

TOTAL					4,246		4,358,799		92.3	%	$	800


(1)		We hold between a 5% — 35% non-controlling interest in these unconsolidated joint ventures. In the listing of multifamily property names, CG has been used as an abbreviation for Colonial Grand and CV as an abbreviation for Colonial Village.

(2)		Represents year initially completed or, where applicable, year(s) in which additional phases were completed at the property.

(3)		For the purposes of this table, units refer to multifamily apartment units. Number of units includes all apartment units occupied or available for occupancy at December 31, 2008.

(4)		Represents weighted average rental rate per unit of the 12 unconsolidated multifamily properties not in lease-up at December 31, 2008.

(5)		This property is currently in lease-up and is not included in the Percent Occupied and Average Rental Rate per Unit totals.

The following table sets forth the total number of multifamily units, percent leased and average base rental rate per unit as of the end of each of the last five years for our consolidated multifamily properties:


						Average Base
	Number		Percent			Rental Rate
Year-End	of Units		Leased (1)			Per Unit (1)

December 31, 2008		30,353		94.1	%	$	784
December 31, 2007		30,371		96.0	%		880
December 31, 2006		32,715		95.5	%		851
December 31, 2005		34,272		95.3	%		817
December 31, 2004		15,489		94.7	%		851


(1)		Represents weighted average occupancy of the multifamily properties that had achieved stabilized occupancy at the end of the respective period (excluding three properties in lease-up at December 31, 2008).

The following table sets forth the total number of multifamily units, percent leased and average base rental rate per unit as of the end of each of the last five years for our unconsolidated multifamily properties:


						Average Base
	Number		Percent			Rental Rate
Year-End	of Units		Leased (1)			Per Unit (1)

December 31, 2008		4,246		92.3	%	$	800
December 31, 2007		5,943		96.1	%		803
December 31, 2006		5,396		94.6	%		746
December 31, 2005		10,065		95.1	%		666
December 31, 2004		9,520		90.0	%		324


(1)		Represents weighted average occupancy of the multifamily properties that had achieved stabilized occupancy at the end of the respective period (excluding four properties in lease-up at December 31, 2008).

Office Properties

Our office segment is comprised of 48 office properties (including 2 properties in lease-up), consisting of three wholly-owned consolidated properties and 45 properties held through unconsolidated joint ventures, which properties contain, in the aggregate, a total of approximately 16.2 million net rentable square feet. Of the 48 office properties, 18 are located in Alabama (representing 20% of the total office property net rentable square feet), 15 are located in Florida (representing 36% of the total office property net rentable square feet), eight are located in Atlanta, Georgia (representing 24% of the total office property net rentable square feet), three are located in Charlotte, North Carolina (representing 3% of the total office property net rentable square feet), one is located in Memphis, Tennessee (representing 3% of the total office property net rentable square feet), and four are located in Texas (representing 14% of the total office property net rentable square feet). The office properties range in size from approximately 30,000 square feet to 1.2 million square feet. All of the office properties are managed by us, with the exception of two properties in the DRA/CRT Joint Venture, which are managed by unaffiliated third parties.

The following table sets forth certain additional information relating to the consolidated office properties as of and for the year ended December 31, 2008:

Consolidated Office Properties


											Average Base
				Net Rentable					Total		Rent Per
			Year	Area		Percent			Annualized		Leased
Consolidated Office Property (1)		Location	Completed (2)	Square Feet		Leased			Base Rent (3)		Square Foot

Alabama:
Colonial Center Brookwood Village		Birmingham	2007		169,256		99.3	%	$	4,926,839	$	29.31

Subtotal-Alabama					169,256		99.3	%		4,926,839		29.31

Florida:
Town Park 400	(4)	Orlando	2008		175,674	LU				—		—

Subtotal-Florida					175,674		—			—		—

North Carolina:
Metropolitan Midtown	(4)	Charlotte	2008		161,693	LU				—		—

Subtotal-North Carolina					161,693		—			—		—

TOTAL					506,623		99.3	%	$	4,926,839	$	29.31


(1)		At December 31, 2008, the three of the properties listed above are 100% owned by us, including two that are currently in lease-up.

(2)		Represents year initially completed or, where applicable, most recent year in which the property was substantially renovated or in which an additional phase of the property was completed.

(3)		Total Annualized Base Rent includes all base rents at our wholly-owned properties for leases in place at December 31, 2008.

(4)		This property is currently in lease-up and is not included in the Percent Leased and Average Base Rent per Leased Square Foot property totals.

The following table sets forth certain additional information relating to the unconsolidated office properties as of and for the year ended December 31, 2008.

Unconsolidated Office Properties


											Average Base
				Net Rentable					Total		Rent Per
			Year	Area		Percent			Annualized		Leased
Unconsolidated Office Property (1)		Location	Completed (2)	Square Feet		Leased			Base Rent (3)		Square Foot
Alabama:
Colonial Center Blue Lake		Birmingham	1982-2005		166,944		83.4	%	$	2,832,643	$	20.61
Colonial Center Colonnade		Birmingham	1989/99		419,387		98.1	%		8,951,165		21.82
Riverchase Center		Birmingham	1985		306,143		95.0	%		3,089,438		10.70
Land Title Bldg.		Birmingham	1975		29,987		100.0	%		409,208		13.65
International Park		Birmingham	1987/99		210,984		94.2	%		3,906,811		20.29
Independence Plaza		Birmingham	1979-2000		106,216		94.8	%		1,822,843		18.74
Colonial Plaza		Birmingham	1999		170,850		88.8	%		2,703,997		18.31
Colonial Center Lakeside	(4)	Huntsville	1989/90		122,162		97.9	%		2,134,446		17.47
Colonial Center Research Park	(4)	Huntsville	1999		133,750		100.0	%		2,437,553		18.43
Colonial Center Research Place	(4)	Huntsville	1979/84/88		272,558		76.6	%		2,660,518		12.74
DRS Building	(4)	Huntsville	1972/86/90/03		215,485		100.0	%		1,923,432		8.93
Regions Center	(4)	Huntsville	1990		154,297		98.7	%		2,865,601		19.50
Perimeter Corporate Park	(4)	Huntsville	1986/89		234,851		94.1	%		4,031,607		18.33
Progress Center	(4)	Huntsville	1987/89		221,992		88.6	%		2,531,980		12.88
Research Park Office Center	(4)	Huntsville	1998/99		236,453		94.7	%		2,778,868		12.41
Northrop Grumman	(4)	Huntsville	2007		110,275		100.0	%		1,517,466		13.76

Subtotal-Alabama					3,112,334		93.3	%		46,597,576		16.20

Florida:
Broward Financial Center		Ft Lauderdale	1986		326,186		78.3	%		6,513,967		28.95
Baymeadows Way		Jacksonville	1989/90/98		224,281		100.0	%		2,130,669		9.50
Jacksonville Baymeadows		Jacksonville	1999		751,926		88.3	%		8,851,508		13.51
Jacksonville JTB		Jacksonville	2001		416,773		89.5	%		4,978,765		13.74
901 Maitland Center		Orlando	1985		155,822		71.2	%		2,256,793		20.50
Colonial Center at TownPark		Orlando	2001		657,844		97.2	%		13,166,372		21.63
Colonial Center Heathrow		Orlando	1988/96/97/98/99/2000/2001		922,266		88.9	%		16,059,489		19.85
Colonial TownPark Office		Orlando	2004		37,970		84.8	%		782,627		24.31
Orlando Central		Orlando	1980		625,635		74.0	%		8,447,666		18.50
Orlando Lake Mary		Orlando	1999		304,547		74.2	%		4,000,555		17.80
Orlando University		Orlando	2001		386,400		83.6	%		6,489,883		20.18
Colonial Center at Bayside		Tampa	1988/94/97		212,896		76.9	%		3,224,626		19.69
Colonial Place I & II		Tampa	1984/1986		371,674		86.7	%		8,213,079		25.32
Concourse Center		Tampa	1982-2005/1983-2003/1984		294,369		88.1	%		5,073,055		20.08

Subtotal-Florida					5,688,589		85.7	%		90,189,054		18.96

Georgia:
Colonial Center at Mansell Overlook JV		Atlanta	1987/96/97/00		653,040		98.2	%		13,501,086		21.57
Shoppes & Lakeside at Mansell JV		Atlanta	1996/97/05		35,748		73.8	%		689,071		26.10
The Peachtree		Atlanta	1989		316,635		92.6	%		5,425,020		23.43
Atlantic Center Plaza		Atlanta	2001		499,725		91.5	%		13,597,550		30.74
Atlanta Chamblee		Atlanta	2000		1,139,373		89.7	%		20,002,151		19.83
Atlanta Perimeter		Atlanta	1985		182,036		85.2	%		2,933,059		19.43
McGinnis Park		Atlanta	2001		201,421		74.9	%		2,791,600		18.94
Ravinia 3		Atlanta	1991		812,578		92.2	%		13,610,266		18.54

Subtotal-Georgia					3,840,556		91.0	%		72,549,803		21.59


										Average Base
			Net Rentable					Total		Rent Per
		Year	Area		Percent			Annualized		Leased
Unconsolidated Office Property (1)	Location	Completed (2)	Square Feet		Leased			Base Rent (3)		Square Foot

North Carolina:
Esplanade	Charlotte	1981/2007		202,810		83.0	%		3,111,935		19.29
Charlotte University	Charlotte	1999		182,989		78.0	%		2,755,046		19.30

Subtotal-North Carolina				385,799		80.6	%		5,866,981		19.29

Tennessee:
Germantown Center	Memphis	1999		535,756		82.2	%		8,396,407		19.43

Subtotal-Tennessee				535,756		82.2	%		8,396,407		19.43

Texas:
Research Park Plaza III and IV	Austin	2001		357,689		100.0	%		7,939,130		22.20
Signature Place	Dallas	1983/86		436,079		77.3	%		6,000,745		17.94
Post Oak	Houston	1982		1,200,389		93.7	%		22,188,362		20.47
Westchase	Houston	2000		184,259		93.3	%		3,978,554		23.40

Subtotal-Texas				2,178,416		91.4	%		40,106,791		18.84

TOTAL				15,741,450		89.1	%	$	263,706,612	$	19.30


(1)		We hold between a 10% — 15% non-controlling interest in these unconsolidated joint ventures.

(2)		Represents year initially completed or, where applicable, most recent year in which the property was substantially renovated or in which an additional phase of the property was completed.

(3)		Total Annualized Base Rent includes all base rents at our partially-owned properties for leases in place at December 31, 2008.

(4)		We acquired a 40% interest (of which 30% was owned by CPSI, our taxable REIT subsidiary) in three separate tenancy in common (“TIC”) investments of the same nine properties during November 2007. Since the inception of this joint venture, we disposed of portions of our interest through a series of 10 transactions. As a result of these transactions, as of December 31, 2008, our interest has effectively been reduced to 10%.

The following table sets out a schedule of the lease expirations for leases in place as of December 31, 2008, for our consolidated office properties:


			Net Rentable		Annualized		Percent of Total
Year of	Number of		Area Of		Base Rent of		Annual Base Rent
Lease	Tenants with		Expiring Leases		Expiring		Represented by
Expiration	Expiring Leases		(Square Feet) (1)		Leases (1)(2)		Expiring Leases (1)

2009		1		6,687		238,929		2.8	%
2010		—		—		—		—
2011		—		—		—		—
2012		—		—		—		—
2013		6		65,540		1,555,059		18.2	%
2014		—		—		—		—
Thereafter		11		294,584		6,756,833		79.0	%

		18		366,811	$	8,550,821		100.0	%


(1)		Excludes approximately 139,812 square feet of space not leased as of December 31, 2008.

(2)		Annualized base rent is calculated using base rents as of December 31, 2008.

The following table sets out a schedule of the lease expirations for leases in place as of December 31, 2008, for our office properties held in unconsolidated joint ventures:


			Net Rentable		Annualized		Percent of Total
Year of	Number of		Area Of		Base Rent of		Annual Base Rent
Lease	Tenants with		Expiring Leases		Expiring		Represented by
Expiration	Expiring Leases		(Square Feet) (1)		Leases (1)(2)		Expiring Leases (1)

2009		316		2,162,333	$	37,429,836		14.6	%
2010		278		1,636,208		30,756,239		12.0	%
2011		253		2,078,425		40,016,241		15.6	%
2012		166		2,406,896		48,756,422		19.0	%
2013		123		1,408,942		30,296,286		11.8	%
2014		58		1,487,623		24,810,715		9.6	%
2015		33		827,337		13,010,513		5.1	%
2016		16		434,024		8,650,391		3.4	%
2017		11		546,297		8,234,106		3.2	%
2018		8		92,234		1,917,889		0.7	%
Thereafter		15		723,172		13,362,423		5.2	%

		1,277		13,803,491	$	257,241,061		100.0	%


(1)		Excludes approximately 1,937,959 square feet of space not leased as of December 31, 2008.

(2)		Annualized base rent is calculated using base rents as of December 31, 2008.

The following table sets forth the net rentable area, total percent leased and average base rent per leased square foot for each of the last five years for our consolidated office properties:


						Average Base
	Rentable Area		Total			Rent Per Leased
Year-End	(Square Feet)		Percent Leased (1)			Square Foot (1)

December 31, 2008		506,623		99.3	%	$	29.31
December 31, 2007		207,000		97.1	%	$	14.42
December 31, 2006		6,534,000		94.7	%	$	17.97
December 31, 2005		7,744,000		92.4	%	$	19.25
December 31, 2004		5,840,000		92.2	%	$	18.28

(1)

Total Percent Leased and Average Base Rent Per Leased Square Foot is calculated excluding one property in lease-up at December 31, 2008.

The following table sets forth the net rentable area, total percent leased and average base rent per leased square foot for each of the last five years for our unconsolidated office properties:


						Average Base
	Rentable Area		Total			Rent Per Leased
Year-End	(Square Feet)		Percent Leased (1)			Square Foot (1)

December 31, 2008		15,741,450		89.1	%	$	19.30
December 31, 2007		15,866,000		92.3	%	$	18.40
December 31, 2006		10,393,000		88.6	%	$	18.39
December 31, 2005		11,756,000		86.4	%	$	16.01
December 31, 2004		30,000		100.0	%	$	13.23


(1)		Total Percent Leased and Average Base Rent Per Leased Square Foot is calculated excluding two properties in lease-up at December 31, 2008.

Retail Properties

The retail segment is comprised of 28 retail properties (including two properties in lease-up), consisting of six wholly-owned consolidated properties and 22 properties held through unconsolidated joint ventures, which properties contain, in the aggregate, a total of approximately 7.8 million square feet of gross retail area (including space owned by anchor tenants). Of the 28 retail properties, 15 are located in Alabama (representing 60% of the total retail property gross rentable area), six are located in Florida (representing 16% of the total retail property gross rentable area), one is located in Georgia (representing 4% of the total retail property gross rentable area), one is located in North Carolina (representing 2% of the total retail property gross rentable area), three are located in Tennessee (representing 11% of the total retail property gross rentable area), and two are located in Texas (representing 7% of the total retail property gross rentable area). All of the retail properties are managed by us, except Parkway Place and Colonial Promenade Craft Farms, which are managed by unaffiliated third parties.

The following table sets forth certain information relating to the consolidated retail properties as of and for the year ended December 31, 2008.

Consolidated Retail Properties


																	Average
																	Base
																	Rent Per
						GRA (Sq Ft)		GRA (Sq Ft)		Number					Total		Leased
				Year		CLP		Anchor		Of		Percent			Annualized		Square
Consolidated Retail Property (1)			Location	Completed (2)		Owned (3)		Owned (3)(4)		Stores		Leased (3)			Base Rent (5)		Foot (6)


Alabama:
Brookwood Village Center			Birmingham		1974		4,708		—		1		100.0	%	$	83,528	$	17.74
Colonial Brookwood Village			Birmingham		1973/91/00		372,053		231,953		64		94.6	%		6,393,923		27.84
Colonial Promenade Fultondale	(7	)	Birmingham		2007		158,679		210,515		27		92.8	%		2,178,450		20.82
Colonial Promenade Tannehill			Birmingham		2008		200,616		127,307		31		99.3	%		2,972,861		20.71

Subtotal-Alabama							736,056		569,775		123		96.7	%		11,628,762		24.87

Florida:
Colonial Promenade Winter Haven	(7	)	Orlando		1986/2008		286,297		—		18		94.4	%		2,032,071		13.42

Subtotal-Florida							286,297		—		18		94.4	%		2,032,071		13.42

North Carolina
Metropolitan Midtown	(8	)	Charlotte		2008		172,129		—		7	LU				—		—

Subtotal-North Carolina							172,129		—		7		—			—		—

Total							1,194,482		569,775		148		96.1	%	$	13,660,833	$	23.59


(1)		At December 31, 2008, the six properties listed above are 100% owned by us, including one property that is currently in lease-up.

(2)		Represents year initially completed or, where applicable, year(s) in which the property was substantially renovated or an additional phase of the property was completed.

(3)		For the purposes of this table, GRA refers to gross retail area, which includes gross leasable area and space owned by anchor tenants. Percent leased excludes anchor-owned space.

(4)		Represents space owned by anchor tenants.

(5)		Total Annualized Base Rent includes all base rents at our wholly-owned properties for leases in place at December 31, 2008.

(6)		Includes tenants occupying less than 10,000 square feet (i.e., excludes anchor tenants). Rental terms for anchor tenants generally are not representative of the larger portfolio.

(7)		This property was classified as held for sale at December 31, 2008.

(8)		This property is currently in lease-up and is not included in Percent Leased and Average Base Rent per Leased Square Foot property totals.

The following table sets forth certain information relating to the unconsolidated retail properties as of and for the year ended December 31, 2008.

Unconsolidated Retail Properties


																	Average
																	Base
																	Rent Per
						GRA (Sq Ft)		GRA (Sq Ft)		Number					Total		Leased
				Year		CLP		Anchor		Of		Percent			Annualized		Square
Unconsolidated Retail Property (1)			Location	Completed (2)		Owned (3)		Owned (3)(4)		Stores		Leased (3)			Base Rent (5)		Foot (6)


Alabama:
Colonial Pinnacle Tutwiler II			Birmingham		2007		65,000		—		2		100.0	%	$	899,761	$	—
Colonial Promenade Alabaster			Birmingham		2005		218,681		392,868		27		96.9	%		2,908,620		19.25
Colonial Promenade Alabaster II			Birmingham		2007		129,348		225,921		26		96.8	%		2,043,561		21.35
Colonial Promenade Hoover			Birmingham		2002		164,866		215,766		33		93.9	%		1,964,666		21.35
Colonial Promenade Trussville			Birmingham		2000		388,302		—		23		96.2	%		3,237,307		15.45
Colonial Promenade Trussville II			Birmingham		2004		58,182		224,509		15		92.1	%		864,954		17.56
Colonial Shoppes Clay			Birmingham		1982/2004		66,165		—		10		88.3	%		700,704		13.91
Colonial Shoppes Colonnade			Birmingham		1989/2005		125,462		—		26		87.5	%		1,786,129		18.39
Colonial Promenade Craft Farms	(7	)	Gulf Shores		2007		220,035		125,000		32	LU				—		—
Parkway Place			Huntsville		1999		287,556		348,164		69		88.8	%		5,707,447		29.35
Colonial Promenade Madison			Madison		2000		110,712		—		15		100.0	%		1,189,124		15.28

Subtotal-Alabama							1,834,309		1,532,228		278		94.0	%		21,302,273		21.86

Florida:
Colonial Promenade Lakewood			Jacksonville		1995		194,840		—		44		82.9	%		1,858,743		14.58
Colonial Promenade Hunter’s Creek			Orlando		1993/95		227,536		—		23		47.0	%		1,434,668		22.04
Colonial Promenade TownPark			Orlando		2005		198,421		—		23		87.5	%		2,207,977		25.16
Colonial Promenade Burnt Store			Punta Gorda		1990		95,023		—		19		91.3	%		858,088		13.56
Colonial Promenade Northdale			Tampa		1988/2000		175,917		55,000		21		96.5	%		1,828,372		17.56

Subtotal-Florida							891,737		55,000		130		78.3	%		8,187,848		18.27

Georgia:
Colonial Promenade Beechwood			Athens		1963/92/05		350,091		—		39		100.0	%		3,882,049		19.32

Subtotal-Georgia							350,091		—		39		100.0	%		3,882,049		19.32

Tennessee:
Colonial Pinnacle Turkey Creek			Knoxville		2005		485,584		—		61		96.5	%		7,769,604		23.82
Colonial Pinnacle Turkey Creek III	(8	)	Knoxville	Dev			—		—		—		—			—		—
Colonial Promenade Smyrna			Smyrna		2008		148,333		267,502		24		93.4	%		2,256,479		20.33

Subtotal-Tennessee							633,917		267,502		85		95.8	%		10,026,083		22.90

Texas:
Colonial Pinnacle Kingwood Commons			Houston		2003/2004		164,356		—		29		82.2	%		2,358,942		21.83
Colonial Promenade Portofino			Houston		2000		371,560		—		40		92.0	%		5,306,304		22.36

Subtotal-Texas							535,916		—		69		89.0	%		7,665,246		22.17

Total							4,245,970		1,854,730		601		90.7	%	$	51,063,499	$	21.17


(1)		We hold between a 5% — 50% non-controlling interest in these unconsolidated joint ventures.

(2)		Represents year initially completed or, where applicable, year(s) in which the property was substantially renovated or an additional phase of the property was completed.

(3)		GRA refers to gross retail area, which includes gross leasable area and space owned by anchor tenants. Percent leased excludes anchor-owned space.

(4)		Represents space owned by anchor tenants.

(5)		Total Annualized Base Rent includes all base rents at our partially-owned properties for leases in place at December 31, 2008.

(6)		Includes tenants occupying less than 10,000 square feet (i.e., excludes anchor tenants). Rental terms for anchor tenants generally are not representative of the larger portfolio. This property is currently in lease-up and is not included in Percent Leased, Total Annualized Base Rent and Average Base Rent per Leased Square Foot property totals.

(7)		This property is currently in development and is not included in Percent Leased, Total Annualized Base Rent and Average Base Rent per Leased Square Foot property totals.

The following table sets out a schedule of the lease expirations for leases in place as of December 31, 2008, for our consolidated retail properties:


			Net Rentable		Annualized		Percent of Total
Year of	Number of		Area Of		Base Rent of		Annual Base Rent
Lease	Tenants with		Expiring Leases		Expiring		Represented by
Expiration	Expiring Leases		(Square Feet) (1)		Leases (1)		Expiring Leases (1)


2009		14		29,699	$	460,550		3.0	%
2010		8		18,794		351,183		2.3	%
2011		23		52,229		1,489,611		9.7	%
2012		26		116,939		2,235,566		14.6	%
2013		22		66,675		1,200,067		7.8	%
2014		9		26,550		525,026		3.4	%
2015		3		13,100		295,980		1.9	%
2016		3		113,725		709,800		4.6	%
2017		10		70,032		1,430,611		9.3	%
2018		12		94,605		1,982,738		12.9	%
Thereafter		18		486,711		4,664,698		30.4	%

		148		1,089,059	$	15,345,830		100.0	%


(1)		Annualized base rent is calculated using base rents as of December 31, 2008.

The following table sets out a schedule of the lease expirations for leases in place as of December 31, 2008, for our retail properties held in unconsolidated joint ventures:


			Net Rentable		Annualized		Percent of Total
Year of	Number of		Area Of		Base Rent of		Annual Base Rent
Lease	Tenants with		Expiring Leases		Expiring		Represented by
Expiration	Expiring Leases		(Square Feet) (1)		Leases (1)		Expiring Leases (1)


2009		62		132,827	$	2,420,374		4.5	%
2010		92		410,958		5,302,421		9.9	%
2011		87		411,930		6,436,848		12.0	%
2012		95		450,952		6,476,259		12.1	%
2013		73		274,022		5,470,293		10.2	%
2014		29		107,339		1,800,344		3.4	%
2015		25		261,468		3,081,444		5.7	%
2016		45		352,259		5,442,442		10.1	%
2017		35		253,440		4,308,555		8.0	%
2018		25		150,475		2,706,801		5.0	%
Thereafter		33		961,498		10,181,964		19.0	%

		601		3,767,168	$	53,627,745		100.0	%


(1)		Annualized base rent is calculated using base rents as of December 31, 2008.

The following table sets forth the total gross retail area, percent leased and average base rent per leased square foot as of the end of each of the last five years for the consolidated retail properties:


	Gross					Average
	Retail Area		Percent			Base Rent Per Leased
Year-End	(Square Feet)		Leased (1)			Square Foot (1) (2)

December 31, 2008		1,764,257		96.1	%	$	23.59
December 31, 2007		1,042,000		95.1	%	$	24.09
December 31, 2006		7,271,300		93.1	%	$	17.45
December 31, 2005		8,551,300		91.6	%	$	17.39
December 31, 2004		14,173,900		91.4	%	$	18.58


(1)		Total Percent Leased and Average Base Rent Per Leased Square Foot is calculated excluding one property in lease-up at December 31, 2008.

(2)		Average base rent per leased square foot is calculated using specialty store year-end base rent figures.

The following table sets forth the total gross retail area, percent leased and average base rent per leased square foot as of the end of each of the last five years for the unconsolidated retail properties:


	Gross					Average
	Retail Area		Percent			Base Rent Per Leased
Year-End	(Square Feet)		Leased (1)			Square Foot (1) (2)

December 31, 2008		6,100,700		90.7	%	$	21.17
December 31, 2007		9,514,000		90.0	%	$	20.62
December 31, 2006		5,466,700		93.9	%	$	20.93
December 31, 2005		4,901,700		93.4	%	$	21.13
December 31, 2004		1,120,100		85.4	%	$	22.64


(1)		Total Percent Leased and Average Base Rent Per Leased Square Foot is calculated excluding one property in lease-up at December 31, 2008.

(2)		Average base rent per leased square foot is calculated using specialty store year-end base rent figures.

For-Sale Residential

As of December 31, 2008, we had six consolidated for-sale developments, including one lot development. As of December 31, 2008, net of the $35.9 million impairment charge recorded in 2008 and the $43.3 million impairment charge recorded in 2007 on our consolidated assets, we had approximately $57.6 million of capital cost (based on book value, including pre-development and land costs) invested in these six consolidated projects (which excludes properties originally planned as condominium conversions but subsequently placed into the multifamily rental pool prior December 31, 2008). See Note 7 — “For-Sale Activities” in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for additional discussion.

Undeveloped Land

We currently own various parcels of land that are held for future developments. Land adjacent to multifamily properties typically would be considered for potential development of another phase of an existing multifamily property if we determine that the particular market can absorb additional apartment units. For expansions at office and retail properties, we own parcels both contiguous to the boundaries of the properties, which would accommodate additional office buildings and expansion of shopping centers, and outparcels which are suitable for restaurants, financial institutions, hotels, or free standing retailers. However, as previously discussed, we have postponed future development activities (including previously identified future development projects) and conversion projects in the near term and we have decided to accelerate plans to dispose of our for-sale residential assets including condominium conversions and land held for future for-sale residential and mixed-use developments.

Property Markets

The table below sets forth certain information with respect to the geographic concentration of our consolidated properties as of December 31, 2008.

Geographic Concentration of Consolidated Properties


	Units (Multifamily)
State	(1)		NRA (Office) (2)		GRA (Retail) (3)


Alabama		2,595		206,703		1,305,831
Arizona		952		—		—
Florida		2,573		175,674		286,297
Georgia		4,719		—		—
Nevada		—		—		—
North Carolina		8,317		161,693		172,129
South Carolina		1,578		—		—
Tennessee		349		—		—
Texas		6,390		—		—
Virginia		2,880		—		—

Total		30,353		544,070		1,764,257


(1)		Units (in this table only) refer to multifamily apartment units.

(2)		NRA refers to net rentable area of office space.

(3)		GRA refers to gross retail area, which includes gross leasable area and space owned by anchor tenants.

Our consolidated and unconsolidated operating properties, including those currently in development, are located in a variety of distinct submarkets within Alabama, Arizona, Florida, Georgia, Nevada, North Carolina, South Carolina, Tennessee, Texas and Virginia. However, Birmingham, Alabama; Orlando, Florida; Atlanta, Georgia; Charlotte and Raleigh, North Carolina; and Austin, Dallas and Houston, Texas are our primary markets. We believe that our markets in these 10 states are characterized by stable and increasing populations. However, as a result of the ongoing recession, the markets in which our properties are located have experienced reduced spending, falling home prices and mounting job losses. Although the weakening economy and mounting job losses in the U.S., together with the downturn in the overall U.S. housing market have resulted in increased supply and led to deterioration in the multifamily market generally, we believe that in the long run these markets should continue to provide a steady demand for multifamily, office and retail properties.

Mortgage Financing

As of December 31, 2008, we had approximately $1.8 billion of collateralized and unsecured indebtedness outstanding with a weighted average interest rate of 5.1% and a weighted average maturity of 4.8 years. Of this amount, approximately $103.8 million was collateralized mortgage financing and $1.7 billion was unsecured debt. Our mortgaged indebtedness was collateralized by five of our consolidated properties and carried a weighted average interest rate of 5.2% and a weighted average maturity of 9.1 years. The following table sets forth our collateralized and unsecured indebtedness in more detail.


(dollars in thousands)
							Anticipated
							Annual Debt
	Interest			Principal Balance			Service (1/1/09 —				Balance Due
Property (1)	Rate			(as of 12/31/08)			12/31/09)		Maturity Date		on Maturity
Multifamily Properties
CV at Matthews		5.800	%	$	14,700		$	853		03/29/16	$	14,700
CV at Timber Crest		3.370	%(3)		13,652			460		08/15/15		13,652
CG at Wilmington		5.380	%(3)		27,100			1,458		04/01/18		27,100
CG at Trinity Commons		5.430	%(3)		30,500			1,656		04/01/18		30,500
CG at Godley Station		5.550	%		17,834			1,635		06/01/25		—
Other debt:
Unsecured Credit Facility (2)		2.040	%(3)		311,630			6,357		06/15/12		311,630
Medium Term Notes		8.800	%		20,035			1,763		02/01/10		20,035
Medium Term Notes		8.800	%		5,000			440		03/15/10		5,000
Medium Term Notes		8.050	%		10,000			805		12/27/10		10,000
Medium Term Notes		8.080	%		10,000			808		12/24/10		10,000
Senior Unsecured Notes		6.875	%		100,000			6,875		08/15/12		100,000
Senior Unsecured Notes		6.150	%		113,000			6,950		04/15/13		113,000
Senior Unsecured Notes		4.800	%		100,000			4,800		04/01/11		100,000
Senior Unsecured Notes		6.250	%		232,071			14,504		06/15/14		232,071
Senior Unsecured Notes		4.750	%		226,758			10,771		02/01/10		226,758
Senior Unsecured Notes		5.500	%		325,000			17,875		10/01/15		325,000
Senior Unsecured Notes		6.050	%		208,159			12,594		09/01/16		208,159
Unamortized Discounts					(3,420	)						(3,420	)

TOTAL CONSOLIDATED DEBT		5.096	%	$	1,762,019		$	90,604			$	1,744,185


(1)		Certain of the properties were developed in phases and separate mortgage indebtedness may encumber each of the various phases. In the listing of property names, CG has been used as an abbreviation for Colonial Grand and CV as an abbreviation for Colonial Village.

(2)		This unsecured credit facility bears interest at a variable rate, based on LIBOR plus a spread of 75 basis points. The facility also includes a competitive bid feature that allows us to convert up to $337.5 million under the unsecured credit facility to a fixed rate, for a fixed term not to exceed 90 days. At December 31, 2008, we had no amounts outstanding under the competitive bid feature.

(3)		Represents variable rate debt.

In addition to our consolidated debt, all of our unconsolidated joint venture properties are also subject to mortgage loans. Under these unconsolidated joint venture non-recourse mortgage loans, we could, under certain circumstances, be responsible for portions of the mortgage indebtedness in connection with certain customary non-recourse carve-out provisions, such as environmental conditions, misuse of funds, and material misrepresentations. Our pro-rata share of such indebtedness as of December 31, 2008 was $476.3 million. In addition, we have made certain guarantees in connection with our investment in unconsolidated joint ventures (see Note 20 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K).

Item 3. Legal Proceedings.

We are involved in various lawsuits and claims arising in the normal course of business, many of which are expected to be covered by liability insurance. In the opinion of management, although the outcomes of these normal course suits and claims are uncertain, in the aggregate they should not have a material adverse effect on our business, financial condition, and results of operations. In addition, neither we nor any of our properties are presently subject to any material litigation arising out of the ordinary course of business. For additional information regarding legal disputes, see Note 20 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

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

No matters were submitted to a vote of our unitholders during the fourth quarter of 2008.

PART II

Item 5. Market for Registrant’s Common Equity and Related Shareholder Matters.

There is no established market trading for the units. As of February 25, 2009, there were 78 holders of record of units.

The Trust has made an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ending December 31, 1993. If the Trust qualifies for taxation as a REIT, it generally will not be subject to Federal income tax to the extent it distributes at least 90% of its REIT taxable income to its shareholders. Our partnership agreement requires us to distribute at least quarterly 100% of our available cash (as defined in the partnership agreement) to holders of our partnership units. Consistent with our partnership agreement, we intend to continue to distribute quarterly an amount of our available cash sufficient to enable the Trust to pay quarterly dividends to its shareholders in an amount necessary to satisfy the requirements applicable to REITs under the Internal Revenue Code and to eliminate federal income and excise tax liability.

The following table sets forth the distributions per common unit paid by us during the periods indicated below:


Calendar Period	Distribution
2008:
First Quarter	$	.50
Second Quarter	$	.50
Third Quarter	$	.50
Fourth Quarter	$	.25

2007:
First Quarter	$	.68
Second Quarter (1)	$	.89
Third Quarter	$	.68
Fourth Quarter	$	.50


(1)		Includes a special distribution paid during the second quarter of 2007 of $0.21 per unit in connection with the completion of the Strategic Transactions (see Note 2 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K).

The Trust intends to continue to declare quarterly distributions on its common shares. In order to maintain its qualification as a REIT, the Trust must make annual distributions to its shareholders of at least 90% of its taxable income. Future distributions will be declared and paid at the discretion of the Board of Trustees of the Trust and the amount and timing of distributions will depend upon cash generated by operating activities, our financial condition, capital requirements, the Trust’s annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as the Board of Trustees of the Trust deems relevant. In light of recent Internal Revenue procedure changes, the Board of Trustees of the Trust is currently considering paying future distributions to its shareholders, beginning in May 2009, in a combination of common shares and cash. No decisions have been made at this time as to the manner in which distributions will be paid to unitholders in the event Trust shareholders receive distributions in cash and stock, as described above. This alternative dividend structure is intended to allow us to retain additional capital, thereby strengthening our balance sheet. The Board of Trustees of the Trust reviews the dividend quarterly and there can be no assurance as to the manner in which future dividends will be paid or that the current dividend level will be maintained in future periods.

The Trust from time to time issues common shares of beneficial interest (“Common Shares”) pursuant to its Direct Investment Program, its 2008 Omnibus Incentive Plan and its Employee Share Option and Restricted Share Plan (which expired during 2008), in transactions that are registered under the Securities Act of 1933, as amended (the “Act”). Pursuant to CRLP’s Third Amended and Restated Agreement of Limited Partnership, each time the Trust issues Common Shares pursuant to the foregoing plans, CRLP issues to the Trust, its general partner, an equal number of units for the same price at which the Common Shares were sold, in transactions that are not registered under the Act in reliance on Section 4(2) of the Act due to the fact that units were issued only to the Trust and therefore, did not involve a public offering. During the quarter ended December 31, 2008, CRLP issued 42,517 common units to the Trust for direct investments and other issuances under these plans for an aggregate of approximately $0.4 million.

Issuer Purchases of Equity Securities

A summary of our repurchases of our common units for the three months ended December 31, 2008 was as follows:


					Units Purchased as		Maximum Number of
					Part of Publicly		Units that may yet
	Total Number of		Average Price Paid		Announced Plans or		be Purchased Under
	Units Purchased (1)		per Unit		Programs		the Plans
October 1 - October 31, 2008		1,430	$	11.30		—		—
November 1 - November 30, 2008		1,040	$	6.71		—		—
December 1 - December 31, 2008		1,157	$	7.17		—		—

Total		3,627	$	8.67		—		—


(1)		Represents the number of units acquired by our Trust from employees as payment of applicable statutory minimum withholding taxes owed upon vesting of restricted stock granted under the Trust’s Third Amended and Restated Stock Option and Restricted Stock Plan. Whenever the Trust purchases or redeems its preferred and common shares, we purchase, redeem or cancel an equivalent number of our units.

Item 6. Selected Financial Data.

The following table sets forth selected financial and operating information on a historical basis for CRLP for each of the five years ended December 31, 2008. The following information should be read together with our consolidated financial statements and notes thereto included in Item 8 of this Form 10-K. Our historical results may not be indicative of future results due, among other things, to our strategic initiative of being a multifamily-focused REIT and our current decision to accelerate the disposal of our for-sale residential assets and land held for future for-sale residential and mixed-use developments, and to postpone future development activities (including previously identified future development projects) until we determine that the current economic environment has sufficiently improved, as discussed further under Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Strategy and Outlook” (see Note 1 — Organization and Basis of Presentation in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

COLONIAL REALTY LIMITED PARTNERSHIP
SELECTED FINANCIAL INFORMATION


(in thousands, except per unit data)	2008			2007			2006		2005			2004

OPERATING DATA


Total revenue	$	344,458		$	422,939		$	466,037	$	380,774		$	231,707
Expenses:
Depreciation and amortization		105,512			120,152			143,549		150,328			67,260
Impairment charges		116,550			44,129			—		—			—
Other operating		185,719			229,859			223,349		159,282			95,625
Income from operations		(63,323	)		28,799			99,139		71,164			68,822
Interest expense		75,153			92,475			121,441		112,798			64,107
Interest income		2,776			7,591			7,754		4,354			1,046
Gains from sales of property		3,799			29,450			66,794		105,608			4,748
Other income, net		29,083			5,906			39,528		(834	)		4,716
Income from continuing operations		(102,803	)		(22,064	)		90,940		62,889			15,225
Income from discontinued operations		52,200			98,752			161,924		220,580			62,089
Distributions to preferred unitholders		16,024			20,689			28,153		29,641			22,274
Net income available to common unitholders		(66,654	)		55,639			222,584		253,828			55,040
Per unit — basic:
Income from continuing operations	$	(2.09	)	$	(0.76	)	$	1.08	$	0.68		$	(0.19	)
Income from discontinued operations		0.92			1.74			2.88		4.50			1.66

Net income per unit — basic	$	(1.17	)	$	0.98		$	3.96	$	5.18		$	1.47


Per unit — diluted:
Income from continuing operations	$	(2.09	)	$	(0.76	)	$	1.06	$	0.67		$	(0.19	)
Income from discontinued operations		0.92			1.74			2.86		4.46			1.63

Net income per unit — diluted	$	(1.17	)	$	0.98		$	3.92	$	5.13		$	1.45


Distributions per unit ⁽¹⁾	$	1.75		$	2.75		$	2.72	$	2.70		$	2.68


BALANCE SHEET DATA


Land, buildings and equipment, net	$	2,594,032		$	2,394,587		$	3,562,951	$	3,888,927		$	2,426,379
Total assets		3,154,501			3,229,637			4,431,774		4,499,227			2,801,324
Total long-term liabilities		1,762,019			1,641,839			2,397,906		2,494,350			1,855,787


OTHER DATA

Total properties (at end of year)		192			200			223		261			153


(1)		Includes a special distribution paid of $0.21 per unit during the second quarter of 2007(see Note 2 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K).

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the consolidated financial condition and consolidated results of operations should be read together except as otherwise noted, with the consolidated financial statements of CRLP and notes thereto contained in Item 8 of this Form 10-K.

General

As described above, under Item 1 — “Business-Business Strategy”, in June and July 2007, we completed our strategic initiative to become a multifamily focused REIT.

We are the operating partnership of the Trust, our general partner, which is a publically traded, multifamily-focused REIT that owns, develops and operates multifamily communities primarily located in the Sunbelt region of the United States. Also, we create additional value for our unitholders by managing commercial assets through joint venture investments and pursuing development opportunities. The Trust is a fully-integrated real estate company, which means that it is engaged in the acquisition, development, ownership, management and leasing of multifamily communities and other commercial real estate properties. The Trust’s assets are owned by, and substantially all of its business is conducted through, us and our subsidiaries and other affiliates. The Trust holds approximately 84.6% of the interests in us. .

As of December 31, 2008, we owned or maintained a partial ownership in 116 multifamily apartment communities containing a total of 35,504 apartment units (consisting of 103 wholly-owned consolidated properties and 13 properties partially-owned through unconsolidated joint venture entities aggregating 31,258 and 4,246 units, respectively), 48 office properties containing a total of approximately 16.2 million square feet of office space (consisting of three wholly-owned consolidated properties and 45 properties partially-owned through unconsolidated joint-venture entities aggregating 0.5 and 15.7 million square feet, respectively), 28 retail properties containing a total of approximately 5.4 million square feet of retail space, excluding anchor-owned square-footage (consisting of six wholly-owned properties and 22 properties partially-owned through unconsolidated joint venture entities aggregating 1.2 million and 4.2 million square feet, respectively), and certain parcels of land adjacent to or near certain of these properties. As of December 31, 2008, consolidated multifamily, office and retail properties that had achieved stabilized occupancy (which occurs once a property has attained 93% physical occupancy) were 94.1%, 89.7% and 91.8% leased, respectively.

As a lessor, the majority of our revenue is derived from residents and tenants under existing leases at our properties. Therefore, our operating cash flow is dependent upon the rents that we are able to charge to our residents and tenants, and the ability of these residents and tenants to make their rental payments. We also receive third-party management fees generated from third-party management agreements related to management of properties held in joint ventures.

Business Strategy and Outlook

We continue to experience a global financial and economic crisis, which has included, among other things, significant reductions and disruptions in available capital and liquidity from banks and other providers of credit, substantial reductions and/or volatility in equity values worldwide, and concerns that the weakening U.S. and worldwide economies may enter into a prolonged recessionary period. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in some cases have resulted in the unavailability of financing even for companies who are otherwise qualified to obtain financing. In addition, the weakening economy and mounting job losses in the U.S., and the slowdown in the overall U.S. housing market, resulting in increased supply, have led to deterioration in the multifamily market. The turmoil in the credit and capital markets, continuing job losses and our expectation that the economy will to continue to remain weak or weaken further before we see any improvements have caused us to recalibrate our business plan.

Our outlook for 2009 reflects a challenging year. We have renewed our focus on liquidity, maintaining a strong balance sheet, addressing our near term debt maturities, managing our existing properties and operating our portfolio efficiently and reducing our overhead. To help implement our plans to strengthen the balance sheet and deleverage the company, the Board of Trustees of the Trust decided to accelerate plans to dispose of our for-sale residential assets including condominium conversions and land held for future sale and for-sale residential and mixed-use developments. We also significantly reduced our development pipeline during 2008, including postponing future development activities until we determine that the current economic environment has sufficiently improved. As a result of these decisions, as discussed further below, we incurred a non-cash impairment charge of $116.9 million during the fourth quarter of 2008.

As discussed further below, in light of recent Internal Revenue procedure changes, the Board of Trustees of the Trust is currently considering paying future distributions to its shareholders, beginning in May 2009, in a combination of common

shares and cash. No decisions have been made at this time as to the manner in which distributions will be paid to unitholders in the event Trust shareholders receive distributions in cash and stock. This alternative dividend structure is intended to allow us to retain additional capital, thereby strengthening our balance sheet. However, the Board of Trustees of the Trust reserves the right to pay any future distribution entirely in cash. We also intend to look for opportunities to repurchase our additional outstanding unsecured senior notes and the Trust intends to look for opportunities to repurchase its Series D preferred depositary shares, in each case at appropriate prices and as circumstances warrant. Upon any repurchase of Series D preferred depository shares by the Trust, we will repurchase a number of Series D Cumulative Redeemable Preferred Units corresponding to the number of 8 1/8% Series D Cumulative Redeemable Preferred Shares represented by the repurchased Series D preferred depository shares. These actions are intended to streamline the business and allow us to further concentrate on our multifamily strategy.

We believe that our business strategy, the availability of borrowings under our credit facilities, combined with limited debt maturities in 2009, the number of unencumbered properties in our multifamily portfolio and the additional financing through Fannie Mae expected to be obtained in the first quarter of 2009, has us positioned to work through this challenging economic environment. As of December 31, 2008, we were in compliance with all of our financial covenants. Our current projections indicate that we will be able to operate in compliance with these covenants in 2009 and beyond. However, if the real estate market continues to decline, if we fail to meet our operational budget, and/or if we are unable to successfully execute our plans as further described below, we could violate these covenants, and as a result may be subject to higher finance costs and fees and/or accelerated maturities. As mentioned elsewhere herein, we have adopted a plan which focuses on lowering leverage and increasing financial flexibility.

We intend to prudently manage and minimize discretionary operating and capital expenditures and raising the necessary debt and equity capital to maximize liquidity, repay outstanding borrowings as they mature and comply with financial covenants in 2009. As mentioned previously, we also intend to raise additional capital through the issuance of collateralized financings of up to $500 million through Fannie Mae and/or Freddie Mac and asset sales. In addition, and as the market allows, we may contemplate strategically repurchasing our publicly traded unsecured debt at a discount to par and may consider paying a portion of the Trust’s 2009 quarterly dividends with common shares, both of which should result in improvement of our financial covenant ratios.

We believe we have reasonably projected our 2009 operations for financial covenant purposes, as well as considered other viable alternatives and contingencies to address our objectives of reducing leverage and continuing to comply with our covenants. However, the current volatility in the real estate market renders it at least possible that we may not be able to remain compliant with our covenants in 2009.

Executive Summary of Results of Operations

The following discussion of results of operations should be read in conjunction with the Consolidated Statements of Operations and Comprehensive Income (Loss) and the Operating Results Summary included below.

For the year ended December 31, 2008, we reported a net loss to common unitholders of $(66.7) million, or $(1.17) per diluted unit, compared with net income of $55.6 million, or $0.98 per diluted unit, for the same period in 2007. In addition to our results from operations, results for the 2008 period include a non-cash impairment charge of $116.9 million ($114.9 million included in continuing operations, $2.0 included in discontinued operations), related to certain of our for-sale residential properties and land held for future sale and for-sale and mixed-use development, and one retail development property, $16.0 million of gains from the repurchase of unsecured senior notes, $49.9 million of gains from the disposition of assets, and the write-off of $4.4 million of abandoned pursuit costs.

In addition to the foregoing, the other principal factors that influenced our operating results for 2008 are as follows:

•		We sold six wholly-owned multifamily apartment communities and our interest in seven partially-owned multifamily apartment communities for an aggregate sales price of $155.4 million;

•		We sold one wholly-owned office asset and our interest in one partially-owned office asset for gross proceeds of $8.5 million;

•		We sold our interest in a partially-owned retail joint venture, consisting of six retail assets, for gross proceeds of $38.3 million;

•		We completed the development of eight multifamily properties consisting of 1,780 apartment homes;

•		The multifamily portfolio experienced only modest growth during the year ended 2008 compared to the same period in 2007. Continued weakening in the economy and mounting job losses in the U.S., as well as the downturn in the overall U.S. housing market, has resulted in increased supply and led to deterioration in the multifamily market. As a

		result, for 2008, we have experienced greater pricing pressure, which in turn, has slowed our rental rate growth. Results for the year ended 2008 were driven by growth in Austin and Dallas/Fort Worth, Texas; Raleigh and Charlotte, North Carolina; Richmond, Virginia; and Huntsville and Birmingham, Alabama. During the last half of 2008, we have experienced slower traffic trends and job losses in our markets, which led to declining growth trends that we expect to continue in 2009;

•		Operating revenues and expenses associated with our office and retail assets decreased primarily due to:

	•		the office and retail joint venture transactions that were consummated during June 2007; and

	•		the outright sale of 16 retail assets during 2007;

•		We repurchased $195.0 million of unsecured senior notes in separate transactions at an average of discount of 9.1% to par value. We recognized an aggregate gain of approximately $16.0 million from these transactions, net of issuance costs;

•		The Trust repurchased 988,750 of its outstanding 8 1/8% Series D Preferred depositary shares for an aggregate purchase price of $24.0 million at a 3% discount to the liquidation preference price. In connection therewith, we repurchased a number of Series D Cumulative Redeemable Preferred Units corresponding to the number of 8 1/8% Series D Cumulative Redeemable Preferred Shares represented by the repurchased Series D preferred depository shares. Net of non-cash issuance costs written off, the impact of these transactions on net income was minimal; and

•		We experienced a $17.3 million reduction in interest expense primarily as a result of property dispositions.

Additionally, our multifamily portfolio physical occupancy for consolidated properties was 94.1%, 96.0% and 95.5% for the years ended December 31, 2008, 2007 and 2006.

Operating Results Summary

The following operating results summary is provided for reference purposes and is intended to be read in conjunction with the narrative discussion. This information is presented to correspond with the manner in which we analyze our operating results.


	For the Years Ended December 31,									Variance
(amounts in thousands)	2008			2007			2006			2008 v 2007			2007 v 2006
Revenues:
Minimum rent	$	276,039		$	319,141		$	362,297		$	(43,102	)	$	(43,156	)
Minimum rent from affiliates		96			1,153			2,547			(1,057	)		(1,394	)
Percentage rent		416			917			957			(501	)		(40	)
Tenant recoveries		3,737			11,397			22,438			(7,660	)		(11,041	)
Other property related revenue		35,404			32,531			29,621			2,873			2,910
Construction revenues		10,137			38,448			30,484			(28,311	)		7,964
Other non-property related revenues		18,629			19,352			17,693			(723	)		1,659

Total revenue		344,458			422,939			466,037			(78,481	)		(43,098	)


Expenses:
Property operating expenses		84,929			93,056			99,407			(8,127	)		(6,351	)
Taxes, licenses and insurance		38,806			44,221			48,230			(5,415	)		(4,009	)
Construction expenses		9,530			34,546			29,411			(25,016	)		5,135
Property management expenses		8,426			12,178			12,535			(3,752	)		(357	)
General and administrative expenses		23,326			25,650			20,181			(2,324	)		5,469
Management fee and other expense		15,316			15,673			12,575			(357	)		3,098
Restructuring charges		1,028			3,019			—			(1,991	)		3,019
Investment and development		4,358			1,516			1,010			2,842			506
Depreciation & amortization		105,512			120,152			143,549			(14,640	)		(23,397	)
Impairment and other losses		116,550			44,129			1,600			72,421			42,529

Total operating expenses		407,781			394,140			368,498			13,641			25,642

Income (loss) from operations		(63,323	)		28,799			97,539			(92,122	)		(68,740	)


Other income (expense):
Interest expense and debt cost amortization		(75,153	)		(92,475	)		(121,441	)		17,322			28,966
Gains (losses) on retirement of debt		15,951			(10,363	)		(641	)		26,314			(9,722	)
Interest income		2,776			7,591			7,754			(4,815	)		(163	)
Income from partially-owned unconsolidated entities		12,516			11,207			34,823			1,309			(23,616	)
Gains (losses) from hedging activities		(385	)		345			5,535			(730	)		(5,190	)
Gains from sales of property, net of income taxes		3,799			29,450			66,794			(25,651	)		(37,344	)
Transaction costs		—			(11,026	)		—			11,026			(11,026	)
Income taxes and other		1,001			15,743			(189	)		(14,742	)		15,932

Total other income (expense)		(39,495	)		(49,528	)		(7,365	)		10,033			(42,163	)

Income (loss) before minority interest and discontinued operations		(102,818	)		(20,729	)		90,174			(82,089	)		(110,903	)
Minority interest of limited partners		15			(1,335	)		766			1,350			(2,101	)

Income (loss) from continuing operations		(102,803	)		(22,064	)		90,940			(80,739	)		(113,004	)
Income from discontinued operations		52,200			98,752			161,924			(46,552	)		(63,172	)


Net income (loss)		(50,603	)		76,688			252,864			(127,291	)		(176,176	)


Distributions to general partner preferred unitholders		(8,773	)		(13,439	)		(20,902	)		4,666			7,463
Distributions to limited partner preferred unitholders		(7,251	)		(7,250	)		(7,250	)		(1	)		—
Preferred unit issuance costs write-off, net of discount		(27	)		(360	)		(2,128	)		333			1,768

Net income (loss) available to common unitholders	$	(66,654	)	$	55,639		$	222,584		$	(122,293	)	$	(166,945	)

Operating Results — 2008 compared to 2007

Minimum rent

Minimum rent for the year ended December 31, 2008 was $276.1 million, a decrease of $44.2 million from the comparable prior year period. The decline in minimum rent was attributable to a decrease of approximately $58.0 million due to a reduced number of consolidated office and retail properties in 2008 resulting from the office and retail joint venture

transactions that closed during 2007. This decrease was offset by increases in multifamily rental revenues of $14.6 million, of which $7.0 million is due to development projects placed into service, $4.7 million due to new property acquisitions and approximately $1.5 million as a result of increased rental revenues related to condominium projects placed into the rental pool, which were previously for-sale residential development properties.

Tenant recoveries

Tenant recoveries for the year ended December 31, 2008 was $3.7 million, a decrease of $7.7 million from the comparable prior year period as a result of a decrease in the number of consolidated office and retail properties in 2008 resulting from the office and retail joint venture transactions that closed during 2007.

Other property related revenue

Other property related revenue for the year ended December 31, 2008 was $35.4 million, an increase of $2.9 million from the comparable prior year period as a result of an increase in multifamily cable revenue of $2.5 million and other ancillary income of $3.2 million. This increase was partially offset by approximately $3.5 million due to a reduced number of consolidated office and retail properties in 2008 resulting from the office and retail joint venture transactions that closed during 2007.

Construction activities

Revenues and expenses from construction activities for the year ended December 31, 2008 decreased approximately $28.3 million and $25.0 million, respectively, from the comparable prior year period as a result of a decrease in construction activity year over year.

Other non-property related revenues

Other non-property related revenues, which consist primarily of management fees, development fees, and other miscellaneous fees decreased $0.7 million for the year ended December 31, 2008 as compared to the same period in 2007. Management and development fees increased $1.1 million in 2008 as we began to recognize fees in the third quarter of 2007 following the office and retail joint venture transactions that closed in June 2007. The increase in fees was offset by a $1.5 million reserve related to a note receivable.

Property operating expenses

Property operating expenses for the year ended December 31, 2008 were $84.9 million, a decrease of $8.1 million from the comparable prior year period. The decline in property operating expenses was attributable to a decrease of approximately $15.0 million as a result of the office and retail joint venture dispositions in 2007, offset by increased multifamily property operating expenses of approximately $5.9 million primarily related to condominium projects placed into the rental pool, development projects placed into service and increases in cable television expenses related to our cable ancillary income program. In addition, operating expenses increased approximately $1.0 million related new property acquisitions.

Taxes, licenses and insurance

Taxes, licenses and insurance expenses for the year ended December 31, 2008 were $38.8 million, a decrease of $5.4 million from the comparable prior year period. The decline was attributable to a decrease of approximately $6.8 million as a result of the disposition of the office and retail joint venture transactions that closed during 2007, partially offset by increased multifamily property tax expenses of $1.4 million primarily related to condominium projects placed into the rental pool and development projects placed into service.

Property management expenses

Property management expenses consist of regional supervision and accounting costs related to property operations. These expenses for the year ended December 31, 2008 were $8.4 million, a decrease of $3.8 million from the comparable prior year period. The decrease was primarily due to an overall decrease in management compensation following completion of our 2007 strategic transactions.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2008 were $23.3 million, a decrease of $2.3 million from the comparable prior year period. The decrease was primarily due to a $1.4 million charge associated with the termination of our pension plan recorded during 2007 and a reduction in salary expenses as a result of our 2007 strategic transactions.

Management fee and other expenses

Management fee and other expenses consist of property management and other services provided to third parties. These expenses for the year ended December 31, 2008 were $15.3 million, a decrease of $0.4 million from the comparable prior year period. This decrease is related to a reduction in salary expense and commissions in 2008 offset with an increase in legal fees associated with various contingencies discussed in Note 20 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.

Restructuring charges

The restructuring charges for the year ended December 31, 2008 were $1.0 million associated with our plan to downsize construction and development personnel in light of the then-current market conditions and our decision to delay future development projects, which we communicated in October 2008. The restructuring charges recorded in the year ended December 31, 2007 were comprised of termination benefits and severance costs recorded in the second and fourth quarters of 2007 associated with our strategic initiative to become a multifamily focused REIT. See Note 4 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional details.

Investment and development

Investment and development expense for the year ended December 31, 2008 was $4.4 million, an increase of $2.8 million from the comparable prior year period. The increase in 2008 was the result of the decision in the fourth quarter 2008 to abandon pursuit of certain future development opportunities which resulted in the write-off of previously capitalized expenses.

We incur costs prior to land acquisition including contract deposits, as well as legal, engineering and other external professional fees related to evaluating the feasibility of such developments. If we determine that it is probable that we will not develop a particular project, any related pre-development costs previously incurred are immediately expensed. Abandoned pursuits are volatile and, therefore, vary between periods.

Depreciation and amortization

Depreciation and amortization expense for the year ended December 31, 2008 was $105.5 million, a decrease of $14.6 million from the comparable prior year period. This decrease is primarily related to the office and retail joint venture transactions that closed in June 2007.

Impairment and other losses

Impairment charges and other losses for the year ended December 31, 2008 were $116.5 million, of which $114.9 million is due to our efforts to improve our liquidity and deleverage the balance sheet. To help accomplish these efforts, the Board of Trustees of the Trust made the decision to accelerate our plans to dispose of our for-sale residential assets and land held for future sale and for-sale residential and mixed-use developments. Included in the impairment charge is $59.4 million associated with certain of our completed for-sale residential properties and condominium conversions, $36.2 million is related to land held for future sale and for-sale residential mixed-use developments, and $19.3 million related to a retail development. The remaining amount, $1.6 million, was the result of casualty losses due to fire damage at four apartment communities.

Interest expense and debt cost amortization

Interest expense and debt cost amortization for the year ended December 31, 2008 was $75.2 million, a decrease of $17.3 million from the comparable prior year period. The decrease is primarily a result of the pay down of debt associated with proceeds received from the joint venture transactions in June 2007 and the outright multifamily and retail asset sales in 2007 and 2008.

Gain (losses) on retirement of debt

Gains (losses) on retirement of debt for the year ended December 31, 2008 was a gain of $16.0 million, compared to a loss of $10.4 million for the comparable prior year period. In 2008, we recognized gains of approximately $16.0 million on the repurchase of $195.0 million of outstanding unsecured senior notes. In 2007, we recognized losses of $29.2 million in prepayment penalties associated with the repayment of $409.0 million of collateralized mortgage loans, which were partially offset by the write-off of $16.7 million of mark-to-market debt intangibles during 2007.

Interest income

Interest income for the year ended December 31, 2008 was $2.8 million, a decrease of $4.8 million from the comparable prior year period. This decrease is attributable to interest income earned on mezzanine loans outstanding in 2007 and additional cash generated by our 2007 strategic transactions.

Income from partially-owned unconsolidated entities

Income from unconsolidated entities for the year ended December 31, 2008 was $12.5 million, an increase of $1.3 million, due primarily to an increase in gains on the sale of our joint venture ownership interest year over year. We recognized an aggregate gain of $18.2 million from the sale of our interest in the GPT/Colonial Retail Joint Venture and the sale of a portion of our interest in the Huntsville TIC joint venture during 2008 compared to a gain of $17.5 million from the sale of our interest in Colonial Grand at Bayshore, Las Olas Centre (a DRA/CRT JV property) and Colonial Village at Hendersonville during the year ended 2007. The remaining increase is attributable to the gains recognized from the sale of our interest in seven multifamily apartment communities and one office asset during 2008.

Gains (losses) from hedging activities

Losses on hedging activities for the year ended December 31, 2008 was $0.4 million, compared to a gain of $0.3 million for the comparable prior year period. In 2008, we recognized a loss on hedging activities as a result of a reclassification of amounts in Accumulated Other Comprehensive Income in connection with our conclusion that it is probable that we will not make interest payments associated with previously hedged debt.

Gains from sales of property

Gains from sales of property for the year ended December 31, 2008 was $3.8 million, a decrease of $25.7 million from the comparable prior year period due to fewer asset sales in 2008. During 2008, we sold six multifamily apartment communities and one office asset. During 2007, we sold 12 multifamily apartment communities, 15 retail assets (11 of which were sold for no gain) and our 90% interest in Village on the Parkway. In addition, we sold our interest in three retail development properties including the sale of 85% of Colonial Pinnacle Craft Farms I and the sale of 95% of each of Colonial Promenade Alabaster II and Colonial Pinnacle Tutwiler II during 2007.

Transaction costs

Transaction costs were $11.0 million for the year ended December 31, 2007, as a result of the office and retail joint venture transactions that occurred during June 2007.

Income taxes and other

Income taxes and other income for the year ended December 31, 2008 was $1.0 million, a decrease of $14.7 million from the comparable prior year period. The decrease was the result of a $16.5 million income tax benefit associated with the $43.3 million non-cash impairment charge related to our for-sale residential business recorded during 2007.

Income from discontinued operations

Income from discontinued operations for the year ended December 31, 2008 was $52.2 million, a decrease of $46.6 million from the comparable prior year period. At December 31, 2008 we had classified two retail assets consisting of approximately 0.3 million square feet (excluding anchor owned square footage) as held for sale. The operating property sales that occurred in the twelve months ended December 31, 2008 and 2007, which resulted in gains on disposal of $46.1 million (net of income taxes of $40,000) and $91.2 million (net of income taxes of $1.8 million), respectively, are classified as discontinued operations (see Note 6 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K).

Gains on dispositions in 2008 include the sale of six multifamily apartment communities and one office asset. Gains on dispositions in 2007 include the sale of twelve multifamily apartment communities and 16 retail assets. Income from discontinued operations also includes $2.0 million of impairment charges recorded during 2008.

Distributions to general partner preferred unitholders

Distributions to general partner preferred unitholders decreased approximately $4.7 million for the year ended December 31, 2008, as compared to the same period in 2007. This decrease is a result of the repurchase by the Trust of 988,750 Series D Preferred Shares of Beneficial Interest during 2008 (which resulted in the repurchase by us of a number of Series D Preferred Units corresponding to the number of Series D preferred shares of the Trust represented by such repurchased Series D Depositary Shares) and the redemption of the Series C Preferred Shares of Beneficial Interest and the Series E Cumulative Redeemable Preferred Shares of Beneficial Interest during 2007 (which resulted in the repurchase by us of all outstanding Series C Preferred Units and Series E Preferred Units, all of which were held by the Trust as general partner of CRLP).

Operating Results — 2007 compared to 2006

Minimum rent

Minimum rent for the year ended December 31, 2007 was $320.3 million, a decrease of $44.6 million from the comparable prior year period. This decrease is a result of the office and retail joint venture transactions that took place in June 2007 and is partially offset by $27.4 million of minimum rent from new multifamily apartment community acquisitions and $3.6 million from new developments placed into service.

Tenant recoveries

Tenant recoveries for the year ended December 31, 2007 was $11.4 million, a decrease of $11.0 million from the comparable prior year period as a result from the net disposition activity since December 31, 2006, including, in particular, the dispositions resulting from the office and retail joint venture transactions and retail sales in June 2007 and July 2007, respectively.

Other property related revenue

Other property related revenue for the year ended December 31, 2007 was $32.5 million, an increase of $2.9 million from the comparable prior year period. This increase is primarily a result of revenue from new multifamily acquisitions.

Construction activities

Revenues from construction activities for the year ended December 31, 2007 were $38.5 million, an increase of $8.0 million from the comparable prior year period. Expenses from construction activities for the year ended December 31, 2007 were $34.5 million, an increase of $5.1 million from the comparable prior year period. We provided construction services to Colonial Grand at Traditions, a wholly-owned development project during 2007, and to Colonial Grand at Canyon Creek, in which we own a 25% interest, during 2006 and 2007. All revenues and expenses associated with our percent interest are eliminated in consolidation.

Other non-property related revenues

Other non-property related revenues increased $1.7 million for the year ended December 31, 2007, as compared to the same period in 2006. This increase is a result of the management fees that we began receiving as a result of the office and retail joint venture transactions that closed in June 2007, as well as an increase in construction and development fees. These increases were partially offset by lost management fee revenues from the DRA Southwest Partnership, in which we sold our interest in December 2006, and from the GPT/Colonial Retail Joint Venture, for which we ceased providing management services as of June 2007.

Property operating expenses

Property operating expenses for the year ended December 31, 2007 were $93.1 million, a decrease of $6.4 million from the comparable prior year period. This decrease resulted from the net disposition activity since December 31, 2006, including, in particular, the dispositions resulting from the office and retail joint venture transactions and retail sales in June 2007 and July 2007, respectively.

Taxes, licenses and insurance

Taxes, licenses and insurance expenses for the year ended December 31, 2007 were $44.2 million, a decrease of $4.0 million from the comparable prior year period. This decrease resulted from the net disposition activity since December 31, 2006, including, in particular, the dispositions resulting from our 2007 strategic transactions.

Property management expenses

Property management expenses consist of regional supervision and accounting costs related to property operations. These expenses decreased $0.4 million for the year ended December 31, 2007 as compared to the same period in 2006 primarily due to a reallocation of management salaries to management fee expenses as a result of the office and retail joint venture transactions that closed in June 2007.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2007 were $25.7 million, an increase of $5.5 million from the comparable prior year period primarily as a result of expenses incurred in connection with the termination of our pension plan, totaling $2.3 million (including a one-time pension bonus of $1.4 million), an increase in corporate office rental fees of $1.0 million, an increase in insurance costs of $1.1 million and an increase in salaries and incentives of $1.0 million. The remaining increase is attributable to costs incurred as a result of unsuccessful ventures.

Management fee and other expenses

Management fee and other expenses consist of property management and other services provided to third parties, including properties held in unconsolidated joint ventures in which we are a member. These expenses increased $3.1 million for the year ended December 31, 2007 as compared to the same period in 2006 primarily due to an increase in broker commissions paid on leasing and dispositions in 2007, the reallocation of management salaries from property management expenses, and an increase in recruiting and other general corporate expenditures resulting from our office and retail joint venture transactions that closed in June 2007.

Restructuring charges

The restructuring charges recorded in the year ended December 31, 2007 were comprised of termination benefits and severance costs recorded in the second and fourth quarters of 2007 associated with our strategic initiative to become a multifamily focused REIT (See Note 4 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K).

Investment and development

Investment and development expense for the year ended December 31, 2007 was $1.5 million, an increase of $0.5 million from the comparable prior year period. We incur costs prior to land acquisition including contract deposits, as well as legal, engineering and other external professional fees related to evaluating the feasibility of such developments. If we determine that it is not probable that we will develop a particular project, any related pre-development costs previously incurred are immediately expensed. Abandoned pursuits are volatile and, therefore, vary between periods.

Depreciation and amortization expenses

Depreciation and amortization expense for the year ended December 31, 2007 was $120.2 million, a decrease of $23.4 million from the comparable prior year period. This decrease resulted from the net disposition activity since December 31, 2006, including, in particular, the dispositions resulting from our 2007 strategic transactions.

Impairment and other losses

For 2007, we recorded non-cash impairment charges totaling $44.1 million. Of this charge, $43.3 million was recorded on our for-sale residential assets, as a result of the deterioration in the single family housing market, primarily in Gulf Shores, Alabama and Charlotte, North Carolina, and the turmoil in the mortgage markets. We recorded an income tax benefit of $16.5 million related to this charge. In addition, we recorded an impairment charge of $0.8 million during 2007, as a result of fire damage at two separate multifamily apartment communities. The fires resulted in the loss of a total of 20 units at the two properties.

Interest expense and debt cost amortization

Interest expense and debt cost amortization for the year ended December 31, 2007 was $92.5 million, a decrease of $29.0 million from the comparable prior year period, the decrease in interest expense is a result of the pay-down of $409.0 million of collateralized mortgages associated with 37 multifamily properties with a portion of the proceeds received from the June 2007 joint venture transactions.

Gains (losses) on retirement of debt

Gains (losses) on retirement of debt increased approximately $9.7 million during the year ended December 31, 2007 as compared to the same period in 2006. During the second quarter 2007, with proceeds from the office and retail joint venture transactions, we repaid $409.0 million of collateralized mortgages associated with 37 multifamily properties. These repayments resulted in a loss on retirement of debt during year ended December 31, 2007, comprised of approximately $29.2 million in prepayment penalties partially offset by the write-off of approximately $16.7 million of mark-to-market debt intangibles.

Income from partially-owned unconsolidated entities

Income from unconsolidated entities decreased $23.6 million for the year ended December 31, 2007 due primarily to the gain on the sale of our interest in 15 multifamily apartment communities which were part of the DRA Southwest Joint Venture recognized in December 2006. This decrease was partially offset by gains recognized during 2007 of $9.2 million from the sale of our 25% interest in Colonial Grand at Bayshore in March 2007, $6.6 million gain from the sale of our 15% interest in Las Olas Centre in July 2007 and $1.7 million from the sale of our 25% interest in Colonial Village at Hendersonville in September 2007.

Gains (losses) from hedging activities

Gains on hedging activities decreased $5.2 million during the year ended December 31, 2007 as compared to the same period in 2006. This decrease resulted from the settlement of $200 million forward starting swap during the first quarter of 2006 and settling a $175 million forward starting interest rate swap during the fourth quarter of 2006. Combined, we received a payment of $5.6 million in connection with these settlements in 2006.

Gains from sales of property

Gains from sales of property for the year ended December 31, 2007 were $29.5 million, compared to $66.8 million in the prior year, due to fewer asset sales in 2007 compared to 2006. Dispositions in 2006 include 16 wholly-owned multifamily apartment communities, seven wholly-owned office assets and six wholly-owned retail assets.

Income taxes and other

During 2007, we recorded an income tax benefit of $15.8 million primarily as a result of the income tax benefit associated with the $43.3 million non-cash impairment charge related to our for-sale residential business. This income tax benefit was partially offset by income tax expense associated with gains on sales of retail developments.

Income from discontinued operations

Income from discontinued operations decreased $63.2 million for year ended December 31, 2007 as compared to the same period in 2006. At December 31, 2007, we had classified sixteen multifamily apartment communities containing approximately 4,284 units and one office asset consisting of approximately 37,000 square feet as held for sale. The operating property sales that occurred in the years ended December 31, 2007 and 2006, which resulted in gains on disposal of $91.2 million (net of income taxes of $1.8million) and $134.6 million (net of income taxes of $8.6 million), respectively, are classified as discontinued operations (see Note 6 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K). Gains on dispositions in 2007 include the sale of 12 multifamily apartment communities and 16 retail assets. Gains on dispositions in 2006 include the sale of 16 multifamily apartment communities, one office asset and one retail asset.

Distributions to general partner preferred unitholders

Distributions to general partner preferred unitholders decreased $7.5 million for the year ended December 31, 2007, as compared to the same period in 2006 as a result of the redemption of the Series C Preferred Shares of Beneficial Interest on June 30, 2006 and the partial repurchase during 2006 and redemption in 2007 of the Series E Cumulative Redeemable Preferred Shares of Beneficial Interest during 2006 and 2007 (which resulted in the repurchase by us of all outstanding Series C Preferred Units and Series E Preferred Units, all of which were held by the Trust as general partner of CRLP). In connection with the Series E Preferred Shares redemption in 2007, we wrote off $0.3 million of associated issuance costs.

For-Sale and Development Activity

For-Sale Real Estate and Land Held for Development Valuation

To help implement our plans to strengthen our balance sheet and deleverage the company, in January 2009, the Board of Trustees of the Trust decided to accelerate plans to dispose of our for-sale residential assets including condominium conversions and land held for future sale and for-sale residential and mixed-use developments. As discussed above in Item 1-“Impairment,” we recorded a non-cash impairment charge of $116.9 million in the fourth quarter of 2008 as a result of the decision in January 2009. The impairment charge was calculated as the difference between the estimated fair value of each property and our current book value and the estimated costs to complete. We also incurred $4.4 million of abandoned pursuit costs and $1.0 million of restructuring charges related to a reduction in our development staff and other overhead personnel.

We calculate the fair values of each for-sale residential and land held for development project evaluated for impairment under SFAS No. 144 based on current market conditions and assumptions made by management, which may differ materially from actual results if market conditions continue to deteriorate or improve. Specific facts and circumstances of each project are evaluated, including local market conditions, traffic, sales velocity, relative pricing, and cost structure.

With respect to our Colonial Promenade Nord du Lac retail development, we are reviewing various alternatives for this development, and have reclassified the amount spent to date from an active development to a future development. The estimated fair value of this asset was calculated based upon our intent to sell this property upon stabilization, current assumptions regarding rental rates, costs to complete, lease-up, holding period and the estimated sales price.

We will continue to monitor the specific facts and circumstances at our for-sale properties and development projects. If market conditions do not improve or if there is further market deterioration, it may impact the number of projects we can sell, the timing of the sales and/or the prices at which we can sell them in future periods. If we are unable to sell projects, we may incur additional impairment charges on projects previously impaired as well as on projects not currently impaired but for which indicators of impairment may exist, which would decrease the value of our assets as reflected on our balance sheet and adversely affect net income and partners’ equity. There can be no assurances of the amount or pace of future for-sale residential sales and closings, particularly given current market conditions.

Other Development Activities

As noted above, we have postponed future development activities (including previously identified future development projects). We do not plan to start new developments until we determine that the current economic environment has sufficiently improved. As a result of the decision to postpone future development activities (including previously identified future development projects), we incurred $4.4 million of abandoned pursuit costs. We also incurred $1.0 million of restructuring charges related to a reduction in our development staff and other overhead personnel, resulting in expected annual savings in 2009 of approximately $3.9 million. We expect to invest approximately $30.0 million to $40.0 million to complete projects currently under construction.

Liquidity and Capital Resources

The following discussion relates to changes in cash due to operating, investing and financing activities, which are presented in our Consolidated Statements of Cash Flows contained in Item 8 of this Form 10-K.

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2008 increased to $118.1 million from $98.8 million for the comparable prior year period due to the improved operating performance of our fully stabilized communities, the recently introduced bulk cable program and favorable changes in the working capital components (decreases in prepaid expenses and other assets with increases in accounts payable), offset by prepayment penalties of $29.2 million paid

in 2007. In 2009, we expect cash flows from operating activities to be consistent with or slightly less than 2008 primarily driven by the challenging economic environment and a projected decrease in our core multifamily operations, which should be somewhat offset by reduced overhead expenses.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2008 was $167.5 million compared to net cash provided of $162.9 million for the comparable prior year period. This decreased is primarily due to less disposition activity during 2008 as compared to 2007, a decrease in distributions from partially owned entities in 2008 and less funds received from the repayments of notes receivable during 2008. In 2009, we expect cash used in investing activities to substantially decrease as we have decided to accelerate our plan to dispose of our for-sale residential assets including condominium conversions and land held for future sale and for-sale residential and mixed-use developments, and as a result of reduced expenditures attributable to our development pipeline due to our decision to postpone future development activities (including previously indentified future development projects). In addition, during February 2009, we disposed of Colonial Promenade at Fultondale. The proceeds from this sale were used to reduce the amount outstanding on our unsecured credit facility.

Financing Activities

Net cash used in financing activities for the year ended December 31, 2008 decreased to $34.3 million from $256.6 million for the comparable prior year period. The decrease was primarily due to the payment of a special distribution following completion of the office and retail joint venture transactions in June 2007 and $104.8 million (excluding the write-off of issuance costs) for the redemption of Series E preferred depositary shares during 2007 (and the corresponding repurchase by us of Series E Preferred Units). The remaining change is attributable to the net change in the revolving credit facility balance, the repurchase of $195.0 million of unsecured senior notes and the issuance of $71.3 million of secured mortgages during 2008, which was offset by $23.8 million of cash used to repurchase the Trust’s 8 1/8% Series D preferred depositary shares (and a number of Series D Preferred Units corresponding to the number of 8 1/8% Series D Cumulative Redeemable Preferred Shares represented by such repurchased Series D preferred depository shares) in privately negotiated transactions during the year ended December 31, 2008. In 2009, we believe that our business strategy, the availability of borrowings under our credit facilities, limited debt maturities in 2009, the number of unencumbered properties in our multifamily portfolio and the additional financing through Fannie Mae expected to be obtained in the first quarter of 2009 has us positioned to work through this challenging economic environment. This liquidity, along with our projected asset sales is expected to allow us to execute our plan in the short-term, without the dependency on the capital markets.

Short-Term Liquidity Needs

Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses directly associated with our portfolio of properties (including regular maintenance items), capital expenditures incurred to lease our space (e.g., tenant improvements and leasing commissions), interest expense and scheduled principal payments on our outstanding debt, and quarterly distributions that we pay to our common and preferred unitholders. In the past, we have primarily satisfied these requirements through cash generated from operations and borrowings under our unsecured credit facility.

The majority of our revenue is derived from residents and tenants under existing leases, primarily at our multifamily properties. Therefore, our operating cash flow is dependent upon the rents that we are able to charge to our tenants and residents, and the ability of these tenants and residents to make their rental payments. The weakening economy and mounting job losses in the U.S., and the slowdown in the overall U.S. housing market, which has resulted in increased supply and deterioration in the multifamily market generally, could adversely affect the our ability to lease our multifamily properties as well as the rents we are able to charge and thereby adversely affect our revenues.

We believe that cash generated from operations and dispositions of assets and borrowings under our unsecured credit facility will be sufficient to meet our short-term liquidity requirements in 2009. However, factors described below and elsewhere herein may have a material adverse effect on our future cash flow. We will continue to review liquidity sufficiency, as well as events that could affect our credit ratings and our ability to access the capital markets and our credit facilities. While we have no immediate need to access the capital or credit markets at this time, the volatility and liquidity disruptions in the capital and credit markets may make it more difficult or costly for us to raise capital through the Trust’s issuance of common shares or preferred shares or our issuance of subordinated notes or through private financings and may create additional risks in the upcoming months and possibly years. A prolonged downturn in the financial markets may cause us to seek alternative sources of financing potentially less attractive than our current financing, and may require us to further adjust our business plan accordingly.

Long-Term Liquidity Needs

Our long-term liquidity requirements consist primarily of funds necessary to pay the principal amount of our long-term debt as it matures, significant non-recurring capital expenditures that need to be made periodically at our properties, development projects that we undertake and costs associated with acquisitions of properties that we pursue. Historically, we have satisfied these requirements principally through the most advantageous source of capital at that time, which has included the incurrence of new debt through borrowings (through public offerings of unsecured debt and private incurrence of collateralized and unsecured debt), sales of common and preferred shares by the Trust (subject to the Trust’s ability to access the capital markets), capital raised through the disposition of assets and joint venture capital transactions. While the current market conditions for public offerings of unsecured debt and equity are unfavorable, we believe these sources of capital will continue to be available in the future to fund our long-term capital needs. Given our availability of our credit facilities, limited debt maturities in 2009, the number of unencumbered properties in our multifamily portfolio and the additional financing through Fannie Mae expected to be obtained in the first quarter of 2009, we expect to be able to meet our short-term needs without accessing the public capital markets in 2009. However, factors described below and elsewhere herein may have a material adverse effect on our continued access to these capital sources.

Our ability to incur additional debt is dependent upon a number of factors, including our credit ratings, the value of our unencumbered assets, our degree of leverage and borrowing restrictions imposed by our current lenders. As discussed further below in Item 7 — “Credit Ratings,” we currently have investment grade ratings for prospective unsecured debt offerings from three major rating agencies. If we experienced a credit downgrade, we may be limited in our access to capital in the unsecured debt market, which we have historically utilized to fund investment activities, and the interest rate we are paying under our existing credit facility would increase.

The Trust’s ability to raise funds through sales of common shares and preferred shares is dependent on, among other things, general market conditions for REITs, market perceptions about the Trust and the current trading price of the Trust’s shares. The current financial and economic crisis and significant deterioration in the stock and credit markets have resulted in significant price volatility, which have caused market prices of many stocks, including the price of the Trust’s common shares, to fluctuate substantially and have adversely affected the market value of the Trust’s common shares. With respect to both debt and equity, a prolonged downturn in the financial markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. These events also may make it more difficult or costly for us to raise capital through the issuance of the Trust’s common or preferred shares or our subordinated notes or through private financings. We will continue to analyze which source of capital is most advantageous to us at any particular point in time, but the equity and credit markets may not be consistently available on terms that are attractive.

Over the last few years, we have maintained our asset recycling program, which helps us to maximize our investment returns through the sale of assets that have reached their investment potential and reinvest the proceeds into opportunities with more growth potential. During 2008, we sold six wholly-owned multifamily apartment communities consisting of 1,746 units. We also sold our 10%-15% ownership interests in seven multifamily apartment communities consisting of 1,751 units. In addition to the sale of these multifamily apartment communities, during 2008, we sold one office asset consisting of 37,000 square feet, our 15% interest in another office asset consisting of 156,000 square feet and our 10% ownership interest in the GPT/Colonial Retail Joint Venture representing approximately 3.9 million square feet (including anchor-owned square footage). Sales proceeds of approximately $202.2 million, including our pro-rata share of disposition proceeds for our interests in partially-owned properties, were used to repay a portion of the borrowings under our unsecured line of credit, to repay mortgages associated with the properties, to fund general corporate purposes and to fund other investment opportunities. In addition, as a result of the re-evaluation of our operating strategy as it relates to its for-sale residential properties and condominium conversions, land held for future sale and for-sale residential and mixed-use developments and retail development activities, we have decided to accelerate our plans to dispose of our for-sale residential assets including condominium conversions and land held for future sale and for-sale residential and mixed-use developments. Our ability to generate cash from asset sales is limited by market conditions and certain rules applicable to REITs. Our ability to sell properties in the future to raise cash is expected to be limited based on current market conditions. For example, we may not be

able to sell a property or properties as quickly as we have in the past or on terms as favorable as we have previously received. Moreover, for-sale residential properties under development or acquired for development usually generate little or no cash flow until completion of development and sale of a significant number of homes or condominium units and may experience operating deficits after the date of completion and until such homes or condominium units are sold.

At December 31, 2008, our total outstanding debt balance was $1.8 billion. The outstanding balance includes fixed-rate debt of $1.4 billion, or 81.5% of the total debt balance, and floating-rate debt of $325.3 million, or 18.5% of the total debt balance. Our total market capitalization as of December 31, 2008 was $2.4 billion and our ratio of total outstanding indebtedness to market capitalization was 72.2%. As further discussed below, at December 31, 2008, we had an unsecured revolving credit facility providing for total borrowings of up to $675.0 million and a cash management line providing for borrowings up to $35.0 million.

Distributions

The regular distribution on our common units of partnership interest was $0.50 per unit per quarter for the first three quarters of 2008 and $0.25 per unit for the fourth quarter of 2008, or $1.75 per unit during 2008. The reduced distribution will allow us to retain more capital, thereby improving our balance sheet. We also pay regular quarterly distributions on our preferred units. The maintenance of these distributions is subject to various factors, including the discretion of the Board of Trustees of the Trust (acting in its capacity as our general partner), the requirements under our partnership agreement, our ability to pay distributions under Delaware law, the availability of cash to make the necessary distribution payments and the effect on the Trust of REIT distribution requirements, which require at least 90% of the Trust’s taxable income to be distributed to its shareholders.

Moreover, in light of recent Internal Revenue procedure changes, the Board of Trustees of the Trust is currently considering paying future distributions to its shareholders, beginning in May 2009, in a combination of common shares and cash. No decisions have been made at this time as to the manner in which distributions will be paid to unitholders in the event Trust shareholders receive distributions in cash and stock, as described above. This dividend and the alternative dividend structure are intended to allow us to retain additional capital, thereby strengthening our balance sheet. However, the Board of Trustees of the Trust reserves the right to pay any future distribution entirely in cash. The Board of Trustees of the Trust reviews the dividend quarterly, and there can be no assurance as to the manner in which future dividends will be paid or that the current dividend level will be maintained in future periods.

Collateralized Credit Facility

During the first quarter of 2009, we expect to lock an all-in interest rate of 6.04% on a 10-year, $350 million credit facility to be originated by PNC ARCS LLC and repurchased by Fannie Mae (NYSE:FNM). In connection with this rate lock, we posted a deposit equal to 2% of the loan amount (subject to forfeiture in certain circumstances if we do not complete the financing transaction). This credit facility will be collateralized by 19 multifamily properties. The proceeds from this credit facility are expected to be used to pay down outstanding borrowings on our unsecured line of credit, provide liquidity that can be used toward completion of the remaining ongoing developments and provide additional funding for our unsecured bond repurchase program.

In addition to the Fannie Mae facility, we are continuing negotiations with Fannie Mae or Freddie Mac (NYSE: FRE) to provide additional financing of up to $150 million with respect to certain of our existing other multifamily properties. Proceeds received from additional financing transactions would be used to provide additional liquidity for our unsecured bond repurchase program and to provide liquidity for our debt maturities through 2010. However, no assurance can be given that we will be able to consummate any of these additional financing arrangements.

Unsecured Revolving Credit Facility

During January 2008, we, together with the Trust, added $175 million of additional borrowing capacity through the accordion feature of our unsecured revolving credit facility (the “Credit Facility”) with Wachovia Bank, National Association, a subsidiary of Wells Fargo & Company (“Wachovia”), as Agent for the lenders, Bank of America, N.A. as Syndication Agent, Wells Fargo Bank, National Association (“Wells Fargo”), Citicorp North America, Inc. and Regions Bank, as Co-Documentation Agents, and U.S. Bank National Association and PNC Bank, National Association, as Co-Senior Managing Agents and other lenders named therein. As of December 31, 2008, we, with the Trust as guarantor, have a $675.0 million Credit Facility. The amended Credit Facility has a maturity date of June 21, 2012.

Base rate loans and revolving loans are available under the Credit Facility. The Credit Facility also includes a competitive bid feature that allows us to convert up to $337.5 million under the Credit Facility to a fixed rate and for a fixed

term not to exceed 90 days. Generally, base rate loans bear interest at Wachovia’s designated base rate, plus a base rate margin ranging up to 0.25% based on our unsecured debt ratings from time to time. Revolving loans bear interest at LIBOR plus a margin ranging from 0.325% to 1.05% based on our unsecured debt ratings. Competitive bid loans bear interest at LIBOR plus a margin, as specified by the participating lenders. Based on our current unsecured debt rating, the revolving loans currently bear interest at a rate of LIBOR plus 75 basis points.

Included in the Credit Facility, we have a $35.0 million cash management line provided by Wachovia that will expire on June 15, 2012. The cash management line had an outstanding balance of $14.6 million as of December 31, 2008.

The Credit Facility and cash management line, which is primarily used to finance property acquisitions and developments, had an outstanding balance at December 31, 2008 of $311.6 million. The interest rate of the Credit Facility was 2.04% and 5.47% at December 31, 2008 and 2007, respectively.

The Credit Facility contains various restrictions, representations, covenants and events of default that could preclude future borrowings (including future issuances of letters of credit) or trigger early repayment obligations, including, but not limited to the following: nonpayment; violation or breach of certain covenants; failure to perform certain covenants beyond a cure period; failure to satisfy certain financial ratios; a material adverse change in the consolidated financial condition, results of operations, our business or prospects; and generally not paying our debts as they become due. At December 31, 2008, we were in compliance with these covenants. Specific financial ratios with which we must comply pursuant to the Credit Facility consist of the Fixed Charge Coverage Ratio as well as the Debt to Total Asset Value Ratio. Both of these ratios are measured quarterly. The Fixed Charge ratio generally requires that our earnings before interest, taxes, depreciation and amortization be at least equal to 1.5 times our Fixed Charges. Fixed Charges generally include interest payments (including capitalized interest) and preferred dividends. The Debt to Total Asset Value ratio generally requires our debt to be less than 60% of its total asset value. We do not anticipate any events of noncompliance with either of these ratios in 2009. The ongoing recession and continued uncertainty in the stock and credit markets may negatively impact our ability to generate earnings sufficient to maintain compliance with these ratios and other debt covenants.

As described above, many of the recent disruptions in the financial markets have been brought about in large part by failures in the U.S. banking system. If Wachovia or any of the other financial institutions that have extended credit commitments to us under the Credit Facility or otherwise are adversely affected by the conditions of the financial markets, they may become unable to fund borrowings under their credit commitments to us under the Credit Facility, the cash management line or otherwise. If our lenders become unable to fund our borrowings pursuant to their commitments to us, we may need to obtain replacement financing, and such financing, if available, may not be available on commercially attractive terms.

Mortgage Financing

During March 2008, we refinanced mortgages associated with two of our multifamily apartment communities, Colonial Grand at Trinity Commons, a 462-unit apartment community located in Raleigh, North Carolina, and Colonial Grand at Wilmington, a 390-unit apartment community located in Wilmington, North Carolina. We financed an aggregate of $57.6 million, at a weighted average interest rate of 5.4%. The loan proceeds were used to repay the mortgages of $29.0 million and the balance was used to pay down our unsecured line of credit.

During September 2008, we refinanced a mortgage associated with Colonial Village at Timber Crest, a 282-unit apartment community located in Charlotte, North Carolina. Loan proceeds were $13.7 million, with a floating rate of LIBOR plus 292 basis points, which was 3.4% at December 31, 2008. The proceeds, along with additional borrowings of $0.6 million from our Credit Facility, were used to repay the $14.3 million outstanding mortgage.

Equity Repurchases

In January 2008, the Board of Trustees of the Trust authorized the repurchase of up to $25.0 million of the Trust’s 8 1/8% Series D preferred depositary shares in a limited number of separate, privately negotiated transactions. Each Series D preferred depositary share represents 1/10 of a share of the Trust’s 8 1/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share. In connection with the repurchase of the Series D Preferred Shares, the Board of Trustees of the Trust, as general partner of CRLP, also authorized the repurchase of a number of Series D Cumulative Redeemable Preferred Units corresponding to the number of Series D preferred shares of the Trust represented by such repurchased Series D Depositary Shares. During 2008, the Trust repurchased 988,750 shares of its outstanding 8 1/8% Series D preferred depositary shares in privately negotiated transactions for an aggregate purchase price of $24.0 million, at an average price of $24.17 per depositary share (and we repurchased a number of Series D Preferred Units corresponding to the number of Series D preferred shares of the Trust represented by such repurchased Series D Depositary Shares). The Trust

received a discount to the liquidation preference price of $25.00 per depositary share, of approximately $0.8 million on the repurchase and wrote off approximately $0.9 million of issuance costs.

On October 29, 2008, the Board of Trustees of the Trust authorized a repurchase program which allows the Trust to repurchase up to an additional $25.0 million of its outstanding 8 1/8% Series D preferred depositary shares over a 12 month period and requires CRLP to repurchase a number of Series D Preferred Units corresponding to the number of Series D preferred shares of the Trust represented by any such repurchased Series D Depositary Shares. The Series D preferred depositary may be repurchased from time to time in open market purchases or privately negotiated transactions, subject to applicable legal requirements, market conditions and other factors. The repurchase program does not obligate the Trust to repurchase any specific amounts of preferred shares, and repurchases pursuant to the program may be suspended or resumed at any time without further notice or announcement. The Trust will continue to monitor the equity markets and repurchase preferred shares if the repurchases meet the Trust’s required criteria, as funds are available. If the Trust were to repurchase outstanding Series D depositary shares, the Trust would expect to record additional non-cash charges related to the write-off of Series D preferred issuance costs.

Unsecured Senior Note Repurchases

In January 2008, the Board of Trustees of the Trust authorized us to repurchase up to $50.0 million of our outstanding unsecured senior notes. On April 2008, the Board of Trustees of the Trust authorized a senior note repurchase program to allow us to repurchase up to an additional $200.0 million of our outstanding unsecured senior notes from time to time through December 31, 2009. In December 2008, the Board of Trustees of the Trust expanded the April 2008 program by an additional $300.0 million for a total repurchase authorization under the April 2008 repurchase program of $500.0 million. The senior notes may be repurchased from time to time in open market transactions or privately negotiated transactions, subject to applicable legal requirements, market conditions and other factors. The repurchase program does not obligate us to repurchase any specific amounts of senior notes, and repurchases pursuant to the program may be suspended or resumed at any time without further notice or announcement.

During 2008, we repurchased $195.0 million of our outstanding unsecured senior notes in separate transactions at an average 9.1% discount to par value, which represents an 8.5% yield to maturity. As a result of the repurchases, we recognized an aggregate gain of $16.0 million, which is included in “Gains (losses) on retirement of debt” on our Consolidated Statements of Operations and Comprehensive Income (Loss). We will continue to monitor the debt markets and repurchase certain senior notes that meet our required criteria, as funds are available.

Other Financing Transactions

During July 2007, we repaid our outstanding $175 million 7.0% unsecured senior notes due July 2007 from proceeds received from asset sales.

During July 2007, the DRA/CLP JV increased mortgage indebtedness on the properties it owns from $588.2 million to approximately $742.0 million. The additional proceeds, of approximately $153.8 million, were utilized to payoff partner loans and establish a capital reserve, with the remainder being distributed to the partners on a pro-rata basis. Our pro-rata share of the additional proceeds was approximately $18.6 million (see Note 2 to our Notes to Consolidated Financial Statements included in Item 8 on this Form 10-K).

During July 2007, the OZRE JV increased mortgage indebtedness on the properties it owns from $187.2 million to approximately $284.0 million. The additional proceeds, of approximately $96.8 million, were utilized to payoff partner loans and establish a capital reserve, with the remainder being distributed to the partners on a pro-rata basis. Our pro-rata share of the additional proceeds was approximately $13.8 million (see Note 2 to our Notes to Consolidated Financial Statements included in Item 8 on this Form 10-K).

During June 2007, we repaid $409.0 million of collateralized mortgages associated with 37 multifamily communities with proceeds from the joint venture transactions (see Note 2 and Note 10 to our Notes to Consolidated Financial Statements included in Item 8 on this Form 10-K). In conjunction with the repayment, we incurred $29.2 million of prepayment penalties. These penalties were offset by $16.7 million of write-offs related to the mark-to-market intangibles on the associated mortgage debt repaid. The weighted average interest rate of the mortgages repaid was 7.0%.

Investing Activities

During 2008, we acquired the remaining 75% interest in one multifamily apartment community containing 270 units for an aggregate cost of $18.4 million, which consisted of the assumption of $14.7 million of existing mortgage debt ($3.7

million of which was previously unconsolidated as a 25% partner) and $7.4 million of cash. We completed the development of seven wholly-owned multifamily apartment communities and one partially-owned multifamily apartment community for $188.0 million, which represents our cost for the seven wholly-owned developments and our portion of the cost for the partially-owned development. Also, we completed the development of five commercial assets, consisting of two wholly-owned office assets, totaling 0.3 million square feet, and two wholly-owned retail assets and one partially-owned retail asset, totaling 0.5 million square feet, excluding anchor-owned square feet, for an aggregate cost of $139.8 million. In addition, we completed the development of three for-sale residential assets and one residential lot development, containing 150 units and 59 lots, respectively, for an aggregate cost of $85.1 million.

We regularly incur significant expenditures in connection with the re-leasing of our office and retail space, principally in the form of tenant improvements and leasing commissions. The amounts of these expenditures can vary significantly, depending on the particular market and the negotiations with tenants. We also incur expenditures for certain recurring capital expenses. During 2008, we incurred approximately $3.0 million related to tenant improvements and leasing commissions, and approximately $24.6 million of recurring capital expenditures. We expect to pay for future re-leasing and recurring capital expenditures out of cash from operations.

Credit Ratings

Our current credit ratings are as follows:


Rating Agency	Rating	Last update

Fitch	BBB- (1)	April 1, 2008
Moody’s	Baa3 (2)	November 17, 2008
Standard & Poor’s	BBB- (2)	February 5, 2009


(1)		Ratings outlook is “stable”.

(2)		Ratings outlook is “negative”.

In February 2009, Standard & Poor’s placed our ratings, including our ‘BBB-’ corporate credit rating, on CreditWatch with negative implications based on our weaker than expected fourth quarter 2008 results. During 2008, Standard and Poor’s revised its outlook from stable to negative based on our debt service coverage metrics. During November 2008, Moody’s announced that it affirmed our outlook and credit rating.

Our credit ratings are investment grade. If we experience a credit downgrade, we may be limited in our access to capital in the unsecured debt market, which we have historically utilized to fund our investment activities. In addition, as previously discussed, our spread on our unsecured credit facility would increase.

Market Risk

In the normal course of business, we are exposed to the effect of interest rate changes that could affect our results of operations and financial condition or cash flow. We limit these risks by following established risk management policies and procedures, including the use of derivative instruments to manage or hedge interest rate risk. However, interest rate swap agreements and other hedging arrangements may expose us to additional risks, including a risk that a counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. The table below presents the principal amounts, weighted average interest rates, fair values and other terms required by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes at December 31, 2008.


																						Estimated
																						Fair
(in thousands)	2009			2010			2011			2012			2013			Thereafter			Total			Value

Fixed Rate Debt	$	682		$	272,540		$	100,728		$	100,280		$	113,756		$	848,751		$	1,436,737		$	1,160,615
Average interest rate at December 31, 2008		5.6	%		5.4	%		4.8	%		6.9	%		6.1	%		5.8	%		5.8	%
Variable Debt	$	—		$	—		$	—		$	311,630		$	—		$	13,652		$	325,282		$	325,282
Average interest rate at December 31, 2008		N/A			N/A			N/A			2.0	%		N/A			3.4	%		2.1	%

The table incorporates only those exposures that exist as of December 31, 2008. It does not consider those exposures or positions, which could arise after that date. Moreover, because firm commitments are not presented in the table above, the information presented therein has limited predictive value. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at that time, and interest rates.

As of December 31, 2008, we had approximately $325.3 million of outstanding floating rate debt. We do not believe that the interest rate risk represented by our floating rate debt is material in relation to our $1.8 billion of outstanding total debt and our $3.2 billion of total assets as of December 31, 2008.

If market rates of interest on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease annual future earnings and cash flows by approximately $3.3 million. If market rates of interest on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $3.3 million. This assumes that the amount outstanding under our variable rate debt remains approximately $325.3 million, the balance as of December 31, 2008.

Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements or other identified risks. To accomplish this objective, we primarily use interest rate swaps (including forward starting interest rate swaps) and caps as part of our cash flow hedging strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. As of December 31, 2008, we had no outstanding interest rate swap agreements.

At December 31, 2008 and 2007, there were no derivatives included in other assets. At December 31, 2006, derivatives with a fair value of $0.7 million were included in other assets. There was no change in net unrealized gains/(losses) in 2008. The change in net unrealized gains/(losses) of ($0.5) million in 2007 and $3.0 million in 2006 for derivatives designated as cash flow hedges is separately disclosed in the statements of changes in partners’ equity and comprehensive income. At December 31, 2008 and 2007, there were no derivatives that were not designated as hedges. The change in fair value of derivatives not designated as hedges of $2.7 million is included in other income (expense) in 2006. There was no hedge ineffectiveness during 2008 and 2007. Hedge ineffectiveness of ($0.1) million on cash flow hedges due to index mismatches was recognized in other income during 2006. As of December 31, 2008, all of our hedges are designated as cash flow hedges under SFAS No. 133, and we do not enter into derivative transactions for speculative or trading purposes.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to “Interest expense and debt cost amortization” as interest payments are made on our hedged debt or to “Gains (losses) on hedging activities” at such time that the interest payments on the hedged debt become no longer probable to occur as originally specified. A portion of the interest payments on the hedged debt became no longer probable to occur as a result of our bond repurchase program (see Note 12 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K). The changes in accumulated other comprehensive income for reclassifications to “Interest expense and debt cost amortization” tied to interest payments made on the hedged debt was $0.5 million, $0.6 million and $0.5 million during 2008, 2007 and 2006, respectively. The changes in accumulated other comprehensive income for reclassification to “Gains (losses) on hedging activities” related to interest payments on the hedged debt that have been deemed no longer probable to occur as a result of repurchases under our senior note repurchase program was $0.3 million during 2008, with no impact during 2007 and 2006.

During May 2007, we settled a $100.0 million interest rate swap and received a payment of approximately $0.6 million. This interest rate swap was in place to convert a portion of the floating rate payments on our Credit Facility to a fixed rate. This derivative originally qualified for hedge accounting under SFAS No. 133. However, in May of 2007, due to our then-pending joint venture transactions (see Note 2 to our Notes to Consolidated Financial Statements included in Item 8 of

this Form 10-K) and the expected resulting pay down of our term loan and Credit Facility, this derivative no longer qualified for hedge accounting which resulted in a gain of approximately $0.4 million.

During February 2006, we settled a $200.0 million forward starting interest rate swap and received a payment of approximately $4.3 million. This forward starting interest rate swap was in place to convert the floating rate payments on certain expected future debt obligations to a fixed rate. This derivative originally qualified for hedge accounting under SFAS No. 133. However, in December of 2005 as a result of a modification to the forecasted transaction, this derivative no longer qualified for hedge accounting. As a result, we began treating this derivative as an economic hedge during 2005. Changes in the fair value of this derivative were recognized in earnings in other income (expense) and totaled approximately $2.7 million for the period of time the derivative was active during 2006. The fair value of this derivative at the time it no longer qualified for hedge accounting was approximately $1.5 million, which will remain in accumulated other comprehensive income and be reclassified to interest expense over the applicable period of the associated debt, which is approximately eight years at December 31, 2008.

During June 2006, we entered into a forward starting interest rate swap agreement to hedge the interest rate risk associated with a forecasted debt issuance that occurred on August 28, 2006. This interest rate swap agreement had a notional amount of $200 million, a fixed interest rate of 5.689%, and a maturity date of November 15, 2016. This interest rate swap agreement was settled concurrent with our issuance of $275 million of debt in the senior notes offering completed August 28, 2006 (see Note 13 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K). The settlement resulted in a settlement payment of approximately $5.2 million. This amount will remain in other comprehensive income and be reclassified to interest expense over the remaining term of the associated debt, which is approximately eight years at December 31, 2008. On August 15, 2006, we also entered into a $75 million treasury lock agreement to hedge the interest rate risk associated with the remaining $75 million of senior notes issued on August 28, 2006. This treasury lock agreement was settled on August 28, 2006 for a settlement payment of approximately $0.1 million which will also remain in other comprehensive income and be reclassified to interest expense over the remaining life of the associated debt.

During November 2006, we settled a $175.0 million forward starting interest rate swap and received a payment of approximately $2.9 million. This forward starting interest rate swap was in place to convert the floating rate payments on certain expected future debt obligations to a fixed rate. In November of 2006, we settled this forward starting swap agreement as a result of its determination that the forecasted debt issuance was no longer probable due to our strategic shift (see Note 2 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K). In December 2006, we made the determination that it was probable that the forecasted debt issuance would not occur. As a result, we reversed the $2.9 million in other comprehensive income to other income during December of 2006.

Further, we have a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, we have not sustained a material loss from those instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives.

Contractual Obligations and Other Commercial Commitments

The following tables summarize the material aspects of our future contractual obligations and commercial commitments as of December 31, 2008:

Contractual Obligations


	Payments Due in Fiscal
(in thousands)	Total		2009		2010		2011		2012		2013		Thereafter


Long-Term Debt Principal:
Consolidated	$	1,762,019	$	681	$	272,541	$	100,728	$	411,910	$	113,756	$	862,403
Partially-Owned Entities ⁽¹⁾		476,313		117,207		89,018		10,063		6,568		12,950		240,506
Long-Term Debt Interest:
Consolidated		449,947		89,754		77,942		71,563		64,352		52,224		94,112
Partially-Owned Entities ⁽¹⁾		100,863		21,090		18,032		15,617		15,165		14,426		16,533
Long-Term Debt Principal and Interest:
Consolidated		2,211,966		90,435		350,483		172,291		476,262		165,980		956,515
Partially-Owned Entities ⁽¹⁾		577,175		138,297		107,050		25,680		21,732		27,376		257,040

Total	$	2,789,141	$	228,732	$	457,533	$	197,971	$	497,994	$	193,356	$	1,213,554


(1)		Represents our pro-rata share of principal maturities (excluding net premiums and discounts) and interest.

Other Commercial Commitments


	Total Amounts
(in thousands)	Committed		2009		2010		2011		2012		2013		Thereafter


Standby Letters of Credit	$	3,461	$	3,294	$	—	$	168	$	—	$	—	$	—
Guarantees		33,550		12,650		20,900		—		—		—		—

Total Commercial Commitments	$	37,011	$	15,944	$	20,900	$	168	$	—	$	—	$	—

Commitments and Contingencies

We are involved in a contract dispute with a general contractor in connection with construction costs and cost overruns with respect to certain of our for-sale projects, which are being developed in a joint venture in which we are a majority owner. The contractor is affiliated with our joint venture partner.

	•		In connection with the dispute, in January 2008, the contractor filed a lawsuit against us alleging, among other things, breach of contract, enforcement of a lien against real property, misrepresentation, conversion, declaratory judgment and an accounting of costs, and is seeking $10.3 million in damages, plus consequential and punitive damages.

	•		Certain of the subcontractors, vendors and other parties, involved in the projects, including purchasers of units, have also made claims in the form of lien claims, general claims or lawsuits. We have been sued by purchasers of certain condominium units alleging breach of contract, fraud, construction deficiencies and misleading sales practices. Both compensatory and punitive damages are sought in these actions. Some of these claims have been resolved by negotiations and mediations, and others may also be similarly resolved. Some of these claims will likely be arbitrated or litigated to conclusion.

We are continuing to evaluate our options and investigate these claims, including possible claims against the contractor and other parties. We intend to vigorously defend ourselves against these claims. However, no prediction of the likelihood, or amount, of any resulting loss or recovery can be made at this time and no assurance can be given that the matter will be resolved favorably.

In connection with certain retail developments, we have received funding from municipalities for infrastructure costs. In most cases, the municipalities issue bonds that are repaid primarily from sales tax revenues generated from the tenants at each respective development. We have guaranteed the shortfall, if any, of tax revenues to the debt service requirements on the bonds. The total amount outstanding on these bonds was approximately $13.5 million and $11.3 million at December 31, 2008 and December 31, 2007, respectively. At December 31, 2008 and December 31, 2007, no liability was recorded for these guarantees.

In April 2008, the Nord du Lac community development district (the “CDD”), a third-party governmental entity, issued $24.0 million of special assessment bonds. The funds from this bond issuance will be used by the CDD to construct infrastructure for the benefit of the Colonial Pinnacle Nord du Lac development. In accordance with EITF 91-10, we have recorded restricted cash and other liabilities for the $24.0 million bond issuance. This transaction has been treated as a non-cash transaction in our Consolidated Statement of Cash Flows for the twelve months ended December 31, 2008. During 2008, we sold land for $3.8 million to the CDD for the construction of infrastructure, resulting in a $3.8 million decrease in restricted cash. As previously discussed, we have postponed future development activities, including this development and have reclassified the amount spent to date from an active development to a future development. Interest payments on the bonds for 2009 will be made from a capitalized interest account funded with bond proceeds. Thereafter, repayment of the bonds will be funded by special assessments on the property owner(s) within the CDD. The first special assessment is expected to be due on or about December 31, 2009. As the property owner, we intended to fund the special assessments from payments by tenants in the development. Until Colonial Pinnacle Nord du Lac is developed and leased, it is not expected to generate sufficient tenant revenues to support the full amount of the special assessments, in which case we would be obligated pay the special assessments to the extent not funded through tenant payments. The special assessments are not a personal liability of the property owner, but constitute a lien on the assessed property. In the event of a failure to pay the special assessments, the CDD would have the right to force the sale of the property included in the project. We are continuing to evaluate various alternatives for this development.

In connection with the office and retail joint venture transactions, (see Note 2 — “2007 Strategic Transactions” in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K), we assumed certain contingent obligations for a total of $15.7 million, of which $6.8 million remains outstanding as of December 31, 2008.

In January 2008, we received notification related to an unclaimed property audit for the States of Alabama and Tennessee. As of December 31, 2008, we have accrued an estimated liability.

We are a party to various legal proceedings incidental to our business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect our financial position or results of operations or cash flows.

Guarantees and Other Arrangements

During April 2007, we committed, with our joint venture partner, to guarantee up to $7.0 million of a $34.1 million construction loan obtained by the Colonial Grand at Traditions Joint Venture. We, along with our joint venture partner, committed to each provide 50% of the guarantee. Construction at this site is substantially complete as the project was placed into service during 2008. As of December 31, 2008, the joint venture had drawn $32.9 million on the construction loan, which matures in April 2010. At December 31, 2008, no liability was recorded for the guarantee.

During November 2006, we committed with our joint venture partner to guarantee up to $17.3 million of a $34.6 million construction loan obtained by the Colonial Promenade Smyrna Joint Venture (see Note 10 in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K). We and our joint venture partner each committed to provide 50% of the $17.3 million guarantee, as each partner has a 50% ownership interest in the joint venture. Construction at this site is substantially complete as the project was placed into service during 2008. As of December 31, 2008, the Colonial Promenade Smyrna Joint Venture had drawn $32.5 million on the construction loan, which matures in December 2009. At December 31, 2008, no liability was recorded for the guarantee.

During February 2006, we committed to guarantee up to $4.0 million of a $27.4 million construction loan obtained by the Colonial Grand at Canyon Creek Joint Venture (see Note 10 in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K). Construction at this site is complete as the project was placed into service in 2007. As of December 31, 2008, the joint venture had drawn $27.4 million on the construction loan, which matures in March 2009. At December 31, 2008, no liability was recorded for the guarantee.

During September 2005, in connection with the acquisition of CRT with DRA, CRLP guaranteed approximately $50.0 million of third-party financing obtained by the DRA/CRT JV with respect to 10 of the CRT properties. During 2006, seven of the ten properties were sold. The DRA/CRT JV (see Note 10 in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K) is obligated to reimburse CRLP for any payments made under the guaranty before making distributions of cash flows or capital proceeds to the DRA/CRT JV partners. At December 31, 2008, no liability was recorded for the guarantee. As of December 2008, this guarantee, which, matures in January 2010, had been reduced to $17.4 million as a result of the pay down of the associated secured debt from the sales of assets.

In connection with the formation of Highway 150 LLC (see Note 10 in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K) in 2002, we executed a guarantee, pursuant to which we would serve as a

guarantor of $1.0 million of the debt related to the joint venture, which is collateralized by the Colonial Promenade Hoover retail property. Our maximum guarantee of $1.0 million may be requested by the lender, only after all of the rights and remedies available under the associated note and security agreements have been exercised and exhausted. At December 31, 2008, the total amount of debt of the joint venture was approximately $16.4 million and matures in December 2012. At December 31, 2008, no liability was recorded for the guarantee.

In connection with the contribution of certain assets to CRLP, certain partners of CRLP have guaranteed indebtedness of CRLP totaling $26.5 million at December 31, 2008. The guarantees are held in order for the contributing partners to maintain their tax deferred status on the contributed assets. These individuals have not been indemnified by CRLP.

As discussed above, in connection with certain retail developments, we have received funding from municipalities for infrastructure costs. In most cases, the municipalities issue bonds that are repaid primarily from sales tax revenues generated from the tenants at each respective development. We have guaranteed the shortfall, if any, of tax revenues to the debt service requirements on the bonds.

Off-Balance Sheet Arrangements

At December 31, 2008, our pro-rata share of mortgage debt of unconsolidated joint ventures is $476.3 million.

The aggregate maturities of this mortgage debt are as follows:


	(in millions)
2009	$	117.2
2010		89.0
2011		10.1
Thereafter		260.0

	$	476.3

Of this debt, $100.2 million, $71.3 million and $4.2 million for years 2009, 2010 and 2011, respectively, includes an option for at least a one-year extension. Under these unconsolidated joint venture non-recourse mortgage loans, we could, under certain circumstances, be responsible for portions of the mortgage indebtedness in connection with certain customary non-recourse carve-out provisions, such as environmental conditions, misuse of funds, and material misrepresentations. In addition, as more fully described above, we have made certain guarantees in connection with our investment in unconsolidated joint ventures. We do not have any other off-balance sheet arrangements with any unconsolidated investments or joint ventures that we believe have or are reasonably likely to have a material effect on our financial condition, results of operations, liquidity or capital resources.

Summary of Critical Accounting Policies

We believe our accounting policies are in conformity with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements. We consider the following accounting policies to be critical to our reported operating results:

Principles of Consolidation— We consolidate entities in which we have a controlling interest or entities where we are determined to be the primary beneficiary under FASB Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities.” Under FIN 46R, variable interest entities (“VIEs”) are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. Additionally, Emerging Issues Task Force (“EITF”) Issue No. 04-5, Determining Whether a General Partner, or the General Partner as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights provides guidance in determining whether a general partner controls and, therefore, should consolidate a limited partnership. The application of FIN 46R and EITF No. 04-5 requires management to make significant estimates and judgments about our and our partners’ rights, obligations and economic interests in such entities. Where we have less than a controlling financial interest in an entity or we are not the primary beneficiary of the entity under FIN 46R, the entity is accounted for on the equity method of accounting. Accordingly, our share of the net earnings or losses of these entities is included in consolidated net income. A description of

our investments accounted for using the equity method of accounting is included in Note 10 Investments in Partially-Owned Entities and Other Arrangements in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. All significant intercompany accounts and transactions have been eliminated in consolidation.

We recognize minority interest in our Consolidated Balance Sheets for partially-owned entities that we consolidate. The minority partners’ share of current operations is reflected in “Minority interest of limited partners in Consolidated Partnerships” in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Land, Buildings, and Equipment—Land, buildings, and equipment is stated at the lower of cost, less accumulated depreciation, or fair value. We review our long-lived assets and certain intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the asset’s fair value. Assets classified as held for sale are reported at the lower of their carrying amount or fair value less cost to sell. We determine fair value based on a probability weighted discounted future cash flow analysis.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”), land inventory and for-sale residential projects under development are reviewed for potential write-downs when impairment indicators are present. SFAS No. 144 requires that in the event the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts, impairment charges are required to be recorded to the extent that the fair value of such assets is less than their carrying amounts. These estimates of cash flows are significantly impacted by estimates of sales price, selling velocity, sales incentives, construction costs, and other factors. Due to uncertainties in the estimation process, actual results could differ from such estimates. For those assets deemed to be impaired, the impairment to be recognized is to be measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Our determination of fair value is based on a probability weighted discounted future cash flow analysis, current negotiations regarding a potential sale or other related factors, all of which incorporate available market information as well as other assumptions made by management.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, as follows:


		Useful Lives
Buildings		20 — 40 years
Furniture and fixtures		5 or 7 years
Equipment		3 or 5 years
Land improvements		10 or 15 years
Tenant improvements		Life of lease

Repairs and maintenance costs are charged to expense as incurred. Replacements and improvements are capitalized and depreciated over the estimated remaining useful lives of the assets.

Acquisition of Real Estate Assets— We account for our acquisitions of investments in real estate in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations, which requires the fair value of the real estate acquired to be allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of other tenant relationships, based in each case on their fair values. We consider acquisitions of operating real estate assets to be “businesses” as that term is contemplated in Emerging Issues Task Force Issue No. 98-3, Determining Whether a Non-monetary Transaction Involves Receipt of Productive Assets or of a Business.

We allocate purchase price to the fair value of the tangible assets of an acquired property (which includes the land and building) determined by valuing the property as if it were vacant. The “as-if-vacant” value is allocated to land and buildings based on management’s determination of the relative fair values of these assets. We also allocate value to tenant improvements based on the estimated costs of similar tenants with similar terms.

Above-market and below-market in-place lease values for acquired properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term and any fixed-rate renewal periods in the respective leases.

The aggregate value of other intangible assets acquired are measured based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management may engage independent third-party appraisers to perform these valuations and those appraisals use commonly employed valuation techniques, such as discounted cash flow analyses. Factors considered in these analyses include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. We also consider information obtained about each property as a result of our pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods depending on specific local market conditions and depending on the type of property acquired. Management also estimates costs to execute similar leases including leasing commissions, legal and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination as part of the transaction.

The total amount of other intangible assets acquired is further allocated to in-place leases, which includes other tenant relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement or management’s expectation for renewal), among other factors.

From time to time, we pursue acquisition opportunities and will not be successful in all cases. Costs incurred related to these acquisition opportunities are expensed when it is no longer probable that we will be successful in the acquisition.

Undeveloped Land and Construction in Progress— Undeveloped land and construction in progress is stated at cost unless such assets are impaired pursuant to the provisions of SFAS No. 144, in which case such assets are recorded at fair value.

Costs incurred during predevelopment are capitalized after we have identified a development site, determined that a project is feasible and concluded that it is probable that the project will proceed. While we believe we will recover this capital through the successful development of such projects, it is possible that a write-off of unrecoverable amounts could occur. Once it is no longer probable that a development will be successful, the predevelopment costs that have been previously capitalized are expensed.

The capitalization of costs during the development of assets (including interest, property taxes and other direct costs) begins when an active development commences and ends when the asset, or a portion of an asset, is delivered and is ready for its intended use. Cost capitalization during redevelopment of assets (including interest and other direct costs) begins when the asset is taken out of service for redevelopment and ends when the asset redevelopment is completed and the asset is placed in-service.

Valuation of Receivables— Due to the short-term nature of the leases at our multifamily properties, generally six months to one year, our exposure to tenant defaults and bankruptcies is minimized. Our policy is to record allowances for all outstanding receivables greater than 30 days past due at our multifamily properties.

We are subject to tenant defaults and bankruptcies at our office and retail properties that could affect the collection of outstanding receivables. In order to mitigate these risks, we perform credit review and analysis on all commercial tenants and significant leases before they are executed. We evaluate the collectability of outstanding receivables and record allowances as appropriate. Our policy is to record allowances for all outstanding invoices greater than 60 days past due at our office and retail properties.

We had $1.0 million and $1.4 million in an allowance for doubtful accounts as of December 31, 2008 and 2007, respectively.

Notes Receivable— Notes receivable consists primarily of promissory notes issued by third parties. We record notes receivable at cost. We evaluate the collectability of both interest and principal for each of its notes to determine whether it is impaired. A note is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a note is considered to be impaired, the amount of the allowance is calculated by comparing the recorded investment to either the value determined by discounting the expected future cash flows at the note’s effective interest rate or to the fair value of the collateral if the note is collateral dependent.

Notes receivable activity for the twelve months ended December 31, 2008 consists primarily of the following:

	(1)		We had a promissory note of approximately $29.5 million related to a for-sale residential project in which we had a 40% interest. During 2008, the Regents Park Joint Venture defaulted on this note. As a result, we converted the outstanding notes receivable due from the Regents Park Joint Venture (Phase I) to preferred equity in the same joint venture. We did not record a gain or loss upon conversion of the outstanding notes receivable balance to preferred equity. Because of these events, we have consolidated this joint venture in its financial statements as of December 31, 2008 (see Note 10 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K).

	(2)		We had short-term seller financing related to the sale of Colonial Grand at Shelby Farms I & II for approximately $27.8 million with an original maturity date of July 27, 2008 and a rate of 6.50%. There were two 30-day extension options available at a rate of 8.0% and 12.0%, respectively. During July 2008, the buyer exercised the first of these extension options. In August 2008, the buyer repaid the note in full.

We had recorded accrued interest related to our outstanding notes receivable of $0.1 million, $0.2 million and $5.2 million as of December 31, 2008, 2007 and 2006, respectively. As of December 31, 2008, 2007 and 2006, we had recorded a reserve of $1.5 million, $0.9 million and $0.6 million, respectively, against its outstanding notes receivable and accrued interest. The weighted average interest rate on the notes receivable outstanding at December 31, 2008, 2007 and 2006 was approximately 5.9%, 8.1% and 11.8%, respectively. Interest income is recognized on an accrual basis.

We provided first mortgage financing to third parties in 2008 as discussed above. In 2007, we provided first mortgage financing to third parties of $17.5 million and received principal payments of $7.3 million on these loans. We provided $1.3 million ($0.4 million of subordinated financing and $0.9 million of seller-financing) of financing to third parties in 2008 and $8.6 million of subordinated financing to third parties in 2007. We received principal payments of $1.7 million and $49.5 million on these and other outstanding subordinated loans during 2008 and 2007, respectively. As of December 31, 2008 and 2007, we had outstanding notes receivable balances of $2.9 million and $30.7 million, respectively. As of December 31, 2008, we had a reserve of $1.5 million related to these notes.

Deferred Debt and Lease Costs—Deferred debt costs consist of loan fees and related expenses which are amortized on a straight-line basis, which approximates the effective interest method, over the terms of the related debt. Deferred lease costs include leasing charges, direct salaries and other costs incurred by us to originate a lease, which are amortized on a straight-line basis over the terms of the related leases.

Derivative Instruments—All derivative instruments are recognized on the balance sheet and measured at fair value. Derivatives that do not qualify for hedge treatment under SFAS No. 133 (subsequently amended by SFAS Nos. 137 and 138), Accounting for Derivative Instruments and Hedging Activities, must be recorded at fair value with gains or losses recognized in earnings in the period of change. We enter into derivative financial instruments from time to time, but do not use them for trading or speculative purposes. Interest rate cap agreements and interest rate swap agreements are used to reduce the potential impact of increases in interest rates on variable-rate debt.

We formally document all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge (see Note 13 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K). This process includes specific identification of the hedging instrument and the hedge transaction, the nature of the risk being hedged and how the hedging instrument’s effectiveness in hedging the exposure to the hedged transaction’s variability in cash flows attributable to the hedged risk will be assessed. Both at the inception of the hedge and on an ongoing basis, we assess whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows or fair values of hedged items. We discontinue hedge accounting if a derivative is not determined to be highly effective as a hedge or has ceased to be a highly effective hedge.

Share-Based Compensation— The Trust currently sponsors share option plans and restricted share award plans (Refer to Note 16 — Share—based Compensation in our Notes to Consolidated Financial Statements contained in Item 8 of this

Form 10-K). In December 2004, the FASB issued SFAS No. 123 (Revised), Share Based Payment (“SFAS No. 123(R)”), which replaced SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 (R) requires compensation costs related to share-based payment transactions to be recognized in financial statements.

Revenue Recognition— Sales and the associated gains or losses on real estate assets, condominium conversion projects and for-sale residential projects are recognized in accordance with the provisions of Statement of Financial Accounting Standard (“SFAS”) No. 66, Accounting for Sales of Real Estate(“SFAS No. 66”). For condominium conversion and for-sale residential projects, sales and the associated gains for individual condominium units are recognized upon the closing of the sale transactions, as all conditions for full profit recognition have been met (“Completed Contract Method”). Under SFAS No. 66, we use the relative sales value method to allocate costs and recognize profits from condominium conversion and for-sale residential sales.

Estimated future warranty costs on condominium conversion and for-sale residential sales are charged to cost of sales in the period when the revenues from such sales are recognized. Such estimated warranty costs are approximately 0.5% of total revenue. As necessary, additional warranty costs are charged to costs of sales based on management’s estimate of the costs to remediate existing claims.

Revenue from construction contracts is recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Adjustments to estimated profits on contracts are recognized in the period in which such adjustments become known.

Other income received from long-term contracts signed in the normal course of business, including property management and development fee income, is recognized when earned for services provided to third parties, including joint ventures in which we own a minority interest.

We, as lessor, retain substantially all the risks and benefits of property ownership and account for our leases as operating leases. Rental income attributable to leases is recognized on a straight-line basis over the terms of the leases. Certain leases contain provisions for additional rent based on a percentage of tenant sales. Percentage rents are recognized in the period in which sales thresholds are met. Recoveries from tenants for taxes, insurance, and other property operating expenses are recognized in the period the applicable costs are incurred in accordance with the terms of the related lease.

Segment Reporting— We have adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS No. 131”). SFAS No. 131 defines an operating segment as a component of an enterprise that engages in business activities that generate revenues and incur expenses, which operating results are reviewed by the chief operating decision maker in the determination of resource allocation and performance, and for which discrete financial information is available. We manage our business based on the performance of four separate operating segments: multifamily, office, retail and for-sale residential.

Investments in Joint Ventures — To the extent that we contribute assets to a joint venture, our investment in the joint venture is recorded at our cost basis in the assets that were contributed to the joint venture. To the extent that our cost basis is different from the basis reflected at the joint venture level, the basis difference is amortized over the life of the related assets and included in our share of equity in net income of the joint venture. In accordance with the provisions of SFAS No. 66 and Statement of Position 78-9, Accounting for Investments in Real Estate Ventures, paragraph 30, we recognize gains on the contribution of real estate to joint ventures, relating solely to the outside partner’s interest, to the extent the economic substance of the transaction is a sale. We continually evaluate our investments in joint ventures for other than temporary declines in market value. On a periodic basis, management assesses whether there are any indicators that the value of our investments in unconsolidated joint ventures may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment. We have determined that these investments are not impaired as of December 31, 2008 and 2007.

Investment and Development Expenses - Investment and development expenses consist primarily of costs related to abandoned pursuits. We incur costs prior to land acquisition including contract deposits, as well as legal, engineering and other external professional fees related to evaluating the feasibility of such developments. If we determine that it is probable that we will not develop a particular project, any related pre-development costs previously incurred are immediately expensed. We recorded $4.4 million, $1.5 million and $1.0 million in investment and development expenses in 2008, 2007 and 2006, respectively.

Assets and Liabilities Measured at Fair Value — On January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”) for financial assets and liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Recent Accounting Pronouncements — In September 2006, the FASB issued SFAS No. 157. As discussed above, SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for our financial assets and liabilities on January 1, 2008. In February 2008, the FASB reached a conclusion to defer the implementation of the SFAS No. 157 provisions relating to non-financial assets and liabilities until January 1, 2009. The FASB also reached a conclusion to amend SFAS No. 157 to exclude SFAS No. 13 Accounting for Leases and its related interpretive accounting pronouncements. SFAS No. 157 is not expected to materially affect how we determine fair value, but has resulted in certain additional disclosures (see Note 3 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K). We adopted SFAS No. 157 effective January 1, 2008 for financial assets and financial liabilities and do not expect this adoption to have a material effect on our consolidated results of operations or financial position. We also adopted the deferral provisions of FASB Staff Position, or FSP, SFAS No. 157-2, “Effective Date of FASB Statement No. 157,” which delays the effective date of SFAS No. 157 for all nonrecurring fair value measurements of non-financial assets and liabilities (except those that are recognized or disclosed at fair value in the financial statements on a recurring basis) until fiscal years beginning after November 15, 2008. We also adopted FSP SFAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.” This FSP, which provides guidance on measuring the fair value of a financial asset in an inactive market, had no impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. The provisions of SFAS No. 159 are effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51. SFAS No. 160 amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. SFAS No. 160 also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. The provisions of SFAS No. 160 are effective for fiscal years beginning after November 15, 2008, including interim periods beginning January 1, 2009. Based on our evaluation of SFAS No. 160, we have concluded that we will continue to classify our noncontrolling interest as “temporary equity” in our consolidated balance sheet. We will continue

to evaluate the impact of other provisions of SFAS No. 160 on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which changes how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS No. 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard will, among other things, impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from acquisition accounting; and change accounting practices for acquired contingencies, acquisition-related restructuring costs, and tax benefits. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are currently evaluating the impact of SFAS No. 141(R) on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 161 is intended to help investors better understand how derivative instruments and hedging activities affect an entity’s financial position, financial performance and cash flows through enhanced disclosure requirements. The enhanced disclosures primarily surround disclosing the objectives and strategies for using derivative instruments by their underlying risk as well as a tabular format of the fair values of the derivative instruments and their gains and losses. SFAS No.161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We are currently evaluating how this standard will impact our disclosures regarding derivative instruments and hedging activities.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”. This FSP allows us to use our historical experience in renewing or extending the useful life of intangible assets. This FSP is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and shall be applied prospectively to intangible assets acquired after the effective date. We do not expect the application of this FSP to have a material impact on our consolidated financial statements.

In June 2008, the FASB issued an FSP, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF No. 03-6-1”), which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, “Earnings per Share.” Under the guidance in FSP EITF No. 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per unit pursuant to the two-class method. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. All prior-period earnings per unit data presented shall be adjusted retrospectively. Early adoption is not permitted. We are currently assessing the impact, if any, the adoption of FSP EITF No. 03-6-1 will have on our financial position and results of operations.

In December 2008, the EITF issued EITF 08-6, Equity Method Investment Accounting Considerations, which, amongst other items, clarifies that the initial carrying value of an equity method investment should be based on the cost accumulation model. EITF 08-6 is effective on a prospective basis in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. We do not expect the application of EITF 08-6 to have a material impact on its consolidated financial statements.

Inflation

Leases at the multifamily properties generally provide for an initial term of six months to one year and allow for rent adjustments at the time of renewal. Leases at the office properties typically provide for rent adjustments and the pass-through of certain operating expenses during the term of the lease. Substantially all of the leases at the retail properties provide for the pass-through to tenants of certain operating costs, including real estate taxes, common area maintenance expenses, and insurance. All of these provisions permit us to increase rental rates or other charges to tenants in response to rising prices and, therefore, serve to minimize our exposure to the adverse effects of inflation.

An increase in general price levels may immediately precede, or accompany, an increase in interest rates. At December 31, 2008, our exposure to rising interest rates was mitigated by our high percentage of consolidated fixed rate

COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per unit data)


	December 31,			December 31,
	2008			2007
ASSETS
Land, buildings and equipment	$	2,897,761		$	2,431,064
Undeveloped land and construction in progress		380,676			531,410
Less: Accumulated Depreciation		(406,428	)		(290,118	)
Real estate assets held for sale, net		102,699			253,641

Net real estate assets		2,974,708			2,925,997

Cash and equivalents		9,185			92,841
Restricted cash		29,766			10,005
Accounts receivable, net		23,102			25,534
Notes receivable		2,946			30,756
Prepaid expenses		5,332			8,845
Deferred debt and lease costs		16,783			15,637
Investment in partially owned entities		46,221			69,682
Deferred tax asset		9,311			19,897
Other assets		37,147			30,443

Total Assets	$	3,154,501		$	3,229,637


LIABILITIES AND PARTNERS’ EQUITY
Notes and mortgages payable	$	1,450,389		$	1,575,921
Unsecured credit facility		311,630			39,316
Mortgages payable related to real estate held for sale		—			26,602

Total long-term liabilities		1,762,019			1,641,839

Accounts payable		52,898			68,858
Accrued interest		20,716			23,064
Accrued expenses		7,520			16,425
Other liabilities		32,140			11,966

Total liabilities		1,875,293			1,762,152


Limited partners’ redeemable units, at redemption value — 8,860,971 and 10,052,778 units outstanding at December 31, 2008 and 2007, respectively		73,812			227,494

Limited partners’ minority interest in consolidated partnerships		1,943			2,439

General partner —
Common equity — 48,546,268 and 47,216,549 units outstanding at December 31, 2008 and 2007, respectively		1,014,545			1,025,654
Preferred equity ($125,000 liquidation preference)		96,707			120,550
Limited partners’ preferred equity ($100,000 liquidation preference)		97,406			97,406
Accumulated other comprehensive income (loss)		(5,205	)		(6,058	)

Total partners’ equity		1,203,453			1,237,552


Total liabilities and partners’ equity	$	3,154,501		$	3,229,637

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

COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per unit data)


	For the years ended
	December 31,			December 31,			December 31,
	2008			2007			2006
Revenue:
Base rent	$	276,039		$	319,141		$	362,297
Base rent from affiliates		96			1,153			2,547
Percentage rent		416			917			957
Tenant recoveries		3,737			11,397			22,438
Other property related revenue		35,404			32,531			29,621
Construction revenues		10,137			38,448			30,484
Other non-property related revenue		18,629			19,352			17,693

Total revenue		344,458			422,939			466,037

Operating expenses:
Property operating expenses		84,929			93,056			99,407
Taxes, licenses, and insurance		38,806			44,221			48,230
Construction expenses		9,530			34,546			29,411
Property management expenses		8,426			12,178			12,535
General and administrative expenses		23,326			25,650			20,181
Management fee and other expenses		15,316			15,673			12,575
Restructuring charges		1,028			3,019			—
Investment and development expenses		4,358			1,516			1,010
Depreciation		102,237			109,570			125,706
Amortization		3,275			10,582			17,843
Impairment and other losses		116,550			44,129			1,600

Total operating expenses		407,781			394,140			368,498

Income (loss) from operations		(63,323	)		28,799			97,539

Other income (expense):
Interest expense		(75,153	)		(92,475	)		(121,441	)
Gains (losses) on retirement of debt		15,951			(10,363	)		(641	)
Interest income		2,776			7,591			7,754
Income (loss) from partially-owned unconsolidated entities		12,516			11,207			34,823
Gains on hedging activities		(385	)		345			5,535
Gains from sales of property, net of income taxes of $1,533, $6,548 and $3,416 for 2008, 2007 and 2006, respectively		3,799			29,450			66,794
Transaction costs		—			(11,026	)		—
Income taxes and other		1,001			15,743			(189	)

Total other expense		(39,495	)		(49,528	)		(7,365	)

Income (loss) before minority interest and discontinued operations		(102,818	)		(20,729	)		90,174
Minority interest of limited partners in consolidated partnerships		15			(1,335	)		766

Income (loss) from continuing operations		(102,803	)		(22,064	)		90,940


Income from discontinued operations		6,243			11,523			29,896
Gain on disposal of discontinued operations, net of income taxes of $1,064, $1,839 and $8,554 for 2008, 2007 and 2006, respectively		46,052			91,218			134,619
Minority interest of limited partners in discontinued operations		(95	)		(3,989	)		(2,591	)

Income from discontinued operations		52,200			98,752			161,924

Net income (loss)		(50,603	)		76,688			252,864


Distributions to general partner preferred unitholders		(8,773	)		(13,439	)		(20,902	)
Distributions to limited partner preferred unitholders		(7,251	)		(7,250	)		(7,250	)
Preferred unit issuance costs write-off		(27	)		(360	)		(2,128	)

Net income (loss) available to common unitholders		(66,654	)		55,639			222,584

Net income (loss) available to common unitholders allocated to limited partners		11,225			(10,099	)		(42,135	)

Net income (loss) available to common unitholders allocated general partner	$	(55,429	)	$	45,540		$	180,449


Net income (loss) available to common unitholders per common unit — basic:
Income (loss) from continuing operations	$	(2.09	)	$	(0.76	)	$	1.09
Income from discontinued operations		0.92			1.74			2.88

Net income (loss) available to common unitholders per common unit — basic	$	(1.17	)	$	0.98		$	3.97



Net income (loss) available to common unitholders per common unit — diluted:
Income (loss) from continuing operations	$	(2.09	)	$	(0.76	)	$	1.06
Income from discontinued operations		0.92			1.74			2.86

Net income (loss) available to common unitholders per common unit	$	(1.17	)	$	0.98		$	3.92
- diluted

Weighted average common units outstanding — basic		56,904			56,723			56,162
Weighted average common units outstanding — diluted		56,904			56,723			56,698


Net income (loss)	$	(50,603	)	$	76,688		$	252,864
Other comprehensive income (loss):
Unrealized income (loss) on cash flow hedging activities		(100	)		(535	)		(3,029	)
Change in additional minimum pension liability		—			—			239
Change related to pension plan termination		—			2,615			—

Comprehensive income (loss)	$	(50,703	)	$	78,768		$	250,074

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

COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
(amounts in thousands)


For the Years Ended December 31, 2008, 2007 and 2006
							Limited			Accumulated
	General Partner						Partners’			Other
	Common			Preferred			Preferred			Comprehensive
	Equity			Equity			Equity			Income (Loss)			Total



Balance, December 31, 2005	$	1,003,583		$	301,450		$	97,406		$	(915	)	$	1,401,524


Net income available to common unitholders before preferred unit distributions		222,583			20,903			7,250			—			250,736
Net income available to common unitholders allocated to limited partners		(42,135	)		—			—			—			(42,135	)
Cash contributions		32,686			—			—			—			32,686
Redeemption of preferred units		—			(76,464	)		—			—			(76,464	)
Distributions		(153,264	)		(20,903	)		(7,250	)					(181,417	)
Unrealized loss on derivative financial instruments		—			—			—			(3,029	)		(3,029	)
Reclassification adjustments for amounts included in net income		—			—			—			(2,386	)		(2,386	)
Change in additional minimum pension liability		—			—			—			239			239
Adoption of SFAS No. 158		—			—			—			(2,615	)		(2,615	)
Adjustment of limited partner common equity to redemption value		2,609			—			—			—			2,609

Balance, December 31, 2006	$	1,066,062		$	224,986		$	97,406		$	(8,706	)	$	1,379,748


Net income available to common unitholders before preferred unit distributions		55,639			13,439			7,250			—			76,328
Net income available to common unitholders allocated to limited partners		(10,099	)		—			—			—			(10,099	)
Cash contributions		21,859			—			—			—			21,859
Redeemption of preferred units		—			(104,436	)		—			—			(104,436	)
Distributions		(144,960	)		(13,439	)		(7,250	)					(165,649	)
Special cash distribution		(11,999	)		—			—			—			(11,999	)
Special distribution of joint venture units		(229,409	)		—			—			—			(229,409	)
Unrealized loss on derivative financial instruments		—			—			—			(535	)		(535	)
Reclassification adjustments for amounts included in net income		—			—			—			568			568
Termination of pension plan		—			—			—			2,615			2,615
Adjustment of limited partner common equity to redemption value		278,561			—			—			—			278,561

Balance, December 31, 2007	$	1,025,654		$	120,550		$	97,406		$	(6,058	)	$	1,237,552


Net loss available to common unitholders before preferred unit distributions		(66,654	)		8,773			7,251			—			(50,630	)
Net loss available to common unitholders allocated to limited partners		11,225			—			—			—			11,225
Cash contributions		2,321			—			—			—			2,321
Redeemption of preferred units		—			(23,843	)		—			—			(23,843	)
Distributions		(100,458	)		(8,773	)		(7,251	)					(116,482	)
Unrealized loss on derivative financial instruments		—			—			—			(100	)		(100	)
Reclassification adjustments for amounts included in net income		—			—			—			953			953
Adjustment of limited partner common equity to redemption value		142,457			—			—			—			142,457

Balance, December 31, 2008	$	1,014,545		$	96,707		$	97,406		$	(5,205	)	$	1,203,453

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

COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)


For the Years Ended December 31, 2008, 2007 and 2006
	2008			2007			2006

Cash flows from operating activities:
Net income (loss)		(50,603	)		76,688		$	252,865
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		107,610			123,811			166,628
Loss (Income) from partially-owned unconsolidated entities		(12,516	)		(11,207	)		(34,823	)
Distributions of income from partially-owned unconsolidated entities		13,344			13,207			9,370
Gains from sales of property		(52,652	)		(128,287	)		(213,383	)
Transaction costs		—			11,026			—
(Gain) loss on retirement of debt		(16,021	)		12,521			—
Prepayment penalties		—			(29,207	)		—
Impairment charges		116,900			46,629			1,600
Other, net		1,959			(4,782	)		5,450
Decrease (increase) in:
Restricted cash		440			5,902			(7,765	)
Accounts receivable, net		2,276			(276	)		(1,341	)
Prepaid expenses		3,362			10,943			(2,000	)
Other assets		234			(12,700	)		(12,450	)
Increase (decrease) in:
Accounts payable		6,838			(4,104	)		2,229
Accrued interest		(2,348	)		(9,405	)		3,406
Accrued expenses and other		(690	)		(1,921	)		2,010

Net cash provided by operating activities		118,133			98,838			171,796

Cash flows from investing activities:
Acquisition of properties		(7,369	)		(125,400	)		(350,306	)
Development expenditures		(280,492	)		(314,299	)		(309,923	)
Development expenditures paid to an affiliate		(50,605	)		(77,035	)		(59,165	)
Tenant improvements		(3,046	)		(5,960	)		(26,133	)
Capital expenditures		(24,613	)		(34,198	)		(36,509	)
Issuance of notes receivable		(9,436	)		(26,195	)		(40,549	)
Repayments of notes receivable		5,939			56,708			17,179
Proceeds from sales of property, net of selling costs		176,997			650,735			865,918
Transaction costs		—			(11,026	)		—
Distributions from partially owned entities		32,734			100,131			92,242
Capital contributions to partially owned entities		(13,363	)		(43,142	)		(17,336	)
Purchase of investments		5,757			(7,379	)		—

Net cash provided by (used in) investing activities		(167,497	)		162,940			135,418

Cash flows from financing activities:
Principal reductions of debt		(223,295	)		(655,076	)		(260,594	)
Payment of debt issuance costs		(2,272	)		—			—
Proceeds from additional borrowings		71,302			818,748			274,011
Net change in revolving credit balances		259,311			(147,143	)		(24,656	)
Distributions to common and preferred unitholders		(116,482	)		(165,649	)		(181,417	)
Special cash distribution		—			(11,999	)		—
Redemption of preferred units		(23,844	)		(105,157	)		(78,527	)
Proceeds from dividend reinvestment plan and exercise of stock options		1,270			21,859			32,686
Other financing activities, net		(282	)		(12,167	)		(11,685	)

Net cash used in financing activities		(34,292	)		(256,584	)		(250,182	)

Increase in cash and equivalents		(83,656	)		5,194			57,032
Cash and equivalents, beginning of period		92,841			87,647			30,615

Cash and equivalents, end of period	$	9,185		$	92,841		$	87,647


Supplemental disclosures of cash flow information:
Cash paid during the year for interest, including amounts capitalized	$	97,331		$	127,271		$	141,839
Cash paid during the year for income taxes	$	4,755		$	5,799		$	17,513


Supplemental disclosure of non cash transactions:
Issuance of community development district bonds (“CDD”) related to Nor du Lac project	$	(24,000	)		—			—
Conversion of notes receivable balance due from Regents Park Joint Venture (Phase I)	$	(30,689	)		—			—
Cash flow hedging activities	$	(100	)	$	(535	)	$	(3,029	)

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

COLONIAL REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

1. Organization and Basis of Presentation

Colonial Realty Limited Partnership (“CRLP”), a Delaware limited partnership, is the operating partnership of Colonial Properties Trust (the “Trust”), an Alabama real estate investment trust (“REIT”) whose shares are listed on the New York Stock Exchange (“NYSE”). As used herein, “CRLP” includes Colonial Properties Services, Inc. (“CPSI”), Colonial Properties Services Limited Partnership (“CPSLP”) and CLNL Acquisition Sub, LLC (“CLNL”). The Trust was originally formed as a Maryland REIT on July 9, 1993 and reorganized as an Alabama REIT under a new Alabama REIT statute on August 21, 1995. The Trust is a fully integrated, self-administered and self-managed REIT, which means that it is engaged in the acquisition, development, ownership, management and leasing of commercial real estate property. CRLP’s activities include ownership or partial ownership and operation of a portfolio of 192 properties as of December 31, 2008 (including 112 consolidated properties and 80 properties held through unconsolidated joint ventures), consisting of multifamily, office and retail properties located in Alabama, Arizona, Florida, Georgia, North Carolina, South Carolina, Tennessee, Texas and Virginia. As of December 31, 2008, including properties in lease-up, CRLP owns interests in 116 multifamily apartment communities (including 103 wholly-owned consolidated properties and 13 properties partially-owned through unconsolidated joint ventures), 48 office properties (including three wholly-owned consolidated properties and 45 properties partially-owned through unconsolidated joint ventures) and 28 retail properties (including six consolidated properties and 22 properties partially-owned through unconsolidated joint ventures).

2. 2007 Strategic Transactions

In November 2006, the Trust announced its plan to accelerate becoming a multifamily focused REIT by reducing its ownership interests in its office and retail portfolios. To facilitate this plan, in June 2007, the Trust completed two joint venture transactions, one involving 26 properties and the other involving 11 properties. In addition, in July 2007, CRLP completed the outright sale of an additional 12 retail properties. Each of these transactions is discussed in more detail below.

On June 15, 2007, the Trust completed its office joint venture transaction with DRA G&I Fund VI Real Estate Investment Trust, an entity advised by DRA Advisors LLC (“DRA”). The Trust sold to DRA its 69.8% interest in the newly formed joint venture (the “DRA/CLP JV”) that became the owner of 24 office properties and two retail properties that were previously wholly-owned by CRLP. Total sales proceeds from the sale of this 69.8% interest were approximately $379.0 million. CRLP retained a 15% minority interest in the DRA/CLP JV (see Note 10), as well as management and leasing responsibilities for the 26 properties. In addition to the approximate 69.8% interest purchased from the Trust, DRA purchased an aggregate of 2.6% of the interests in the DRA/CLP JV from the limited partners of CRLP. As of December 31, 2007, DRA owned an approximate 72.4% interest in the DRA/CLP JV, a subsidiary of CRLP owned a 15% interest and certain of our limited partners of CRLP that did not elect to sell their interests in the DRA/CLP JV owned the remaining approximate 12.6% interest. The purchase price paid by DRA for each limited liability company interest it acquired in the DRA/CLP JV was based on a portfolio value of approximately $1.1 billion, of which approximately $588.2 million was funded with mortgage indebtedness. The Trust recorded a net gain of approximately $211.8 million on the sale of its 69.8% interest to DRA. The Trust also deferred a gain of approximately $7.2 million as a result of certain obligations it assumed in the transaction. During 2007, the Trust recognized approximately $3.0 million of this deferred gain as a result of a reduction of the related obligations. The Trust did not recognize any of this deferred gain during 2008. In May 2008, certain members in the DRA/CLP JV exercised an option to sell membership interests totaling approximately $1.7 million. DRA purchased these units with cash increasing its ownership interest in the joint venture from 72.4% to 73.3%. CRLP’s ownership interest in the DRA/CLP JV remained at 15.0%.

On June 20, 2007, the Trust completed its retail joint venture transaction with OZRE Retail, LLC (“OZRE”). The Trust sold to OZRE its 69.8% interest in the newly formed joint venture (the “OZRE JV”) that became the owner of 11 retail properties that were previously wholly-owned by CRLP. Total sales proceeds from the sale of this 69.8% interest were approximately $115.0 million. CRLP retained a 15% minority interest in the OZRE JV (see Note 10), as well as management and leasing responsibilities for the 11 properties. In addition to the approximate 69.8% interest purchased from the Trust, OZRE purchased an aggregate of 2.7% of the interests in the OZRE JV from limited partners of CRLP. As of December 31, 2007, OZRE owned an approximate 72.5% interest in the OZRE JV, a subsidiary of CRLP owned a 15% interest and certain of the limited partners of CRLP that did not elect to sell their interests in the OZRE JV to OZRE owned the remaining approximate 12.5% interest. The purchase price paid by OZRE for each limited liability company interest it acquired in the OZRE JV was based on a portfolio value of approximately $360.0 million, of which approximately $187.2 million was funded with mortgage indebtedness. The Trust recorded a net gain of approximately $64.7 million on the sale of its 69.8% interest to

OZRE. The Trust also deferred a gain of approximately $8.5 million as a result of certain obligations it assumed in the transaction. During 2007, the Trust recognized approximately $5.5 million of this deferred gain as a result of a reduction of the related obligations. The Trust did not recognize any of this deferred gain during 2008; however, the Trust funded $0.4 million of this obligation as required per the purchase/sale agreement. In June 2008, certain members in the OZRE JV exercised an option to sell membership interests totaling approximately $9.1 million to the OZRE JV. The redeemed units were cancelled by the OZRE JV increasing OZRE’s ownership interest from 72.5% to 82.7% and CRLP’s ownership interest from 15.0% to 17.1%.

In July 2007, the Trust completed its strategic initiative to become a multifamily REIT with the outright sale of an additional 11 retail assets for an aggregate sales price of $129.0 million (the asset sales, together with the joint venture transactions completed in June 2007 are collectively referred to herein as the “Strategic Transactions”) (see Note 6). As a result of the sale of one of these assets for less than its carrying value, CRLP recorded an impairment charge of approximately $2.5 million during 2007, which is included in “Income from discontinued operations” in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2007. In addition, the CRLP sold a retail property, of which it owned 90%, for a sales price of $74.4 million (see Note 6).

As a result of the joint venture transactions discussed above, the Trust paid a special distribution of $10.75 per share on June 27, 2007. The remaining proceeds from these transactions were used to pay down a portion of CRLP’s outstanding indebtedness (see Note 12). During 2007, CRLP incurred approximately $29.2 million in prepayment penalties, which was partially offset by the write-off of approximately $16.7 million in debt intangibles. These amounts are included in “Gains (losses) on retirement of debt” in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2007.

During 2007, CRLP incurred transaction costs of approximately $11.8 million (excluding minority interest of approximately $2.0 million) in connection with the office and retail joint venture transactions, including employee incentives of approximately $0.5 million. These transaction costs were recorded as a part of the net gain recorded for the two joint venture transactions for the Trust.

3. Summary of Significant Accounting Policies

Basis of Presentation— The consolidated financial statements include CRLP, Colonial Properties Services Inc. (“CPSI”), Colonial Properties Services Limited Partnership (“CPSLP”), and CLNL Acquisition Sub, LLC (“CLNL”). CPSI is a taxable REIT subsidiary of the Trust that is not entitled to a dividend paid deduction and is subject to federal, state and local income taxes. CPSI provides property development, leasing and management for third-party owned properties and administrative services to CRLP. CRLP generally reimburses CPSI for payroll and other costs incurred in providing services to CRLP. All inter-company transactions are eliminated in the accompanying consolidated financial statements.

Entities in which CRLP owns, directly or indirectly, a fifty percent or less interest and does not control are reflected in the consolidated financial statements as investments accounted for under the equity method. Under this method, the investment is carried at cost plus or minus equity in undistributed earnings or losses since the date of acquisition. For those entities in which CRLP owns less than 100% of the equity interest, CRLP consolidates the entity if CRLP has the direct or indirect ability to make major decisions about the entities’ activities based on the terms of the respective joint venture agreements which specify the sharing of participating and protective rights such as decisions regarding major leases, encumbering the entities with debt and whether to dispose of entities. CRLP also consolidates certain partially-owned entities and other subsidiaries if CRLP owns less than 100% of the equity interest and is deemed to be the primary beneficiary as defined by the Financial Accounting Standards Board (“FASB”) Interpretation 46 “Consolidation of Variable Interest Entities”, an Interpretation of ARB No. 51, as revised (“FIN 46(R)”). CRLP eliminates in consolidation revenues and expenses associated with its percentage interest in unconsolidated subsidiaries.

CRLP recognizes minority interest in its Consolidated Balance Sheets for partially-owned entities that CRLP consolidates. The minority partners’ share of current operations is reflected in “Minority interest of limited partners in consolidated partnerships” in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Pursuant to CRLP’s Third Amended and Restated Agreement of Limited Partnership, as amended, each time the Trust issues shares, it contributes to CRLP any net proceeds raised in connection with the issuance and CRLP issues an equivalent number of units to the Trust. Similarly, whenever the Trust purchases or redeems its preferred and common shares, CRLP purchases, redeems or cancels an equivalent number of its units.

Federal Income Tax Status— CRLP is a partnership for federal income tax purposes. As a partnership CRLP is not subject to federal income tax on its income. Instead, each of CRLP’s partners, including the Trust, is required to pay tax on such partner’s allocable share of income. The Trust, which is considered a corporation for federal income tax purposes, qualifies as a REIT for federal income tax purposes and generally will not be subject to federal income tax to the extent it distributes its REIT taxable income to its shareholders. REITs are subject to a number of organizational and operational requirements. If the Trust fails to qualify as a REIT in any taxable year, the Trust will be subject to federal income tax on its taxable income at regular corporate rates. The Trust may be subject to certain state and local taxes on its income and property.

In addition, CRLP’s financial statements include the operations of a taxable REIT subsidiary, CPSI, which is not entitled to a dividends paid deduction and is subject to federal, state and local income taxes. CPSI provides property development, leasing and management services for third-party owned properties and administrative services to CRLP. CRLP generally reimburses CPSI for payroll and other costs incurred in providing services to CRLP. CPSI uses the liability method of accounting for income taxes. Deferred income tax assets and liabilities result from temporary differences. Temporary differences are differences between tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future periods. CPSI provides property development, construction services, leasing and management services for joint-venture and third-party owned properties and administrative services to CRLP and engages in for-sale development and conversion activity. CRLP generally reimburses CPSI for payroll and other costs incurred in providing services to CRLP. All inter-company transactions are eliminated in the accompanying Consolidated Financial Statements. CPSI’s consolidated provision (benefit) for income taxes was $0.8 million, ($7.4) million and $12.2 million for the years ended December 31, 2008, 2007 and 2006, respectively. CPSI’s effective income tax rate was -0.90%, 41.87% and 38.31% for the years ended December 31, 2008, 2007 and 2006, respectively. As of December 31, 2008, CPSI has a net deferred tax asset of approximately $9.3 million, which resulted primarily from the impairment charge related to the Trust’s for-sale residential properties. CPSI has assessed the recoverability of this asset and believes that, as of December 31, 2008, recovery is more likely than not based upon future taxable income and the ability to carryback taxable losses to prior periods.

In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. FIN 48 was effective for CRLP on January 1, 2007. The adoption did not have a material impact on CRLP’s consolidated financial statements. CRLP has concluded that there are no significant uncertain tax positions requiring disclosure, and there are no material amounts of unrecognized tax benefits.

Tax years 2005 through 2007 are subject to examination by the federal and state taxing authorities. There are no significant income tax examinations currently in process.

CRLP may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. When CRLP has received an assessment for interest and/or penalties, it has been classified in the financial statements as income tax expense.

Land, Buildings, and Equipment—Land, buildings, and equipment is stated at the lower of cost, less accumulated depreciation, or fair value. CRLP reviews its long-lived assets and certain intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the asset’s fair value. Assets classified as held for sale are reported at the lower of their carrying amount or fair value less cost to sell. CRLP determines fair value based on a probability weighted discounted future cash flow analysis.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”), land inventory and for-sale residential projects under development are reviewed for potential write-downs when impairment indicators are present. SFAS No. 144 requires that in the event the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts, impairment charges are required to be recorded to the extent that the fair value of such assets is less than their carrying amounts. These estimates of cash flows are significantly impacted by estimates of sales price, selling velocity, sales incentives, construction costs and other factors. Due to uncertainties in the estimation process, actual results could differ from such estimates. For those assets deemed to be impaired, the impairment to be recognized is to be measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. CRLP’s determination of fair value is based on a probability weighted discounted future cash flow analysis, current negotiations regarding a potential sale or other related factors, all of which incorporate available market information as well as other assumptions made by management.

During December 2008, CRLP recorded a $116.9 million impairment charge related to certain of the Trust’s for-sale residential properties including condominium conversions, land held for future sale and for-sale residential and mixed-use development and one retail property. Of this charge, $114.9 million is included in “Impairment and other losses” on CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss) and $2.0 million is included in “Income from discontinued operations” on CRLP’s Consolidated Statements of Opertions and Comprehensive Income (Loss). CRLP also recorded a $1.7 million casualty loss as a result of fire damage at four multifamily apartment communities that is included in “Impairment and other losses” on CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss).

During June 2007, CRLP recorded a $2.5 million impairment charge related to a retail asset that was sold in July 2007. As a result of the sale, this $2.5 million impairment charge is included in “Income from discontinued operations” on CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss). During September 2007, CRLP recorded an impairment charge of $43.3 million related to the Trust’s for-sale residential business (see Note 5) and $0.8 million as a result of fire damage at two multifamily apartment communities. The fires resulted in the loss of a total of 20 units at the two properties.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, as follows:


		Useful Lives
Buildings		20 — 40 years
Furniture and fixtures		5 or 7 years
Equipment		3 or 5 years
Land improvements		10 or 15 years
Tenant improvements		Life of lease

Repairs and maintenance are charged to expense as incurred. Replacements and improvements are capitalized and depreciated over the estimated remaining useful lives of the assets.

Acquisition of Real Estate Assets—CRLP accounts for its acquisitions of investments in real estate in accordance with SFAS No. 141, Business Combinations, which requires the fair value of the real estate acquired to be allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of other tenant relationships, based in each case on the fair values. CRLP considers acquisitions of operating real estate assets to be “businesses” as that term is contemplated in EITF Issue No. 98-3, Determining Whether a Non-monetary Transaction Involves Receipt of Productive Assets or of a Business.

CRLP allocates purchase price to the fair value of the tangible assets of an acquired property (which includes the land and building) determined by valuing the property as if it were vacant. The “as-if-vacant” value is allocated to land and buildings based on management’s determination of the relative fair values of these assets. CRLP also allocates value to tenant improvements based on the estimated costs of similar tenants with similar terms.

The aggregate value of other intangible assets acquired are measured based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management may engage independent third-party appraisers to perform these valuations and those appraisals use commonly employed valuation techniques, such as discounted cash flow analyses. Factors considered in these analyses include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. CRLP also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods depending on specific local market conditions and depending on the type of property acquired.

Management also estimates costs to execute similar leases including leasing commissions, legal and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination as part of the transaction.

The total amount of other intangible assets acquired is further allocated to in-place leases, which includes other tenant relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and CRLP’s overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of CRLP’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement or management’s expectation for renewal), among other factors.

The value of in-place leases and tenant relationships are amortized as a leasing cost expense over the initial term of the respective leases and any renewal periods. These intangible assets generally have a composite life of three to nine months for CRLP’s multifamily properties. In no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense.

As December 31, 2008, CRLP did not have any unamortized in-place lease intangible assets or above (below) market lease intangibles. The aggregate amortization expense for in-place lease intangible assets recorded during 2008 was $0.5 million.

As of December 31, 2006, CRLP had $98.4 million of gross in-place lease intangible assets related to its office and retail properties and accumulated amortization for these in-place lease intangible assets was $66.2 million related these properties. The aggregate amortization expense for these in-place lease intangible assets was $6.5 million and $14.6 million for 2007 and 2006, respectively. The unamortized portion of these in-place lease intangible assets was disposed of in the office and retail joint venture transactions that occurred during 2007, therefore, there were no unamortized assets as of December 31, 2007.

Additionally, as of December 31, 2006, CRLP had $4.7 million of net above (below) market lease intangibles related to its office and retail property properties. The above (below) market lease intangibles are amortized as a decrease or increase of rental revenue over the terms of the related leases. The aggregate amortization of these intangibles was $0.8 million and $1.6 million for 2007 and 2006, respectively. The unamortized portion of these above (below) market lease intangibles was disposed of in the office and retail joint venture transactions that occurred during 2007.

Undeveloped Land and Construction in Progress—Undeveloped land and construction in progress is stated at cost unless such assets are impaired pursuant to the provisions of SFAS No. 144, in which case such assets are recorded at fair value.

Costs incurred during predevelopment are capitalized after CRLP has identified a development site, determined that a project is feasible and concluded that it is probable that the project will proceed. While CRLP believes it will recover this capital through the successful development of such projects, it is possible that a write-off of unrecoverable amounts could occur. Once it is no longer probable that a development will be successful, the predevelopment costs that have been previously capitalized are expensed.

The capitalization of costs during the development of assets (including interest, property taxes and other direct costs) begins when an active development commences and ends when the asset, or a portion of an asset, is delivered and is ready for its intended use. Cost capitalization during redevelopment of assets (including interest and other direct costs) begins when the asset is taken out-of-service for redevelopment and ends when the asset redevelopment is completed and the asset is transferred back into service.

Cash and Equivalents—CRLP includes highly liquid marketable securities and debt instruments purchased with a maturity of three months or less in cash equivalents. The majority of CRLP’s cash and equivalents are held at major commercial banks.

CRLP has included in accounts payable book overdrafts representing outstanding checks in excess of funds on deposit of $10.3 million and $22.3 million as of December 31, 2008 and 2007, respectively.

Restricted Cash—Restricted cash is comprised of cash balances which are legally restricted as to use and consists primarily of resident and tenant deposits, deposits on for-sale residential lots and units and cash in escrow for self insurance retention.

As of December 31, 2008, restricted cash on CRLP’s Balance Sheet includes $20.2 million of community development district special assessment bonds (see Note 20).

Valuation of Receivables— Due to the short-term nature of the leases at its multifamily properties, generally six months to one year, CRLP’s exposure to tenant defaults and bankruptcies is minimized. CRLP’s policy is to record allowances for all outstanding receivables greater than 30 days past due at its multifamily properties.

CRLP is subject to tenant defaults and bankruptcies at its office and retail properties that could affect the collection of outstanding receivables. In order to mitigate these risks, CRLP performs credit review and analysis on all commercial tenants and significant leases before they are executed. CRLP evaluates the collectability of outstanding receivables and records allowances as appropriate. CRLP’s policy is to record allowances for all outstanding invoices greater than 60 days past due at its office and retail properties.

CRLP had an allowance for doubtful accounts of $1.0 million and $1.4 million as of December 31, 2008 and 2007, respectively.

Notes Receivable— Notes receivable consists primarily of promissory notes issued by third parties. CRLP records notes receivable at cost. CRLP evaluates the collectability of both interest and principal for each of its notes to determine whether it is impaired. A note is considered to be impaired when, based on current information and events, it is probable that CRLP will be unable to collect all amounts due according to the existing contractual terms. When a note is considered to be impaired, the amount of the allowance is calculated by comparing the recorded investment to either the value determined by discounting the expected future cash flows at the note’s effective interest rate or to the fair value of the collateral if the note is collateral dependent.

Notes receivable activity for the twelve months ended December 31, 2008 consists primarily of the following:

	(1)		CRLP had a promissory note of approximately $29.5 million related to a for-sale residential project in which CRLP had a 40% interest. During 2008, the Regents Park Joint Venture defaulted on this note. As a result, CRLP converted the outstanding notes receivable due from the Regents Park Joint Venture (Phase I) to preferred equity in the same joint venture. CRLP did not record a gain or loss upon conversion of the outstanding notes receivable balance to preferred equity. Because of these events, CRLP has consolidated this joint venture in its financial statements as of December 31, 2008 (see Note 10).

	(2)		CRLP had short-term seller financing related to the sale of Colonial Grand at Shelby Farms I & II for approximately $27.8 million with an original maturity date of July 27, 2008 and a rate of 6.50%. There were two 30-day extension options available at a rate of 8.0% and 12.0%, respectively. During July 2008, the buyer exercised the first of these extension options. In August 2008, the buyer repaid the note in full.

CRLP had accrued interest related to its outstanding notes receivable of $0.1 million and $0.2 million as of December 31, 2008 and 2007, respectively. As of December 31, 2008 and 2007, CRLP had recorded a reserve of $1.5 million and $0.9 million, respectively, against its outstanding notes receivable and accrued interest. The weighted average interest rate on the notes receivable outstanding at December 31, 2008 and 2007 was approximately 5.9% and 8.1%, respectively. Interest income is recognized on an accrual basis.

CRLP provided first mortgage financing to third parties in 2008 as discussed above. In 2007, CRLP provided first mortgage financing to third parties of $17.5 million and received principal payments of $7.3 million on these loans. CRLP provided subordinated financing to third parties of $1.3 million and $8.6 million in 2008 and 2007, respectively. CRLP received principal payments of $1.7 million and $49.5 million on these and other outstanding subordinated loans during 2008 and 2007, respectively. As of December 31, 2008 and 2007, CRLP had outstanding notes receivable balances of $2.9 million, net of a $1.5 million reserve, and $30.7 million, respectively.

Deferred Debt and Lease Costs—Deferred debt costs consist of loan fees and related expenses which are amortized on a straight-line basis, which approximates the effective interest method, over the terms of the related debt. Deferred lease costs include leasing charges, direct salaries and other costs incurred by CRLP to originate a lease, which are amortized on a straight-line basis over the terms of the related leases.

Derivative Instruments—All derivative instruments are recognized on the balance sheet and measured at fair value. Derivatives that do not qualify for hedge treatment under SFAS No. 133 (subsequently amended by SFAS Nos. 137 and 138), Accounting for Derivative Instruments and Hedging Activities, must be recorded at fair value with gains or losses recognized in earnings in the period of change. CRLP enters into derivative financial instruments from time to time, but does not use them

for trading or speculative purposes. Interest rate cap agreements and interest rate swap agreements are used to reduce the potential impact of increases in interest rates on variable-rate debt.

CRLP formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge (see Note 13). This process includes specific identification of the hedging instrument and the hedged transaction, the nature of the risk being hedged and how the hedging instrument’s effectiveness in hedging the exposure to the hedged transaction’s variability in cash flows attributable to the hedged risk will be assessed. Both at the inception of the hedge and on an ongoing basis, CRLP assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows or fair values of hedged items. CRLP discontinues hedge accounting if a derivative is not determined to be highly effective as a hedge or has ceased to be a highly effective hedge.

Share-Based Compensation—The Trust currently sponsors share option plans and restricted share award plans (see Note 16). In December 2004, the FASB issued SFAS No. 123 (Revised), Share Based Payment (“SFAS No. 123(R)”), which replaced SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) requires compensation costs related to share-based payment transactions to be recognized in financial statements.

Revenue Recognition— Sales and the associated gains or losses on real estate assets, condominium conversion projects and for-sale residential projects are recognized in accordance with the provisions of SFAS No. 66, Accounting for Sales of Real Estate (“SFAS No. 66”). For condominium conversion and for-sale residential projects, sales and the associated gains for individual condominium units are recognized upon the closing of the sale transactions, as all conditions for full profit recognition have been met (“Completed Contract Method”). Under SFAS No. 66, CRLP uses the relative sales value method to allocate costs and recognize profits from condominium conversion and for-sale residential sales.

CRLP, as lessor, retains substantially all the risks and benefits of property ownership and accounts for its leases as operating leases. Rental income attributable to leases is recognized on a straight-line basis over the terms of the leases. Certain leases contain provisions for additional rent based on a percentage of tenant sales. Percentage rents are recognized in the period in which sales thresholds are met. Recoveries from tenants for taxes, insurance, and other property operating expenses are recognized in the period the applicable costs are incurred in accordance with the terms of the related lease.

Net Income Per Unit—Basic net income per common unit is computed by dividing the net income available to common unitholders by the weighted average number of common units outstanding during the period. Diluted net income per common unit is computed by dividing the net income available to common unitholders by the weighted average number of common units outstanding during the period, the dilutive effect of restricted shares issued, and the assumed conversion of all potentially dilutive outstanding share options.

Self Insurance Accruals— CRLP is self insured up to certain limits for general liability claims, workers’ compensation claims, property claims and health insurance claims. Amounts are accrued currently for the estimated cost of claims incurred, both reported and unreported.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Segment Reporting—CRLP has adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS No. 131”). SFAS No. 131 defines an operating segment as a component of an enterprise that engages in business activities that generate revenues and incur expenses, which operating results are reviewed by the chief operating decision maker in the determination of resource allocation and performance and for which discrete financial information is available. CRLP manages its business based on the performance of four separate operating segments: multifamily, office, retail and for-sale residential.

Investments in Joint Ventures — To the extent that CRLP contributes assets to a joint venture, CRLP’s investment in the joint venture is recorded at CRLP’s cost basis in the assets that were contributed to the joint venture. To the extent that CRLP’s cost basis is different from the basis reflected at the joint venture level, the basis difference is amortized over the life of the related assets and included in CRLP’s share of equity in net income of the joint venture. In accordance with the provisions of SFAS No. 66 and Statement of Position 78-9, Accounting for Investments in Real Estate Ventures, paragraph 30, CRLP recognizes gains on the contribution of real estate to joint ventures, relating solely to the outside partner’s interest, to the extent the economic substance of the transaction is a sale. On a periodic basis, management assesses whether there are any indicators that the value of CRLP’s investments in unconsolidated joint ventures may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment. CRLP has determined that these investments are not impaired as of December 31, 2008 and 2007.

Investment and Development Expenses - Investment and development expenses consist primarily of costs related to abandoned pursuits. CRLP incurs cost prior to land acquisition including contract deposits, as well as legal, engineering and other external professional fees related to evaluating the feasibility of such developments. If CRLP determines that it is probable that it will not develop a particular project, any related pre-development costs previously incurred are immediately expensed. CRLP recorded $4.4 million, $1.5 million and $1.0 million in investment and development expenses in 2008, 2007 and 2006, respectively.

Assets and Liabilities Measured at Fair Value - On January 1, 2008, CRLP adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”) for financial assets and liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that CRLP has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. CRLP’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Recent Accounting Pronouncements — In September 2006, the FASB issued SFAS No. 157. As discussed above, SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 was effective for CRLP’s financial assets and liabilities on January 1, 2008. In February 2008, the FASB reached a conclusion to defer the implementation of the SFAS No. 157 provisions relating to non-financial assets and liabilities until January 1, 2009. The FASB also reached a conclusion to amend SFAS No. 157 to exclude SFAS No. 13 Accounting for Leases and its related interpretive accounting pronouncements. SFAS No. 157 is not expected to materially affect how CRLP determines fair value, but has resulted in certain additional disclosures (see above). CRLP adopted SFAS No. 157 effective January 1, 2008 for financial assets and financial liabilities and this

adoption had no material effect on the consolidated results of operations or financial position. CRLP also adopted the deferral provisions of FASB Staff Position, or FSP, SFAS No. 157-2, “Effective Date of FASB Statement No. 157,” which delays the effective date of SFAS No. 157 for all nonrecurring fair value measurements of non-financial assets and liabilities (except those that are recognized or disclosed at fair value in the financial statements on a recurring basis) until fiscal years beginning after November 15, 2008. CRLP also adopted FSP SFAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.” This FSP, which provides guidance on measuring the fair value of a financial asset in an inactive market, had no impact on CRLP’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. SFAS No. 160 also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. The provisions of SFAS No. 160 are effective for fiscal years beginning after November 15, 2008, including interim periods beginning January 1, 2009. Based on CRLP’s evaluation of SFAS No. 160, CRLP has concluded that it will continue to classify its noncontrolling interest as “temporary equity” in its consolidated balance sheet. CRLP is continuing to evaluate the impact of other provisions of SFAS No. 160 on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS No. 141(R)”), which changes how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS No. 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard will, among other things, impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from acquisition accounting; and change accounting practices for acquired contingencies, acquisition-related restructuring costs, and tax benefits. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. CRLP is currently evaluating the impact of SFAS No. 141(R) on CRLP’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”), an amendment of FASB Statement No. 133. SFAS No. 161 is intended to help investors better understand how derivative instruments and hedging activities affect an entity’s financial position, financial performance and cash flows through enhanced disclosure requirements. The enhanced disclosures primarily surround disclosing the objectives and strategies for using derivative instruments by their underlying risk as well as a tabular format of the fair values of the derivative instruments and their gains and losses. SFAS No.161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. CRLP is currently evaluating how this standard will impact CRLP’s disclosures regarding derivative instruments and hedging activities.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”. This FSP allows CRLP to use its historical experience in renewing or extending the useful life of intangible assets. This FSP is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and shall be applied prospectively to intangible assets acquired after the effective date. CRLP does not expect the application of this FSP to have a material impact on its consolidated financial statements.

In June 2008, the FASB issued an FSP Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF No. 03-6-1”), which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method as described in SFAS No. 128, “Earnings per Share.”

Under the guidance in FSP EITF No. 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. All prior-period earnings per share data presented shall be adjusted retrospectively. Early adoption is not permitted. The Trust is currently assessing the impact, if any, the adoption of FSP EITF No. 03-6-1 will have on its financial position and results of operations.

In December 2008, the EITF issued EITF 08-6, Equity Method Investment Accounting Considerations, which, amongst other items, clarifies that the initial carrying value of an equity method investment should be based on the cost accumulation model. EITF 08-6 is effective on a prospective basis in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Trust does not expect the application of EITF 08-6 to have a material impact on its consolidated financial statements.

4. Restructuring Charges

Effective December 30, 2008, Weston M. Andress resigned from the Trust, including his positions as President and Chief Financial Officer and as a member of the Board of Trustees of the Trust. In connection with his resignation, the Trust and Mr. Andress entered into a severance agreement resulting in a cash payment of $1.25 million. In addition, all of Mr. Andress’ unvested restricted stock and non-qualified stock options granted on his behalf were forfeited, and as a result, previously recognized unearned stock based compensation expense of $1.8 million was reversed. Therefore, due to the resignation of Mr. Andress, a net of $(0.5) million was recognized as “Restructuring charges” on CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss) reducing CRLP’s overall expense.

In addition, in light of the ongoing recession and credit crisis, during the fourth quarter of 2008, the Trust reevaluated its operating strategy as it relates to certain aspects of its business and decided to postpone future development activities (including previously identified future development projects) in an effort to focus on maintaining efficient operations of the current portfolio. As a result, during 2008, CRLP reduced its workforce by an additional 87 employees through the elimination of certain positions resulting in CRLP incurring an aggregate of $1.5 million in termination benefits and severance related charges. Of the $1.5 million in restructuring charges, approximately $0.6 million was associated with CRLP’s multifamily segment, $0.2 million with CRLP’s office segment, $0.3 million with CRLP’s retail segment and $0.4 million of these restructuring costs were non-divisional charges.

As a result of the actions noted above, CRLP recognized $1.0 million of restructuring charges during 2008, of which $0.5 million is accrued in “Accrued expenses” on CRLP’s Consolidated Balance Sheet at December 31, 2008.

During 2007, as a direct result of the strategic initiative to become a multifamily focused REIT, CRLP incurred $3.0 million in termination benefits and severance costs. Of the $3.0 million in restructuring charges, approximately $0.2 million was associated with CRLP’s multifamily segment, $0.7 million with CRLP’s office segment, $0.3 million with CRLP’s retail segment and $0.3 million with CRLP’s for-sale residential segment. The remainder of these restructuring costs was non-divisional charges.

The expenses of CRLP’s reduction in workforce and other termination costs, as described above, are included in “Restructuring charges” in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2008 and 2007, pursuant to Financial Accounting Standards Board (“FASB”) No. 146.

5. Impairment

The ongoing recession and significant deterioration in the stock and credit markets continue to adversely affect the condominium and single family housing markets. During 2008, the for-sale real estate markets remained unstable due to the limited availability of lending and other types of mortgages, the tightening of credit standards and an oversupply of such assets, resulting in reduced sales velocity and reduced pricing in the real estate market. In light of the ongoing recession and credit crisis, the Board of Trustees of the Trust has renewed its focus on liquidity, maintaining a strong balance sheet, addressing CRLP’s near term debt maturities, managing its existing properties and operating its portfolio efficiently and reducing its overhead. To help implement its plans to strengthen the balance sheet and deleverage the company, the Board of Trustees of the Trust decided to accelerate plans to dispose of CRLP’s for-sale residential assets including condominium conversions and land held for future sale and for-sale residential and mixed-use developments and postpone any new future development activities (including previously identified future development projects) until a determination is made that the current economic environment has sufficiently improved.

Further, during 2008, CRLP recorded an impairment charge of $116.9 million ($114.9 million in continuing operations, $2.0 million in discontinued operations). Of this total, $37.9 million is attributable to certain of the Trust’s completed for-sale residential properties and condominium conversions; $23.5 million relates to properties originally planned as condominiums that were subsequently placed into the multifamily rental pool; $36.2 million is attributable to land held for future sale and for-sale residential and mixed-use developments; and $19.3 million is attributable to a retail development. The impairment charge was calculated as the difference between the estimated fair value of each property and CRLP’s current book value plus the estimated costs to complete. The remaining amount in continuing operations, $1.7 million, relates to casualty losses due to fire damage at four apartment communities. CRLP also incurred $4.4 million of abandoned pursuit costs as a result of CRLP’s decision to postpone future development activities (including previously identified future development projects) and $1.0 million of restructuring charges related to a reduction in CRLP’s development staff and other overhead personnel.

During 2007, CRLP recorded an impairment charge of $46.6 million ($44.1 million included in continuing operations and $2.5 million included in discontinued operations), of which $45.8 million relates to a reduction of the carrying value of certain of its for-sale residential developments and condominium conversions to their estimated fair value, due primarily to reasons previously discussed above and certain units that were under contract did not close because buyers elected not to consummate the purchase of the units. The impairment charge related to the properties located in Gulf Shores, Alabama (Cypress Village project and Grander condominium development), one condominium project in downtown Charlotte, North Carolina (The Enclave) and one condominium development in Atlanta, Georgia. The remaining amount in continuing operations, $0.8 million, was recorded as the result of casualty losses due to fire damage at two apartment communities.

During 2006, CRLP recorded an impairment charge of $1.6 million due to one property originally planned as a condominium development but was subsequently placed into the multifamily rental pool. In 2006, the condominium market began to weaken, due to increased mortgage financing rates and an increased supply of such assets, and as a result CRLP made a strategic decision to convert this property into a multifamily community.

CRLP calculates the fair value of each property and development project evaluated for impairment under SFAS No. 144 based on current market conditions and assumptions made by management, which may differ materially from actual results if market conditions continue to deteriorate or improve. Specific facts and circumstances of each project are evaluated, including local market conditions, traffic, sales velocity, relative pricing, and cost structure. CRLP will continue to monitor the specific facts and circumstances at its for-sale properties and development projects. If market conditions do not improve or if there is further market deterioration, it may impact the number of projects CRLP can sell, the timing of the sales and/or the prices at which CRLP can sell them in future periods. If CRLP is unable to sell projects, it may incur additional impairment charges on projects previously impaired as well as on projects not currently impaired but for which indicators of impairment may exist, which would decrease the value of CRLP’s assets as reflected on the balance sheet and adversely affect net income and partners’ equity. There can be no assurances of the amount or pace of future for-sale residential sales and closings, particularly given current market conditions.

6. Property Acquisitions and Dispositions

Property Acquisitions

During 2008, CRLP acquired the remaining 75% interest in one multifamily apartment community containing 270 units for a total cost of $18.4 million, which consisted of the assumption of $14.7 million of existing mortgage debt ($3.7 million of which was previously unconsolidated by CRLP as a 25% partner) and $7.4 million of cash. During 2007, CRLP acquired four multifamily apartment communities containing 1,084 units for an aggregate cost of approximately $138.2 million, which consisted of the assumption of $18.9 million of existing mortgage debt ($6.6 million of which was previously unconsolidated by CRLP as a 35% partner) and $125.4 million of cash. Also, during 2007, CRLP acquired a partnership interest in three multifamily apartment communities containing 775 units for an aggregate cost of approximately $12.3 million, which consisted of $9.5 million of newly issued mortgage debt and $2.8 million of cash. During 2006, CRLP acquired ten multifamily apartment communities containing 3,676 units and an additional 50,000 square feet of condominium interest in an office asset for an aggregate cost of approximately $350.3 million in 2006. Also during 2006, CRLP acquired a partnership interest in four multifamily apartment communities containing 1,216 units for an aggregate cost of approximately $19.0 million.

The consolidated operating properties acquired during 2008, 2007 and 2006 are listed below:


		Effective
	Location	Acquisition Date	Units/Square Feet
			(unaudited)
Multifamily Properties:
Colonial Village at Matthews	Charlotte, NC	January 16, 2008		270
Colonial Grand at Old Town Scottsdale North	Phoenix, AZ	January 31, 2007		208
Colonial Grand at Old Town Scottsdale South	Phoenix, AZ	January 31, 2007		264
Colonial Grand at Inverness Commons	Phoenix, AZ	March 1, 2007		300
Merritt at Godley Station	Savannah, GA	May 1, 2007		312
Colonial Village at Willow Creek	Dallas, TX	May 31, 2006		478
Colonial Grand at McDaniel Farm	Atlanta, GA	May 31, 2006		424
Colonial Village at Shoal Creek	Dallas, TX	June 1, 2006		408
Colonial Village at Chancellor Park	Charlotte, NC	June 30, 2006		340
Colonial Grand at Scottsdale	Phoenix, AZ	July 31, 2006		180
Colonial Grand at Pleasant Hill	Atlanta, GA	August 31, 2006		502
Colonial Grand at Shiloh	Atlanta, GA	September 8, 2006		498
Colonial Village at Oakend	Dallas, TX	September 28, 2006		426
Colonial Grand at University Center	Charlotte, NC	November 1, 2006		156
Colonial Grand at Cypress Cove	Charleston, SC	December 28, 2006		264

Results of operations of these properties, subsequent to their respective acquisition dates, are included in the consolidated financial statements of CRLP. The cash paid to acquire these properties is included in the consolidated statements of cash flows. CRLP has accounted for its acquisitions in 2008, 2007 and 2006 in accordance with SFAS 141. The property acquisitions during 2008, 2007 and 2006 are comprised of the following:


	(in thousands)
	2008			2007			2006

Assets purchased:
Land, buildings, and equipment	$	22,297		$	144,229		$	348,545
Other assets		—			522			3,796

		22,297			144,751			352,341
Notes and mortgages assumed		(14,700	)		(18,944	)		—
Other liabilities assumed or recorded		(228	)		(407	)		(2,035	)


Cash paid	$	7,369		$	125,400		$	350,306

In addition to the acquisition of the operating properties mentioned above, CRLP acquired certain parcels of land to be utilized for future development opportunities.

The following unaudited pro forma financial information for the years ended December 31, 2008, 2007 and 2006, give effect to the above operating property acquisitions as if they had occurred at the beginning of the periods presented. The information for the year ended December 31, 2008 includes pro forma results for the months during the year prior to the acquisition date and actual results from the date of acquisition through the end of the year. The pro forma results are not intended to be indicative of the results of future operations.


	*** Pro Forma (Unaudited) ***
	Year			Year		Year
	Ended December 31,			Ended December 31,		Ended December 31,
In thousands, except per unit data	2008			2007		2006

Total revenue	$	344,586		$	406,097	$	481,252

Net income (loss) available to common unitholders	$	(66,670	)	$	54,960	$	223,995

Net income (loss) per common unit — dilutive	$	(1.17	)	$	0.97	$	3.95

Property Dispositions — Continuing Operations

During 2008, 2007 and 2006, CRLP sold various consolidated parcels of land located adjacent to its existing properties for an aggregate sales price of $16.6 million, $15.2 million and $25.9 million, respectively, which were used to repay a portion of the borrowings under CRLP’s unsecured credit facility and to support its investment activities and for general corporate purposes.

During 2008, CRLP sold its interests in seven multifamily apartment communities representing approximately 1,751 units, its 15% interest in one office asset representing 0.2 million square feet and its 10% interest in the GPT/Colonial Retail Joint Venture, which included six retail malls totaling an aggregate 3.9 million square feet, including anchor-owned square footage. CRLP’s interests in these properties were sold for approximately $59.7 million. The gains from the sales of these interests are included in “Income from partially-owned unconsolidated entities” in CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss) (see Note 10).

During 2007, in addition to the joint venture transactions discussed in Note 10, CRLP sold a majority interest in three development properties representing a total of 786,500 square feet, including anchor-owned square footage. CRLP’s interests in these properties were sold for approximately $93.8 million (see Development Dispositions below). Also during 2007, CRLP sold a wholly-owned retail asset containing 131,300 square feet. CRLP’s interest in this property was sold for approximately $20.6 million. Because CRLP retained management and leasing responsibilities for this property, the gain on the sale was included in continuing operations.

During 2006, CRLP sold an 85% interest in an office complex representing approximately 877,000 square feet to a joint venture formed by CRLP and unrelated parties for approximately $140.6 million. CRLP continues to manage the properties and accounts for its 15% interest in this joint venture as an equity investment. The gain on the sale of CRLP’s 85% interest is included in “Gains from sales of property” in CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss). CRLP also sold a wholly-owned office property containing 76,000 square feet for a total sales price of $13.7 million and two wholly-owned retail properties representing approximately 1.0 million square feet for a total sales price of approximately $90.0 million. Because CRLP retained management and leasing responsibilities for these three properties, the gains on the sales are included in continuing operations.

Also during 2006, CRLP sold its interests in 20 multifamily apartment communities representing approximately 4,985 units, including 16 that were part of the DRA Southwest Partnership, and its interests in six office assets representing 2.1 million square feet, all of which were part of the DRA/CRT joint venture. CRLP’s interests in these properties were sold for approximately $155.1 million. The gains from the sales of these interests are included in “Income from partially-owned unconsolidated entities” in CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss)(see Note 10).

Also during 2006, CRLP sold 90% of its interest in four retail properties representing approximately 0.7 million square feet to a joint venture formed by CRLP and unrelated parties for approximately $114.6 million. CRLP continues to manage the properties and accounted for its 10% interest in this joint venture as an equity investment. The remaining 10% interest was sold in December 2006 for approximately $7.3 million. The gain on the sale of CRLP’s 90% interest is included in “Gains from sales of property” in CRLP’s Statements of Operations and Comprehensive Income (Loss) and the gain from the sale of the remaining 10% interest is included in “Income from partially-owned unconsolidated entities” in CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss) (see Note 10).

Property Dispositions — Discontinued Operations

During 2008, CRLP sold six wholly-owned multifamily apartment communities representing 1,746 units for a total cost of approximately $139.5 million. CRLP also sold a wholly-owned office property containing 37,000 square feet for a total sales price of $3.1 million. The proceeds were used to repay a portion of the borrowings under CRLP’s unsecured credit facility and fund future investments and for general corporate purposes.

During 2007, CRLP disposed of 12 consolidated multifamily apartment communities representing 3,140 units and 15 consolidated retail assets representing 3.3 million square feet, including anchor-owned square footage. The multifamily and retail assets were sold for a total sales price of $479.2 million, which was used to repay a portion of the borrowings under CRLP’s unsecured credit facility and fund future investments.

During 2006, CRLP disposed of 16 consolidated multifamily apartment communities representing 5,608 units and two consolidated office assets representing 0.5 million square feet. The multifamily and office properties were sold for a total sales


			Units/Square
Property	Location	Date	Feet
			(unaudited)
Multifamily
Colonial Grand at Hunter’s Creek	Orlando, FL	September 2008		496
Colonial Grand at Shelby Farms I & II	Memphis, TN	June 2008		450
Colonial Village at Bear Creek	Fort Worth, TX	June 2008		120
Colonial Village at Pear Ridge	Dallas, TX	June 2008		242
Colonial Village at Bedford	Fort Worth, TX	June 2008		238
Cottonwood Crossing	Fort Worth, TX	June 2008		200
Beacon Hill	Charlotte, NC	January 2007		349
Clarion Crossing	Raleigh, NC	January 2007		260
Colonial Grand at Enclave	Atlanta, GA	January 2007		200
Colonial Village at Poplar Place	Atlanta, GA	January 2007		324
Colonial Village at Regency Place	Raleigh, NC	January 2007		180
Colonial Village at Spring Lake	Atlanta, GA	January 2007		188
Colonial Village at Timothy Woods	Athens, GA	January 2007		204
Colonial Grand at Promenade	Montgomery, AL	February 2007		384
Mayflower Seaside	Virginia Beach, VA	June 2007		265
Cape Landing	Myrtle Beach, SC	June 2007		288
Colonial Grand at Natchez Trace	Jackson, MS	June 2007		328
Colonial Grand at The Reservoir	Jackson, MS	June 2007		170
Stonebrook	Atlanta, GA	July 2007		188
The Timbers	Raleigh, NC	January 2006		176
Summerwalk	Charlotte, NC	January 2006		160
Colonial Grand at Whitemarsh	Savannah, GA	January 2006		352
Colonial Village at Stone Brook	Atlanta, GA	January 2006		188
Colonial Village at Remington Place	Raleigh, NC	January 2006		136
Colonial Village at Paces Glen	Charlotte, NC	January 2006		172
Colonial Village at Caledon Woods	Greenville, SC	January 2006		350
The Trestles	Raleigh, NC	March 2006		280
The Meadows I, II & III	Asheville, NC	March 2006		392
Copper Crossing	Fort Worth, TX	March 2006		400
Colonial Village at Estrada	Dallas, TX	March 2006		248
Arbor Trace	Norfolk, VA	April 2006		148
Colonial Village at Haverhill	San Antonio, TX	October 2006		322
Colonial Grand at Galleria	Birmingham, AL	December 2006		1,080
Colonial Grand at Riverchase	Birmingham, AL	December 2006		468
Colonial Village at Research Park	Huntsville, AL	December 2006		736

Office
250 Commerce Center	Montgomery, AL	February 2008		37,000
Colonial Center at Mansell Overlook	Atlanta, GA	September 2007		188,478
Colonial Bank Centre	Miami, FL	September 2006		235,500
Interstate Park	Montgomery, AL	November 2006		227,000

Retail (1)
Rivermont Shopping Center	Chattanooga, TN	February 2007		73,481
Colonial Shoppes Yadkinville	Yadkinville, NC	March 2007		90,917
Colonial Shoppes Wekiva	Orlando, FL	May 2007		208,568
Village on the Parkway	Dallas, TX	July 2007		381,166
Britt David Shopping Center	Columbus, GA	July 2007		102,564
Colonial Mall Decatur	Huntsville, AL	July 2007		576,098
Colonial Mall Lakeshore	Gainesville, GA	July 2007		518,290
Colonial Mall Staunton	Staunton, VA	July 2007		423,967
Colonial Mayberry Mall	Mount Airy, NC	July 2007		206,940
Colonial Promenade Montgomery	Montgomery, AL	July 2007		209,114
Colonial Promenade Montgomery North	Montgomery, AL	July 2007		209,912
Colonial Shoppes Bellwood	Montgomery, AL	July 2007		88,482
Colonial Shoppes McGehee Place	Montgomery, AL	July 2007		98,255
Colonial Shoppes Quaker Village	Greensboro, NC	July 2007		102,223
Olde Town Shopping Center	Montgomery, AL	July 2007		38,660


(1)		Square footage includes anchor-owned square footage.

Development Dispositions

During 2008, CRLP recorded gains on sales of commercial developments totaling $1.7 million, net of income taxes. This amount relates to changes in development cost estimates, including stock-based compensation costs, which were capitalized into certain of CRLP’s commercial developments that were sold in previous periods.

In addition, CRLP recorded a gain on sale of $2.8 million ($1.7 million net of income taxes) from the Colonial Grand at Shelby Farms II multifamily expansion phase development as discussed in Property Dispositions — Discontinued Operations.

During December 2007, CRLP sold 95% of its interest in Colonial Promenade Alabaster II and two build-to-suit outparcels at Colonial Pinnacle Tutwiler II (hhgregg & Havertys) to a joint venture between CRLP and Watson LLC (Watson). The retail assets include 418,500 square feet, including anchor-owned square-footage, and are located in Birmingham, Alabama. CRLP’s interest was sold for approximately $48.1 million. CRLP recognized a gain of approximately $8.3 million after tax and minority interest on the sale. CRLP’s remaining 5% investment in the partnership is comprised of $0.5 million in contributed property and $2.0 million of newly issued mortgage debt. The proceeds from the sale were used to fund other developments and for other general corporate purposes. Because CRLP retained an interest in these properties and management and leasing responsibilities for these properties, the gain on the sale was included in continuing operations.

During July 2007, CRLP sold 85% of its interest in Colonial Pinnacle Craft Farms I located in Gulf Shores, Alabama. The retail shopping center development includes 368,000 square feet, including anchor-owned square-footage. CRLP sold its 85% interest for approximately $45.7 million and recognized a gain of approximately $4.2 million, after income tax, from the sale. The proceeds from the sale are expected to be used to fund developments and for other general corporate purposes. Because CRLP retained an interest in this property, the gain on the sale was included in continuing operations.

During December 2006, CRLP sold Colonial Pinnacle Tutwiler Farm located in Birmingham, Alabama. The retail shopping center development includes 450,000 square feet, including anchor-owned square footage. CRLP sold the development for approximately $54.4 million and recognized a gain of approximately $20.5 million from the sale. The proceeds from the sale were used to fund other investment activities. Because CRLP sold this property outright, gains from the sale of this property are included in “Income from discontinued operations” on CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss).

Held for Sale

CRLP classifies real estate assets as held for sale, only after CRLP has received approval by its internal investment committee, has commenced an active program to sell the assets, and in the opinion of CRLP’s management it is probable the asset will sell within the next 12 months.

At December 31, 2008, CRLP had classified two retail assets, two condominium conversion properties and six for-sale developments as held for sale. These real estate assets are reflected in the accompanying consolidated balance sheets at $37.2 million, $0.8 million and $64.7 million, respectively, at December 31, 2008, which represents the lower of depreciated cost or fair value less costs to sell. Depreciation and amortization expense not recorded for the year ended December 31, 2008 related to assets classified as held for sale at December 31, 2008 was $0.4 million and $0.1 million, respectively. There was no depreciation or amortization expense suspended for the years ended December 31, 2007 or 2006 related to assets classified as held for sale at December 31, 2008.

At December 31, 2007, CRLP had classified 16 multifamily assets and one office asset, two condominium conversion properties and two for-sale developments as held for sale. These real estate assets are reflected in the accompanying consolidated balance sheets at $228.5 million, $2.9 million and $22.2 million at December 31, 2007, which represents the lower of depreciated cost or fair value less costs to sell.

In accordance with SFAS No. 144, the operating results of properties (excluding condominium conversion properties not previously operated) designated as held for sale, are included in “Income from discontinued operations” on the Consolidated Statements of Operations and Comprehensive Income (Loss) for all periods presented. Also, under the provisions of SFAS No. 144, the reserves, if any, to write down the carrying value of the real estate assets designated and classified as held for sale are also included in discontinued operations (excluding condominium conversion properties not previously operated). Additionally, under SFAS No. 144, any impairment losses on assets held for continuing use are included in continuing operations.

Below is a summary of the operations of the properties sold during 2008, 2007 and 2006 and properties classified as held for sale as of December 31, 2008, that are classified as discontinued operations:


	(amounts in thousands)
	Year Ended December 31,
	2008			2007			2006

Property revenues:
Base rent	$	12,643		$	34,292		$	100,937
Tenant recoveries		681			3,727			7,797
Other revenue		1,235			3,477			9,459

Total revenues		14,559			41,496			118,193

Property operating and maintenance expense		5,558			17,350			46,767
Impairment		2,025			2,500			—
Depreciation		799			4,475			23,184
Amortization		117			77			4,890

Total operating expenses		8,499			24,402			74,841
Interest expense		183			(3,169	)		(12,574	)
Interest income		—			7			33
Other		—			(2,409	)		(915	)
Income from discontinued operations before net gain on disposition of discontinued operations		6,243			11,523			29,896
Net gain on disposition of discontinued operations		46,052			91,218			134,619
Minority interest to limited partners		(95	)		(3,989	)		(2,591	)


Income from discontinued operations	$	52,200		$	98,752		$	161,924

7. For-Sale Activities

During 2008, 2007 and 2006, CRLP, through CPSI, sold three, 262 and 607 condominium units, respectively, at its condominium conversion properties. During 2008, CRLP, through CPSI, also sold one residential lot and 76 condominium units at its for-sale residential development properties. During 2007, CRLP, through CPSI, also sold 14 residential lots and 101 condominium units at its for-sale residential development properties. During 2006, CRLP, through CPSI, sold five residential lots and 49 condominium units at its for-sale residential development properties. During 2008, 2007 and 2006, “Gains from sales of property” on the Consolidated Statements of Operations and Comprehensive Income (Loss) included $1.7 million ($1.1 million net of income taxes), $13.2 million ($10.6 million net of income taxes) and $33.9 million ($24.1 million net of income taxes), respectively, from these condominium conversion and for-sale residential sales. A summary of revenues and costs of condominium conversion and for-sale residential sales for 2008, 2007 and 2006 are as follows:


	Years Ended
	December 31,
(amounts in thousands)	2008			2007			2006
Condominium conversion revenues	$	448		$	51,073		$	117,732
Condominium conversion costs		(401	)		(40,972	)		(86,614	)

Gains on condominium conversion sales, before minority interest and income taxes		47			10,101			31,118


For-sale residential revenues		17,851			26,153			12,513
For-sale residential costs		(16,226	)		(23,016	)		(9,683	)

Gains on for-sale residential sales, before minority interest and income taxes		1,625			3,137			2,830


Minority interest		—			250			(1,967	)
Provision for income taxes		(552	)		(2,630	)		(9,825	)

Gains on condominium conversion and for-sale residential sales, net of minority interest and income taxes	$	1,120		$	10,858		$	22,156

Completed for-sale residential projects of approximately $64.7 million and $22.2 million are reflected in real estate assets held for sale as of December 31, 2008 and 2007, respectively.

The net gains on condominium unit sales are classified in discontinued operations if the related condominium property was previously operated by CRLP as an apartment community. For 2008, 2007 and 2006, gains on condominium unit sales, net of income taxes, of $0.1 million, $9.3 million and $21.9 million, respectively, are included in discontinued operations. Condominium conversion properties are reflected in the accompanying Consolidated Balance Sheets as part of “Real estate assets held for sale, net” and totaled $0.8 million and $2.9 million as of December 31, 2008 and 2007, respectively.

During December 2006, through CPSI, CRLP sold an option to purchase land for a total sales price of $3.2 million. CRLP recognized a gain, net of income taxes, of $1.5 million on the sale, which is included in “Gains from sales of property” in CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss).

For cash flow statement purposes, CRLP classifies capital expenditures for newly developed for-sale residential communities and for other condominium conversion communities in investing activities. Likewise, the proceeds from the sales of condominium units and other residential sales are also included in investing activities.

8. Land, Buildings and Equipment

Land, buildings, and equipment consist of the following at December 31, 2008 and 2007:

(in thousands)

Useful Lives

2008

2007

Buildings

20 to 40 years

2,196,792

1,821,988

Furniture and fixtures

5 or 7 years

104,440

81,818

Equipment

3 or 5 years

32,064

26,024

Land improvements

10 or 15 years

184,501

159,622

Tenant improvements

Life of lease

42,076

41,234

2,559,873

2,130,686

Accumulated depreciation

(406,444

)

(290,118

)

2,153,429

1,840,568

Real estate assets held for sale, net

102,699

253,641

Land

337,904

300,378

2,594,032

2,394,587

100

9. Undeveloped Land and Construction in Progress

During 2008, CRLP completed the construction of seven wholly-owned and one partially-owned multifamily developments adding 1,781 apartment homes to the portfolio. These completed developments are:


		Units		Total Costs
	Location	(unaudited)		(in thousands)

Colonial Grand at Traditions (1)	Gulf Shores, AL		324	$	13,938
Colonial Village at Cypress Village (2)(3)	Gulf Shores, AL		96		26,235
Colonial Village at Godley Lake	Savannah, GA		288		26,668
Colonial Grand at Ayrsley	Charlotte, NC		368		35,803
Colonial Grant at Huntersville	Charlotte, NC		250		26,031
Colonial Grand at Matthews Commons	Charlotte, NC		216		21,262
Enclave (2)(4)	Charlotte, NC		85		25,353
Colonial Grand at Shelby Farms II (5)	Memphis, TN		154		12,758

			1,781	$	188,048


(1)		Represents 35% of development costs, as we are a 35% equity partner in this unconsolidated development.

(2)		These properties, formerly for-sale residential properties, are now multifamily apartment communities.

(3)		Total costs are presented net of $16.8 million impairment charge recorded during 2007.

(4)		Total costs are presented net of a $5.4 million impairment charge recorded during 2007.

(5)		This property was sold during June 2008 (see Note 6).

In addition to the multifamily developments, CRLP completed the construction of five commercial assets in 2008 adding 338,000 square feet of office space and 479,000 square feet of retail space, excluding anchor-owned square footage, to the portfolio. The completed developments include:


		Total		Total
		Square Feet (1)		Cost
	Location	(unaudited)		(in thousands)

Office Properties
Colonial Center TownPark 400 (2)	Orlando, FL		176	$	27,031
Metropolitan Midtown (2)(3)	Charlotte, NC		162		34,569

			338		61,600

Retail Properties
Colonial Promenade Fultondale (4)	Birmingham, AL		159		21,220
Metropolitan Midtown (2)(3)	Charlotte, NC		172		39,501
Colonial Promenade Smyrna (5)	Smyrna, TN		148		17,507

			479	$	78,228


(1)		Square footage is presented in thousands and excludes anchor-owned square footage.

(2)		These projects are part of mixed-use developments.

(3)		Total costs are net of economic grant proceeds of approximately $8.3 million (present value).

(4)		This property was classified as “Real estate assets held for sale” on CRLP’s Balance Sheet as of December 31, 2008 and was subsequently sold in February 2009.

(5)		Represents 50% of the development costs, as we are a 50% equity partner in this unconsolidated development.

During 2008, CRLP completed Grander, a 26-unit residential development located in Gulf Shores, Alabama. Total project cost for this for-sale residential development was approximately $11.1 million, net of a $6.7 million and $4.3 million impairment charge recorded during 2008 and 2007, respectively. Regents Park (Phase I), a 23-unit townhome development located in Atlanta, Georgia, was also completed. Total project cost for this for-sale residential development was approximately $35.3 million, net of a $14.8 million and $1.2 million impairment charge recorded during 2008 and 2007, respectively. CRLP also completed Metropolitan, a 101-unit condominium development located in Charlotte, North Carolina. Total project cost for this development was approximately $36.2 million, net of a $9.1 million impairment charge recorded during 2008 and $4.0

101

million, of the $12.3 million, of economic grant proceeds related to the condominium portion of Metropolitan. CRLP also completed 59 lots at Whitehouse Creek, formerly Spanish Oaks, a residential lot development located in Mobile, Alabama with a total project cost of $2.5 million. These for-sale residential assets and lot development were classified as “Real estate assets held for sale” on CRLP’s Balance Sheet as of December 31, 2008.

CRLP has postponed the lot developments of Colonial Traditions at Gulf Shores and Cypress Village, both of which are located in Gulf Shores, Alabama, until market conditions improve.

During 2007, CRLP completed the construction of a wholly-owned multifamily development, adding 422 apartment homes to the portfolio. This development, Colonial Grand at Round Rock located in Austin, Texas, had a total cost of approximately $35.0 million. CRLP also completed the development of Colonial Grand at Canyon Creek, a multifamily apartment community in which CRLP owns a 25% interest. CRLP’s portion of the total cost of the project totaled $7.9 million.

During 2007, CRLP completed the development of six commercial assets adding 429,000 square feet of office space and 436,000 square feet of retail space, excluding anchor-owned square footage, to the portfolio. These office developments, Colonial Center Brookwood located in Birmingham, Alabama, Northrop Grumman located in Huntsville, Alabama and Colonial Center TownPark 300 located in Orlando, Florida had an aggregate total cost of approximately $81.4 million. These retail assets, Colonial Pinnacle Tutwiler Farm II and Colonial Promenade Alabaster II located in Birmingham and Colonial Pinnacle Craft Farms I located in Gulf Shores, Alabama had an aggregate total cost of $79.7 million. All three of the completed retail assets were sold during 2007 (see Note 6 — Development Dispositions).

During 2007, CRLP completed the construction of Regatta at James Island, a 212-unit condominium development located in Charleston, South Carolina. Total project cost for this for-sale residential development was approximately $25.7 million. CRLP also completed the development of Southgate on Fairview (formerly Colonial Traditions at South Park), a 47-unit condominium project located in Charlotte, North Carolina. Total project cost for this for-sale residential development was approximately $16.4 million.

During 2006, CRLP completed the construction of a multifamily development, adding 238 apartment homes to the portfolio. This development, located in Austin, Texas, had a total cost of $24.1 million. Additionally, CRLP completed the construction of Colonial Pinnacle Tutwiler Farm, located in Birmingham, Alabama, and Colonial Pinnacle Turkey Creek, in which CRLP owns a 50% interest, located in Knoxville, Tennessee. These assets had a total cost of $72.5 million. Colonial Pinnacle Tutwiler Farm was sold during the fourth quarter of 2006.

CRLP’s ongoing consolidated development projects are in various stages of the development cycle. Active developments as of December 31, 2008 consist of:


		Total
		Units/						Costs
		Square				Estimated		Capitalized
		Feet (1)		Estimated		Total Costs		to Date
	Location	(unaudited)		Completion		(in thousands)		(in thousands)

Multifamily Projects:
Colonial Grand at Desert Vista	Las Vegas, NV		380		2009		53,000	$	42,463
Colonial Grand at Ashton Oaks	Austin, TX		362		2009		35,300		28,316
Colonial Grand at Onion Creek	Austin, TX		300		2009		32,300		32,000

Retail Projects:
Colonial Promenade Tannehill (2)	Birmingham, AL		350		2009		8,900		5,633


Construction in Progress for Active Developments								$	108,412


(1)		Square footage is presented in thousands. Square footage for the retail assets excludes anchor-owned square-footage.

(2)		Total cost and development costs recorded through December 31, 2008 have been reduced by $44.7 million for the portion of the development that was placed into service during 2008. Total cost for this project is expected to be approximately $53.6 million, of which, $6.4 million is expected to be received from the city as reimbursement for infrastructure costs.

102

Interest capitalized on construction in progress during 2008, 2007 and 2006 was $25.0 million, $27.1 million and $17.1 million, respectively.

There are no for-sale residential projects actively under development as of December 31, 2008. For-sale residential projects actively under development of $96.0 million (net of a $42.1 million non-cash impairment charge related to wholly-owned for-sale properties) as of December 31, 2007, are reflected as “Undeveloped land and construction in progress” in the accompanying Consolidated Balance Sheets.

CRLP owns approximately $151.2 million of land parcels that are held for future developments. CRLP expects to defer developments of land parcels held for future development (other than land parcels held for future sale and for-sale residential and mixed-use developments , which CRLP plans to sell, as further discussed in Note 5) until the economy improves. These developments and undeveloped land include:


				Costs
		Total Units/		Capitalized
		Square Feet (1)		to Date
	Location	(unaudited)		(in thousands)

Multifamily Projects:
Colonial Grand at Sweetwater	Phoenix, AZ		195	$	7,281
Colonial Grand at Thunderbird	Phoenix, AZ		244		8,368
Colonial Grand at Randal Park (2)	Orlando, FL		750		13,604
Colonial Grand at Hampton Preserve	Tampa, FL		486		14,320
Colonial Grand at South End	Charlotte, NC		353		12,046
Colonial Grand at Wakefield	Raleigh, NC		369		7,210
Colonial Grand at Azure	Las Vegas, NV		188		7,728
Colonial Grand at Cityway	Austin, TX		320		4,967

Retail
Colonial Pinnacle Craft Farms II (2)	Gulf Shores, AL		74		2,027
Colonial Promenade Huntsville	Huntsville, AL		111		9,527
Colonial Promenade Nor du Lac (3)	Covington, LA		497		34,029

*Other Projects and Undeveloped Land*
Multifamily					6,714
Office					2,880
Retail					5,502
For-Sale Residential (4)					43,119
Mixed-Use (5)					92,942


Consolidated Construction in Progress				$	272,264


(1)		Square footage is presented in thousands. Square footage for the retail assets excludes anchor-owned square-footage.

(2)		These projects are part of mixed-use developments.

(3)		Costs capitalized to date are net of a $19.3 million impairment charge (see Note 5) and excludes $24.0 million of community development district special assessment bonds.

(4)		Costs capitalized to date are net of a $6.5 million impairment charge recorded during 2008 and a $14.8 million impairment charge recorded during 2007.

(5)		Costs capitalized to date are net of a $29.7 million impairment charge recorded during 2008.

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10. Investment in Partially-Owned Entities and Other Arrangements

Investments in Consolidated Partially-Owned Entities

During the third quarter of 2008, CRLP converted its outstanding note receivable due from the Regents Park Joint Venture (Phase I) to preferred equity after the Regents Park Joint Venture defaulted on this note receivable. CRLP negotiated amendments to the operating agreement for the joint venture such that the $29.5 million outstanding balance of the note receivable, as well as all of CRLP’s original equity of $3.0 million (plus a preferred return) will receive priority distributions over the joint venture partner’s original equity of $4.5 million (plus a preferred return). CRLP also amended the Joint Venture operating agreement to expressly grant CRLP control rights with respect to the management and future funding of this project. As a result of the foregoing, CRLP began consolidating this joint venture in its financial statements as of September 30, 2008.

During July 2007, CRLP disposed of its 90% interest in Village on the Parkway, a 380,500 square foot retail asset located in Dallas, Texas. CRLP sold the property for approximately $74.4 million and recognized a gain of approximately $15.7 million from the sale. CRLP recorded minority interest of approximately $4.1 million on this sale. The proceeds from the sale were used to fund developments and for other general corporate purposes.

During March 2006, CRLP disposed of its majority interest in Colonnade Properties, LLC for approximately $2.5 million. There was no gain or loss recognized on the disposition. At December 31, 2006, CRLP had a $3.1 million outstanding note receivable from Colonnade Properties, LLC, which was repaid during 2007.

Investments in Unconsolidated Partially-Owned Entities

Investments in unconsolidated partially-owned entities at December 31, 2008 and 2007 consisted of the following:

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				(in thousands)
	Percent			December 31,			December 31,
	Owned			2008			2007

Multifamily:
Arbors at Windsor Lake, Columbia, SC		—	(1)	$	—		$	569
Auberry at Twin Creeks, Dallas, TX		—	(2)		—			702
Belterra, Ft. Worth, TX		10.00	%		616			708
Carter Regents Park, Atlanta, GA		40.00	%(3)		3,424			5,282
CG at Huntcliff, Atlanta, GA		20.00	%		1,894			2,138
CG at McKinney, Dallas, TX (Development)		25.00	%		1,521			1,003
CG at Research Park, Raleigh, NC		20.00	%		1,053			1,197
CG at Traditions, Gulf Shores, AL (Development)		35.00	%		570			1,591
CMS / Colonial Joint Venture I		15.00	%		289			435
CMS / Colonial Joint Venture II		15.00	%(4)		(461	)		(419	)
CMS Florida		25.00	%		(561	)		(338	)
CMS Tennessee		25.00	%		114			258
CMS V/CG at Canyon Creek, Austin, TX		25.00	%		638			1,226
CV at Matthews, Charlotte, NC		—	(5)		—			1,004
DRA Alabama		10.00	%(6)		921			2,260
DRA Cunningham, Austin, TX		20.00	%		896			969
DRA CV at Cary, Raleigh, NC		20.00	%		1,752			2,026
DRA The Grove at Riverchase, Birmingham, AL		20.00	%		1,291			1,409
Fairmont at Fossil Creek, Fort Worth, TX		—	(7)		—			567
Park Crossing, Fairfield, CA		—	(8)		—			797
Stone Ridge, Columbia, SC		—	(9)		—			451

Total Multifamily					13,957			23,835

Office:
600 Building Partnership, Birmingham, AL		33.33	%		118			76
Colonial Center Mansell JV		15.00	%		727			1,377
DRA / CLP JV		15.00	%(10)		(10,976	)		(6,603	)
DRA / CRT JV		15.00	%(11)		24,091			23,365
Huntville TIC, Huntsville, AL		10.00	%(12)		(3,746	)		7,922

Total Office					10,214			26,137

Retail:
Colonial Promenade Alabaster II/Tutwiler II, Birmingham, AL		5.00	%		(173	)		(107	)
Colonial Promenade Craft Farms, Gulf Shores, AL		15.00	%		823			1,300
Colonial Promenade Madison, Huntsville, AL		25.00	%		2,187			2,258
Colonial Promenade Smyrna, Smyrna, TN		50.00	%		2,378			2,297
GPT / Colonial Retail JV		—	(13)		—			(5,021	)
Highway 150, LLC, Birmingham, AL		10.00	%		67			64
OZRE JV		17.10%	(14)		(7,579	)		(6,204	)
Parkside Drive LLC I, Knoxville, TN		50.00	%		4,673			6,898
Parkside Drive LLC II, Knoxville, TN (Development)		50.00	%		6,842			6,270
Parkway Place Limited Partnership, Huntsville, AL		50.00	%(15)		10,690			10,342

					19,908			18,097

Other:
Colonial / Polar-BEK Management Company, Birmingham, AL		50.00	%		33			28
Heathrow, Orlando, FL		50.00	%		2,109			1,585

					2,142			1,613


				$	46,221		$	69,682


Footnotes on following page

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(1)		CRLP sold its 10% interest in Arbors at Windsor Lake during January 2008.

(2)		CRLP sold its 15% interest in Auberry at Twin Creeks during January 2008.

(3)		CRLP began consolidating the Regents Park Joint Venture (Phase I) in its financial statements as of September 30, 2008. The Regents Park Joint Venture (Phase II) consists of undeveloped land.

(4)		The CMS/Colonial Joint Venture II holds one property in which CRLP has a 15% partnership interest.

(5)		CRLP acquired the remaining 75% interest in Colonial Village at Matthews during January 2008 (see Note 6).

(6)		The DRA Alabama sold its 10% interest in Madison at Shoal Run and Meadows of Brook Highland during December 2008. The JV only has one property as of December 31, 2008.

(7)		CRLP sold its 15% interest in Fairmont at Fossil Creek during January 2008.

(8)		CRLP sold its 10% interest in Park Crossing during February 2008.

(9)		CRLP sold its 10% interest in Stone Ridge during June 2008.

(10)		As of December 31, 2008, this joint venture included 16 office properties and 2 retail properties located in Birmingham, Alabama; Orlando and Tampa, Florida; Atlanta, Georgia; Charlotte, North Carolina and Austin, Texas. Amount includes the value of CRLP’s investment of approximately $23.2 million, offset by the excess basis difference on the June 2007 joint venture transaction (see Note 2) of approximately $34.1 million, which is being amortized over the life of the properties.

(11)		As of December 31, 2008, this joint venture included 17 properties located in Ft. Lauderdale, Jacksonville and Orlando, Florida; Atlanta, Georgia; Charlotte, North Carolina; Memphis, Tennessee and Houston, Texas. CRLP sold its 15% interest in Decoverly, located in Rockville, Maryland, during May 2008.

(12)		Amount includes CRLP’s investment of approximately $3.8 million, offset by the excess basis difference on the transaction of approximately $7.5 million, which is being amortized over the life of the properties.

(13)		CRLP sold its 10% interest in GPT/ Colonial Retail JV during February 2008.

(14)		As of December 31, 2008, this joint venture included 11 retail properties located in Birmingham, Alabama; Jacksonville, Orlando, Punta Gorda and Tampa, Florida; Athens, Georgia and Houston, Texas. Amount includes the value of CRLP’s investment of approximately $9.0 million, offset by the excess basis difference on the June 2007 joint venture transaction of approximately $16.6 million, which is being amortized over the life of the properties. As of June 1, 2008, CRLP’s percentage ownership increased from 15.0% to 17.1% (see Note 2).

(15)		As of November 1, 2008, CRLP’s interest in Parkway Place limited partnership increased from 45.00% to 50.0%, due to a JV Partner executing a put option.

During January and February 2008, CRLP disposed of its interests in four multifamily apartment communities, containing an aggregate of 884 units and an aggregate sales price of approximately $11.2 million, which represents CRLP’s share of the sales proceeds. The properties sold include:


		Units		Sales Price
	Location	(unaudited)		(in millions)
Park Crossing	Fairfield, CA		200	$	3.4
Auberry at Twin Creek	Dallas, TX		216		3.2
Fairmont at Fossil Creek	Fort Worth, TX		240		3.2
Arbors at Windsor Lake	Columbia, SC		228		1.4

			884	$	11.2

The proceeds from these dispositions were used to fund future investment activities and for general corporate purposes.

During February 2008, CRLP disposed of its 10% interest in the GPT/Colonial Retail Joint Venture, which included six retail malls totaling an aggregate of 3.9 million square feet (including anchor-owned square footage). CRLP’s interest in this asset was sold for a total sales price of approximately $38.3 million. The proceeds from the sale were used to fund future investment activities and for general corporate purposes.

During May 2008, the DRA/CRT joint venture distributed Decoverly, a 156,000 square foot office asset located in Rockville, Maryland, to its equity partners (85% to DRA and 15% to CRLP). Subsequently, DRA purchased CRLP’s 15% interest in the asset for approximately $5.4 million, including the assumption of $3.8 million of debt and $1.6 million in cash. The proceeds from the sale of this asset were used to fund future investment activities and for general corporate purposes.

During June 2008, CRLP disposed of its 10% interest in Stone Ridge, a 191-unit multifamily apartment community located in Columbia, South Carolina. CRLP’s interest in this asset was sold for a total sales price of approximately $0.8 million. The proceeds were used to fund future investment activities and for general corporate purposes.

During December 2008, CRLP disposed of its 10% interest in Madison at Shoal Run, a 276-unit multifamily apartment community, and Meadows of Brook Highland, a 400-unit multifamily apartment community, both of which are

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located in Birmingham, Alabama. CRLP’s interests in these assets were sold for a total sales price of $4.1 million and the proceeds will be used to fund future investment activities and for general corporate purposes.

During 2008, CRLP disposed of a portion of its interest in the Huntsville TIC through a series of ten transactions. As a result of these transactions, CRLP’s interest was effectively reduced from 40.0% to 10.0%. Proceeds from sales totaled $15.7 million. The proceeds from the sale of this interest were used to repay a portion of the borrowings outstanding under CRLP’s unsecured line of credit.

During January 2007, CRLP sold its 25% ownership interest in Colonial Grand at Bayshore, a 376-unit multifamily apartment community located in Sarasota, Florida, for $15.0 million. The proceeds were used to repay a collateralized mortgage loan and a portion of the borrowings under CRLP’s unsecured credit facility.

During February 2007, CRLP acquired a 15% interest in Fairmont at Fossil Creek, a 240-unit multifamily apartment community located in Fort Worth, Texas. CRLP’s investment in the partnership was approximately $3.2 million, which consisted of $2.6 million of newly issued mortgage debt and $0.6 million of cash. The cash portion of this investment was funded from borrowings under CRLP’s unsecured credit facility.

During February 2007, the DRA/CRT JV sold St. Petersburg Center, a 675,000 square foot office asset located in Tampa, Florida. The asset was sold for $14.0 million, which represents CRLP’s 15% interest in the sales proceeds. CRLP used the proceeds from the sale to repay a collateralized mortgage loan.

During February 2007, CRLP acquired a 15% interest in Auberry at Twin Creeks, a 216-unit multifamily apartment community located in Dallas, Texas. CRLP’s investment in the partnership was approximately $3.1 million, which consisted of $2.6 million of newly issued mortgage debt and $0.5 million of cash. The cash portion of this investment was funded from borrowings under CRLP’s unsecured credit facility.

During February 2007, CRLP entered into a joint venture agreement with a 65% partner to complete the development of Colonial Grand at Traditions, a 324-unit multifamily project located in Gulf Shores, Alabama. CRLP will act as the general contractor for this project and will earn development / general contractor fees which will be recognized as earned according to the terms of the construction and development agreement. CRLP’s initial investment in this joint venture was $3.0 million in cash and CRLP has guaranteed up to $3.5 million of the construction loan that the joint venture will use to complete the project. In addition, if this property is ultimately sold to a third party, CRLP will receive distributions of 50% of the gains upon the sale of the property.

During May 2007, CRLP acquired a 20% interest in Colonial Village at Cary, a 319-unit multifamily apartment community located in Raleigh, North Carolina. CRLP’s investment in the partnership was approximately $6.0 million, which consisted of $4.3 million of newly issued mortgage debt and $1.7 million of cash. The cash portion of this investment was funded from borrowings under CRLP’s unsecured credit facility.

During May 2007, CRLP acquired the remaining 65% interest in Merritt at Godley Station from our joint venture partner. CRLP’s additional investment in the property was approximately $20.9 million, which consisted of the assumption of $12.3 million of existing mortgage debt and $8.6 million of cash. The cash portion of this investment was funded by proceeds from asset sales and borrowings under CRLP’s unsecured credit facility.

During June 2007, CRLP completed its office joint venture transaction with DRA. CRLP sold to DRA its 69.8% interest in the newly formed joint venture that became the owner of 24 office properties and two retail properties that were previously wholly-owned by CRLP. CRLP retained a 15% minority interest in the DRA/CLP JV, as well as the management and leasing responsibilities for the 26 properties owned by the DRA/CLP JV (see Note 2).

During June 2007, CRLP completed its retail joint venture transaction with OZRE. CRLP sold to OZRE its 69.8% interest in the newly formed joint venture that became the owner of 11 retail properties that were previously wholly-owned by CRLP. CRLP retained a 15% minority interest in the OZRE JV as well as the management and leasing responsibilities for the 11 properties owned by the OZRE JV (see Note 2).

During July 2007, CRLP sold 85% of its interest in Colonial Pinnacle Craft Farms I to a joint venture partner. The retail asset includes 243,000 square feet, excluding anchor-owned square footage, and is located in Gulf Shores, Alabama (see Note 6).

During July 2007, the DRA/CRT JV disposed of Las Olas Centre, a 469,200 square foot office asset located in Fort Lauderdale, Florida. CRLP sold its 15% interest in the property for approximately $34.6 million and recognized a gain of

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approximately $6.6 million from the sale. The proceeds from the sale were used to repay the associated mortgage on the asset and to fund investment activity.

During September 2007, the CMS-Tennessee joint venture disposed of Colonial Village at Hendersonville, a 364-unit multifamily apartment community located in Nashville, Tennessee. CRLP sold its 25% interest in the property for approximately $6.8 million and recognized a gain of approximately $1.7 million from the sale. The proceeds from the sale were used to fund ongoing developments and for other general corporate purposes.

During November 2007, the DRA/CLP JV disposed of nine office properties containing 1.7 million square feet located in Huntsville, Alabama for net proceeds of approximately $209 million (CRLP’s 15% interest in these assets totaled approximately $31.4 million). As part of the transaction, CRLP acquired a 40% interest (of which 30% is held by CPSI) in three separate tenancy in common (“TIC”) investments of the same nine office properties for a total acquisition price of $88.7 million, which included the issuance of $43.0 million of third-party financing and $30.4 million of ground lease financing. CRLP continues to manage the nine properties and intends to sell CPSI’s 30% ownership in each of these TIC investments during 2008 through offerings sponsored by Bluerock Real Estate, LLC (the 60% partner) to unrelated TIC investors and to retain CRLP’s 10% ownership interest.

During December 2007, CRLP sold 95% of its interest in Colonial Promenade Alabaster II and two build-to-suit outparcels at Colonial Pinnacle Tutwiler II to a joint venture partner. The retail developments are located in Birmingham, Alabama (see Note 6).

During December 2007, CRLP entered into a 50% / 50% joint venture agreement for the development of Turkey Creek Phase III, a 170,000 square foot development located in Knoxville, Tennessee. CRLP’s initial investment in this joint venture to acquire the land was approximately $6.0 million. The development of this property will be funded with a construction loan obtained by the joint venture.

During December 2007, CRLP entered into a 20% joint venture with McDowell Properties to develop Colonial Grand at Lake Forest, a 529-unit multifamily apartment community located in Dallas, Texas. CRLP will act as the general contractor for this project and will earn development / general contractor fees, which will be recognized as earned according to the terms of the construction and development agreement. CRLP’s initial equity investment was approximately $1.3 million. The total cost of the development is expected to be approximately $62 million and will be funded primarily through a construction loan.

Combined financial information for CRLP’s investments in unconsolidated partially-owned entities since the date of CRLP’s acquisitions is as follows:


	As of December 31,
(in thousands)	2008		2007

Balance Sheet
Assets
Land, building, & equipment, net	$	3,130,487	$	3,713,743
Construction in progress		57,441		106,098
Other assets		317,164		342,894

Total assets	$	3,505,092	$	4,162,735


Liabilities and Partners’ Equity
Notes payable (1)	$	2,711,059	$	3,224,146
Other liabilities		156,700		115,346
Partners’ Equity		637,333		823,243

Total liabilities and partners’ capital	$	3,505,092	$	4,162,735

Statement of Operations


(for the years ended)	2008			2007			2006

Revenues	$	457,088		$	425,115		$	380,280
Operating expenses		(180,731	)		(174,278	)		(155,845	)
Interest expense		(165,258	)		(154,896	)		(143,862	)
Depreciation, amortization and other		(159,426	)		(68,927	)		87,613

Net income (loss) (2)	$	(48,327	)	$	27,014		$	168,186


Footnotes on following page

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(1)		CRLP’s pro rata portion of indebtedness, as calculated based on ownership percentage, at December 31, 2008 and 2007 was $476.3 million and $544.2 million, respectively.

(2)		In addition to CRLP’s pro-rata share of income (loss) from partially-owned unconsolidated entities, “Income from partially-owned unconsolidated entities” of $12.5 million for the year ended December 31, 2008 includes gains on CRLP’s dispositions of joint-venture interests and amortization of basis differences which are not reflected in the table above.

The following table summarizes balance sheet financial data of significant unconsolidated partially-owned entities in which CRLP had ownership interests as of December 31, 2008 and 2007 (dollar amounts in thousands):


	Total Assets				Total Debt				Total Equity
	2008		2007		2008		2007		2008		2007

DRA/CRT	$	1,189,996	$	1,248,807	$	940,981	$	993,264	$	201,447	$	202,162
DRA/CLP		927,397		973,861		741,907		741,907		153,962		194,210
OZRE		363,589		378,497		292,714		284,000		52,890		74,012
GPT (1)		—		374,498		—		322,776		—		43,982
Huntsville TIC (2)		224,644		160,478		107,540		107,540		36,112		49,980

	$	2,705,626	$	3,136,141	$	2,083,142	$	2,449,487	$	444,411	$	564,346


(1)		CRLP sold its interest in this joint venture in February 2008.

(2)		During 2008, CRLP reduced its interest in this joint venture from 40.0% to 10.0%.

The following table summarizes income statement financial data of significant unconsolidated partially-owned entities in which CRLP had ownership interests for the years ended December 31, 2008, 2007 and 2006 (dollar amounts in thousands):


	Total Revenues						Net Income (Loss)									Share of Net Income (Loss)(1)
	2008		2007		2006		2008			2007			2006			2008			2007			2006

DRA/CRT (2)	$	172,985	$	170,433	$	215,676	$	(19,994	)	$	13,179		$	(41,909	)	$	(1,694	)	$	2,941		$	(6,286	)
DRA/CLP		117,445		62,812		—		(17,892	)		(1,682	)		—			(398	)		975			—
OZRE		34,607		18,695		—		(9,916	)		(5,314	)		—			(665	)		(232	)		—
GPT (3)		8,191		48,692		45,896		(1,752	)		(13,403	)		(9,581	)		11,977			(917	)		(958	)
Huntsville TIC (4)		24,662		4,005		—		(10,809	)		(1,018	)		—			4,063			1,016			—

	$	357,890	$	304,637	$	261,572	$	(60,363	)	$	(8,238	)	$	(51,490	)	$	13,283		$	3,783		$	(7,244	)


(1)		Includes amortization of excess basis differences, management fee eliminations and gains on sale.

(2)		Net Income for 2007 is attributable to the sale of Las Olas Centre and St. Petersburg Center. Gains on the sales of these assets were approximately $45.6 million.

(3)		CRLP sold its interest in this joint venture in February 2008 and recognized a gain of approximately $12.2 million.

(4)		CRLP sold a portion of its interest in this joint venture in a series of 10 transactions during 2008 and recognized a gain of approximately $6.0 million.

Investments in Variable Interest Entities

CRLP evaluates all transactions and relationships with variable interest entities (VIEs) to determine whether CRLP is the primary beneficiary of the entities in accordance with FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51” (FIN 46R).

An overall methodology for evaluating transactions and relationships under the VIE requirements includes the following two steps:

	•		determine whether the entity meets the criteria to qualify as a VIE, and

	•		determine whether CRLP is the primary beneficiary of the VIE.

When evaluating whether an investment (or other transaction) qualifies as a VIE, the significant factors and judgments that CRLP considers consist of the following:

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	•		the design of the entity, including the nature of its risks and the purpose for which the entity was created, to determine the variability that the entity was designed to create and distribute to its interest holders;

	•		the nature of CRLP’s involvement with the entity;

	•		whether control of the entity may be achieved through arrangements that do not involve voting equity;

	•		whether there is sufficient equity investment at risk to finance the activities of the entity;

	•		whether parties other than the equity holders have the obligation to absorb expected losses or the right to receive residual returns; and

	•		whether the voting rights and the economic rights are proportional.

For each VIE identified, CRLP evaluates whether it is the primary beneficiary by considering the following significant factors and judgments:

	•		whether CRLP’s variable interest absorbs the majority of the VIE’s expected losses,

	•		whether CRLP’s variable interest receives the majority of the VIE’s expected returns, and

	•		whether CRLP has the ability to make decisions that significantly affect the VIE’s results and activities.

Based on CRLP’s evaluation of the above factors and judgments, as of December 31, 2008, CRLP does not have a controlling interest nor is CRLP the primary beneficiary of any VIEs for which there is a significant variable interest. Also, as of December 31, 2008, CRLP has interests in three VIEs with significant variable interests for which CRLP is not the primary beneficiary.

Unconsolidated Variable Interest Entities

As of December 31, 2008, CRLP has interests in three VIEs with significant variable interests for which CRLP is not the primary beneficiary. The following is summary information as of December 31, 2008 regarding these unconsolidated VIEs:

(in thousands)


					Maximum
	Carrying Amount		Potential Additonal		Exposure to
VIE	of Investment		Support Obligation		Loss

DRA/CRT JV	$	24,091	$	17,400	$	41,491
CG at Canyon Creek		638		4,000		4,638
CG at Traditions		570		3,500		4,070

With respect to CRLP’s investment in DRA/CRT JV, CRLP is entitled to receive distributions in excess of its ownership interest if certain target return thresholds are satisfied. In addition, during September 2005, in connection with the acquisition of CRT with DRA, CRLP fully guaranteed approximately $50.0 million of third-party financing obtained by the DRA/CRT JV with respect to 10 of the CRT properties. During 2006, seven of the ten properties were sold. The DRA/CRT JV is obligated to reimburse CRLP for any payments made under the guaranty before making distributions of cash flows or capital proceeds to the DRA/CRT JV partners. As of December 31, 2008, this guarantee, which matures in January 2010, has been reduced to $17.4 million, as a result of the pay down of the associated collateralized debt from the sales of assets.

CRLP committed to guarantee up to $4.0 million of a $27.4 million construction loan obtained by the Colonial Grand at Canyon Creek Joint Venture, which represents a guaranty that is greater than CRLP’s proportionate interest in this joint venture. Accordingly, this investment qualifies as a VIE. However, CRLP has determined that it is remote that it would absorb a majority of the losses for this joint venture and, therefore, does not consolidate this investment.

CRLP committed with its joint venture partner to guarantee up to $7.0 million of a $34.1 million construction loan obtained by the Colonial Grand at Traditions Joint Venture. CRLP and its joint venture partner each committed to provide 50% of the guarantee, which is different from the venture’s voting and economic interests. As a result, this investment qualifies as a VIE but CRLP has determined that it is remote that it would absorb a majority of the losses for this joint venture and, therefore, does not consolidate this investment.

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11. Segment Information

Since 2007, CRLP has had four operating segments: multifamily, office, retail and for-sale residential. Prior to 2007, CRLP had three operating segments: multifamily, office and retail. As a result of impairment charges recorded during the third quarter of 2007 and the fourth quarter of 2008 related to CRLP’s for-sale residential projects, CRLP’s for-sale residential operating segment met the quantitative threshold to be considered a reportable segment. Prior to 2007, the results of operations and assets of the for-sale residential segment were previously included in other income (expense) and in unallocated corporate assets, respectively, due to the insignificance of this operating segment in prior periods. CRLP also has expertise appropriate to each specific product type, which is responsible for acquiring, developing, managing and leasing properties within such segment. The pro-rata portion of the revenues, net operating income (“NOI”), and assets of the partially-owned unconsolidated entities that CRLP has entered into are included in the applicable segment information. Additionally, the revenues and NOI of properties sold that are classified as discontinued operations are also included in the applicable segment information. In reconciling the segment information presented below to total revenues, income from continuing operations, and total assets, investments in partially-owned unconsolidated entities are eliminated as equity investments and their related activity are reflected in the consolidated financial statements as investments accounted for under the equity method, and discontinued operations are reported separately. Management evaluates the performance of its multifamily, office and retail segments and allocates resources to them based on segment NOI. Segment NOI is defined as total property revenues, including unconsolidated partnerships and joint ventures, less total property operating expenses (such items as repairs and maintenance, payroll, utilities, property taxes, insurance and advertising). Management evaluates the performance of its for-sale residential business based on net gains / losses. Presented below is segment information, for the multifamily, office and retail segments, including the reconciliation of total segment revenues to total revenues and total segment NOI to income from continuing operations before minority interest for the years ended December 31, 2008, 2007 and 2006, and total segment assets to total assets as of December 31, 2008 and 2007. Additionally, CRLP’s net gains / losses on for-sale residential projects for the years ended December 31, 2008, 2007 and 2006 are presented below:

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	For the Year Ended December 31,
(in thousands)	2008			2007			2006
Revenues:
Segment Revenues:
Multifamily	$	314,567		$	307,943		$	320,520
Office		57,265			98,735			172,381
Retail		36,843			70,664			110,291

Total Segment Revenues		408,675			477,342			603,192

Partially-owned unconsolidated entities — Mfam		(8,605	)		(10,287	)		(18,906	)
Partially-owned unconsolidated entities — Off		(49,687	)		(41,392	)		(33,736	)
Partially-owned unconsolidated entities — Rtl		(20,132	)		(19,028	)		(14,497	)
Construction revenues		10,137			38,448			30,484
Other non-property related revenue		18,629			19,352			17,693
Discontinued operations property revenues		(14,559	)		(41,496	)		(118,193	)

Total Consolidated Revenues		344,458			422,939			466,037

NOI:
Segment NOI:
Multifamily		188,255			182,950			190,838
Office		34,868			62,496			112,616
Retail		25,953			48,738			79,321

Total Segment NOI		249,076			294,184			382,775

Partially-owned unconsolidated entities — Mfam		(4,221	)		(4,964	)		(10,813	)
Partially-owned unconsolidated entities — Off		(29,513	)		(24,170	)		(20,416	)
Partially-owned unconsolidated entities — Rtl		(14,384	)		(13,042	)		(9,897	)
Other non-property related revenue		18,629			19,352			17,693
Discontinued operations property NOI		(6,976	)		(21,646	)		(71,426	)
Impairment — discontinued ops (1)		(2,025	)		(2,500	)		—
Impairments — continuing ops (2)		(116,550	)		(44,129	)		(1,600	)
Construction NOI		607			3,902			1,073
Property management expenses		(8,426	)		(12,178	)		(12,535	)
General and administrative expenses		(23,326	)		(25,650	)		(20,181	)
Management fee and other expenses		(15,316	)		(15,673	)		(12,575	)
Restructuring charge		(1,028	)		(3,019	)		—
Investment and developments		(4,358	)		(1,516	)		(1,010	)
Depreciation		(102,237	)		(109,570	)		(125,706	)
Amortization		(3,275	)		(10,582	)		(17,843	)

Income (Loss) from operations		(63,323	)		28,799			97,539

Total other income (expense), net (3)		(39,495	)		(49,528	)		(7,365	)

Income (Loss) before minority interest and discontinued operations	$	(102,818	)	$	(20,729	)	$	90,174


	December 31,		December 31,
(in thousands)	2008		2007
Assets
Segment Assets
Multifamily	$	2,473,262	$	2,449,558
Office		126,721		82,630
Retail		276,193		149,933
For-Sale Residential		106,114		211,729

Total Segment Assets		2,982,290		2,893,850

Unallocated corporate assets (4)		172,211		335,787

	$	3,154,501	$	3,229,637


Footnotes on following page

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(1)		The impairment charge recorded during 2008 is related to two of CRLP’s condominium conversion properties. The impairment charge recorded during 2007 is related to a retail asset sold during 2007.

(2)		During 2008, CRLP recorded a $114.9 million impairment charge related to CRLP’s for-sale residential business and certain development projects. Additionally, there was $1.7 million in casualty losses recorded as a result of fire damage at four multifamily apartment communities. Of the $44.1 million impairment charge presented in continuing operations in 2007, $43.3 million is related to CRLP’s for-sale residential business as a result of the deterioration in the single family housing market and dislocation in the mortgage market and $0.8 million is a result of fire damage sustained at two multifamily apartment communities.

(3)		For-sale residential activities including net gain on sales and income tax expense (benefit) are included in other income. (See table below for additional details on for-sale residential activities and also Note 7 related to for-sale activities).

(4)		Includes CRLP’s investment in partially-owned entities of $46,221 and $69,682 as of December 31, 2008 and 2007, respectively.

For-Sale Residential


	For the Year Ended December 31,
(in thousands)	2008			2007			2006

Gains on for-sale residential sales	$	1,625		$	3,137		$	2,830
Impairment		(35,900	)		(43,300	)		(1,600	)
Income tax benefit (expense) (1)		(562	)		15,398			(1,404	)

Income (loss) from for-sale residential sales	$	(34,837	)	$	(24,765	)	$	(174	)


(1)		CRLP has established a partial valuation allowance for the portion of the net deferred tax asset in excess of the amount that it is more likely than not of recovery (see Note 18).

12. Notes and Mortgages Payable

Notes and mortgages payable at December 31, 2008 and 2007 consist of the following:


	(in thousands)
	2008		2007

Unsecured credit facility	$	311,630	$	39,316
Mortgages and other notes:
3.37% to 6.00%		755,786		714,197
6.01% to 7.50%		649,603		843,326
7.51% to 9.00%		45,000		45,000

	$	1,762,019	$	1,641,839

During January 2008, CRLP, together with the Trust, added $175 million of additional borrowing capacity through the accordion feature of CRLP’s unsecured revolving credit facility (the “Credit Facility”) with Wachovia Bank, National Association, a subsidiary of Wells Fargo & Company (“Wachovia”), as Agent for the lenders, Bank of America, N.A. as Syndication Agent, Wells Fargo Bank, National Association (“Wells Fargo”), Citicorp North America, Inc. and Regions Bank, as Co-Documentation Agents, and U.S. Bank National Association and PNC Bank, National Association, as Co-Senior Managing Agents and other lenders named therein. As a result, as of December 31, 2008, CRLP, with the Trust as guarantor, has a $675.0 million Credit Facility. The amended Credit Facility has an expiration date of June 21, 2012.

Base rate loans and revolving loans are available under the Credit Facility. The Credit Facility also includes a competitive bid feature that allows CRLP to convert up to $337.5 million under the Credit Facility to a fixed rate and for a fixed term not to exceed 90 days. Generally, base rate loans bear interest at Wachovia’s designated base rate, plus a base rate margin ranging up to 0.25% based on CRLP’s unsecured debt ratings from time to time. Revolving loans bear interest at LIBOR plus a margin ranging from 0.325% to 1.05% based on CRLP’s unsecured debt ratings. Competitive bid loans bear interest at LIBOR plus a margin, as specified by the participating lenders. Based on CRLP’s current unsecured debt rating, the revolving loans currently bear interest at a rate of LIBOR plus 75 basis points.

Included in the Credit Facility, CRLP has a $35.0 million cash management line provided by Wachovia that will expire on June 15, 2012. The cash management line had an outstanding balance of $14.6 million as of December 31, 2008.

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The Credit Facility and cash management line, which is primarily used by CRLP to finance property acquisitions and developments, had an outstanding balance at December 31, 2008 of $311.6 million. The interest rate of the Credit Facility was 2.04% and 5.47% at December 31, 2008 and 2007, respectively.

The Credit Facility contains various restrictions, representations, covenants and events of default that could preclude future borrowings (including future issuances of letters of credit) or trigger early repayment obligations, including, but not limited to the following: nonpayment; violation or breach of certain covenants; failure to perform certain covenants beyond a cure period; failure to satisfy certain financial ratios; a material adverse change in the consolidated financial condition, results of operations, business or prospects of CRLP; and generally not paying CRLP’s debts as they become due. At December 31, 2008, CRLP was in compliance with these covenants. Specific financial ratios with which CRLP must comply pursuant to the Credit Facility consist of the Fixed Charge Coverage Ratio as well as the Debt to Total Asset Value Ratio. Both of these ratios are measured quarterly. The Fixed Charge ratio generally requires that CRLP’s earnings before interest, taxes, depreciation and amortization be at least equal 1.5 times CRLP’s Fixed Charges. Fixed Charges generally include interest payments (including capitalized interest) and preferred dividends. The Debt to Total Asset Value ratio generally requires CRLP’s debt to be less than 60% of its total asset value. CRLP does not anticipate any events of noncompliance with either of these ratios in 2009. The ongoing recession and continued uncertainty in the stock and credit markets may negatively impact CRLP’s ability to generate earnings sufficient to maintain compliance with these ratios and other debt covenants. However, given the ongoing recession and continued uncertainty in the stock and credit markets, there can be no assurance that we will be able to maintain compliance with these ratios and other debt covenants in the future, particularly if conditions worsen.

Many of the recent disruptions in the financial markets have been brought about in large part by failures in the U.S. banking system. If Wachovia or any of the other financial institutions that have extended credit commitments to CRLP under the Credit Facility or otherwise are adversely affected by the conditions of the financial markets, these financial institutions may become unable to fund borrowings under credit commitments to CRLP under the Credit Facility, the cash management line or otherwise. If these lenders become unable to fund CRLP’s borrowings pursuant to the financial institutions’ commitments, CRLP may need to obtain replacement financing, and such financing, if available, may not be available on commercially attractive terms.

During March 2008, CRLP refinanced mortgages associated with two of its multifamily apartment communities, Colonial Grand at Trinity Commons, a 462-unit apartment community located in Raleigh, North Carolina, and Colonial Grand at Wilmington, a 390-unit apartment community located in Wilmington, North Carolina. CRLP financed an aggregate of $57.6 million, at a weighted average interest rate of 5.4%. The loan proceeds were used to repay the mortgages of $29.0 million and the balance was used to pay down CRLP’s unsecured line of credit.

During September 2008, CRLP refinanced a mortgage associated with Colonial Village at Timber Crest, a 282-unit apartment community located in Charlotte, North Carolina. Loan proceeds were $13.7 million, with a floating interest rate of LIBOR plus 292 basis points, which was 3.4% at December 31, 2008. The proceeds, along with additional borrowings of $0.6 million from CRLP’s Credit Facility, were used to repay the $14.3 million outstanding mortgage.

In January 2008, the Board of Trustees of the Trust authorized the repurchase up to $50.0 million of CRLP’s outstanding unsecured senior notes. In April 2008, the Board of Trustees of the Trust authorized a senior note repurchase program to allow the repurchase up to $200.0 million of CRLP’s outstanding unsecured senior notes from time to time through December 31, 2009. In December 2008, the Board of Trustees of the Trust expanded the April 2008 repurchase program by an additional $300.0 million for a total repurchase authorization under the April 2008 repurchase program of $500.0 million. The senior notes may be repurchased from time to time in open market transactions or privately negotiated transactions, subject to applicable legal requirements, market conditions and other factors. The repurchase program does not obligate CRLP to repurchase any specific amounts of senior notes, and repurchases pursuant to the program may be suspended or resumed at any time without further notice or announcement.

During 2008, CRLP repurchased $195.0 million of its outstanding unsecured senior notes in separate transactions at an average 9.1% discount to par value, which represents an 8.5% yield to maturity. As a result of the repurchases, CRLP recognized an aggregate gain of $16.0 million, which is included in “Gains (losses) on retirement of debt” on CRLP’s Consolidated Statements of Operations and Comprehensive Income (Loss). CRLP will continue to monitor the debt markets and repurchase certain senior notes that meet CRLP’s required criteria, as funds are available.

During June 2007, CRLP repaid $409.0 million of collateralized mortgages associated with 37 multifamily communities with proceeds from asset sales. In conjunction with the repayment, CRLP incurred $29.2 million of prepayment penalties. These penalties were offset by $16.7 million of write-offs related to the mark-to-market intangibles on the associated mortgage debt repaid. The weighted average interest rate of the mortgages repaid was 7.0%.

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During July 2007, CRLP repaid its outstanding $175 million 7.0% unsecured senior notes due July 2007 from proceeds received from asset sales.

During July 2007, the DRA/CLP JV increased mortgage indebtedness on the properties it owns from approximately $588.2 million to approximately $742.0 million. The additional proceeds, of approximately $153.8 million, were utilized to payoff partner loans and establish a capital reserve, with the remainder being distributed to the partners on a pro-rata basis. As a result, CRLP received a distribution of approximately $18.6 million (see Note 2).

During July 2007, the OZRE JV increased mortgage indebtedness on the properties it owns from approximately $187.2 million to approximately $284.0 million. The additional proceeds, of approximately $96.8 million, were utilized to payoff partner loans and establish a capital reserve, with the remainder being distributed to the partners on a pro-rata basis. As a result, CRLP received a distribution of approximately $13.8 million (see Note 2).

At December 31, 2008, CRLP had $1.7 billion in unsecured indebtedness including balances outstanding on its Credit Facility and certain other notes payable. The remainder of CRLP’s notes and mortgages payable are collateralized by the assignment of rents and leases of certain properties and assets with an aggregate net book value of approximately $139.5 million at December 31, 2008.

The aggregate maturities of notes and mortgages payable, including CRLP’s Credit Facility at December 31, 2008, were as follows:


	(in thousands)
2009	$	681
2010		272,541
2011		100,728
2012 (1)		411,910
2013		113,756
Thereafter		862,403

	$	1,762,019


(1)		Year 2012 includes $311.6 million outstanding on CRLP’s credit facility as of December 31, 2008, which matures in June 2012.

Based on borrowing rates available to CRLP for notes and mortgages payable with similar terms, the estimated fair value of CRLP’s notes and mortgages payable at December 31, 2008 and 2007 was approximately $1.5 billion and $1.7 billion, respectively.

See Note 22 — “Subsequent Events” for additional financing activities.

13. Derivative Instruments

SFAS No. 133, as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by SFAS No. 133, CRLP records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. CRLP assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value are recognized in earnings.

CRLP’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks. To accomplish this objective, CRLP primarily uses interest rate swaps (including forward

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starting interest rate swaps) and caps as part of its cash flow hedging strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. As of December 31, 2008 and 2007, CRLP had no outstanding interest rate swap agreements.

At December 31, 2008 and 2007, there were no derivatives included in other assets. At December 31, 2006, derivatives with a fair value of $0.7 million were included in other assets. CRLP did not have a change in unrealized gains/(losses) in 2008. The change in net unrealized gains/(losses) of ($0.5) million in 2007 and $3.0 million in 2006 for derivatives designated as cash flow hedges is separately disclosed in the statements of changes in partners’ equity. At December 31, 2008 and 2007, there were no derivatives that were not designated as hedges. The change in fair value of derivatives not designated as hedges of $2.7 million is included in other income (expense) in 2006. There was no hedge ineffectiveness during 2008 and 2007. Hedge ineffectiveness of ($0.1) million on cash flow hedges due to index mismatches was recognized in other income during 2006. As of December 31, 2008, all of CRLP’s hedges are designated as cash flow hedges under SFAS No. 133, and CRLP does not enter into derivative transactions for speculative or trading purposes.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to “Interest expense and debt cost amortization” as interest payments are made on CRLP’s hedged debt or to “Gains (losses) on hedging activities” at such time that the interest payments on the hedged debt become probable of not occurring as originally specified. A portion of the interest payments on the hedged debt became probable of not occurring as a result of CRLP’s bond repurchase program (see Note 12). The changes in accumulated other comprehensive income for reclassifications to “Interest expense and debt cost amortization” tied to interest payments made on the hedged debt was $0.5 million, $0.6 million and $0.5 million during 2008, 2007 and 2006, respectively. The changes in accumulated other comprehensive income for reclassification to “Gains (losses) on hedging activities” related to interest payments on the hedged debt that have been deemed no longer probable to occur as a result of repurchases under CRLP’s senior note repurchase program was $0.3 million during 2008, with no impact during 2007 and 2006.

During May 2007, CRLP settled a $100.0 million interest rate swap and received a payment of approximately $0.6 million. This interest rate swap was in place to convert a portion of the floating rate payments on CRLP’s Credit Facility to a fixed rate. This derivative originally qualified for hedge accounting under SFAS No. 133. However, in May of 2007, due to CRLP’s then-pending joint venture transactions (see Note 2) and the expected resulting pay down of CRLP’s term loan and Credit Facility, this derivative no longer qualified for hedge accounting which resulted in a gain of approximately $0.4 million.

During February 2006, CRLP settled a $200.0 million forward starting interest rate swap and received a payment of approximately $4.3 million. This forward starting interest rate swap was in place to convert the floating rate payments on certain expected future debt obligations to a fixed rate. This derivative originally qualified for hedge accounting under SFAS No. 133. However, in December of 2005 as a result of a modification to the forecasted transaction, this derivative no longer qualified for hedge accounting. As a result, CRLP began treating this derivative as an economic hedge during 2005. Changes in the fair value of this derivative were recognized in earnings in other income (expense) and totaled approximately $2.7 million for the period of time the derivative was active during 2006. The fair value of this derivative at the time it no longer qualified for hedge accounting was approximately $1.5 million, which will remain in accumulated other comprehensive income and be reclassified to interest expense over the applicable period of the associated debt, which is approximately eight years at December 31, 2008.

During June 2006, CRLP entered into a forward starting interest rate swap agreement to hedge the interest rate risk associated with a forecasted debt issuance that occurred on August 28, 2006. This interest rate swap agreement had a notional amount of $200 million, a fixed interest rate of 5.689%, and a maturity date of November 15, 2016. This interest rate swap agreement was settled concurrent with CRLP’s issuance of $275 million of debt in the senior notes offering completed August 28, 2006. The settlement resulted in a settlement payment of approximately $5.2 million by CRLP. This amount will remain in other comprehensive income and be reclassified to interest expense over the remaining term of the associated debt, which is approximately eight years at December 31, 2008. On August 15, 2006, CRLP also entered into a $75 million treasury lock agreement to hedge the interest rate risk associated with the remaining $75 million of senior notes issued on August 28, 2006. This treasury lock agreement was settled on August 28, 2006 for a settlement payment of approximately $0.1 million which will also remain in other comprehensive income and be reclassified to interest expense over the remaining life of the associated debt.

During November 2006, CRLP settled a $175.0 million forward starting interest rate swap and received a payment of approximately $2.9 million. This forward starting interest rate swap was in place to convert the floating rate payments on certain expected future debt obligations to a fixed rate. In November of 2006, CRLP settled this forward starting swap agreement as a result of its determination that the forecasted debt issuance was no longer probable due to CRLP’s strategic shift (see Note 2). In December 2006, CRLP made the determination that it was probable that the forecasted debt issuance

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would not occur. As a result, CRLP reversed the $2.9 million in other comprehensive income to other income during December of 2006.

Further, CRLP has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, CRLP has not sustained a material loss from those instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives.

14. Capital Structure

At December 31, 2008, the Trust controlled CRLP as the sole general partner and as the holder of 84.6% of the common units of CRLP. The limited partners of CRLP who hold redeemable or common units, are those persons (including certain officers and trustees) who, at the time of the initial public offering, elected to hold all or a portion of their interest in the form of units rather than receiving common shares of the Trust, or individuals from whom CRLP acquired certain properties, who elected to receive units in exchange for the properties. Redeemable units represent the number of outstanding limited partnership units as of the date of the applicable balance sheet, valued at the closing market value of the Trust’s common shares. Each redeemable unit may be redeemed by the holder thereof for either one common share or cash equal to the fair market value thereof at the time of such redemption, at the option of the Trust.

The rollforward of redeemable units at redemption value for the year ended December 31, 2008 is as follows:


	(in thousands)

Redemption value, December 31, 2007	$	227,494

Net income available to common unitholders allocated to limited partners		(11,225	)

Adjustment of limited partner common equity to redemption value		(142,457	)


Redemption value, December 31, 2008	$	73,812

In 1999, CRLP issued $100 million of Series B Cumulative Redeemable Perpetual Preferred Units (“Series B preferred units”) in a private placement, that are exchangeable for Series B preferred shares of the Trust, net of offering costs of $2.6 million. On February 18, 2004, CRLP modified the terms of the $100.0 million 8.875% Preferred Units. Under the modified terms, the Preferred Units bear a distribution rate of 7.25% and are redeemable at the option of CRLP, in whole or in part, after February 24, 2009, at the cost of the original capital contribution plus the cumulative priority return, whether or not declared. The terms of the Preferred Units were further modified on March 14, 2005 to extend the redemption date from February 24, 2009 to August 24, 2009. The Preferred Units are exchangeable for 7.25% Series B Preferred Shares of the Trust, in whole or in part at anytime on or after January 1, 2014, at the option of the holders.

The Board of Trustees of the Trust manages CRLP by directing the affairs of CRLP. The Trust’s interests in CRLP entitle it to share in cash distributions from, and in the profits and losses of, CRLP in proportion to the Trust’s percentage interest therein and entitle the Trust to vote on all matters requiring a vote of the limited partners.

15. Cash Contributions

In April 2003, the Trust issued $125.0 million or 5,000,000 depositary shares, each representing 1/10 of a share of 8.125% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share (the “Series D Preferred Shares”). The depositary shares are currently callable by Trust and have a liquidation preference of $25.00 per depositary share. The depositary shares have no stated maturity, sinking fund or mandatory redemption and are not convertible into any other securities of the Trust.

In January 2008, the Board of Trustees of the Trust authorized the repurchase of up to $25.0 million of the Trust’s 8 1/8% Series D preferred depositary shares in a limited number of separate, privately negotiated transactions. In October 2008, the Board of Trustees of the Trust authorized a repurchase program which allows the repurchase of up to an additional $25.0 million of the Trust’s outstanding 8 1/8% Series D preferred depositary shares over a 12 month period. In connection with the repurchase of the Series D Preferred Shares, the Board of Trustees of the Trust, as general partner of

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CRLP, also authorized the repurchase of a number of Series D Cumulative Redeemable Preferred Units by CRLP corresponding to the number of Series D preferred shares of the Trust represented by such repurchased Series D Depositary Shares. The Series D preferred depositary shares may be repurchased from time to time over a 12 month period in open market purchases or privately negotiated transactions, subject to applicable legal requirements, market conditions and other factors. The repurchase program does not obligate the Trust to repurchase any specific amounts of preferred shares, and repurchases pursuant to the program may be suspended or resumed at any time without further notice or announcement. The Trust will continue to monitor the equity markets and repurchase preferred shares if the repurchases meet the required criteria, as funds are available. If the Trust were to repurchase outstanding Series D depositary shares, it would expect to record additional non-cash charges related to the write-off of Series D preferred issuance costs.

During 2008, the Trust repurchased 988,750 of its outstanding 8 1/8% Series D preferred depositary shares in privately negotiated transactions for an aggregate purchase price of $24.0 million, at an average price of $24.17 per depositary share (and CRLP repurchased a number of Series D Preferred Units corresponding to the number of Series D preferred shares of the Trust represented by such repurchased Series D Depositary Shares). The Trust received an approximate $0.8 million discount to the liquidation preference price of $25.00 per depositary share on the repurchase and wrote-off approximately $0.9 million of issuance costs.

In June 2007, in connection with the office and retail joint venture transactions, all common equity partners of CRLP were distributed units in the DRA/CLP JV and the OZRE JV based on 85% of their ownership interest in CRLP. CRLP recorded this distribution at book value, which reduced common unit equity by approximately $229.4 million during 2007 (see Note 2). Additionally, in connection with these transactions, all common equity partners received a special cash distribution of $0.21 per unit, or $12.0 million in the aggregate.

In April 2005, in connection with the Cornerstone acquisition, the Trust issued 5,326,349 Series E preferred depositary shares each representing 1/100th of a 7.62% Series E Cumulative Redeemable Preferred Share of Beneficial Interest, liquidation preference $2,500 per share, of the Trust. In February 2006, the Board of Trustees of the Trust announced its authorization of the repurchase of up to $65.0 million of the Trust’s Series E Depositary Shares, each representing 1/100 of a share of its 7.62% Series E Cumulative Redeemable Preferred Shares. In connection with the repurchase of the Series E Preferred Shares, the Board of Trustees of the Trust, as general partner of CRLP, also authorized the repurchase of a corresponding amount of Series E Preferred Units, all of which were held by the Trust, as general partner of CRLP. During 2006, the Trust repurchased 1,135,935 million Series E depositary shares for a total cost of approximately $28.5 million. The Trust wrote off approximately $0.3 million of issuance costs associated with this redemption. In April 2007, the Board of Trustees of the Trust authorized the redemption of, and in May 2007 the Trust redeemed all of, its remaining outstanding 4,190,414 Series E depositary shares for a total cost of $104.8 million. In connection with the redemption of the remaining outstanding Series E Depositary Shares, the Board of Trustees of the Trust, as general partner of CRLP, also authorized the redemption of all outstanding Series E Preferred Units, all of which were held by the Trust as general partner of CRLP. In connection with this redemption, CRLP wrote off $0.3 million of associated issuance costs. The redemption price was $25.00 per Series E depositary share plus accrued and unpaid dividends for the period from April 1, 2007 through and including the redemption date, for an aggregate redemption price per Series E depositary share of $25.3175.

In June 2001, the Trust issued 2,000,000 preferred shares of beneficial interest (Series C Preferred Shares). The Series C Preferred Shares pay a quarterly dividend at 9.25% per annum and may be called by the Trust on or after June 19, 2006. The Series C Preferred Shares have no stated maturity, sinking fund or mandatory redemption and are not convertible into any other securities of the Trust. The Series C Preferred Shares have a liquidation preference of $25.00 per share. In April 2006, the Board of Trustees of the Trust authorized the redemption of the Trust’s 9.25% Series C Cumulative Redeemable Preferred Shares. In connection with the redemption of the Series C Preferred Shares, the Board of Trustees of the Trust, as general partner of CRLP, also authorized the redemption of all outstanding Series C Preferred Units by CRLP, all of which were held by the Trust as general partner of CRLP. The redemption, for an aggregate redemption price of approximately $50.0 million, occurred on June 30, 2006. The Trust wrote off approximately $1.9 million of issuance costs associated with this redemption during 2006.

16. Share-based Compensation

Effective January 1, 2006, the Trust accounts for share-based compensation using the fair value method prescribed in SFAS No. 123(R) (see Note 3). For share-based compensation granted from January 1, 2003 to December 31, 2005, the Trust accounted for share-based compensation under the fair value method prescribed by SFAS No. 123. Other than the required modification under SFAS No. 123(R) to use an estimated forfeiture rate for award terminations and forfeitures, and the provisions related to retirement eligible employees, the adoption of SFAS No. 123(R) did not have an impact on the Trust’s accounting for share-based compensation. In prior years, the Trust used a policy of recognizing the effect of award forfeitures as they occurred. Under SFAS No. 123(R), such award forfeitures are recognized based on an estimate of the number of

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awards expected to be forfeited during the estimated service period. The cumulative impact of this modification on awards granted prior to January 1, 2006 was $0.2 million and was reflected as a reduction of compensation expense in the year ended December 31, 2006.

Incentive Share Plans

On March 7, 2008, the Board of Trustees of the Trust approved the 2008 Omnibus Incentive Plan (the “2008 Plan”). The 2008 Plan was approved by the Trust’s shareholders on April 23, 2008. The Third Amended and Restated Share Option and Restricted Share Plan (the “Prior Plan”) expired by its terms in April 2008. The 2008 Plan provides the Trust with the opportunity to grant long-term incentive awards to employees and non-employee directors, as well independent contractors, as appropriate. The 2008 Plan authorizes the grant of seven types of share-based awards — share options, restricted shares, unrestricted shares, share units, share appreciation rights, performance shares and performance units. Five million common shares were reserved for issuance under the 2008 Plan. At December 31, 2008, 4,028,193 common shares of the Trust were available for issuance under the 2008 Plan.

In connection with the grant of options under the 2008 Plan, the Executive Compensation Committee of the Board of Trustees of the Trust determines the option exercise period and any vesting requirements. All outstanding options granted to date under the 2008 Plan and the Prior Plan have a term of ten years and vest over a periods ranging from one to five years. Similarly, restricted shares vest over a period ranging from one to five years.

Compensation costs for share options have been valued on the grant date using the Black-Scholes option-pricing method. The weighted average assumptions used in the Black-Scholes option pricing model were as follows:


	For the Year Ending
	December 31,
	2008			2007			2006
Dividend yield		7.92	%		5.76	%		5.76	%
Expected volatility		20.70	%		19.42	%		21.01	%
Risk-free interest rate		3.77	%		4.64	%		5.11	%
Expected option term (years)		7.1			7.2			7.5

For this calculation, the expected dividend yield reflects the Trust’s current historical yield. Expected volatility was based on the historical volatility of the Trust’s common shares. The risk-free interest rate for the expected life of the options was based on the implied yields on the U.S Treasury yield curve. The weighted average expected option term was based on the Trust’s historical data for prior period share option exercises and forfeiture activity.

During the year ended December 31, 2008, the Trust granted share options to purchase 215,279 common shares to its employees and trustees. For the years ended December 31, 2008, 2007 and 2006, the Trust recognized compensation expense related to share options of $0.3 million ($0.1 million of compensation expense related to share options was reversed due to the Trust’s restructuring), $0.7 million and $0.8 million, respectively. Upon the exercise of share options, the Trust issues common shares from authorized but unissued common shares. Total cash proceeds from exercise of stock options were $1.1 million, $2.4 million and $7.0 million for the years ended December 31, 2008, 2007 and 2006, respectively.

The following table presents a summary of share option activity under all plans for the year ended December 31, 2008:

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	Options Outstanding
				Weighted Average
	Shares			Exercise Price (1)

Options outstanding, beginning of period		1,594,930		$	24.65
Granted		215,279			23.56
Exercised		(57,075	)		19.62
Forfeited		(228,749	)		29.17

Options outstanding, end of period		1,524,385		$	24.00


(1)		In connection with the special distribution paid by the Trust related to the recapitalization during 2007 (see Note 2), the exercise price of all of the Trust’s then outstanding options has been reduced by $10.63 per share for all periods presented as required under the terms of the Trust’s option plans.

The weighted average grant date fair value of options granted in 2008, 2007 and 2006 was $1.40, $5.13 and $5.70, respectively. The total intrinsic value of options exercised during 2008, 2007 and 2006 was $0.5 million, $2.9 million and $4.1 million, respectively.

As of December 31, 2008, the Trust had approximately 1.5 million share options outstanding with a weighted average exercise price of $24.00 and a weighted average remaining contractual life of 4.5 years. These share options outstanding did not have an intrinsic value as of December 31, 2008. The total number of exercisable options at December 31, 2008 was approximately 1.3 million. As of December 31, 2008, the weighted average exercise price of exercisable options was $23.27 and the weighted average remaining contractual life was 3.7 years for these exercisable options. These exercisable options did not have an aggregate intrinsic value at December 31, 2008. At December 31, 2008, there was $0.5 million of unrecognized compensation cost related to unvested share options, which is expected to be recognized over a weighted average period of 1.9 years.

The following table presents the change in deferred compensation related to restricted share awards:


	(amounts in thousands)

Balance, December 31, 2007	$	8,349

Amortization of deferred compensation		(3,317	)
Reversal of deferred compensation due to cancelled shares (1)		(2,956	)
Issuance of restricted shares		4,516


Balance, December 31, 2008	$	6,592


(1)		Of this amount, $2.6 million is attributable to the Trust’s restructuring during 2008.

The following table presents the change in nonvested restricted share awards:


				Weighted Average
	For the Year Ended			Grant Date
	December 31, 2008			Fair Value

Nonvested Restricted Shares, December 31, 2007		419,609		$	41.35

Granted		284,982			21.38
Vested		(123,123	)		42.00
Cancelled/Forfeited		(172,931	)		35.28


Nonvested Restricted Shares, December 31, 2008		408,537		$	32.08

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The weighted average grant date fair value of restricted share awards issued during 2008, 2007 and 2006 was $21.38, $40.44 and $46.39, respectively. For the years ended December 31, 2008, 2007 and 2006, the Trust recognized compensation expense related to restricted share awards of $3.3 million ($1.0 million of compensation expense related to restricted share awards was reversed and $0.2 million was accelerated due to the Trust’s restructuring), $3.9 million and $3.0 million, respectively. For the years ended December 31, 2008, 2007 and 2006, the Trust separately capitalized $1.3 million, $5.4 million and $0.9 million, respectively, for restricted share awards granted in connection with certain real estate developments. The total intrinsic value for restricted share awards that vested during 2008, 2007 and 2006 was $2.6 million, $3.2 million and $3.2 million, respectively. At December 31, 2008, the unrecognized compensation cost related to nonvested restricted share awards is $6.6 million, which is expected to be recognized over a weighted average period of 2.0 years.

Adoption of Incentive Program

On April 26, 2006, the Executive Compensation Committee of the Board of Trustees of the Trust adopted a new incentive program in which seven executive officers of the Trust participate. The program provides for the following awards:

	•		the grant of a specified number of restricted shares, totaling approximately $6.3 million, which vest at the end of the five-year service period beginning on April 26, 2006 (the “Vesting Period”), and/or

	•		an opportunity to earn a performance bonus, based on absolute and relative total shareholder return over a three-year period beginning January 1, 2006 and ending December 31, 2008 (the “Performance Period”).

A participant’s restricted shares will be forfeited if the participant’s employment is terminated prior to the end of the Vesting Period. The compensation expense and deferred compensation related to these restricted shares is included in the restricted share disclosures above.

A participant would forfeit his right to receive a performance payment if the participant’s employment were terminated prior to the end of the Performance Period, unless termination of employment resulted from the participant’s death or disability, in which case the participant (or the participant’s beneficiary) would earn a pro-rata portion of the applicable award. Performance payments, if earned, were payable in cash, common shares or a combination of the two. Each performance award has specified threshold, target and maximum payout amounts ranging from $5,000 to $6,000,000 per participant. The performance awards were valued with a binomial model by a third party valuation firm. The performance awards, which had a fair value on the grant date of $5.4 million ($4.9 million net of estimated forfeitures), were valued as equity awards tied to a market condition.

On January 29, 2009, the Executive Compensation Committee of the Board of Trustees of the Trust confirmed the calculation of the payouts under the performance awards as of the end of the Performance Period for each of the remaining participants in the incentive program, and approved the form in which the performance awards are to be made. An aggregate of $299,000 was paid to the four remaining participants in cash that was withheld to satisfy applicable tax withholding, and the balance of the award was satisfied through the issuance of an aggregate of 69,055 common shares.

The Trust used a third party valuation firm to assist in valuing these awards using a binomial model. The significant assumptions used to measure the fair value of the performance awards are as follows:

	•		risk-free rate,

	•		expected standard deviation of returns (i.e., volatility),

	•		expected dividend yield, and

	•		correlation in stock price movement.

The risk-free rate was set equal to the yield, for the term of the remaining duration of the performance period, on treasury securities as of April 26, 2006 (the grant date). The data was obtained from the Federal Reserve for constant maturity treasuries for 2-year and 3-year bonds. Standard deviations of stock price movement for the Trust and its peer companies (as defined by the Board of Trustees of the Trust) were set equal to the annualized daily volatility measured over the 3-year period ending on April 26, 2006. Annual stock price correlations over the ten-year period from January 1, 1996 through December 31, 2005, for a total of 595 correlation measurements, were examined. The average correlation was 0.54.

To calculate Total Shareholder Return for each company that was defined by the Trust’s Board of Trustees as a peer, the Trust compared the projected December 31, 2008 stock price plus the expected cumulative dividends paid during the performance measurement period to the actual closing price on December 31, 2005. The last (normalized) dividend payment made for each such company in 2005 was annualized and this annual dividend amount was assumed to be paid in each year of the performance measurement period.

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Due to the fact that the form of payout (cash, common shares, or a combination of the two) is determined solely by the Board of Trustees of the Trust, and not the employee, the grant was valued as an equity award.

For the years ended December 31, 2008, 2007 and 2006, the Trust recognized $1.4 million, $1.9 million and $1.3 million, respectively, of compensation expense attributable to the performance based share awards. As a result of the departure of certain grantees of performance based share awards, the Trust reduced compensation expense by $1.0 million during 2008. As of December 31, 2008, these awards have been fully expensed.

Employee Share Purchase Plan

The Trust maintains an Employee Share Purchase Plan (the “Purchase Plan”). The Purchase Plan permits eligible employees of the Trust, through payroll deductions, to purchase common shares at market price. The Purchase Plan has no limit on the number of common shares that may be issued under the plan. The Trust issued 9,405, 3,725 and 2,652 common shares pursuant to the Purchase Plan during 2008, 2007 and 2006, respectively.

17. Employee Benefits

Noncontributory Defined Benefit Pension Plan

Employees of CRLP hired prior to January 1, 2002 participate in a noncontributory defined benefit pension plan designed to cover substantially all employees. Pension expense includes service and interest costs adjusted by actual earnings on plan assets and amortization of prior service cost and the transition amount. The benefits provided by this plan are based on years of service and the employee’s final average compensation. CRLP’s policy is to fund the minimum required contribution under ERISA and the Internal Revenue Code. CRLP uses a December 31 measurement date for its plan.

During 2007, the Board of Trustees of the Trust approved the termination of its noncontributory defined benefit pension plan. Accordingly, during 2007, CRLP expensed $2.3 million in connection with this termination, including a one-time pension bonus of approximately $1.4 million. As of December 31, 2007, the termination of the pension plan was substantially complete. During 2008, CRLP made contributions to plan assets of $0.4 million. In addition, the remaining settlement payments of $0.5 million were paid in 2008 upon final determination from the IRS.

The table below presents a summary of pension plan status as of December 31, 2007, as it relates to the employees of CRLP.


	(in thousands)
Change in benefit obligation	2007
Benefit obligation at beginning of year	$	15,662
Service cost		253
Interest cost		758
Curtailment (gain) loss		(4,087	)
Settlment (gain) loss		(380	)
Benefits paid		(134	)
Settlement payments		(13,949	)
Actuarial (gain) loss		2,592

Benefit obligation at end of year	$	715


Change in plan assets
Fair value of plan assets at beginning of year	$	10,317
Actual return on plan assets		718
Employer contributions		3,100
Benefits paid		(134	)
Settlement payments		(13,949	)

Fair value of plan assets at end of year	$	52


Funded status	$	(663	)

Amounts recognized in the consolidated balance as of December 31, 2007 consist of:

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	2007
Weighted-average assumptions used to determine benefit obligations at December 31
Discount rate		5.00	%
Rate of compensation increase		n/a

Weighted-average assumptions used to determine net cost for years ended December 31
Discount rate		5.00	%
Expected long-term rate of return on plan assets		5.00	%
Rate of compensation increase		3.00	%

The following table presents the cash flow activity of the pension plan during the years ending December 31, 2007 and 2006:


	(in thousands)
Contributions	Employer
2006	$	814
2007	$	3,100

Benefit payments (including termination settlement payments)
2007	$	14,084
401(k) Plan

CRLP maintains a 401(k) plan covering substantially all eligible employees. At December 31, 2008, this plan provides, with certain restrictions, that employees may contribute a portion of their earnings with CRLP matching 100% of such contributions up to 4% and 50% on contributions between 4% and 6%, solely at its discretion. Prior to December 31, 2007, this plan provided, with certain restrictions, that employees may contribute a portion of their earnings with CRLP matching one-half of such contributions up to 6%, solely at its discretion. Contributions by CRLP were approximately $2.0 million, $1.0 million and $0.8 million for the years ended December 31, 2008, 2007 and 2006, respectively.

18. Income Taxes

CRLP’s consolidated financial statements include the operations of its taxable REIT subsidiary, CPSI, which is subject to federal, state and local income taxes. CPSI provides property development, leasing and management services for third-party owned properties and administrative services to CRLP. In addition, CRLP performs all of its for-sale residential and condominium conversion activities through CPSI. CRLP generally reimburses CPSI for payroll and other costs incurred in providing services to CRLP. All inter-company transactions are eliminated in the accompanying consolidated financial statements. The components of income tax expense, significant deferred tax assets and liabilities and a reconciliation of CPSI’s income tax expense to the statutory federal rate are reflected in the tables below.

Income tax expense of CPSI for the years ended December 31, 2008, 2007 and 2006 is comprised of the following:

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				(in thousands)
	2008			2007			2006
Current tax expense (benefit):
Federal	$	(10,417	)	$	7,929		$	13,242
State		56			1,401			2,040

		(10,361	)		9,330			15,282

Deferred tax expense (benefit):
Federal		11,063			(14,187	)		(2,641	)
State		72			(2,587	)		(482	)

		11,135			(16,774	)		(3,123	)


Total income tax expense (benefit)		774			(7,444	)		12,159
Income tax expense (benefit) — discontinued operations		(1,064	)		(1,839	)		(8,554	)

Income tax expense (benefit) — continuing operations		(290	)		(9,283	)		3,605

In 2008, 2007 and 2006, income tax expense resulting from condominium conversion unit sales was allocated to discontinued operations (see Note 7).

The components of CPSI’s deferred income tax assets and liabilities at December 31, 2008 and 2007 were as follows:


	(in thousands)
	2008			2007
Deferred tax assets:
Real estate asset basis differences	$	84		$	128
Impairments		44,550			17,466
Deferred revenue		1,971			1,795
Allowance for doubtful accounts		737			321
Accrued liabilities		340			458

	$	47,682		$	20,168


Deferred tax liabilities:
Real estate asset basis differences		(4,088	)		(271	)

		(4,088	)		(271	)


Net deferred tax assets, before valuation allowance	$	43,594		$	19,897

Valuation allowance		(34,283	)		—


Net deferred tax assets, included in other assets	$	9,311		$	19,897

As of December 31, 2008, CPSI had a net deferred tax asset, before valuation allowance, of approximately $43.6 million, which resulted primarily from the impairment charges recorded during each of the years ended December 31, 2008 and 2007. CPSI has evaluated whether it is more likely than not that it will be able to recover its net deferred tax asset based on projections of future taxable income and CPSI’s ability to carry back losses to prior periods. Based on this evaluation, CPSI expects that it is more likely than not that CPSI will be able to recover approximately $9.3 million of its net deferred tax asset. The portion of the net deferred tax asset that CPSI deems recoverable approximates the amount of unutilized carryback potential to the 2007 tax year. Accordingly, CPSI has established a partial valuation allowance for the portion of the net deferred tax asset in excess of the amount that it is able to recover through the known 2007 carryback.

Reconciliations of the 2008 and 2007 effective tax rates of CPSI to the federal statutory rate are detailed below. As shown above, a portion of the 2008 and 2007 income tax expense was allocated to discontinued operations.

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	2008			2007
Federal tax rate		35.00	%		35.00	%
Valuation reserve		(35.87	%)		—
State income tax, net of federal income tax benefit		(0.1	%)		4.09	%
Other		0.07	%		2.78	%

CPSI provision for income taxes		(0.9	%)		41.87	%

For the years ended December 31, 2008 and 2007, other expenses included estimated state franchise and other taxes, including the franchise tax in Tennessee and the margin-based tax in Texas.

19. Leasing Operations

CRLP’s business includes leasing and management of multifamily, office, and retail property. For properties owned by CRLP, minimum rentals due in future periods under noncancelable operating leases extending beyond one year at December 31, 2008 are as follows:


	(in thousands)
2009	$	25,863
2010		26,413
2011		26,190
2012		23,693
2013		21,980
Thereafter		133,683

	$	257,822

The noncancelable leases are with tenants engaged in retail and office operations in Alabama, Florida and North Carolina. Performance in accordance with the lease terms is in part dependent upon the economic conditions of the respective areas. No additional credit risk exposure relating to the leasing arrangements exists beyond the accounts receivable amounts shown in the December 31, 2008 balance sheet. However, financial difficulties of tenants could impact their ability to make lease payments on a timely basis which could result in actual lease payments being less than amounts shown above. Leases with residents in multifamily properties are generally for one year or less and are thus excluded from the above table. Substantially all of CRLP’s land, buildings, and equipment represent property leased under the above and other short-term leasing arrangements.

Rental income from continuing operations for 2008, 2007 and 2006 includes percentage rent of $0.4 million, $0.9 million and $1.0 million, respectively. This rental income was earned when certain retail tenants attained sales volumes specified in their respective lease agreements.

20. Commitments, Contingencies, Guarantees and Other Arrangements

Commitments and Contingencies

CRLP is involved in a contract dispute with a general contractor in connection with construction costs and cost overruns with respect to certain of its for-sale projects, which are being developed in a joint venture in which CRLP is a majority owner. The contractor is affiliated with CRLP’s joint venture partner.

	•		In connection with the dispute, in January 2008, the contractor filed a lawsuit against CRLP alleging, among other things, breach of contract, enforcement of a lien against real property, misrepresentation, conversion, declaratory judgment and an accounting of costs, and is seeking $10.3 million in damages, plus consequential and punitive damages.

	•		Certain of the subcontractors, vendors and other parties, involved in the projects, including purchasers of units, have also made claims in the form of lien claims, general claims or lawsuits. CRLP has been sued by purchasers of certain condominium units alleging breach of contract, fraud, construction deficiencies and misleading sales practices. Both compensatory and punitive damages are sought in these actions. Some of these claims have been resolved by negotiations and mediations, and others may also be similarly resolved. Some of these claims will likely be arbitrated or litigated to conclusion.

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CRLP is continuing to evaluate its options and investigate these claims, including possible claims against the contractor and other parties. CRLP intends to vigorously defend itself against these claims. However, no prediction of the likelihood, or amount, of any resulting loss or recovery can be made at this time and no assurance can be given that the matter will be resolved favorably.

In connection with certain retail developments, CRLP has received funding from municipalities for infrastructure costs. In most cases, the municipalities issue bonds that are repaid primarily from sales tax revenues generated from the tenants at each respective development. CRLP has guaranteed the shortfall, if any, of tax revenues to the debt service requirements on the bonds. The total amount outstanding on these bonds is approximately $13.5 million and $11.3 million at December 31, 2008 and December 31, 2007, respectively. At December 31, 2008 and December 31, 2007, no liability was recorded for these guarantees.

In April 2008, the Nord du Lac community development district (the “CDD”), a third-party governmental entity, issued $24.0 million of special assessment bonds. The funds from this bond issuance will be used by the CDD to construct infrastructure for the benefit of the Colonial Pinnacle Nord du Lac development. In accordance with EITF 91-10, CRLP recorded restricted cash and other liabilities for the $24.0 million bond issuance. This transaction has been treated as a non-cash transaction in CRLP’s Consolidated Statement of Cash Flows for the twelve months ended December 31, 2008. During 2008, CRLP sold land for $3.8 million to the CDD for the construction of infrastructure, resulting in a $3.8 million decrease in restricted cash. As previously discussed, CRLP postponed future development activities, including this development and has reclassified the amount spent to date from an active development to a future development. Interest payments on the bonds for 2009 will be made from a capitalized interest account funded with bond proceeds. Thereafter, repayment of the bonds will be funded by special assessments on the property owner(s) within the CDD. The first special assessment is expected to be due on or about December 31, 2009. As the property owner, CRLP intends to fund the special assessments from payments by tenants in the development. Until Colonial Pinnacle Nord du Lac is developed and leased, it is not expected to generate sufficient tenant revenues to support the full amount of the special assessments, in which case CRLP would be obligated pay the special assessments to the extent not funded through tenant payments. The special assessments are not a personal liability of the property owner, but constitute a lien on the assessed property. In the event of a failure to pay the special assessments, the CDD would have the right to force the sale of the property included in the project. CRLP is continuing to evaluate various alternatives for this development.

In connection with the office and retail joint venture transactions (see Note 2) above, CRLP assumed certain contingent obligations for a total of $15.7 million, of which $6.8 million remains outstanding as of December 31, 2008.

In January 2008, CRLP received notification related to an unclaimed property audit for the States of Alabama and Tennessee. As of December 31, 2008, CRLP has accrued an estimated liability.

CRLP is a party to various legal proceedings incidental to its business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect the financial position or results of operations or cash flows of CRLP.

Guarantees and Other Arrangements

During April 2007, CRLP committed with its joint venture partner to guarantee up to $7.0 million of a $34.1 million construction loan obtained by the Colonial Grand at Traditions Joint Venture. CRLP and its joint venture partner each committed to provide 50% of the guarantee. Construction at this site is substantially complete as the project was placed into service during 2008. As of December 31, 2008, the joint venture had drawn $32.9 million on the construction loan, which matures in April 2010. At December 31, 2008, no liability was recorded for the guarantee.

During November 2006, CRLP committed with its joint venture partner to guarantee up to $17.3 million of a $34.6 million construction loan obtained by the Colonial Promenade Smyrna Joint Venture. CRLP and its joint venture partner each committed to provide 50% of the $17.3 million guarantee, as each partner has a 50% ownership interest in the joint venture. Construction at this site is substantially complete as the project was placed into service during 2008. As of December 31, 2008, the Colonial Promenade Smyrna Joint Venture had drawn $32.5 million on the construction loan, which matures in December 2009. At December 31, 2008, no liability was recorded for the guarantee.

During February 2006, CRLP committed to guarantee up to $4.0 million of a $27.4 million construction loan obtained by the Colonial Grand at Canyon Creek Joint Venture. Construction at this site is complete as the project was placed into service during 2007. As of December 31, 2008, the joint venture had drawn $27.4 million on the construction loan, which matures in March 2009. At December 31, 2008, no liability was recorded for the guarantee.

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During September 2005, in connection with the acquisition of CRT with DRA, CRLP guaranteed approximately $50.0 million of third-party financing obtained by the DRA/CRT JV with respect to 10 of the CRT properties. During 2006, seven of the ten properties were sold. The DRA/CRT JV is obligated to reimburse CRLP for any payments made under the guaranty before making distributions of cash flows or capital proceeds to the DRA/CRT JV partners. As of December 31, 2008, this guarantee, which matures in January 2010, had been reduced to $17.4 million, as a result of the pay down of the associated collateralized debt from the sales of assets. At December 31, 2008, no liability was recorded for the guarantee.

In connection with the formation of Highway 150 LLC in 2002, CRLP executed a guarantee, pursuant to which CRLP serves as a guarantor of $1.0 million of the debt related to the joint venture, which is collateralized by the Colonial Promenade Hoover retail property. CRLP’s maximum guarantee of $1.0 million may be requested by the lender, only after all of the rights and remedies available under the associated note and security agreements have been exercised and exhausted. At December 31, 2008, the total amount of debt of the joint venture was approximately $16.4 million and matures in December 2012. At December 31, 2008, no liability was recorded for the guarantee.

As discussed above, in connection with certain retail developments, CRLP has received funding from municipalities for infrastructure costs. In most cases, the municipalities issue bonds that are repaid primarily from sales tax revenues generated from the tenants at each respective development. CRLP has guaranteed the shortfall, if any, of tax revenues to the debt service requirements on the bonds.

21. Related Party Transactions

The Trust has implemented a specific procedure for reviewing and approving related party construction activities. CRLP historically has used Brasfield & Gorrie LLC, a construction company controlled by Mr. M. Miller Gorrie (a trustee of the Trust), to manage and oversee certain of its development, re-development and expansion projects. This construction company is headquartered in Alabama and has completed numerous projects within the Sunbelt region of the United States. Through the use of market survey data and in-house development expertise, CRLP negotiates the fees and contract prices of each development, re-development or expansion project with this company in compliance with the Trust’s “Policy on Hiring Architects, Contractors, Engineers, and Consultants”, which policy was developed to allow the selection of certain preferred vendors who have demonstrated an ability to consistently deliver a quality product at a fair price and in a timely manner. Additionally, this company outsources all significant subcontractor work through a competitive bid process. Upon approval by the Management Committee, the Management Committee (a non-board level committee composed of various members of management of the Trust) presents each project to the independent members of the Executive Committee of the Board of Trustees of the Trust for final approval.

CRLP paid $50.6 million, $77.0 million and $59.2 million for property construction costs to Brasfield & Gorrie LLC during the years ended December 31, 2008, 2007 and 2006, respectively. Of these amounts, $38.4 million, $67.0 million and $53.1 million was then paid to unaffiliated subcontractors for the construction of these development projects during 2008, 2007 and 2006, respectively. CRLP had $0.6 million, $6.5 million and $9.6 million in outstanding construction invoices or retainage payable to this construction company at December 31, 2008, 2007 and 2006, respectively. Mr. Gorrie has a 3.8% economic interest in Brasfield & Gorrie, LLC. These transactions were unanimously approved by the independent members of the Executive Committee of the Trust’s Board of Trustees consistent with the procedure described above.

CRLP also leases space to Brasfield & Gorrie, LLC, pursuant to a lease originally entered into in 2003. The original lease, which ran through October 31, 2008, was amended in 2007 to extend the term of the lease through October 31, 2013. The amended lease provides for aggregate remaining lease payments of approximately $3.2 million from 2009 through the end of the extended lease term. The amended lease also provides the tenant with a right of first refusal to lease additional vacant space in the same building in certain circumstances. The underlying property was contributed to a joint venture during 2007 in which CRLP retained a 15% interest. CRLP continues to manage the underlying property. The aggregate amount of rent paid under the lease was approximately $0.5 million, $0.6 million and $0.5 million during 2008, 2007 and 2006, respectively.

From 1993 through 2006, CRLP leased space to certain entities in which Mr. Thomas H. Lowder (the Trust’s Chairman and Chief Executive Officer) and Mr. James K. Lowder (a trustee of the Trust), have an interest. CRLP received market rent from these entities of approximately $2.0 million during the year ended December 31, 2006. Additionally, CRLP entered into management and leasing services agreements with certain entities in which Mr. Thomas H. Lowder and Mr. James K. Lowder had an interest. CRLP received fees from these entities under these existing arrangements of approximately $15,000 during the year ended December 31, 2006.

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Since 1993, Colonial Insurance Agency, a corporation wholly-owned by The Colonial Company (in which Thomas Lowder and his family members and James Lowder and his family members each has a 50%ownership interest), has provided insurance risk management, administration and brokerage services for CRLP. As part of this service, CRLP placed insurance coverage with unaffiliated insurance brokers and agents, including Hilb, Rogal & Hobbs, Colonial Insurance Agency, McGriff Siebels & Williams and Marsh, USA, through a competitive bidding process. The premiums paid to these unaffiliated insurance brokers and agents (as they deducted their commissions prior to paying the carriers) totaled $5.0 million, $7.8 million and $4.8 million for 2008, 2007 and 2006, respectively. The aggregate amounts paid by CRLP to Colonial Insurance Agency for these services during the years ended December 31, 2008, 2007 and 2006 were $0.5 million, $0.6 million and $0.5 million, respectively. Neither Mr. T. Lowder nor Mr. J. Lowder has an interest in these premiums.

Other than the Trust’s specific procedure for reviewing and approving related party construction activities, CRLP has not adopted a formal policy for the review and approval of related persons’ transactions generally. Pursuant to its charter, the Trust’s audit committee reviews and discusses with management and its independent registered public accounting firm any such transaction if deemed material and relevant to an understanding of CRLP’s financial statements. These policies and practices may not be successful in eliminating the influence of conflicts.

22. Subsequent Events

Property Disposition

On February 2, 2009, CRLP disposed of Colonial Promenade at Fultondale, a 159,000 square-foot (excluding anchor-owned) retail asset, located in Birmingham, Alabama. CRLP sold this asset for approximately $30.7 million, which included $16.9 million of seller-financing for a term of five years at an interest rate of 5.6%. The net proceeds were used to reduce the amount outstanding on CRLP’s unsecured credit facility.

Financing Activities

During the first quarter of 2009, CRLP expects to complete a $350 million secured credit facility to be originated by PNC ARCS LLC and repurchased by Fannie Mae (NYSE:FNM). The credit facility is expected to mature in 2019 and will have a fixed interest rate of 6.04%. The credit facility will be collateralized by 19 multifamily properties. The proceeds are expected to be used to pay down outstanding borrowings on CRLP’s unsecured line of credit, provide additional liquidity that can be used toward completion of the remaining ongoing developments and provide additional funding for CRLP’s unsecured bond repurchase program.

In addition to the Fannie Mae facility, CRLP’s is continuing negotiations with Fannie Mae and Freddie Mac (NYSE:FRE) to provide additional secured financing of up to an additional $150 million with respect to certain of CRLP’s existing other multifamily properties. However, no assurance can be given that CRLP will be able to consummate these additional financing arrangements. Any proceeds received from these financing transactions would be used to provide additional liquidity for CRLP’s unsecured bond repurchase program and to provide liquidity for debt maturities through 2010.

During February 2009, CRLP repurchased $71.3 million of its outstanding unsecured senior notes in separate transactions under CRLP’s previously announced $500 million unsecured senior note repurchase program at an average 28.7% discount to par value, which represents a 12.7% yield to maturity. As a result of the repurchases, CRLP recognized an aggregate gain of approximately $19.7 million.

Restructuring Charges

During the first quarter of 2009, in an ongoing effort to focus on maintaining efficient operations of the current portfolio, the Trust reduced its workforce by an additional 32 employees through the elimination of certain positions resulting in an aggregate of $0.6 million in termination benefits and severance related charges. Of the $0.6 million in restructuring charges, approximately $0.2 million was associated with the Trust’s multifamily segment, $0.1 million with the Trust’s office segment and $0.3 million with the Trust’s retail segment.

Distribution

During January 2009, the Board of Trustees of the Trust declared a cash distribution on the CRLP common units in the amount of $0.25 per partnership unit, totaling an aggregate of approximately $14.3 million. The distribution was made to partners of record as of February 9, 2009, and was paid on February 17, 2009. Moreover, in light of recent Internal Revenue

129

procedure changes, the Board of Trustees of the Trust is currently considering paying future distributions to its shareholders, beginning in May 2009, in a combination of common shares and cash. No decisions have been made at this time as to the manner in which distributions will be paid to unitholders in the event Trust shareholders receive distributions in cash and stock, as described above. This dividend and the alternative dividend structure are intended to allow us to retain additional capital, thereby strengthening our balance sheet. However, the Board of Trustees of the Trust reserves the right to pay any future distribution entirely in cash. The Board of Trustees of the Trust reviews the dividend quarterly, and there can be no assurance as to the manner in which future dividends will be paid or that the current dividend level will be maintained in future periods.

23. Quarterly Financial Information (Unaudited)

The following is a summary of the unaudited quarterly financial information for the years ended December 31, 2008 and 2007. The information provided herein has been reclassified in accordance with SFAS No. 144 for all periods presented.

2008

(in thousands, except per unit data)


	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Revenues	$	88,991		$	84,073		$	86,165		$	85,229
Income (loss) from continuing operations		15,691			3,946			126			(122,566	)
Income from discontinued operations		6,050			11,106			36,129			(1,085	)
Net income (loss)		21,741			15,052			36,255			(123,651	)
Distributions to preferred unitholders		(4,315	)		(3,993	)		(3,850	)		(3,866	)
Preferred share issuance costs write-off		(184	)		(83	)		240			—
Net income (loss) available to common unitholders		17,242			10,976			32,645			(127,517	)

Net income (loss) per unit:
Basic	$	0.30		$	0.19		$	0.58		$	(2.24	)
Diluted	$	0.30		$	0.19		$	0.58		$	(2.24	)

Weighted average common units outstanding:
Basic		56,868			56,876			56,922			56,904
Diluted		57,029			56,876			56,922			56,904

2007

(in thousands, except per unit data)


	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Revenues	$	125,611		$	120,012		$	89,805		$	87,511
Income (loss) from continuing operations		4,707			(16,157	)		(18,321	)		7,707
Income from discontinued operations		40,731			40,740			14,981			2,300
Net income		45,438			24,583			(3,340	)		10,007
Distributions to preferred unitholders		(6,303	)		(5,683	)		(4,352	)		(4,351	)
Preferred share issuance costs write-off		—			(330	)		(30	)		—
Net income available to common unitholders		39,135			18,570			(7,722	)		5,656

Net income (loss) per unit:
Basic	$	0.69		$	0.33		$	(0.14	)	$	0.10
Diluted	$	0.69		$	0.33		$	(0.14	)	$	0.10

Weighted average common units outstanding:
Basic		56,543			56,706			56,793			56,849
Diluted		56,543			56,706			56,793			57,273

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Colonial Properties Trust
and Partners of Colonial Realty Limited Partnership:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Colonial Realty Limited Partnership at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A of this Form 10-K. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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

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



/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama

February 27, 2009

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

Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedure

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the Trust’s Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15 of the rules promulgated under the Securities and Exchange Act of 1934, as amended. Based on this evaluation, the Trust’s Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15) that occurred during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management of the Trust is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended. CRLP’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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

In connection with the preparation of CRLP’s annual financial statements, management has undertaken an assessment of the effectiveness of CRLP’s internal control over financial reporting as of December 31, 2008. The assessment was based upon the framework described in “Integrated Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management’s assessment included an evaluation of the design of internal control over financial reporting and testing of the operational effectiveness of internal control over financial reporting. We have reviewed the results of the assessment with the Audit Committee of our Board of Trustees of the Trust.

Based on our assessment under the criteria set forth in COSO, management has concluded that, as of December 31, 2008, CRLP maintained effective internal control over financial reporting.

The effectiveness of CRLP’s internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Item 9B. Other Information.

None.

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PART III

Item 10. Trustees, Executive Officers and Corporate Governance.

We are managed by the Trust, the general partner of CRLP. The information required by this item with respect to trustees, compliance with the Section 16(a) reporting requirements, the audit committee and the audit committee financial expert of the Trust is hereby incorporated by reference from the material appearing in the Trust’s definitive proxy statement for the annual meeting of shareholders to be held in 2009 (the “Proxy Statement”) under the captions “Election of Trustees — Nominees for Election”, “Section 16(a) Beneficial Ownership Reporting Compliance” and “Information Regarding Trustees and Corporate Governance — Committees of the Board of Trustees — Audit Committee”, and “Information Regarding Trustees and Corporate Governance — Committee Membership”, respectively. Information required by this item with respect to executive officers of the Trust is provided in Item 1 of this Form 10-K. Information required by this item with respect to the availability of the Trust code of ethics is provided in Item 1 of this Form 10-K. See “Item 1—Available Information”.

We intend to disclose any amendment to, or waiver from, the Trust code of ethics on its website within four business days following the date of the amendment or waiver.

Item 11. Executive Compensation.

The information required by this item is hereby incorporated by reference from the material appearing in the Proxy Statement under the captions “Compensation Discussion and Analysis”, “Compensation of Trustees and Executive Officers”, “Compensation of Non-Employee Trustees”, “Non-Employee Trustees Fee Structure”, “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report”.

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

The following table sets forth information regarding the beneficial ownership of units as of February 24, 2009 for:

(1) each person known by CRLP to be the beneficial owner of more than five percent of CRLP’s outstanding units,

(2) each trustee of the Trust and each named executive officer of the Trust and

(3) the trustees and executive officers of the Trust as a group.

Each person named in the table has sole voting and investment power with respect to all units shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. References in the table to “units” are to units of limited partnership interest in CRLP. Unless otherwise provided in the table, the address of each beneficial owner is Colonial Plaza, Suite 750, 2101 Sixth Avenue North, Birmingham, Alabama 35203.


	Number of			Percent of
Name and Business Address of Beneficial Owner	Units			Units (1)

Colonial Properties Trust		48,607,490			84.6	%

Thomas H. Lowder		1,931,819	(2)		4.2	%

James K. Lowder 2000 Interstate Parkway Suite 400 Montgomery, Albama 36104		1,931,885	(3)		4.2	%

Carl F. Bailey		17,595			*

M. Miller Gorrie		266,523	(4)		*

William M. Johnson		313,200			*

Glade M. Knight		—			*

Herbert A. Meisler		544,529	(5)		1.0	%

Claude B. Nielsen		5,865			*

Harold W. Ripps		1,925,975			3.4	%

John W. Spiegel		—			*

C. Reynolds Thompson, III		17,595	(6)		*

Paul F. Earle		—			*

133


	Number of			Percent of
Name and Business Address of Beneficial Owner	Units			Units (1)

John P. Rigrish		17,595	(7)		*

Ray Hutchinson		—			*

All executive officers and trustees as a group (16 persons)		5,765,527	(8)		10.0	%


*		Less than 1%

(1)		The number of units outstanding as of February 24, 2009 was 57,468,461. (2) Includes 89,285 units owned by Thomas Lowder Investments, LLC, 1,207,054 units owned by Colonial Commercial Investments, Inc. (“CCI”), 130 units held in trust for the benefit of Thomas Lowder’s children and 635,350 units directly owned by Thomas H. Lowder. Units owned by CCI are reported twice in this table, once as beneficially owned by Thomas H. Lowder and again as beneficially owned by James K. Lowder.

(3)		Includes 89,285 units owned by James Lowder Investments, LLC, 1,207,054 units owned by CCI, 195 units held in trust for the benefit of James K. Lowder’s children and 635,351 units directly owned by James K. Lowder.

(4)		Includes 157,140 units owned by MJE, LLC, and 109,383 units directly owned by Mr. Gorrie.

(5)		Includes 526,934 units owned by Meisler Partnership, of which Mr. Meisler and his wife are partners, and 17,595 units directly owned by Mr. Meisler.

(6)		Includes 17,595 units owned directly by Mr. Thompson, which are pledged to a bank loan.

(7)		Includes 17,595 units owned directly by Mr. Rigrish, which are pledged to a bank loan.

(8)		Units held by CCI have been counted only once for this purpose.

The following table summarizes information, as of December 31, 2008, relating to the Trust’s equity compensation plans pursuant to which options to purchase common shares and restricted common shares may be granted from time to time.


							Number of securities
							remaining available for future
	Number of securities to be			Weighted-average			issuance under equity
	issued upon exercise of			exercise price of			compensation plans
	outstanding options,			outstanding options,			(excluding securities reflected
Plan Category	warrants and rights (a)			warrants and rights (b)			in column (a))

Equity compensation plans approved by security holders (1)		1,782,927	(2)	$	24.07	(3)		2,028,668
Equity compensation plans not approved by security holders		—			—			—

Total		1,782,927		$	24.07			2,028,668


(1)		These plans include the Trust’s 2008 Omnibus Incentive Plan, the Trust’s Third Amended and Restated Employee Share Option and Restricted Share Plan, as amended in 1998 and 2006, the Trust’s Non-Employee Trustee Share Plan, as amended in 1997 and the Trust’s Trustee Share Option Plan, as amended in 1997.

(2)		Includes 408,197 restricted shares that had not vested as of December 31, 2008.

(3)		Weighted-average exercise price of outstanding options has been adjusted for the special distribution paid by the Trust in June 2007 (see Note 2 to our Notes to Consolidated Financial Statements included in Item 8 of this 10-K). In connection with the special distribution, the exercise price of all of the Trust’s then outstanding options was reduced by $10.63 per share as required under the terms of the Trust’s option plans. Weighted-average exercise price of outstanding options also excludes value of outstanding restricted shares of the Trust.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is hereby incorporated by reference from the material appearing in the Proxy Statement under the captions “Certain Relationships and Related Transactions” and “Information Regarding Trustees and Corporate Governance — Board of Trustees Assessment of Independence”.

Item 14. Principal Accountant Fees and Services.

The information required by this item is hereby incorporated by reference from the material appearing in the Trust’s Proxy Statement under the captions “Ratification of Appointment of Independent Registered Public Accounting Firm — Summary of Audit Fees” and “Ratification of Appointment of Independent Registered Public Accounting Firm — Pre-Approval Policy for Services by Auditor”.

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Part IV

Item 15. Exhibits and Financial Statement Schedules


15(a)(1)		*Financial Statements*

The following financial statements of CRLP are included in Part II, Item 8 of this report:

Consolidated Balance Sheets as of December 31, 2008 and 2007

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2008, 2007 and 2006

Consolidated Statements of Partners’ Equity for the years ended December 31, 2008, 2007 and 2006

Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm


15(a)(2)		*Financial Statement Schedules*

Financial statement schedules for the Company are listed on the financial statement schedule index at the end of this report.

All other schedules have been omitted because the required information of such other schedules is not present in amounts sufficient to require submission of the schedule or because the required information is included in the consolidated financial statements.


15(a)(3)		*Exhibits*


Exhibit No.	Exhibit	Reference

2.1	Agreement and Plan of Merger by and among the Trust, CLNL Acquisition Sub LLC and Cornerstone Realty Income Trust, Inc.	Incorporated by reference to Exhibit 2.1 to the Trust’s Current Report on Form 8-K filed with the SEC on October 28, 2004

2.2	Form of Plan of Merger merging Cornerstone Realty Income Trust, Inc. into CLNL Acquisition Sub LLC	Incorporated by reference to Exhibit B to Exhibit 2.2 to the Trust’s Current Report on Form 8-K filed with the SEC on January 25, 2005

2.3	Amendment No. 1 to Agreement and Plan of Merger by and among the Trust, CLNL Acquisition Sub LLC and Cornerstone Realty Income Trust, Inc.	Incorporated by reference to Exhibit 2.2 to the Trust’s Current Report on Form 8-K filed with the SEC on January 25, 2005

2.4	Membership Interests Purchase Agreement (Office Joint Venture), dated as of April 25, 2007, between DRA G&I Fund VI Real Estate Investment Trust and Colonial Properties Trust	Incorporated by reference to Exhibit 2.1 to the Trust’s Current Report on Form 8-K filed with the SEC on May 1, 2007

2.5	Membership Interests Purchase Agreement (Retail Joint Venture), dated as of April 25, 2007, between OZRE Retail, LLC and Colonial Properties Trust	Incorporated by reference to Exhibit 2.2 to the Trust’s Current Report on Form 8-K filed with the SEC on May 1, 2007

2.6	First Amendment to Membership Interests Purchase Agreement (Retail Joint Venture), dated as of June 15, 2007, between OZRE Retail LLC and Colonial Properties Trust	Incorporated by reference to Exhibit 2.3 to the Trust’s Current Report on Form 8-K filed with the SEC on June 21, 2007

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Exhibit No.	Exhibit	Reference

3.1	Declaration of Trust of Colonial Properties Trust, as amended	Incorporated by reference to Exhibit 3.1 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 2008

3.2	Bylaws of the Trust, as amended	Incorporated by reference to Exhibit 3.2 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 2008

4.1	Indenture dated as of July 22, 1996, by and between CRLP and Deutsche Bank Trust Company Americas (formerly Bankers Trust Company)	Incorporated by reference to Exhibit 4.1 to the CRLP’s Annual Report on Form 10-K/A filed with the SEC on October 10, 2003

4.2	First Supplemental Indenture dated as of December 31, 1998, by and between CRLP and Deutsche Bank Trust Company Americas (formerly Bankers Trust Company)	Incorporated by reference to Exhibit 10.13.1 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1998 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

4.5	Deposit Agreement for Series D depository shares by and among the Trust and Equiserve Trust Company, N.A. and Equiserve, Inc.	Incorporated by reference to Exhibit 4.4 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 2003

10.1	Third Amended and Restated Agreement of Limited Partnership of CRLP, as amended	Incorporated by reference to Exhibit 10.1 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007

10.2	Registration Rights and Lock-Up Agreement dated September 29, 1993, among the Trust and the persons named therein	Incorporated by reference to Exhibit 10.2 to the Trust’s Registration Statement on Form S-11/A, No. 33-65954, filed with the SEC on September 21, 1993

10.3	Registration Rights and Lock-Up Agreement dated March 25, 1997, among the Trust and the persons named therein	Incorporated by reference to Exhibit 10.2.2 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1997 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.4	Registration Rights and Lock-Up Agreement dated November 4, 1994, among the Trust and the persons named therein	Incorporated by reference to Exhibit 10.2.3 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1997 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.5	Supplemental Registration Rights and Lock-Up Agreement dated August 20, 1997, among the Trust and the persons named therein	Incorporated by reference to Exhibit 10.2.4 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1997 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

136


Exhibit No.	Exhibit	Reference

10.6	Supplemental Registration Rights and Lock-Up Agreement dated November 1, 1997, among the Trust, CRLP and B&G Properties Company LLP	Incorporated by reference to Exhibit 10.2.5 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1997 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.7	Supplemental Registration Rights and Lock-Up Agreement dated July 1, 1997, among the Trust, CRLP and Colonial Commercial Investments, Inc.	Incorporated by reference to Exhibit 10.2.6 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1997 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.8	Supplemental Registration Rights and Lock-Up Agreement dated July 1, 1996, among the Trust and the persons named therein	Incorporated by reference to Exhibit 10.2.7 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1997 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.9	Registration Rights Agreement dated February 23, 1999, among the Trust, Belcrest Realty Corporation, and Belair Real Estate Corporation	Incorporated by reference to Exhibit 10.2.8 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1998 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.10	Registration Rights and Lock-Up Agreement dated July 1, 1998, among the Trust and the persons named therein	Incorporated by reference to Exhibit 10.2.9 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1998

10.11	Registration Rights and Lock-Up Agreement dated July 31, 1997, among the Trust and the persons named therein	Incorporated by reference to Exhibit 10.2.10 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1998 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

137


Exhibit No.	Exhibit	Reference

10.12	Supplemental Registration Rights and Lock-Up Agreement dated November 18, 1998, among the Trust, CRLP and Colonial Commercial Investments, Inc.	Incorporated by reference to Exhibit 10.2.11 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1998 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.13	Registration Rights and Lock-Up Agreement dated April 30, 1999, among the Trust, CRLP and MJE, L.L.C.	Incorporated by reference to Exhibit 10.2.13 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1999 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.14.1	Form of Employee Share Option and Restricted Share Plan Agreement — 2 Year Vesting †	Incorporated by reference to Exhibit 10.18.1 to the Trust’s Quarterly Report on Form 10-Q for the period ending September 30, 2004

10.14.2	Form of Employee Share Option and Restricted Shares Plan Agreement — 3 Year Vesting †	Incorporated by reference to Exhibit 10.18.2 to the Trust’s Quarterly Report on Form 10-Q for the period ending September 30, 2004

10.14.3	Form of Employee Share Option and Restricted Shares Plan Agreement — 5 Year Vesting †	Incorporated by reference to Exhibit 10.18.3 to the Trust’s Quarterly Report on Form 10-Q for the period ending September 30, 2004

10.14.4	Form of Employee Share Option and Restricted Shares Plan Agreement — 8 Year Vesting †	Incorporated by reference to Exhibit 10.18.4 to the Trust’s Quarterly Report on Form 10-Q for the period ending September 30, 2004

10.14.5	Amended and Restated Trustee Restricted Share Agreement — 1 Year Vesting †	Incorporated by reference to Exhibit 10.18.5 to the Trust’s Quarterly Report on Form 10-Q for the period ending September 30, 2004

10.14.6	Amended and Restated Trustee Non-Incentive Share Option Agreement †	Incorporated by reference to Exhibit 10.18.6 to the Trust’s Quarterly Report on Form 10-Q for the period ending September 30, 2004

10.15	Non-employee Trustee Share Option Plan †	Incorporated by reference to the Trust’s Registration Statement on Form S-8, No. 333-27203, filed with the SEC on May 15, 1997

10.16	Non-employee Trustee Share Plan †	Incorporated by reference to the Trust’s Registration Statement on Form S-8, No. 333-27205, filed with the SEC on May 15, 1997

10.17	Employee Share Purchase Plan †	Incorporated by reference to Exhibit 10.21 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 2003

10.17.1	Amendment to Employee Share Purchase Plan †	Incorporated by reference to Exhibit 10.21.1 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 2006

138


Exhibit No.	Exhibit	Reference

10.18	Annual Incentive Plan †	Incorporated by reference to Exhibit 10.16 to the Trust’s Registration Statement on Form S-11/A, No. 33-65954, filed with the SEC on September 3, 1993

10.19	Executive Unit Purchase Program — Program Summary †	Incorporated by reference to Exhibit 10.15 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1999 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.20	Non-employee Trustee Option Agreement †	Incorporated by reference to Exhibit 10.5 to the Trust’s Registration Statement on Form S-11/A, No. 33-65954, filed with the SEC on September 3, 1993

10.21.1	Non-Competition Agreement, dated May 4, 2007, among Colonial Realty Limited Partnership, Colonial Properties Trust and Thomas H. Lowder †	Incorporated by reference to Exhibit 10.1 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007

10.22	Retirement Agreement between the Trust and Howard B. Nelson, Jr. †	Incorporated by reference to Exhibit 10.26 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 2003

10.23	Officers and Trustees Indemnification Agreement †	Incorporated by reference to Exhibit 10.7 to the Trust’s Registration Statement on Form S-11/A, No. 33-65954, filed with the SEC on September 21, 1993

10.24	Partnership Agreement of CPSLP	Incorporated by reference to Exhibit 10.8 to the Trust’s Registration Statement on Form S-11/A, No. 33-65954, filed September 21, 1993

10.24.1	First Amendment to Partnership Agreement of CPSLP	Incorporated by reference to Exhibit 10.28.1 to the Trust’s Annual Report on Form 10-K for the period ended December 31, 2005

10.25	Articles of Incorporation of Colonial Real Estate Services, Inc., predecessor of CPSI, as amended	Incorporated by reference to Exhibit 10.9 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1994 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

139


Exhibit No.	Exhibit	Reference

10.26	Bylaws of predecessor of Colonial Real Estate Services, Inc., predecessor of CPSI	Incorporated by reference to Exhibit 10.10 to the Trust’s Registration Statement on Form S-11/A, No. 33-65954, filed September 3, 1993

10.27	Credit Agreement dated as of March 22, 2005, by and among CRLP, as Borrower, Colonial Properties Trust, as Guarantor, Wachovia Bank, as Agent for the Lenders, and the Lenders named therein	Incorporated by reference to Exhibit 10.38 to the Trust’s Current Report on Form 8-K filed with the SEC on March 25, 2005

10.27.1	First Amendment to Credit Agreement, dated June 2, 2006, among CRLP, the Trust, Wachovia Bank, National Association as Agent for the Lenders and the Lenders named therein	Incorporated by reference to Exhibit 10.2 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007

10.27.2	Second Amendment to Credit Agreement, dated June 21, 2007, among CRLP, the Trust, Wachovia Bank, National Association as Agent for the Lenders and the Lenders named therein	Incorporated by reference to Exhibit 10.1 to the Trust’s Current Report on Form 8-K filed with the SEC on July 24, 2007

10.28	Bridge Credit Agreement dated October 28, 2004, by and among CRLP, as Borrower, and the Trust, as Guarantor, SouthTrust Bank, as Agent for Lenders, and the Lenders names therein	Incorporated by reference to Exhibit 10.37 to the Trust’s Current Report on Form 8-K filed with the SEC on November 3, 2004

10.29	Facility and Guaranty Agreement among the Trust, CRLP, Bank One, N.A. and the Lenders named therein dated as of December 17, 1999	Incorporated by reference to Exhibit 10.34 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 2003

10.30	Form of Promissory Note under Facility and Guarantee Agreement dated as of December 17, 1999 among the Trust, CRLP, Bank One, N.A. and certain lenders	Incorporated by reference to Exhibit 10.16 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 1999 (which document may be found and reviewed in the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549, in the files therein relating to the Trust, whose file number is 1-12358)

10.31	Form of Restricted Share Agreement (20% per year vesting) †	Incorporated by reference to Exhibit 10.1 to the Trust’s Current Report on Form 8-K filed with the SEC on May 3, 2005

10.32	Form of Restricted Share Agreement (50%/25%/25% vesting) †	Incorporated by reference to Exhibit 10.2 to the Trust’s Current Report on Form 8-K filed with the SEC on May 3, 2005

10.33	Form of Restricted Share Agreement (33 1/3% per year vesting) †	Incorporated by reference to Exhibit 10.3 to the Trust’s Current Report on Form 8-K filed with the SEC on May 3, 2005

10.34	Form of Restricted Share Agreement (60%/40% vesting) †	Incorporated by reference to Exhibit 10.4 to the Trust’s Current Report on Form 8-K filed with the SEC on May 3, 2005

10.35	Form of Restricted Share Agreement (eighth anniversary vesting) †	Incorporated by reference to Exhibit 10.5 to the Trust’s Current Report on Form 8-K filed with the SEC on May 3, 2005

140


Exhibit No.	Exhibit	Reference

10.36	Form of Share Option Agreement (20% per year vesting) †	Incorporated by reference to Exhibit 10.6 to the Trust’s Current Report on Form 8-K filed with the SEC on May 3, 2005

10.37	Amended and Restated Limited Liability Company Agreement of CRTP OP LLC, dated as of September 27, 2005, between DRA CRT Acquisition Corp and Colonial Office JV LLC	Incorporated by reference to Exhibit 10.3 to the Trust’s Quarterly Report on Form 10-Q for the period ended September 30, 2005

10.38	Colonial Properties Trust Third Amended and Restated Employee Share Option and Restricted Share Plan, as amended †	Incorporated by reference to Exhibit 10.1 to the Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2006

10.39	Form of Colonial Properties Trust Third Amended and Restated Employee Share Option and Restricted Share Plan Restricted Share Agreement †	Incorporated by reference to Exhibit 10.2 to the Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2006

10.40	Form of Colonial Properties Trust Third Amended and Restated Employee Share Option and Restricted Share Plan Performance Share Agreement †	Incorporated by reference to Exhibit 10.3 to the Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2006

10.41	Form of Colonial Properties Trust Third Amended and Restated Employee Share Option and Restricted Share Plan Restricted Share Agreement †	Incorporated by reference to Exhibit 10.4 to the Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2006

10.42	Form of Colonial Properties Trust Third Amended and Restated Employee Share Option and Restricted Share Plan Share Option Agreement †	Incorporated by reference to Exhibit 10.5 to the Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2006

10.43	Summary of Incentive Program †	Incorporated by reference to Exhibit 10.5 to the Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2006

10.44	2008 Omnibus Incentive Plan	Incorporated by reference to Exhibit 10.44 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 2008

10.44.1	Summary of 2008 Annual Incentive Plan †	Incorporated by reference to Exhibit 10.1 to the Trust’s Quarterly Report on Form 10-Q for the period ended March 31, 2008

10.44.2	Form of Colonial Properties Trust Non-Qualified Share Option Agreement (Employee Form) †	Incorporated by reference to Exhibit 10.1 to the Trust’s Current Report on Form 8-K filed with the SEC on April 29, 2008

10.44.31	Form of Colonial Properties Trust Non-Qualified Share Option Agreement (Trustee Form) †	Incorporated by reference to Exhibit 10.2 to the Trust’s Current Report on Form 8-K filed with the SEC on April 29, 2008

10.44.4	Form of Colonial Properties Trust Restricted Share Agreement (Employee Form) †	Incorporated by reference to Exhibit 10.3 to the Trust’s Current Report on Form 8-K filed with the SEC on April 29, 2008

10.44.5	Form of Colonial Properties Trust Restricted Share Agreement (Trustee Form) †	Incorporated by reference to Exhibit 10.4 to the Trust’s Current Report on Form 8-K filed with the SEC on April 29, 2008

10.45	Consulting Agreement, dated as of December 30, 2008, among the Trust, CPSI and Weston Andress †	Incorporated by reference to Exhibit 10.45 to the Trust’s Annual Report on Form 10-K for the period ending December 31, 2008

141

Report of Independent Registered Public Accounting Firm

To the Members
of DRA/CLP Office LLC

We have audited the accompanying consolidated balance sheet of DRA/CLP Office LLC and Subsidiaries (the “Company”) as of December 31, 2007, and the related consolidated statements of operations, changes in temporary equity and equity, and cash flows for the period June 13, 2007 (Inception) to December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of DRA/CLP Office LLC and Subsidiaries as of December 31, 2007, and the results of its operations and its cash flows for the period June 13, 2007 (Inception) to December 31, 2007 in conformity with U.S. generally accepted accounting principles.

We express no opinion on the financial statements of DRA/CLP Office LLC and Subsidiaries as of, and for the year-ended December 31, 2008.

/s/ Weiser LLP

New York, NY
February 26, 2008

DRA/CLP Office LLC and Subsidiaries

Consolidated Balance Sheets
(in thousands)


	(Not Covered by the Report Included Herein)
	December 31,			December 31,
	2008			2007

Assets
Real estate investments
Land	$	83,029		$	80,779
Land improvements		97,650			97,538
Buildings and improvements		643,973			637,813
Tenant improvements		57,205			56,328

		881,857			872,458
Accumulated depreciation and amortization		(45,393	)		(15,885	)

Operating properties — net		836,464			856,573

Land held for sale		—			2,250

Total real estate		836,464			858,823

Cash and cash equivalents		23,451			39,516
Tenant receivables, net of allowance for doubtful accounts of $1,265 in 2008 and $367 in 2007		4,403			2,839
Prepaid expenses and other assets		857			888
In-place leases, net of accumulated amortization of $12,327 in 2008 and $4,630 in 2007		29,121			37,520
Deferred costs, net of accumulated amortization of $9,071 in 2008 and $3,154 in 2007		26,904			31,585
Deferred rent receivable, net of allowance for doubtful accounts of $326 in 2008 and $145 in 2007		6,197			2,690


Total assets	$	927,397		$	973,861


Liabilities, Temporary Equity and Equity
Liabilities
Mortgage payable	$	741,907		$	741,907
Acquired net below-market leases, net of accumulated amortization of $2,422 in 2008 and $1,177 in 2007		14,193			16,096
Accounts payable, accrued expenses and other liabilities		4,770			4,058
Interest payable		3,584			3,584
Accrued real estate taxes payable		2,200			2,022
Advance rents and security deposits		6,781			7,047
Payable to members		—			4,937

Total liabilities		773,435			779,651


Commitment and contingencies

Temporary equity
Redeemable common units at redemption value — Colonial		11,126			32,215
Redeemable common units at redemption value — Rollover LP’s		6,519			26,600

		17,645			58,815


Equity — Nonredeemable common units		136,317			135,395


Total liabilities, temporary equity and equity	$	927,397		$	973,861

DRA/CLP Office LLC and Subsidiaries

Consolidated Statements of Cash Flows
(in thousands)


	(Not Covered
	by the Report			For the Period from
	Included Herein)			June 13, 2007
	For the Year Ended			(Inception) to
	December 31, 2008			December 31, 2007

Cash flows from operating activities
Net loss	$	(17,892	)	$	(1,682	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		46,495			23,670
Amortization of acquired net below-market leases		(1,890	)		(1,177	)
Deferred rent receivable		(3,506	)		(3,082	)
Bad debt expense		898			367
Increase (decrease) in cash attributable to changes in operating assets and liabilities, net of effects of real estate portfolio purchase
Tenant and other receivables		(2,462	)		(3,206	)
Prepaid expenses and other assets		31			411
Accounts payable, accrued expenses and other liabilities		712			(3,716	)
Payable to members		(4,937	)		4,937
Interest payable		—			3,584
Accrued real estate taxes payable		178			(2,851	)
Advanced rents and security deposits		(266	)		(2,053	)

Net cash provided by operating activities		17,361			15,202


Cash flows from investing activities
Cash paid in acquisition, net of cash acquired		—			(972,086	)
Capital expenditures		(8,541	)		(6,967	)
Net proceeds from disposition of real estate		—			218,942
Leasing costs paid		(2,529	)		(1,772	)

Net cash used in investing activities		(11,070	)		(761,883	)


Cash flows from financing activities
Proceeds from mortgage notes payable		—			741,907
Repayment of loans from members		—			(15,005	)
Proceeds from loans from members		—			15,005
Proceeds from issuance of nonredeemable common units		—			392,938
Distributions paid to equity member		(16,268	)		(251,175	)
Distributions paid to temporary equity members		(6,088	)		(95,906	)
Deferred loan costs paid		—			(1,567	)

Net cash (used in) provided by financing activities		(22,356	)		786,197


Net (decrease) increase in cash and cash equivalents		(16,065	)		39,516
Cash and cash equivalents at beginning of year		39,516			—

Cash and cash equivalents at end of year	$	23,451		$	39,516


Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	42,315		$	19,299


Supplemental information of non-cash investing and financing activities:
Issuance of redeemable common units for real estate	$	—		$	150,035

Purchase and sale of redeemable common units between equity and temporary equity members	$	1,581		$	—

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007

1. Organization

On June 15, 2007, Colonial Properties Trust (“CLP”) completed a joint venture transaction with DRA G&I Fund VI Real Estate Investment Trust, which is the sole member of G&I VI Investment DRA/CLP Office LLC (“G&I VI”), a member of DRA/CLP Office LLC (the “Company”). G&I VI is an entity advised by DRA Advisors LLC (“DRA”). CLP had previously entered into a Membership Interests Purchase Agreement, dated as of April 25, 2007 (the “Office Purchase Agreement”), to sell to DRA the CLP’s 69.8% limited liability company interest in the Company, a newly-formed joint venture among DRA, Colonial Realty Limited Partnership (“CRLP”), an affiliate of CLP, and the limited partners of CRLP. The Company became the owner of 24 office properties, consisting of 59 buildings and two retail properties that were previously owned by CRLP. The properties are owned by limited liability companies (the “Subsidiaries”), which are owned directly or indirectly by the Company. Pursuant to the Office Purchase Agreement, CRLP retained a 15% interest in the Company, as well as management and leasing responsibilities for the 26 properties owned by the Company. The Company portfolio is composed of 6.9 million square feet of Class A suburban and urban office buildings and two adjoining retail centers located in suburban and urban office markets in Alabama, Florida, Georgia, North Carolina and Texas. In addition to the approximate 69.8% interest purchased from CRLP, DRA purchased an aggregate of 2.6% of the limited liability company interests in the Company from limited partners of CRLP. At December 31, 2007, DRA held approximately 72.4% of the limited liability company interests of the Company; Colonial Office Holdings LLC, a subsidiary of CRLP, holds 15% of the limited liability company interests in the Company (and serves as the “Manager” of the Company); and certain limited partners of CRLP (“Rollover LPs”), that did not elect to sell their interests in the Company to DRA, hold the remaining approximately 12.6% of the limited liability company interests in the Company.

In May 2008, certain Rollover LPs exercised an option to sell their membership interests totaling approximately $1.7 million, reducing the Rollover LPs’ interests to approximately 11.7% of the limited liability company interests in the Company. DRA purchased these Rollover LPs’ units with cash, increasing DRA’s ownership interest from 72.4% to 73.3% of the limited liability company interests of the Company; while Colonial Office Holdings LLC’s continues to hold 15% of the limited liability interests in the Company.

As of December 31, 2008, the Company owned 15 office properties, consisting of 40 office buildings and two retail centers totaling approximately 5.2 million square feet located in suburban and urban office markets in Alabama, Florida, Georgia, North Carolina and Texas.

Operating Agreement — The Company will distribute cash flow from operations for each fiscal quarter first to the holders of common units pro rata, in accordance with their respective percentage interests until the “9% Preferred Return Account” (as defined in the Amended Operating Agreement) of each such holder has been reduced to zero, and thereafter, 15% to the Manager and 85% to the holders of common units (including the Manager), pro rata among such holders of common units in accordance with their respective percentage interests. Capital proceeds from a merger, consolidation or sale of all or substantially all of the properties, and from other refinancings and asset sales, and proceeds in liquidation shall be distributed to holders of common units pro rata in accordance with their respective percentage interests. All distributions are subject to any payments required to be made by the Company in respect of any partner loans made by the Manager or DRA. In addition, the Manager is not required to make any distribution of cash to the members if such distribution would cause a default under a loan agreement to which the Company is a party.

As of December 31, 2008 and for the year then ended, the Company does not meet the criteria of a significant subsidiary to Colonial Properties Trust and as a result, the financial statements for those periods are audited but the report is not presented herein.

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — Continued

2. Summary of Significant Accounting Policies

Principles of Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated in consolidation.

Real Estate Investments — Rental property and improvements are included in real estate investments and are stated at cost. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred. Significant improvements, which improve or extend the useful life of the assets, are capitalized.

Depreciation and Amortization — The Company computes depreciation on its land improvements and buildings and improvements using the straight-line method based on estimated useful lives, which generally range from 3 to 59 years. Tenant improvements are amortized as an expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual expiration date). The values of above-market leases are amortized as a reduction of rental income over the remaining non-cancelable term of the lease. The values of below-market leases are amortized as an increase to rental income over the initial term and any fixed-rate renewal period of the associated lease. The value associated with in-place leases and tenant relationships is amortized as a leasing cost over the initial term of the respective leases and any probability-weighted renewal periods. The initial term and any probability-weighted renewal periods have a current weighted average composite life of 6.2 years. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangibles will be written-off.

Deferred Costs — Deferred leasing costs consist of legal fees and brokerage costs incurred to initiate and renew operating leases and leasing costs acquired at inception and are amortized on a straight-line basis over the related lease term. Deferred financing costs represent commitment fees, legal and other third party costs associated with obtaining commitments for financing that are integral to the closing of such financing. These costs are amortized over the terms of the respective loan agreements. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Deferred costs consist of the following:


	December 31,
(in thousands)	2008		2007
Financing costs	$	1,567	$	1,567
Leasing costs		34,408		33,172

		35,975		34,739
Less accumulated amortization		9,071		3,154


	$	26,904	$	31,585

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — Continued

Future amortization of acquired leasing costs for each of the next five years and thereafter is estimated as follows:


For the Year Ended December 31,
(in thousands)
2009	$	5,309
2010		4,990
2011		3,574
2012		2,311
2013		2,084
Thereafter		3,810

	$	22,078

Impairment and Disposal of Long-Lived Assets — The Company follows Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” In accordance with SFAS 144, the results of operations of real estate held for sale and real estate sold during the year are presented in discontinued operations. The Company no longer records depreciation and amortization on assets held for sale. The Company assesses impairment of long-lived assets whenever changes or events indicate that the carrying value may not be recoverable. The Company assesses impairment of operating properties based on the operating cash flows of the properties. In performing its assessment, the Company makes assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. For the year ended December 31, 2008 and the period ended December 31, 2007, no impairment charges were recorded.

Revenue Recognition — Rental revenue is recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is included in deferred rent receivable on the accompanying balance sheet. The Company establishes, on a current basis, an allowance for future potential tenant credit losses, which may occur against this account. The deferred rent receivable reflected on the balance sheet is net of such allowance.

In addition to base rent, tenants also generally pay their pro rata share of increases in real estate taxes and operating expenses for the building over a base year. In certain leases, in lieu of paying additional rent based upon increases in building operating expenses, the tenant will pay additional rent based upon increases in the consumer price index over the index value in effect during a base year. In addition, certain leases contain fixed percentage increases over the base rent to cover escalations.

Tenant Receivables and Allowances for Doubtful Accounts — Tenant receivables consists of receivables from tenants for rent and other charges, recorded according to the terms of their leases. The Company maintains an allowance for doubtful accounts for estimated losses due to the inability of its tenants to make required payments for rents and other rental services. In assessing the recoverability of these receivables, the Company makes assumptions regarding the financial condition of the tenants based primarily on past payment trends and certain financial information that tenants submit to the Company. As of December 31, 2008 and 2007, respectively, allowance for doubtful accounts amounted to approximately $1.3 million and $0.4 million. The Company may or may not require collateral for tenant receivables.

Cash and Cash Equivalents — The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — Continued

At various times throughout the year, the Company maintained balances in excess of Federal Deposit Insurance Corporation insured limits with two financial institutions.

Income Taxes — No provision or benefit for income taxes has been included in the consolidated financial statements because such taxable income or loss passes through to, and is reportable by, the members of the Company.

Liabilities Measured at Fair Value — On January 1, 2008, the Company adopted SFAS No. 157, "Fair Value Measurements” for financial assets and liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar liabilities in active markets, as well as inputs that are observable for the liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance or a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the liability.

Fair Value of Financial Instruments — The Company believes the carrying amount of its temporary investments, tenant receivables, accounts payable, accrued expenses and other liabilities is a reasonable estimate of fair value of these instruments. Based on the estimated market interest rates of approximately 6.5 percent, the fair value of the Company’s mortgage payable is approximately $711 million as of December 31, 2008.

Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. These estimates are based on historical experience and various other factors that are believed to be reasonable under the circumstances. However, actual results could differ from the Company’s estimates under different assumptions or conditions. On an ongoing basis, the Company evaluates the reasonableness of its estimates.

Redeemable Common Units — In accordance with EITF Topic D-98, “SEC Staff Announcement Regarding the Classification and Measurement of Redeemable Securities,” the Company has elected to recognize changes in the redemption value of the Redeemable Common Units immediately as they occur and to adjust the carrying value to equal the redemption value at the end of each reporting period. The accrued changes are reflected in the Consolidated Statement of Changes in Temporary Equity and Equity as Changes in Redemption Value of Redeemable Common Units.

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — Continued

3. Business Combination

On June 15, 2007, the Company purchased a portfolio of properties comprised of 24 office properties and two retail properties located in suburban and urban office markets in Alabama, Florida, Georgia, North Carolina and Texas. The legal structure of the transaction is described in Note 1. The operations of these properties have been included in these consolidated financial statements since that date. The acquisitions are being accounted for under the purchase method of accounting. The purchase price of approximately $1.1 billion (net of cash acquired of approximately $14.4 million) was allocated to the net assets acquired based upon the estimated fair values at the date of acquisition and also the sale of assets held for sale, which provided relevant market data. The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:


(in thousands)
Property, plant and equipment	$	871,458
Acquired intangibles		57,087
Prepaid expenses and other assets		1,299
Assets held for sale		209,087
Accrued real estate taxes and other liabilities		(7,710	)
Advance rents		(6,843	)
Tenant security deposits and other liabilities		(2,257	)


Total purchase price, net of cash acquired	$	1,122,121

The purchase price of approximately $1.1 billion consists of:

	(1)		Cash of approximately $972 million arising from the issuance of nonredeemable common units and proceeds from mortgage payable

	(2)		Redeemable common units issued with a fair value of approximately $150 million

The Company allocated the purchase price to acquired tangible and identifiable intangible assets, including land, buildings, tenant improvements, above and below market leases, acquired in-place leases, other assets and assumed liabilities in accordance with SFAS No. 141, “Business Combinations”. The allocation to identifiable intangible assets is based upon various factors including the above or below market component of in-place leases, the value of in-place leases and the value of tenant relationships, if any. The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using an interest rate that reflects the risks associated with the lease) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using current fair market rates over the remaining term of the lease. The aggregate value of in-place leases acquired is measured based on the difference between (i) the property values with existing in-place leases adjusted to market rental rates, and (ii) the property valued as if vacant. The allocation of the purchase price to tangible assets (buildings and land) is based upon management’s determination of the value of the property as if it were vacant using discounted cash flow models. Factors considered by management include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. Differing assumptions and methods could have resulted in different estimates of fair value and thus, a different purchase price allocation and corresponding increase or decrease in depreciation and amortization expense.

4. In-Place and Acquired Net Below-Market Leases

For the year ended December 31, 2008 and the period ended December 31, 2007, the Company recognized a net increase of approximately $1.9 million and $1.2 million, respectively, in rental revenue for the amortization of acquired net below-market leases. The amortization for the above-market leases and below-market leases were $3.4 million and ($5.3) million, respectively, for the year ended December 31, 2008. For the period ended December 31, 2007, the amortization for

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — Continued

the above-market leases and below-market leases were $1.5 million and ($2.7) million, respectively. The Company recognized approximately $8.3 million and $4.6 million of amortization of in-place leases for the year ended December 31, 2008 and the period ended December 31, 2007, respectively.

Future amortization of acquired in-place leases and acquired net below-market leases for each of the next five years and thereafter is estimated as follows:


	(in thousands)
			Acquired
	In-Place		Net Below
For the Year Ended December 31,	Leases		Market Leases
2009	$	8,020	$	1,772
2010		7,518		2,303
2011		4,264		2,429
2012		2,105		1,896
2013		1,827		1,604
Thereafter		5,387		4,189

	$	29,121	$	14,193

5. Mortgage Payable

The Company has a non-recourse loan with an amount of approximately $742 million outstanding at December 31, 2008 and 2007 payable to Wells Fargo Bank, N.A.. This loan was made in two advances: (i) an advance in the amount of approximately $588 million on June 13, 2007 and (ii) an advance in the amount of approximately $154 million on July 17, 2007. The loan is interest only and bears monthly interest at a fixed rate of 5.61%. The loan matures on July 1, 2014, is cross collateralized various properties and is guaranteed up to $15 million by DRA. The loan may not be prepaid prior to the maturity date without the payment of a Yield Maintenance Premium, as defined in the loan agreement. In addition, the Company may defeasance one or more of the properties from a lien on the loan upon satisfaction of conditions as stated in the loan agreement. The loan requires that the Company maintain a certain debt service coverage ratio. The Company was in compliance with this covenant during the year ended December 31, 2008. Interest expense in the amount of approximately $42.3 and $22.5 million was incurred during the year ended December 31, 2008 and the period ended December 31, 2007, respectively.

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — Continued

6. Discontinued Operations

Discontinued operations for the year ended December 31, 2008 and period ended December 31, 2007 are summarized as follows:


(in thousands)	2008		2007
Rental revenue	$	—	$	10,115
General operating expenses		—		(1,274	)
Taxes, licenses and insurance		—		(642	)
Management fees paid to affiliates		—		(410	)
Repairs and maintenance		—		(783	)
General and administrative		—		(221	)
Interest expense		—		(220	)


Income from discontinued operations	$	—	$	6,565

In November 2007, the Company sold nine properties consisting of 19 buildings with a total square feet of 1.7 million located in Huntsville, Alabama. The buildings were sold for a total net price of approximately $209 million. The Company did not recognize a gain or loss from the sale of these buildings because the sale of these buildings provided relevant data to the Company that resulted in a modified allocation of the purchase price to those buildings.

7. Leases

The Company’s operations consist principally of owning and leasing office space. Terms of the leases generally range from 5 to 10 years. The Company principally pays all operating expenses, including real estate taxes and insurance. Substantially all of the Company’s leases are subject to rent escalations based on changes in the Consumer Price Index, fixed rental increases or increases in real estate taxes and certain operating expenses. A substantial number of leases contain options that allow leases to renew for varying periods. The Company’s leases are operating leases and expire at various dates through 2029. The future minimum fixed base rentals under these non-cancelable leases are approximately as follows:


For the Year Ended December 31,
(in thousands)
2009	$	87,395
2010		78,877
2011		66,429
2012		44,668
2013		31,157
Thereafter		71,738


	$	380,264

8. Commitments and Contingencies

The Company is a party to various legal proceedings incidental to its business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect the financial position or results of operations or cash flows of the Company.

Property Lockout Period

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — Continued

Other than with respect to the Huntsville, Alabama properties, unless the Manager and DRA have unanimously agreed that the Company will not sell or otherwise transfer or dispose of, directly or indirectly, any property during the three-year period following June 15, 2007 (the “Lockout Period”).

Tax Protection

Certain events or actions by the Company following June 15, 2007 could cause Rollover LPs to recognize for Federal income tax purposes part or all of such Rollover LPs’ gain that is intended to be deferred at the time of the transactions. The Amended Operating Agreement provides for limited “tax protection” benefits for Rollover LPs.

During the period ending seven years and one month following June 15, 2007 (the “Tax Protection Period”), the Company may not, directly or indirectly, (i) take any action, including a sale or disposition of all or any portion of its interest in any of the properties (the “Protected Properties”), if any Rollover LP would be required to recognize gain for Federal income tax purposes pursuant to Section 704(c) of the Internal Revenue Code with respect to the Protected Properties as a result thereof, or (ii) undertake a merger, consolidation or other combination of the Company or any of its subsidiaries with or into any other entity, a transfer of all or substantially all of the assets of the Company, a reclassification, recapitalization or change of the outstanding equity interests of the Company or a conversion of the Company into another form of entity, unless the Company pays to each Rollover LP its “Tax Damages Amount.” The “Tax Damages Amount” to be paid to the Rollover LPs is an amount generally equal to the sum of (A) the built-in gain attributable to the Protected Property recognized by the affected Rollover LP, multiplied by the maximum combined federal and applicable state and local income tax rates for the taxable year in which the disposition occurs and applicable to the character of the resulting gain, plus (B) a “gross-up” amount equal to the taxes (calculated at the rates described in the Amended Operating Agreement which, generally, are the rates that the Rollover LP will be subject to at the time of a recognition event) payable by a Rollover LP as the result of the receipt of such payment.

In connection with the sale of the Huntsville, Alabama assets, the Company accrued tax protection payments of approximately $4.4 million as of December 31, 2007, which was paid to the Rollover LPs during 2008.

9. Redeemable Common Units

Rollover LP Put Rights

At any time after expiration of the Lockout Period, each Rollover LP or any group of Rollover LPs holding in the aggregate a number of the Company common units greater than or equal to the lesser of (x) 526,150 common units or 75% of the remaining common units held by the Rollover LPs, will have the right to require the Company to buy all, but not fewer than all, of its common units during an Annual Redemption Period (as defined in the Amended Operating Agreement) for a purchase price equal to the “Redemption Value.” The “Redemption Value” of the Rollover LP’s common units will equal the product of (x) the percentage interest represented by such common units times (y) an amount equal to (i) the aggregate fair market value of the properties, plus (ii) the net current assets of the Company, minus (iii) the fair value of the indebtedness of the Company and its subsidiaries, minus (iv) the aggregate liquidation preference of any preferred Company units then outstanding, minus (v) an amount equal to 1.0% of the amount in clause (i) as an estimate of sales costs in connection with the sale of such properties. The Rollover LPs’ common units subject to the put rights are referred to as Redeemable common units and are shown in the accompanying consolidated balance sheet as Temporary Equity-Redeemable common units at its redemption value.

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — Continued

As described in Note 1, in May 2008, certain Rollover LPs exercised an option to sell their membership interests totaling approximately $1.7 million reducing the Rollover LPs’ interests to approximately 11.7% of the limited liability company interests in the Company. The redemption value was $6.5 million and $26.6 million at December 31, 2008 and 2007, respectively, which reflects a decrease in redemption value of approximately $11.9 million during the year ended December 31, 2008.

The fair market value of the properties for the second Annual Redemption Period will be internally generated by the Manager based on net operating income of the properties for the preceding fiscal year and using, for all revenue generating properties, the methodology applied in the appraisals that were obtained by DRA in connection with the transactions, and for non-revenue generating properties, the carrying value of such properties on the books of the Company. From and after the third Annual Redemption Period, the fair market value of the properties will be based on the most recent independent appraisal obtained by DRA (which shall not be older than 15 months).

Rollover LP Redemption in Kind

At any time after the seventh anniversary of the date of the Amended Operating Agreement, any Rollover LP or a group of Rollover LPs holding in the aggregate a number of common units greater than or equal to the lesser of (x) the number of common units with an aggregate purchase price of $5 million under the Purchase Agreements, or (y) 75% of the remaining common units held by Rollover LPs, may require the Company to redeem all, but not less than all, of such Rollover LPs’ common units in exchange for one or more properties owned by the Company for at least two years (or common units in entities the sole assets of which are such properties).

Colonial Office Holdings Put Right

At any time after expiration of the Lockout Period, Colonial Office Holdings (“Office Holdings”) will have the right to require the Company to purchase all (but not less than all) of its common units. The purchase price will equal the fair market value of Office Holdings’ common units, which is an amount equal to the percentage interest represented by such Common Units, times (i) the aggregate fair market value of the Properties, plus (ii) the net current assets of the Company, minus (iii) the principal amount of the indebtedness of the Company and its subsidiaries, minus (iv) the aggregate liquidation preference of any preferred common units then outstanding. The fair market value of the Properties will be determined in accordance with the Valuation Method, as defined in the Operating Agreement. The Company may sell properties of DRA’s choice in order to satisfy its obligations to Office Holdings under the Office Holdings put option. Office Holdings will make any required payments of Tax Damages Amounts to the Rollover LPs arising as a result of the sale of one or more Properties in connection with the exercise of Office Holdings’ put option.

Colonial Office Holdings’ common units subject to the put rights are referred to as Redeemable common units and are shown in the accompanying consolidated balance sheet as Temporary Equity-Redeemable common units at its redemption value. The redemption value was $11.1 million and $32.2 million as of December 31, 2008 and 2007, respectively, which resulted in a decrease in redemption value of approximately $16.8 million during the year ended December 31, 2008.

DRA/CLP OFFICE LLC and Subsidiaries

Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — Continued

10. Related Party Transactions

The Company’s properties are managed by Colonial Properties Services, Inc. (the “Property Manager”), a subsidiary of CRLP. During the term of the management agreements, the Company will pay to the Property Manager a management fee equal to 4% of Gross Receipts as defined by the management agreements and reimbursement for payroll, payroll related benefits and administrative expenses. Management fees incurred by the Company for the periods ending December 31, 2008 and 2007 were approximately $4.4 million and $2.8 million, respectively. As of December 31, 2008 and 2007, approximately $.5 million in management fees were included in accounts payable. Construction management fees incurred by the Company for the periods ending December 31, 2008 and 2007 were approximately $.3 million and $.1 million, respectively. As of December 31, 2008 and 2007, there were no construction management fees included in accounts payable. For the periods ending December 31, 2008 and 2007, the Company reimbursed the Property Manager approximately $3.7 million and $2.1 million, respectively, for payroll, payroll related benefits and administrative costs. The Company has accrued payroll of approximately $0.2 million as of December 31, 2008 and 2007.

For the year ended December 31, 2008 and the period ended December 31, 2007, the Company paid leasing commissions to the Property Manager of approximately $1.7 million and $2.3 million, respectively. As of December 31, 2008, approximately $.7 million in leasing commissions were included in accounts payable. As of December 31, 2007, there were no leasing commissions included in accounts payable.

For the period ended December 31, 2007, the Company incurred approximately $0.5 million in disposition fees associated with the properties sold in November payable to the Property Manager. These fees were paid in 2008 and are included in Payable to members as of December 31, 2007.

In June 2007, G&I VI and CRLP provided member loans to the Company of approximately $12.4 million and $2.6 million, respectively, for closing costs and initial working capital. These loans, which were repaid in July 2007, accrued interest at the rate of 10% per annum. Interest expense in the amount of approximately $0.1 million was incurred during the period ended December 31, 2007 related to those member loans.

As discussed in Note 6, in November 2007, the Company disposed of its interest in nine office properties totaling 1.7 million square feet located in Huntsville, AL. As part of the transaction, CLP acquired a 40% interest in three tenancies in common (TIC) investments of the same nine office properties.

The Company leased space to the Property Manager and its affiliates. For the year ended December 31, 2008 and the period ended December 31, 2007, market rent and other income received from the entities totaled approximately $1.5 million and $0.9 million, respectively.

The Company entered into a lease renewal and expansion agreement between the Company and the Property Manager during the same periods. Tenant improvement costs of $0.1 million and $0.7 million were incurred by the Company for the year ended December 31, 2008 and the period ended December 31, 2007, respectively, as required by the terms of the lease agreement.

The Company leased space to an entity in which a trustee of CLP has an interest. The Company received market rent from this entity for approximately $0.5 million and $0.3 million during the year ended December 31, 2008 and the period ended December 31, 2007, respectively.

11. Subsequent Events

In February 2009, the Company paid distributions to the Members totaling approximately $5.4 million.

OZ/CLP Retail LLC and Subsidiaries

Consolidated Statements of Cash Flows
For the Periods Ended December 31, 2008 and 2007
(in thousands)


	(Not Covered
	by the Report			For the Period From
	Included Herein)			June 15, 2007
	For the Year Ended			(Inception) to
	December 31, 2008			December 31, 2007

Cash flows from operating activities
Net loss	$	(9,916	)	$	(5,314	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		16,460			9,166
Above/Below market amortization		(961	)		(514	)
Bad debt expense		210			123
Changes in operating assets and liabilities
Accounts receivable		(957	)		(574	)
Other assets		(368	)		(469	)
Accounts payable and accrued expenses		(91	)		(631	)
Accrued interest		309			1,245
Tenant deposits		(22	)		(110	)
Unearned rent		(51	)		(10	)

Net cash provided by operating activities		4,613			2,912


Cash flows from investing activities
Cash paid in acquisition, net of cash acquired		—			(311,219	)
Restricted cash		(335	)		(1,882	)
Capital expenditures		(1,121	)		(276	)
Leasing costs paid		(682	)		(86	)

Net cash used in investing activities		(2,138	)		(313,463	)


Cash flows from financing activities
Borrowing of long-term debt		—			284,000
Repayment of loans to members		—			(4,952	)
Proceeds from loans of members		—			4,952
Proceeds from issuance of nonredeemable common units		—			125,248
Distributions paid to equity members		(2,234	)		(82,101	)
Distributions paid to temporary equity members		(221	)		(11,741	)
Payment of redemption value to redeeming Rollover LP members		(705	)		—
Deferred loan costs		—			(940	)

Net cash (used in) provided by financing activities		(3,160	)		314,466

(Decrease) Increase in cash		(685	)		3,915

Cash
Beginning of period		3,915			—

End of period	$	3,230		$	3,915


Supplemental disclosure of cash flow information

Cash paid during the year for interest	$	18,223		$	8,503


Supplemental information of non-cash investing and financing activities

Redemption value of redeemable common units to Rollover LP members	$	(9,109	)	$


Issuance of redeemable common units for real estate		—			47,534

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

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007

1. Organization and Basis of Presentation

On June 20, 2007, Colonial Properties Trust (“CLP”) completed a joint venture transaction with OZRE Retail LLC. CLP had previously entered into a Membership Interests Purchase Agreement, dated as of April 25, 2007 (the “Retail Purchase Agreement”), to sell to OZRE Retail LLC CLP’s 69.8% limited liability company interest in OZ/CLP Retail LLC (the “Company”), a newly formed joint venture among OZRE Retail LLC (“OZRE”), Colonial Realty Limited Partnership (“CRLP”), an affiliate of CLP, and the limited partners of CRLP. The Company became the owner of 11 retail properties previously owned by CRLP. The properties are owned by limited liability companies (the “subsidiaries”) which are owned directly or indirectly by the Company. Pursuant to the Retail Purchase Agreement, CRLP retained a 15% minority interest in the Company, as well as management and leasing responsibilities for the 11 properties owned by the Company. In addition to the approximate 69.8% interest purchased from CLP, OZRE purchased an aggregate of 2.7% of the limited liability company interests in the Company from limited partners of CRLP. At December 31, 2007, OZRE held approximately 72.5% of the limited liability company interests of the Company; Colonial Retail Holdings LLC (“Retail Holdings”), a subsidiary of CRLP, held 15% of the limited liability company interests in the Company (and serves as the “Manager” of the Company); and certain limited partners of CRLP (“Rollover LP’s”), that did not elect to sell their interests in the Company to OZRE, hold the remaining approximately 12.5% of the limited liability company interests in the Company.

As of December 31, 2008, the Company owned 11 retail properties totaling approximately 3.0 million square feet located in Alabama, Florida, Georgia and Texas.

In June 2008, certain Rollover LP’s exercised an option to sell their membership interests totaling approximately $9.1 million reducing the Rollover LP’s interests to approximately 0.20% of the limited liability company interests in the Company. The redeemed units were purchased by the joint venture increasing OZRE’s ownership interest from 72.5% to 82.7% and Retail Holdings’ interest from 15% to 17.1%. The purchase price of the redeemed units is payable in installments to the redeeming Rollover LP’s using 50% of the funds otherwise available for distribution to the holders of common company units. During 2008, $0.7 million in payments were made to these redeeming Rollover LP’s. The unpaid portion of the redemption value accrues interest at the rate of 6% per annum and compounds quarterly. As of December 31, 2008, $0.3 million of accrued interest had been recorded.

Operating Agreement — The Company will distribute 50% of cash flow from operations for each fiscal quarter to the redeeming Rollover LP’s until such time the redeeming Rollover LP’s are paid in full. The remaining cash flow from operations will be distributed first to the holders of any outstanding preferred company units (if any preferred company units are outstanding at the time of such distribution; as of December 31, 2008, there are no preferred company units outstanding), second to the holders of common company units, pro rata, in accordance with their respective percentage interests until the “8% Preferred Return Account” (as defined in the Amended Operating Agreement) of each such holder shall have been reduced to zero, and thereafter; 15% to the Manager (the “Promote Payment”) and 85% to the holders of common company units (including the Manager), pro rata among such holders of common company units in accordance with their respective percentage interests. In the event that members of the Company have a positive balance in their “8% Preferred Return Account” after the final distribution of cash flow following any fiscal year of the Company and the Manager shall have received a Promote Payment with respect to such fiscal year, then within 15 days after such distribution of cash flow, the Manager shall pay to the members pro rata in accordance with their respective percentage interests the lesser of: (i) the aggregate amount of the Promote Payment received by Manager with respect to such preceding fiscal year or (ii) the aggregate amount of the members’ positive balances in their respective 8% Preferred Return Accounts. The actual amount (if any) received by each such member shall reduce the positive balance in their respective 8% Preferred Return Account.

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

Subject to the provisions of any agreement to which the Company is a party, net capital proceeds from a merger, consolidation or sale of all or substantially all of the properties, from re-financings and other asset sales, and proceeds in liquidation shall be distributed first to the holders of any outstanding preferred company units and thereafter to the holders of common company units, pro rata in accordance with their respective percentage interests. All distributions are subject to any loan or similar agreements to which the Company is a party, and repayment of any Partner Loans made by Retail Holdings. As of December 31, 2008, as described above, the Company owed $8.7 million in unpaid Redemption Value to redeeming Rollover LP’s. During 2008, $0.7 million in payments were made to these redeeming Rollover LP’s. In addition, the Manager is not required to make any distribution of cash to the members if such distribution would cause a default under a loan agreement to which the Company is party.

2. Summary of Significant Accounting Policies

Principles of Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Land, Buildings and Equipment — Land, buildings, and equipment is stated at the lower of cost, less accumulated depreciation, or fair value. The Company reviews its long-lived assets and certain intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future net cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the asset’s fair value. Assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell. The Company computes depreciation on its operating properties using the straight-line method based on estimated useful lives, which generally range from 3 to 48 years. Tenant improvements are amortized as an expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual expiration date). Repairs and maintenance are charged to expense as incurred. Replacements and improvements are capitalized and depreciated over the estimated remaining useful lives of the assets. The Company recognizes sales of real estate properties only upon the closing of a transaction. Payments received from purchasers prior to closing are recorded as deposits. Profit on real estate sold is recognized using the full accrual method upon closing when the collectability of the sales price is reasonably assured and the Company is not obligated to perform significant activities after the sale. Profit may be deferred in whole or part until the sale meets the requirements of profit recognition on sales of real estate under Statement of Financial Accounting Standards (SFAS) No. 66, Accounting for Sales of Real Estate. Further, the profit is limited by the amount of cash received for which the Company has no commitment to reinvest pursuant to the partial sale provisions found in paragraph 30 of Statement of Position (SOP) 78-9, Accounting for Investments in Real Estate Ventures. There were no sales transactions for the periods ended December 31, 2008 and 2007. Land, buildings and equipment consist of the following as of December 31, 2008 and 2007:


	*(in thousands)*
	December 31, 2008			December 31, 2007
Land	$	58,173		$	58,173
Buildings and improvements		256,899			256,248
Land improvements		24,507			24,507

		339,579			338,928
Accumulated depreciation		(14,841	)		(5,861	)

	$	324,738		$	333,067

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

Depreciation expense for the periods ended December 31, 2008 and 2007 were $9.5 million and $5.9 million, respectively.

Acquisition of Real Estate Assets — The Company accounts for its acquisitions or investments in real estate in accordance with SFAS No. 141, Business Combinations, which requires the fair value of the real estate acquired to be allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of other tenant relationships, based in each case on their fair values. The Company considers acquisitions of operating real estate assets to be “businesses” as that term is contemplated in Emerging Issues Task Force (EITF) Issue No. 98-3, Determining Whether a Non-Monetary Transaction Involves Receipt of Productive Assets or of a Business.

The Company allocates purchase price to the fair value of the tangible assets of an acquired property (which includes the land and building) determined by valuing the property as if it were vacant. The “as-if-vacant” value is allocated to land and buildings based on management’s determination of the relative fair values of these assets. The Company also allocates value to tenant improvements based on the estimated costs of similar tenants with similar terms.

Above-market and below-market in-place lease values for acquired properties are recorded based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term and any fixed-rate renewal periods in the respective leases. These above (below) market lease intangibles have a weighted-average composite life of 7.4 years as of December 31, 2008.

The value associated with in-place leases and tenant relationships is amortized as a leasing cost over the initial term of the respective leases and any probability-weighted renewal periods. The initial term and any probability-weighted renewal periods have a current weighted average composite life of 5.2 years. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangibles will be written off.

The aggregate value of other intangible assets acquired are measured based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. The Company may engage independent third-party appraisers to perform these valuations and those appraisals use commonly employed valuation techniques, such as discounted cash flow analyses. Factors considered in these analyses include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods depending on specific local market conditions and depending on the type of property acquired. Management also estimates costs to execute similar leases including leasing commissions, legal and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination as part of the transaction.

The total amount of other intangible assets acquired is further allocated to in-place leases, which includes other tenant relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

quality and expectations of lease renewals (including those existing under the terms of the lease agreement or management’s expectation for renewal), among other factors.

The values of in-place leases and tenant relationships are amortized as a leasing cost expense over the initial term of the respective leases and any renewal periods. In no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense. Amortization expense for in-place lease intangible assets for the periods ended December 31, 2008 and 2007 were approximately $5.0 million and $2.5 million, respectively.

The Company may pursue acquisition opportunities and will not be successful in all cases. Costs incurred related to these acquisition opportunities are expensed when it is no longer probable that the Company will be successful in the acquisition.

Cash and Cash Equivalents — The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

As of December 31, 2008 and 2007, the Company maintained approximately $3.2 million and $3.9 million, respectively, with one financial institution which exceeds the FDIC insured limits.

Restricted Cash — Restricted cash is comprised of cash balances which are legally restricted as to use and consists of escrowed funds for property taxes, insurance, and future capital improvements.

Accounts Receivable and Allowance for Doubtful Accounts — Accounts receivable consist of receivables from tenants for rent and other charges, recorded according to the terms of their leases. The Company maintains an allowance for doubtful accounts for estimated losses due to the inability of its tenants to make required payments for rents and other rental services. In assessing the recoverability of these receivables, the Company makes assumptions regarding the financial condition of the tenants based primarily on past payment trends and certain financial information that tenants submit to the Company. As of December 31, 2008 and 2007, allowance for doubtful accounts amounted to approximately $0.3 million and $0.1 million, respectively. The Company may or may not require collateral for tenant receivables.

Deferred Lease Costs and Mortgage Costs — Deferred leasing costs and leasing costs acquired at inception consist of legal fees and brokerage costs incurred to initiate and renew operating leases and are amortized on a straight-line basis over the related lease term. Deferred financing costs represent commitment fees, legal and other third party costs associated with obtaining commitments for financing which result in a closing of such financing. These costs are amortized on a straight-line basis over the terms of the respective loan agreements, which approximates the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Deferred costs as of December 31, 2008 and 2007 consist of the following:


	*(in thousands)*
	2008		2007
Financing Costs	$	940	$	940
Leasing Costs		9,142		8,924

		10,083		9,864
Less Accumulated Amortization		2,331		832

	$	7,752	$	9,032

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

Impairment and Disposal of Long-Lived Assets — The Company follows SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. In accordance with SFAS 144, the results of operations of real estate held for sale and real estate sold during the year are presented in discontinued operations. The Company no longer records depreciation and amortization on assets held for sale. The Company assesses impairment of long-lived assets whenever changes or events indicate that the carrying value may not be recoverable. The Company assesses impairment of operating properties based on the operating cash flows of the properties. In performing its assessment, the Company makes assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. For the periods ended December 31, 2008 and 2007, no impairment charges were recorded.

Revenue Recognition — Rental revenue is recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is included in Other assets on the accompanying consolidated balance sheets with a balance of approximately $0.8 million and $0.4 million at December 31, 2008 and 2007, respectively. The Company establishes, on a current basis, an allowance for future potential tenant credit losses which may occur against this account. As of December 31, 2008 and 2007, the allowance was approximately $38,000 and $17,000, respectively.

In addition to base rent, tenants also generally will pay their pro rata share in real estate taxes and operating expenses for the building. In certain leases, in lieu of paying additional rent based upon building operating expenses, the tenant will pay additional rent based upon increases in the consumer price index over the index value in effect during a base year. In addition, certain leases contain fixed percentage increases over the base rent to cover escalations.

Assets and Liabilities Measured at Fair Value — On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements for financial assets and liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Fair Value of Financial Instruments — The Company believes the carrying amount of its temporary investments, tenant receivables, accounts payable and other liabilities is a reasonable estimate of fair value of these instruments. Based on estimated market interest rates for comparable issuances of approximately 7.5% and 6.5% at December 31, 2008 and 2007, respectively, the fair value of the Company’s mortgage payable was approximately $267.1 million and $281.2 million as of December 31, 2008 and 2007, respectively.

Redeemable Common Units — In accordance with EITF Topic Summary D-98, Classification and Measurement of Redeemable Securities, the Company recognizes changes in the redemption value of the Redeemable Common Units immediately as they occur and to adjust the carrying value to equal the redemption value at the end of each reporting period. The accrued changes are reflected in the Consolidated Statements of Members’ Equity and Temporary Equity as Changes in Redemption Value of Redeemable Common Units.

Recent Accounting Pronouncements — In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurement. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for the Company’s financial assets and liabilities on January 1, 2008. In February 2008, the FASB reached a conclusion to defer the implementation of the SFAS No. 157 provisions relating to non-financial assets and liabilities until January 1, 2009. The FASB also reached a conclusion to amend SFAS No. 157 to exclude SFAS No. 13 Accounting for Leases and its related interpretive accounting pronouncements. SFAS No. 157 is not expected to materially affect how the Company determines fair value, but has resulted in certain additional disclosures. The Company adopted SFAS No. 157 effective January 1, 2008 for financial assets and financial liabilities and does not expect this adoption to have a material effect on its consolidated results of operations or financial position but will enhance the level of disclosure for assets and liabilities recorded at fair value. The Company also adopted the deferral provisions of FASB Staff Position, or FSP, SFAS No. 157-2, “Effective Date of FASB Statement No. 157,” which delays the effective date of SFAS No. 157 for all nonrecurring fair value measurements of non-financial assets and liabilities until fiscal years beginning after November 15, 2008. The Company also adopted FSP SFAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.” This FSP, which provides guidance on measuring the fair value of a financial asset in an inactive market, had no impact on the Company’s consolidated financial statements.

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which changes how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS No. 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard will, among other things, impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from acquisition accounting; and change accounting practices for acquired contingencies, acquisition-related restructuring costs, and tax benefits. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the impact of SFAS No. 141(R) on the Company’s consolidated financial statements.

3. Business Combination

On June 20, 2007, the Company purchased a portfolio of properties comprised of 11 retail properties in Alabama, Florida, Georgia, and Texas. The operations of these properties have been included in the consolidated financial statements since that date. The acquisitions are being accounted for under the purchase method of accounting. The purchase price of approximately $358.8 million (net of cash acquired of approximately $3.0 million) was allocated to the net assets acquired based upon the estimated fair values at the date of acquisition. The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. The Company closed the allocation period as of December 31, 2007. The final allocation is as follows:


	(in thousands)
Accounts receivable	$	897
Property, plant and equipment		338,652
Acquired intangibles		23,101
Prepaid and other assets		231
Accrued expenses and accounts payable		(2,394	)
Unearned rent		(1,182	)
Tenant deposits and other liabilities		(552	)

Total purchase price, net of cash acquired	$	358,753

The Company allocated the purchase price to acquired tangible and intangible assets, including land, buildings, tenant improvements, above and below market leases, acquired in-place leases, other assets and assumed liabilities in accordance with SFAS No. 141, Business Combinations. The allocation to intangible assets is based upon various factors including the above or below market component of in-place leases, the value of in-place leases and the value of customer relationships, if any. The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using an interest rate which reflects the risks associated with the lease) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using current fair market rates over the remaining term of the lease. The allocation of the purchase price to tangible assets is based upon management’s determination of the value of the property as if it were vacant using discounted cash flow models. Factors considered by management include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. Differing assumptions and methods could have resulted in different estimates of fair value and thus, a different purchase price allocation and corresponding increase or decrease in depreciation and amortization expense.

4. Intangibles

For the periods ended December 31, 2008 and 2007, the Company recognized a net increase of approximately $1.0 million and $0.5 million, respectively, in rental revenue for the amortization of above and below

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

market leases. The Company recognized approximately $5.0 million and $2.5 million of amortization of in-place leases for the periods ended December 31, 2008 and 2007, respectively.

Future amortization of acquired in-place leases and above (below) market leases for each of the next five years and thereafter is estimated as follows:


(in thousands)
	In-Place		Above (Below)
	Leases		Market Leases
2009	$	3,687	$	(1,034	)
2010		3,033		(984	)
2011		2,111		(1,062	)
2012		1,514		(992	)
2013		1,217		(891	)
Thereafter		4,842		(3,224	)

	$	16,404	$	(8,187	)

5. Mortgage Payable

The Company has a non-recourse loan with an amount of $284 million outstanding on December 31, 2008 payable to Key Bank Real Estate Capital (“Key Bank”). This loan was made in two advances (i) an advance in the amount of approximately $187.2 million on June 15, 2007, (ii) an advance in the amount of approximately $96.8 million on July 23, 2007. The loan is interest only and bears monthly interest at a fixed rate of 6.312%. The loan matures on August 6, 2014 and is collateralized by certain properties. Interest expense on the mortgage payable in the amount of $18.2 million and $9.7 million was incurred during the periods ended December 31, 2008 and 2007, respectively.

6. Leases

The Company’s operations consist principally of owning and leasing retail space. Terms of the leases generally range from 5 to 10 years. The Company principally pays all operating expenses, including real estate taxes and insurance. Substantially all of the Company’s leases are subject to rent escalations based on changes in the Consumer Price Index, fixed rental increases or increases in real estate taxes and certain operating expenses. A substantial number of leases contain options that allow leases to renew for varying periods. The Company’s leases are operating leases and expire at various dates through 2024. The future minimum fixed base rentals under these noncancelable leases are approximately as follows:


	(in thousands)
2009	$	24,758
2010		22,228
2011		17,558
2012		14,351
2013		12,293
Thereafter		51,901

	$	143,089

7. Commitments and Contingencies

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

Property Lockout Period

Unless CRLP and OZRE unanimously agree, the Company will not during the three-year period following the effective date of the Amended Operating Agreement (referred to herein as the “Lockout Period”) sell or otherwise transfer or dispose of, directly or indirectly, any Property.

Tax Protection

Certain events or actions by the Company could cause Rollover LPs to recognize for federal income tax purposes part or all of such Rollover LPs’ gain that was deferred at the time of the transactions. The Amended Operating Agreement provides for limited “tax protection” benefits for Rollover LPs, subject to those exceptions described below in the sections entitled “Rollover LP Put Rights,” and “Rollover LP Redemption in Kind.”

During the period ending seven years and one month following the effective date of the Amended Operating Agreement (the “Tax Protection Period”), the Company may not, directly or indirectly, (i) take any action, including a sale or disposition of all or any portion of its interest in certain designated Properties (the “Protected Properties”) if any Rollover LP would be required to recognize gain for federal income tax purposes pursuant to Section 704(c) of the Code with respect to the Protected Properties as a result thereof, or (ii) undertake a merger, consolidation or other combination of the Company or any of its subsidiaries with or into any other entity, a transfer of all or substantially all of the assets of the Company, a reclassification, recapitalization or change of the outstanding equity interests of the Company or a conversion of the Company into another form of entity, unless the Company pays to each Rollover LP its “Tax Damages Amount.” The “Tax Damages Amount” to be paid to the Rollover LPs is an amount generally equal to the sum of (A) the built-in gain (i.e., generally, the gain Rollover LPs would recognize on a sale at the time of the Transaction) attributable to the Protected Property recognized by the affected Rollover LP, multiplied by the maximum combined federal and applicable state and local income tax rates for the taxable year in which the disposition occurs and applicable to the character of the resulting gain, plus (B) a “gross-up” amount equal to the taxes (calculated at the rates described in the Amended Operating Agreement which, generally, are the rates that the Rollover LP will be subject to at the time of a recognition event) payable by a Rollover LP as the result of the receipt of such payment.

8. Redeemable Common Units

Rollover LP Put Rights

Each Rollover LP will have the right to require the Company to buy some or all, but not less than 1,000 (or the remainder, if such Rollover LP has less than 1,000), of its common Company Units during an Annual Redemption Period (as defined in the Amended Operating Agreement) for a purchase price equal to the “Redemption Value.” The “Redemption Value” of Rollover LP company units equaled, during the first Annual Redemption Period, such Rollover LP’s capital account (determined in accordance with Section 704(c) of the Code), and for every Annual Redemption Period thereafter, the fair market value of such common company units, which shall be equal to the product of (x) the percentage interest represented by such company units times (y) an amount equal to (i) the aggregate fair market value of the Properties, plus (ii) the net current assets of the Company, minus (iii) the principal amount of the indebtedness of the Company and its subsidiaries, minus (iv) the

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

aggregate liquidation preference of any preferred company units then outstanding, minus (v) an amount equal to 1.0% of the amount in clause (y) as an estimate of sales cost in connection with the sale of such properties.

The fair market value of the Properties during any Annual Redemption Period from and after the second Annual Redemption Period will be based on an independent appraisal obtained by the Manager (which shall not be older than 15 months). The Rollover LP’s common units subject to the put rights are referred to as Redeemable common units and are shown in the accompanying consolidated balance sheets as Temporary Equity-Redeemable Common Units at its redemption value.

As discussed in Note 1, in June 2008, certain Rollover LP’s exercised an option to sell their membership interests totaling approximately $9.1 million reducing the Rollover LP’s interests to approximately 0.20% of the limited liability company interests in the Company. The redemption value was $0.1 million and $9.8 million at December 31, 2008 and 2007, respectively, which reflects a decrease in redemption value of approximately $9.7 million during the period ended December 31, 2008. Interest expense in the amount of $0.3 million related to the unpaid portion of the redemption value was incurred during the period ended December 31, 2008.

Rollover LP Redemption in Kind

At any time after the seven years and one month following the effective date of the Amended Operating Agreement, if the Company proposes the sale of all or substantially all of the Properties in one or a series of related transactions, the Manager will provide the Rollover LPs written notice of proposed sale (an “Asset Sale Notice”). Any Rollover LP or a group of Rollover LPs holding in the aggregate a number of company units greater than or equal to the number of common company units with an aggregate purchase price of $3 million under the Purchase Agreements may require the Company to redeem all, but not less than all, of such Rollover LPs’ Company Units in exchange for one or more Properties owned by the Company for at least two years (or at the option of such Rollover LPs, in membership interests in entities the sole assets of which are Properties) (a “Property Redemption”). If such Rollover LP or group of Rollover LPs do not notify the Manager in writing of their decision to request a Property Redemption within 15 days of the date of the asset sale notice, then such Rollover LPs shall be considered not to have elected to participate in a property redemption. The redemption price for the company units being redeemed (the “Cash Amount”) shall equal the fair market value of the company units being redeemed, which shall be an amount equal to the percentage interest represented by such company units, multiplied by (i) the aggregate fair market value of the properties, plus (ii) the net current assets of the Company, minus (iii) the principal amount of the indebtedness of the Company and its subsidiaries, minus (iv) the aggregate liquidated preference of any company units then outstanding, minus (v) an amount equal to 1.0% of the amount in clause (i) as an estimate of sales cost in connection with the sale of such properties. The fair market value of the properties in clause (i) shall be the fair market value determined in accordance with the valuation method described under “Rollover LP Put Rights” above.

OZ/CLP Retail LLC and Subsidiaries

Notes to the Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007 — (Continued)

9. Related Party Transactions

The Company’s properties are managed by Colonial Properties Services, Inc. (the “Property Manager”), an affiliate of CRLP. During the term of the management agreements, the Company will pay to the Property Manager a management fee equal to 4% of gross receipts as defined by the management agreements and reimbursement for payroll, payroll related benefits and administrative expenses. Management fees incurred by the Company for the periods ended December 31, 2008 and 2007 were approximately $1.1 million and $0.7 million, respectively. For the periods ended December 31, 2008 and 2007, the Company reimbursed the Property Manager approximately $0.6 million and $0.4 million, respectively, for payroll, payroll related benefits and administrative costs. In addition, the Company has accrued payroll of approximately $32,000 and $28,000, for the periods ended December 31, 2008 and 2007, respectively.

The Company received payments from the Manager of approximately $0.4 million and $0.2 million related to a master lease agreement for tenant space at one of the properties for the periods ended December 31, 2008 and 2007, respectively.

In June 2007, CRLP provided a member loan to the Company of approximately $5 million for closing costs and initial working capital. This loan accrued interest at the rate of 8% per annum and was repaid in July 2007. Interest expense in the amount of approximately $36,000 was incurred during the period from June 15, 2007 (inception) to December 31, 2007.

10. Subsequent Events

In February 2009, the Company paid distributions to the members totaling approximately $0.5 million. In addition, in February 2009, the Company paid approximately $0.5 million to the redeeming Rollover LP’s.

Appendix S-4

SCHEDULE III
COLONIAL REALTY LIMITED PARTNERSHIP
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2008


			Initial Cost to Company						Gross Amount at Which Carried at Close of Period									Date
							Cost Capitalized											Completed/
					Buildings and		Subsequent to				Buildings and				Accumulated			Placed in				Depreciable
Description	Encumbrances (1)		Land		Improvements		Acquisition		Land		Improvements		Total (2)		Depreciation			Service		Date Acquired		Lives-Years
Multifamily:
Ashley Park		—		3,702,098		15,332,923		138,942		3,702,098		15,471,865		19,173,963		(3,940,277	)		1988		2005	3-40 Years
Autumn Hill		—		7,146,496		24,811,026		2,343,376		7,146,496		27,154,402		34,300,898		(4,150,331	)		1970		2005	3-40 Years
Autumn Park I & II		—		4,407,166		35,387,619		471,142		4,407,166		35,858,760		40,265,926		(3,812,624	)		2001/04		2005	3-40 Years
Brookfield		—		1,541,108		6,022,656		677,386		1,541,108		6,700,042		8,241,150		(1,485,003	)		1984		2005	3-40 Years
Colonial Grand at Arringdon		—		3,016,358		23,295,172		1,002,161		3,016,358		24,297,333		27,313,691		(4,346,467	)		2003		2004	3-40 Years
Colonial Grand at Ayrsley		—		4,261,351		—		31,634,363		4,261,351		31,634,363		35,895,714		(1,242,917	)		2008		2006	3-40 Years
Colonial Grand at Barrett Creek		—		3,320,000		27,237,381		527,525		3,320,000		27,764,905		31,084,905		(3,661,899	)		1999		2005	3-40 Years
Colonial Grand at Bear Creek		—		4,360,000		32,029,388		1,024,732		4,360,000		33,054,120		37,414,120		(4,505,315	)		1998		2005	3-40 Years
Colonial Grand at Bellevue		—		3,490,000		31,544,370		1,781,954		3,490,986		33,325,338		36,816,324		(4,122,798	)		1996		2005	3-40 Years
Colonial Grand at Berkeley Lake		—		1,800,000		16,551,734		475,638		1,800,000		17,027,372		18,827,372		(3,012,528	)		1998		2004	3-40 Years
Colonial Grand at Beverly Crest		—		2,400,000		20,718,143		1,388,422		2,400,000		22,106,565		24,506,565		(3,692,761	)		1996		2004	3-40 Years
Colonial Grand at Crabtree Valley		—		2,100,000		15,272,196		946,183		2,100,000		16,218,379		18,318,379		(1,975,891	)		1997		2005	3-40 Years
Colonial Grand at Cypress Cove		—		3,960,000		24,721,680		1,607,716		3,960,000		26,329,396		30,289,396		(2,251,387	)		2001		2006	3-40 Years
Colonial Grand at Edgewater I		—		1,540,000		12,671,606		16,064,247		2,602,325		27,673,527		30,275,852		(11,811,354	)		1990		1994	3-40 Years
Colonial Grand at Godley Station I		17,834,350		1,594,008		27,057,678		811,070		1,594,008		27,868,748		29,462,756		(1,845,084	)		2001		2006	3-40 Years
Colonial Grand at Hammocks		—		3,437,247		26,514,000		1,568,122		3,437,247		28,082,122		31,519,369		(3,847,245	)		1997		2005	3-40 Years
Colonial Grand at Heather Glen		—		3,800,000		—		35,567,413		4,134,235		35,233,179		39,367,414		(11,096,574	)		2000		1998	3-40 Years
Colonial Grand at Heathrow		—		2,560,661		17,612,990		1,848,855		2,560,661		19,461,845		22,022,506		(7,992,451	)		1997		1994/97	3-40 Years
Colonial Grand at Huntersville		—		3,593,366		—		22,501,149		3,593,366		22,501,149		26,094,515		(842,304	)		2008		2006	3-40 Years
Colonial Grand at Inverness Commons		—		6,976,500		33,892,731		612,008		6,976,500		34,504,739		41,481,239		(2,495,919	)		2001		2006	3-40 Years
Colonial Grand at Lakewood Ranch		—		2,320,442		—		24,131,175		2,359,875		24,091,743		26,451,618		(7,923,108	)		1999		1997	3-40 Years
Colonial Grand at Legacy Park		—		2,212,005		23,076,117		882,554		2,212,005		23,958,671		26,170,676		(2,908,232	)		2001		2005	3-40 Years
Colonial Grand at Liberty Park		—		2,296,019		—		26,188,213		2,296,019		26,188,213		28,484,232		(8,867,350	)		2000		1998	3-40 Years
Colonial Grand at Madison		—		1,689,400		—		22,411,741		1,831,550		22,269,591		24,101,141		(7,731,957	)		2000		1998	3-40 Years
Colonial Grand at Mallard Creek		—		2,911,443		1,277,575		16,549,032		3,320,438		17,417,612		20,738,050		(2,500,922	)		2005		2003	3-40 Years
Colonial Grand at Mallard Lake		—		3,020,000		24,070,350		1,670,322		3,020,000		25,740,672		28,760,672		(3,219,409	)		1998		2005	3-40 Years
Colonial Grand at Matthews Commons		—		2,026,288		—		19,240,022		2,026,288		19,240,022		21,266,310		(123,602	)		2008		2007	3-40 Years
Colonial Grand at McDaniel Farm		—		4,240,000		36,239,339		1,280,170		4,240,000		37,519,509		41,759,509		(3,926,859	)		1997		2006	3-40 Years
Colonial Grand at McGinnis Ferry		—		5,000,114		34,600,386		939,937		5,000,114		35,540,323		40,540,437		(5,684,317	)		1997		2004	3-40 Years
Colonial Grand at Mount Vernon		—		2,130,000		24,943,402		702,965		2,130,000		25,646,367		27,776,367		(4,493,323	)		1997		2004	3-40 Years
Colonial Grand at OldTown Scottsdale North		—		4,837,040		5,271,474		23,870,702		4,837,040		29,142,176		33,979,216		(2,209,093	)		2001		2006	3-40 Years
Colonial Grand at OldTown Scottsdale South		—		6,139,320		6,558,703		30,041,172		6,139,320		36,599,875		42,739,195		(2,788,233	)		2001		2006	3-40 Years
Colonial Grand at Patterson Place		—		2,016,000		19,060,725		1,004,715		2,016,000		20,065,440		22,081,440		(3,327,547	)		1997		2004	3-40 Years
Colonial Grand at Pleasant Hill		—		6,024,000		38,454,690		1,369,548		6,024,000		39,824,238		45,848,238		(3,649,579	)		1996		2006	3-40 Years
Colonial Grand at Quarterdeck		—		9,123,452		12,297,699		1,017,332		9,123,452		13,315,031		22,438,483		(2,186,656	)		1987		2005	3-40 Years
Colonial Grand at River Oaks		—		2,160,000		17,424,336		1,710,886		2,160,000		19,135,222		21,295,222		(3,456,385	)		1992		2004	3-40 Years
Colonial Grand at River Plantation		—		2,320,000		19,669,298		1,335,671		2,320,000		21,004,969		23,324,969		(3,802,512	)		1994		2004	3-40 Years
Colonial Grand at Round Rock		—		2,647,588		—		32,546,620		2,647,588		32,546,620		35,194,208		(3,463,128	)		1997		2004	3-40 Years
Colonial Grand at Scottsdale		—		3,780,000		25,444,988		432,756		3,780,000		25,877,744		29,657,744		(2,503,771	)		1999		2006	3-40 Years
Colonial Grand at Seven Oaks		—		3,439,125		19,943,544		1,249,771		3,439,125		21,193,315		24,632,440		(4,391,078	)		2004		2004	3-40 Years
Colonial Grand at Shiloh		—		5,976,000		43,556,770		935,692		5,976,000		44,492,462		50,468,462		(4,130,244	)		2002		2006	3-40 Years
Colonial Grand at Silverado		—		2,375,425		17,744,643		663,137		2,375,425		18,407,780		20,783,205		(3,064,477	)		2005		2003	3-40 Years
Colonial Grand at Silverado Reserve		—		2,392,000		—		22,105,110		2,692,104		21,805,005		24,497,110		(2,462,899	)		2005		2003	3-40 Years
Colonial Grand at Sugarloaf		—		2,500,000		21,811,418		1,188,475		2,500,000		22,999,893		25,499,893		(3,996,106	)		2002		2004	3-40 Years
Colonial Grand at Town Park (Lake Mary)		—		2,647,374		—		36,608,911		3,110,118		36,146,166		39,256,285		(11,713,696	)		2005		2004	3-40 Years
Colonial Grand at Town Park Reserve		—		867,929		—		9,032,066		957,784		8,942,211		9,899,995		(1,513,258	)		2004		2004	3-40 Years
Colonial Grand at Trinity Commons		30,500,000		5,333,807		35,815,269		1,047,795		5,333,807		36,863,064		42,196,871		(4,205,941	)		2000/02		2005	3-40 Years
Colonial Grand at University Center		—		1,872,000		12,166,656		644,060		1,872,000		12,810,716		14,682,716		(1,118,233	)		2005		2006	3-40 Years
Colonial Grand at Valley Ranch		—		2,805,241		38,037,251		2,069,242		2,805,241		40,106,492		42,911,733		(4,750,709	)		1997		2005	3-40 Years
Colonial Grand at Wilmington		27,100,000		3,344,408		30,554,367		1,397,207		3,344,408		31,951,574		35,295,982		(3,863,714	)		1998/2002		2005	3-40 Years
Colonial Reserve at West Franklin (formerly Trolley Square East & West)		—		4,743,279		14,416,319		5,994,824		4,743,279		20,411,143		25,154,421		(3,083,168	)		1964/65		2005	3-40 Years
Colonial Village at Ashford Place		—		537,600		5,839,838		1,158,068		537,600		6,997,906		7,535,506		(2,554,187	)		1983		1996	3-40 Years
Colonial Village at Canyon Hills		—		2,345,191		11,274,917		777,429		2,345,191		12,052,346		14,397,537		(1,718,163	)		1996		2005	3-40 Years
Colonial Village at Chancellor Park		—		4,080,000		23,213,840		1,238,315		4,080,000		24,452,155		28,532,155		(2,401,360	)		1999		2006	3-40 Years
Colonial Village at Charleston Place		—		1,124,924		7,367,718		743,505		1,124,924		8,111,223		9,236,147		(1,597,361	)		1986		2005	3-40 Years
Colonial Village at Chase Gayton		—		3,270,754		26,910,024		1,326,946		3,270,754		28,236,970		31,507,724		(5,639,645	)		1984		2005	3-40 Years
Colonial Village at Cypress Village (6)		—		5,839,590		—		19,857,307		5,839,590		19,857,307		25,696,897		(511,674	)		2008		2006	3-40 Years
Colonial Village at Deerfield		—		2,032,054		14,584,057		815,177		2,032,054		15,399,235		17,431,289		(2,254,301	)		1985		2005	3-40 Years
Colonial Village at Godley Lake		—		1,053,307		—		25,621,687		1,053,307		25,621,687		26,674,994		(321,103	)		N/A		2007	3-40 Years
Colonial Village at Grapevine		—		6,221,164		24,463,050		1,757,789		6,221,164		26,220,838		32,442,003		(3,692,964	)		1985/86		2005	3-40 Years
Colonial Village at Greenbrier		—		2,620,216		25,498,161		919,874		2,620,216		26,418,035		29,038,251		(3,114,351	)		1980		2005	3-40 Years
Colonial Village at Greentree		—		1,920,436		10,288,950		859,021		1,878,186		11,190,221		13,068,408		(1,611,566	)		1984		2005	3-40 Years


			Initial Cost to Company							Gross Amount at Which Carried at Close of Period										Date
							Cost Capitalized													Completed/
					Buildings and		Subsequent to					Buildings and					Accumulated			Placed in				Depreciable
Description	Encumbrances (1)		Land		Improvements		Acquisition			Land		Improvements			Total (2)		Depreciation			Service		Date Acquired		Lives-Years
Colonial Village at Greystone		—		3,155,483		28,875,949		1,367,570			3,155,483		30,243,519			33,399,002		(3,527,637	)		1998/2000		2005	3-40 Years
Colonial Village at Hampton Glen		—		3,428,098		17,966,469		1,501,855			3,428,098		19,468,324			22,896,422		(3,264,458	)		1986		2005	3-40 Years
Colonial Village at Hampton Pointe		—		8,875,840		15,359,217		946,381			8,875,840		16,305,597			25,181,437		(2,723,753	)		1986		2005	3-40 Years
Colonial Village at Harbour Club		—		3,209,585		20,094,356		1,012,441			3,209,585		21,106,797			24,316,382		(3,177,500	)		1988		2005	3-40 Years
Colonial Village at Highland Hills		—		1,981,613		17,112,176		746,114			1,981,613		17,858,290			19,839,903		(3,430,560	)		1987		2005	3-40 Years
Colonial Village at Huntington		—		1,315,930		7,605,360		1,043,458			1,315,930		8,648,818			9,964,748		(1,237,966	)		1986		2005	3-40 Years
Colonial Village at Huntleigh Woods		—		745,600		4,908,990		1,712,932			730,688		6,636,834			7,367,522		(2,840,651	)		1978		1994	3-40 Years
Colonial Village at Inverness		—		2,349,487		16,279,416		13,711,245			2,936,991		29,403,158			32,340,148		(13,861,627	)		1986/87/90/97		1986/87/90/97	3-40 Years
Colonial Village at Main Park		—		1,208,434		10,235,978		872,553			1,208,434		11,108,531			12,316,966		(1,751,984	)		1984		2005	3-40 Years
Colonial Village at Marsh Cove		—		2,023,460		11,095,073		1,127,155			2,023,460		12,222,228			14,245,688		(2,197,578	)		1983		2005	3-40 Years
Colonial Village at Matthews		14,700,000		2,700,000		20,295,989		535,809			2,700,000		20,831,798			23,531,798		(808,036	)		2008		2008	3-40 Years
Colonial Village at Meadow Creek		—		1,548,280		11,293,190		1,195,867			1,548,280		12,489,057			14,037,337		(2,253,965	)		1984		2005	3-40 Years
Colonial Village at Mill Creek		—		2,153,567		9,331,910		587,118			2,153,567		9,919,028			12,072,595		(2,512,095	)		1984		2005	3-40 Years
Colonial Village at North Arlington		—		2,439,102		10,804,027		794,034			2,439,102		11,598,061			14,037,163		(1,916,019	)		1985		2005	3-40 Years
Colonial Village at Oakbend		—		5,100,000		26,260,164		929,463			5,100,000		27,189,627			32,289,627		(2,465,312	)		1997		2006	3-40 Years
Colonial Village at Pinnacle Ridge		—		1,212,917		8,499,638		550,751			1,212,917		9,050,389			10,263,306		(1,606,389	)		1951/85		2005	3-40 Years
Colonial Village at Quarry Oaks		—		5,063,500		27,767,505		1,735,380			5,063,500		29,502,885			34,566,385		(4,318,806	)		1996		2003	3-40 Years
Colonial Village at Shoal Creek		—		4,080,000		29,214,707		1,393,268			4,080,000		30,607,975			34,687,975		(3,190,391	)		1996		2006	3-40 Years
Colonial Village at Sierra Vista		—		2,320,000		11,370,600		1,013,465			2,308,949		12,395,116			14,704,065		(2,277,605	)		1999		2004	3-40 Years
Colonial Village at South Tryon		—		1,510,535		14,696,088		571,259			1,510,535		15,267,348			16,777,883		(1,791,705	)		2002		2005	3-40 Years
Colonial Village at Stone Point		—		1,417,658		9,291,464		615,937			1,417,658		9,907,401			11,325,059		(1,881,332	)		1986		2005	3-40 Years
Colonial Village at Timber Crest		13,651,674		2,284,812		19,010,168		838,349			2,284,812		19,848,517			22,133,329		(2,395,653	)		2000		2005	3-40 Years
Colonial Village at Tradewinds		—		5,220,717		22,479,977		76,362			5,220,717		22,556,339			27,777,056		(3,170,836	)		1988		2005	3-40 Years
Colonial Village at Trussville		—		1,504,000		18,800,253		2,443,955			1,510,409		21,237,799			22,748,208		(8,510,148	)		1996/97		1997	3-40 Years
Colonial Village at Twin Lakes		—		4,966,922		29,925,363		433,490			5,624,063		29,701,712			35,325,775		(5,137,725	)		2005		2001	3-40 Years
Colonial Village at Vista Ridge		—		2,003,172		11,186,878		835,478			2,003,172		12,022,356			14,025,528		(1,975,228	)		1985		2005	3-40 Years
Colonial Village at Waterford		—		3,321,325		26,345,195		1,188,429			3,321,325		27,533,625			30,854,950		(4,313,784	)		1989		2005	3-40 Years
Colonial Village at Waters Edge		—		888,386		13,215,381		958,332			888,386		14,173,713			15,062,099		(3,107,562	)		1985		2005	3-40 Years
Colonial Village at West End		—		2,436,588		14,800,444		1,488,707			2,436,588		16,289,151			18,725,739		(2,674,572	)		1987		2005	3-40 Years
Colonial Village at Westchase		—		10,418,496		10,348,047		825,802			10,418,496		11,173,849			21,592,345		(2,789,966	)		1985		2005	3-40 Years
Colonial Village at Willow Creek		—		4,780,000		34,143,179		985,697			4,780,000		35,128,876			39,908,876		(3,705,842	)		1996		2006	3-40 Years
Colonial Village at Windsor Place		—		1,274,885		15,017,745		1,176,816			1,274,885		16,194,561			17,469,446		(2,835,529	)		1985		2005	3-40 Years
Colonial Village at Woodlake (formerly Parkside at Woodlake)		—		2,781,279		17,694,376		639,324			2,781,279		18,333,700			21,114,979		(2,445,280	)		1996		2005	3-40 Years
Enclave (formerly The Renwick) (6)		—		4,074,823		—		25,562,339			4,074,823		25,562,339			29,637,162		(377,799	)		2008		2005	3-40 Years
Glen Eagles I & II		—		2,028,204		17,424,915		739,047			2,028,204		18,163,962			20,192,167		(2,694,197	)		1990/2000		2005	3-40 Years
Heatherwood		—		3,550,362		23,731,531		3,388,373			3,550,362		27,119,905			30,670,267		(4,177,981	)		1980		2005	3-40 Years
Murano at Delray Beach (4)(5)		—		2,730,000		20,209,175		(8,674,880	)		2,730,000		11,534,295			14,264,295		(1,424,463	)		2002		2005	3-40 Years
Paces Cove		—		1,509,933		11,127,122		387,992			1,509,933		11,515,113			13,025,046		(2,318,732	)		1982		2005	3-40 Years
Portofino at Jensen Beach (4)(5)		—		3,540,000		16,690,792		(9,989,553	)		3,540,000		6,701,239			10,241,239		(1,161,923	)		2002		2005	3-40 Years
Remington Hills		—		2,520,011		22,451,151		1,947,024			2,520,011		24,398,174			26,918,186		(3,395,386	)		1984		2005	3-40 Years
Summer Tree		—		2,319,541		5,975,472		518,270			2,319,541		6,493,742			8,813,282		(1,431,118	)		1980		2005	3-40 Years
Office:
Colonial Center Brookwood Village		—		1,285,379		—		41,951,240			—		43,236,619			43,236,619		(1,918,672	)		2007		2007	3-40 Years
Colonial Center TownPark 400		—		3,301,914		—		22,927,267			3,301,914		22,927,267			26,229,181		(559,279	)		2008		1999	3-40 Years
Metropolitan Midtown — Plaza		—		2,088,796		—		30,506,029			2,088,796		30,506,029			32,594,825		(644,336	)		2008		2006	3-40 Years
Retail:
Colonial Brookwood Village		—		6,851,321		24,435,002		69,541,347			8,171,373		92,656,296			100,827,670		(36,627,014	)		1973/91/00		1997	3-40 Years
Colonial Pinnacle Tannehill		—		19,097,386		—		34,146,482			19,097,386		34,146,482			53,243,868		(475,419	)		2008		2006	3-40 Years
Colonial Promenade Fultondale (3)		—		1,424,390		15,303,065		3,593,775			1,424,390		18,896,840			20,321,229		(662,500	)		2007		2007	3-40 Years
Colonial Promenade Winter Haven (3)		—		2,880,025		3,928,903		10,104,139			4,045,045		12,868,022			16,913,067		(2,594,853	)		1986		1995	3-40 Years
Metropolitan Midtown — Retail		—		3,481,826		—		35,737,055			3,481,826		35,737,055			39,218,881		(401,078	)		2008		2006	3-40 Years
For-Sale Residential:
Central Park (3)(5)		—		1,437,374		—		4,289,896			1,437,374		4,289,896			5,727,270		—			2007		2005		N/A
Regents (3)(5)(6)				6,794,173		—		9,322,899			6,794,173		9,322,899			16,117,072
Grander (3)(5)(6)		—		4,000,000		—		(1,320,065	)		4,000,000		(1,320,065	)		2,679,935		—			2008		2006		N/A
Southgate at Fairview (3)(5)(6)		—		1,993,941		—		5,091,980			1,993,941		5,091,980			7,085,921		—			2007		2005		N/A
Metropolitan Midtown — Condominiums (3)(5)		—		—		—		23,334,065					23,334,065			23,334,065		—			2008		2006		N/A
Whitehouse Creek (formerly Spanish Oaks) (3)		—		451,391		—		2,091,174			451,391		2,091,174			2,542,565		—			2008		2006		N/A
Condominium Conversion Properties:
Azur at Metrowest (3)(5)		—		3,421,000		22,592,957		(25,150,693	)		220,000		643,264			863,264		—			1997		2003	3-40 Years
Capri at Hunter’s Creek (3)(5)		—		8,781,859		10,914,351		(19,228,365	)		85,005		382,840			467,845		—			1999		1998	3-40 Years
Active Development Projects:
Colonial Grand at Ashton Oaks		—		3,659,400		—		24,656,600			3,659,400		24,656,600			28,316,000		(35,036	)		N/A		2007	3-40 Years


			Initial Cost to Company							Gross Amount at Which Carried at Close of Period										Date
							Cost Capitalized													Completed/
					Buildings and		Subsequent to					Buildings and					Accumulated			Placed in				Depreciable
Description	Encumbrances (1)		Land		Improvements		Acquisition			Land		Improvements			Total (2)		Depreciation			Service		Date Acquired		Lives-Years
Colonial Grand at Desert Vista		—		12,000,000		—		30,463,000			12,000,000		30,463,000			42,463,000		(38,884	)		N/A		2007	3-40 Years
Colonial Grand at Onion Creek (formerly Double Creek)		—		3,505,449		—		28,494,551			3,505,449		28,494,551			32,000,000		(593,126	)		N/A		2005	3-40 Years
Future Development Projects:
Colonial Grand at Azure		—		6,016,000		—		1,712,000			6,016,000		1,712,000			7,728,000		—			N/A		2007		N/A
Colonial Grand at Cityway (formerly Ridell Ranch)		—		3,656,250		—		1,310,750			3,656,250		1,310,750			4,967,000		—			N/A		2006		N/A
Colonial Grand at Hampton Preserve		—		10,500,000		—		3,820,000			10,500,000		3,820,000			14,320,000		—			N/A		2007		N/A
Colonial Grand at Randal Park		—		7,200,000		—		6,404,000			7,200,000		6,404,000			13,604,000		—			N/A		2006		N/A
Colonial Grand at South End		—		9,382,090		—		2,663,910			9,382,090		2,663,910			12,046,000		—			N/A		2007		N/A
Colonial Grand at Sweetwater		—		5,238,000		—		2,043,000			5,238,000		2,043,000			7,281,000		—			N/A		2006		N/A
Colonial Grand at Thunderbird		—		6,500,500		—		1,867,500			6,500,500		1,867,500			8,368,000		—			N/A		2007		N/A
Colonial Grand at Wakefield		—		3,573,196		—		3,636,804			3,573,196		3,636,804			7,210,000		—			N/A		2007		N/A
Colonial Promenade Craft Farms II (5)		—		1,207,040		—		819,960			1,207,040		819,960			2,027,000		—			N/A		2007		N/A
Colonial Promenade Huntsville		—		8,047,720		—		1,479,280			8,047,720		1,479,280			9,527,000		—			N/A		2007		N/A
Colonial Promenade Nor du Lac (5)				20,346,000				13,151,565			20,346,000		13,151,565			33,497,565		—			N/A		2008		N/A
Unimproved Land:
Breland Land		—		9,400,000				500,000			9,400,000		500,000			9,900,000		—			N/A		2005		N/A
Canal Place and Infrastructure		—		10,951,968		—		3,298,095			10,951,968		3,298,095			14,250,063		—			N/A		2005		N/A
Colonial Center Town Park 500		—		2,903,795		—		1,975,960			2,903,795		1,975,960			4,879,755		—			N/A		1999		N/A
Colonial Pinnacle Tutwiler Farm II		—		4,682,430		—		1,293,050			4,682,430		1,293,050			5,975,480		—			N/A		2005		N/A
Colonial Promenade Burnt Store		—		615,380		—		—			615,380		—			615,380		—			N/A		1994		N/A
Craft Farms Mixed Use		—		4,400,000		—		1,828,860			4,400,000		1,828,860			6,228,860		—			N/A		2004		N/A
Cypress Village — Lot Development (5)(6)		—		10,131,879		—		—			10,131,879		—			10,131,879		—			N/A		2006		N/A
Heathrow Land and Infrastructure		—		12,250,568		—		2,964,904			12,560,568		2,654,904			15,215,472		—			N/A		2002		N/A
Lakewood Ranch		—		479,900		—		877,248			479,900		877,248			1,357,148		—			N/A		1999		N/A
Randal Park (5)		—		33,686,904		—		(7,785,103	)		33,686,904		(7,785,103	)		25,901,801		—			N/A		2006		N/A
Town Park Land and Infrastructure				6,600,000		—		2,595,707			6,600,000		2,595,707			9,195,707		—			N/A		1999		N/A
Whitehouse Creek — Lot Development and Infrastructure		—		4,498,609		—		8,778,014			4,498,609		8,778,014			13,276,623		—			N/A		2006		N/A
Woodlands — Craft Farms Residential		—		15,300,000		—		7,100,000			15,300,000		7,100,000			22,400,000		—			N/A		2004		N/A
Other Miscellaneous Projects		—		—		—		12,559,674			—		12,559,674			12,559,674		—			N/A		N/A		N/A
Corporate Assets:		—		—		—		17,708,522			—		17,708,522			17,708,522		(8,190,947	)		N/A		N/A	3-7 Years

	$	103,786,024	$	611,257,694	$	1,818,658,875	$	951,218,826		$	604,893,203	$	2,776,242,196		$	3,381,135,399	$	(406,427,547	)

NOTES TO SCHEDULE III
COLONIAL REALTY LIMITED PARTNERSHIP
December 31, 2008

(1)		See description of mortgage notes payable in Note 12 of Notes to Consolidated Financial Statements.

(2)		The aggregate cost for Federal Income Tax purposes was approximately $2.5 billion at December 31, 2008.

(3)		Amounts include real estate assets classified as held for sale at December 31, 2008.

(4)		During 2008, CRLP is leasing the remaining units at these previously classified condominium conversions.

(5)		These projects are net of an impairment charge of approximately $116.9 million which was recorded during 2008.

(6)		These projects are net of an impairment charge of approximately $43.3 million which was recorded during 2007.

(7)		The following is a reconciliation of real estate to balances reported at the beginning of the year:


	Reconciliation of Real Estate
	2008			2007			2006
Real estate investments:
Balance at beginning of year	$	3,253,753,317		$	4,492,418,562		$	4,554,093,225
Acquisitions of new property		22,050,000			147,800,000			349,888,353
Improvements and development		219,240,957	(a)		342,861,295	(b)		470,553,525
Dispositions of property		(113,908,875	)		(1,729,326,540	)		(882,116,541	)


Balance at end of year	$	3,381,135,399		$	3,253,753,317		$	4,492,418,562


	Reconciliation of Accumulated Depreciation
	2008			2007			2006
Accumulated depreciation:
Balance at beginning of year	$	327,754,602		$	495,268,312		$	463,109,242
Depreciation		96,979,757			114,044,627			148,887,070
Depreciation of disposition of property		(18,306,812	)		(281,558,337	)		(116,728,000	)


Balance at end of year	$	406,427,547		$	327,754,602		$	495,268,312


(a)		This amount is net of an impairment charge of approximately $116.9 million which was recorded during 2008.

(b)		This amount is net of an impairment charge of approximately $43.3 million which was recorded during 2007.


Amounts recognized in the consolidated balance sheets	(in thousands)
	2007
Other liabilities	$	(663	)


Amounts recognized in accumulated other comprehensive income
	2007
Net (gain) loss	$	—
Prior service cost		—

Net amount recognized	$	—


Components of Net Periodic Benefit Cost	(in thousands)
	2007
Service cost	$	253
Interest cost		758
Expected return on plan assets		(611	)
Amortization of prior service cost		1
Amortization of net (gain) loss		22
Curtailment (gain) loss		33
Settlement (gain) loss		549

Net periodic benefit cost	$	1,005


Other Changes in Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income	(in thousands)
	2007
Net (gain) loss	$	(2,581	)
Prior service cost		(33	)
Amortization of prior service cost		(1	)

Total recognized in other comprehensive income	$	(2,615	)


Total recognized in net periodic benefit cost and other comprehensive income	$	(1,610	)


Estimated amortization from accumulated other comprehensive
income into net periodic pension cost over the next twelve months
	(in thousands)
Amortization of net (gain) loss	$	—
Amortization of prior service cost	$	—


†		Denotes a management contract or compensatory plan, contract or arrangement.


15(b)		Exhibits

		The list of Exhibits filed with this report is set forth in response to Item 15(a)(3). The required exhibit index has been filed with the exhibits.

15(c)		Financial Statements

		The Company files as part of this report the financial statement schedules listed on the financial statement schedule index at the end of this report.


	COLONIAL REALTY LIMITED PARTNERSHIP a Delaware limited partnership By: Colonial Properties Trust, its general partner
	By:	/s/ Thomas H. Lowder
		Thomas H. Lowder
		Chairman of the Board and Chief Executive Officer


Signature

/s/ Thomas H. Lowder Thomas H. Lowder		Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

/s/ C. Reynolds Thompson, III C. Reynolds Thompson, III		President, Chief Financial Officer and Trustee (Principal Financial Officer)

/s/ Bradley P. Sandidge Bradley P. Sandidge		Executive Vice President — Accounting (Principal Accounting Officer)

/s/ Carl F. Bailey Carl F. Bailey		Trustee

/s/ M. Miller Gorrie M. Miller Gorrie		Trustee

/s/ William M. Johnson William M. Johnson		Trustee

/s/ Glade M. Knight Glade M. Knight		Trustee

/s/ James K. Lowder James K. Lowder		Trustee

/s/ Herbert A. Meisler Herbert A. Meisler		Trustee

/s/ Claude B. Nielsen Claude B. Nielsen		Trustee

/s/ Harold W. Ripps Harold W. Ripps		Trustee

/s/ John W. Spiegel John W. Spiegel		Trustee


S-1		Consolidated Financial Statements of DRA/CLP Office LLC and Subsidiaries for the Year ended December 31, 2008 and the Period from June 13, 2007 (Date of Inception) through December 31, 2007, and Report of Independent Registered Public Accounting Firm

S-2		Consolidated Financial Statements of OZ/CLP Retail LLC and Subsidiaries for the Year ended December 31, 2008 and the Period from June 15, 2007 (Date of Inception) through December 31, 2007, and Report of Independent Registered Public Accounting Firm

S-3		Schedule II — Valuation and Qualifying Accounts and Reserves

S-4		Schedule III — Real Estate and Accumulated Depreciation


	Page(s)
Report of Independent Registered Public Accounting Firm		1

Audited Consolidated Financial Statements:

Balance Sheets		2

Consolidated Statements of Income		3

Statements of Changes in Temporary Equity and Equity		4

Statements of Cash Flows		5

Notes to Consolidated Financial Statements		6-15


	Equity			Temporary Equity
	G&I VI
	Investment
	DRA/CLP			Colonial Office
	Office, LLC			Holdings, LLC			Rollover LPs			Total
Balance — June 13, 2007 (Inception)	$	—		$	—		$	—		$	—

Issuance of redeemable common units for real estate		—			81,446			68,589			150,035

Cash proceeds from issuance of nonredeemable common units		392,938			—			—			—

Distributions		(251,175	)		(52,062	)		(43,844	)		(95,906	)

Net loss		(1,217	)		(252	)		(213	)		(465	)

Change in redemption value of redeemable common units		(5,151	)		3,083			2,068			5,151


Balance — December 31, 2007		135,395			32,215			26,600			58,815

Purchase and (sale) of redeemable common units		1,581			0			(1,581	)		(1,581	)

Distributions		(16,268	)		(3,353	)		(2,735	)		(6,088	)

Net loss		(13,048	)		(2,684	)		(2,160	)		(4,844	)

Change in redemption value of redeemable common units		28,657			(15,052	)		(13,605	)		(28,657	)


Balance — December 31, 2008	$	136,317		$	11,126		$	6,519		$	17,645


	Equity									Temporary
				Colonial Retail						Equity
	OZRE Retail LLC			Holdings LLC			Total			Rollover LP’s
Balance – Beginning of Period — June 15, 2007 (Inception)	$	—		$	—		$	—		$	—

Issuance of redeemable common units		—			—			—			21,617
Issuance of nonredeemable common units		125,248			25,917			151,165			—
Distributions		(68,025	)		(14,076	)		(82,101	)		(11,741	)
Net loss		(3,852	)		(797	)		(4,649	)		(665	)
Change in redemption value of redeemable common units		(528	)		(110	)		(638	)		638


Balance – December 31, 2007	$	52,843		$	10,934		$	63,777		$	9,849


Redemption of redeemable common units	$	(614	)	$	(127	)	$	(741	)	$	(8,368	)
Distributions		(1,851	)		(383	)		(2,234	)		(221	)
Net loss		(7,804	)		(1,615	)		(9,419	)		(497	)
Change in redemption value of redeemable common units		517			109			626			(626	)


Balance – December 31, 2008	$	43,091		$	8,918		$	52,009		$	137


					Charged to
	Beginning Balance		Charged to		Other						Balance End of
Description	of Period		Expense		Accounts			Deductions			Period
Allowance for uncollectable accounts deducted from accounts receivable in the balance sheet
2008	$	2,259		669		—			(1,929	)(1)	$	999
2007	$	1,720		1,853		—			(1,314	)(1)	$	2,259
2006	$	1,550		1,143		—			(973	)(1)	$	1,720
Allowance for uncollectable accounts deducted from notes receivable in the balance sheet
2008		—		—		1,500	(2)		—		$	1,500
2007		—		—		—			—			—
2006		—		—		—			—			—
Allowance for straight line rent deducted from other assets in the balance sheet
2008	$	330		—		175	(3)		(182	)(4)	$	323
2007	$	1,330		—		87	(3)		(1,087	)(4)	$	330
2006	$	1,140		—		522	(3)		(332	)(4)	$	1,330
Valuation allowance deducted from deferred tax assets on the balance sheet
2008		—		34,283		—			—		$	34,283
2007		—		—		—			—			—
2006		—		—		—			—			—


(1)		Uncollectible accounts written off, and payments received on previously written-off accounts

(2)		Amounts netted against other non-property related revenue in the Consolidated Statements of Operations and Comprehensive Income (Loss)

(3)		Amounts netted against miniminum rent in the Consolidated Statements of Operations and Comprehensive Income (Loss)

(4)		Amounts reversed upon sale of property or property deferred rent equals zero.


12.1		Ratio of Earnings to Fixed Charges

21.1		List of Subsidiaries

31.1		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(all dollar amounts in thousands)	For the Years Ended December 31,
	2008			2007			2006			2005			2004
Earnings:
Pre-tax income (loss) before adjustment for minority interest in consolidated subsidiaries or income, loss from equity investees, extraordinary gain or loss, or gains on sale of properties	$	(119,749	)	$	(77,474	)	$	(16,789	)	$	(47,150	)	$	2,250
Amortization of interest capitalized		3,600			2,700			2,400			1,800			1,700
Interest capitalized		(25,032	)		(27,105	)		(17,063	)		(6,907	)		(5,576	)
Distributed income of equity investees		13,344			13,207			9,370			3,588			2,148
Fixed charges		100,002			122,996			151,425			90,310			76,243


Total earnings	$	(27,835	)	$	34,324		$	129,343		$	41,641		$	76,765


Fixed Charges:
Interest expense		69,951			89,105			127,778			79,136			67,556
Capitalized interest		25,032			27,105			17,063			6,907			5,576
Debt costs amortization		5,019			6,786			6,584			4,267			3,111


Total Fixed Charges	$	100,002		$	122,996		$	151,425		$	90,310		$	76,243


Ratio of Earnings to Fixed Charges		(a	)		(a	)		(a	)		(a	)		1.0


				Jurisdiction of
Name				Formation
1.	Colonial Realty Limited Partnership (CRLP)			Delaware
	A.	Colonial Properties Services Limited Partnership		Delaware
	B.	Colonial Properties Services, Inc. (CPSI)		Alabama
		1.	Heathrow 4, LLC	Delaware
		2.	Heathrow Oakmonte, LLC	Delaware
		3.	The Colonnade/CLP Management LLC	Delaware
		4.	Colonial CPSI Colonnade LLC	Delaware
		5.	Colonial Construction Services L.L.C.	Delaware
		6.	CPSI Mizner, LLC	Delaware
		7.	Montecito Mizner, LLC	Delaware
		8.	CPSI James Island, LLC	Delaware
		9.	Montecito James Island, LLC	Delaware
		10.	CPSI Huntsville TIC Investor I LLC	Delaware
		11.	CPSI Huntsville TIC Investor II LLC	Delaware
		12.	CPSI Huntsville TIC Investor III LLC	Delaware
		13.	Walkers Chapel Road, LLC	Alabama
		14.	Highway 31 Alabaster, LLC	Alabama
		15.	Highway 31 Alabaster Two, LLC	Alabama
		16.	First Ward MB, LLC	Georgia
		17.	First Ward Residential, LLC	North Carolina
		18.	Forty Seven Canal Place, LLC	Alabama
		19.	ACG - CPSI Canyon Creek LP	Delaware
		20.	Lanesboro at Heathrow LLC	Florida
		21.	Sam Ridley, LLC	Delaware
		22.	Midtown Redevelopment Partners, LLC	North Carolina
		23.	Monterey at Lakewood Ranch, LLC	Delaware
		24.	CPSI-Winter Haven, LLC	Delaware
		25.	Regents Park LLC	Georgia
		26.	Regents Park Phase II LLC	Georgia
		27.	1755 Central Park Road Condominiums, LLC	Delaware
		28.	The Azur at Metrowest, LLC	Delaware
		29.	Capri at Hunter’s Creek Condominuims, LLC	Delaware
		30.	CPSI-UCO LLC	Alabama
		31.	CPSI-UCO Spanish Oaks, LLC	Alabama
		32.	CPSI-UCO Grander, LLC	Alabama
		33.	CPSI-UCO Cypress Village I, LLC	Alabama
		34.	CPSI-UCO Cypress Village II, LLC	Alabama
		35.	CPSI-UCO Cypress Village III, LLC	Alabama
	C.	Parkway Place Limited Partnership		Alabama
	D.	Colonial Commercial Contracting LLC		Delaware
	E.	CRLP/CMS, L.L.C.		Delaware
		1.	Mountain Brook, LLC	Alabama
		2.	CMS/Colonial Multifamily Hickory Point JV LLC	Delaware
	F.	CRLP/CMS II, L.L.C.		Delaware
		1.	Rocky Ridge, LLC	Alabama
	G.	Heathrow E, LLC		Delaware

1.		I have reviewed this annual report on Form 10-K of Colonial Realty Limited Partnership;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: February 27, 2009	By:	/s/ Thomas H. Lowder
		Thomas H. Lowder
		Chief Executive Officer of Colonial Properties Trust, the general partner of Colonial Realty Limited Partnership



Date: February 27, 2009	By:	/s/ C. Reynolds Thompson, III
		C. Reynolds Thompson, III
		President and Chief Financial Officer of Colonial Properties Trust, the general partner of Colonial Realty Limited Partnership

	(a)		The Form 10-K of Colonial Realty Limited Partnership for the period ended December 31, 2008 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(b)		Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Colonial Realty Limited Partnership.