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
OR
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 1-12358

COLONIAL PROPERTIES TRUST

(Exact name of registrant as specified in its charter)

Alabama
(State or other jurisdiction
of incorporation) 59-7007599
(IRS Employer
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
Common Shares of Beneficial Interest, $.01 par value per share	New York Stock Exchange
Depositary shares, each representing 1/10 of a share of 81/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share	New York Stock Exchange

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

None

     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 þ Accelerated filer o Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

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 the 44,438,219 Common Shares of Beneficial Interest held by non-affiliates of the Registrant was approximately $889,653,144 based on the closing price of $20.02 as reported on the New York Stock Exchange for such Common Shares of Beneficial Interest on June 30, 2008.

Number of the Registrant’s Common Shares of Beneficial Interest outstanding as of February 25, 2009: 48,606,242          

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.
	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.
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
EX-3.1
EX-3.2
EX-10.44
EX-10.45
EX-10.46
EX-10.47
EX-12.1
EX-21.1
EX-23.1
EX-23.2
EX-23.3
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Documents Incorporated by Reference

Portions of the proxy statement for the annual shareholders meeting to be held on April 22, 2009 are incorporated by reference into Part III of this report. We expect to file our 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;

•  increased exposure, as a multifamily focused real estate investment trust (“REIT”), 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 at 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 ability to continue to satisfy complex rules in order for us to maintain our status as a REIT for federal income tax purposes, the ability of our operating partnership to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of certain of our subsidiaries to maintain their status

2

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.

The Company 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 “Company”, “Colonial”, “we”, “us” and “our” refer to Colonial Properties Trust, an Alabama real estate investment trust, and one or more of its subsidiaries and other affiliates, including Colonial Realty Limited Partnership, Colonial Properties Services Limited Partnership and Colonial Properties Services, Inc. or, as the context may require, Colonial Properties Trust only or Colonial Realty Limited Partnership only.

We are a multifamily-focused self-administered equity 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 shareholders by managing commercial assets through joint venture investments and pursuing development opportunities. We are a fully-integrated real estate company, which means that we are engaged in the acquisition, development, ownership, management and leasing of multifamily communities and other commercial real estate properties. 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.

We are the direct general partner of, and as of December 31, 2008, held approximately 84.6% of the interests in, Colonial Realty Limited Partnership, a Delaware limited partnership (“CRLP” or the “Operating Partnership”). We conduct all of our business through CRLP, Colonial Properties Services Limited Partnership (“CPSLP”), which provides management services for our properties, and Colonial Properties Services, Inc. (“CPSI”), which provides management services for properties owned by third parties, including unconsolidated joint venture entities. We perform all of our for-sale residential and condominium conversion activities through CPSI.

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

3

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 Maryland on July 9, 1993. We were reorganized as an Alabama real estate investment trust in 1995. Our executive offices are located at 2101 Sixth Avenue North, Suite 750, Birmingham, Alabama, 35203 and our telephone number is (205) 250-8700.

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”). We sold to DRA our 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. We retained, through CRLP, 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”). We sold to OZRE our 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. We retained, through CRLP, 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, we 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 us to concentrate our 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, our Board of Trustees decided to accelerate plans to dispose of our for-sale

4

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, our Board of Trustees reduced the quarterly dividend rate to $0.25 per share beginning with the dividend declared for the fourth quarter of 2008. In light of recent Internal Revenue procedure changes, our Board of Trustees is currently considering paying future distributions to common shareholders, beginning in May 2009, in a combination of common shares and cash. This dividend and the alternative dividend structure are intended to allow us to retain additional capital, thereby strengthening our balance sheet. However, our Board of Trustees reserves the right to pay any future distribution entirely in cash. We will also look for opportunities to repurchase outstanding unsecured senior notes of CRLP and our 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 our common shares, preferred shares or 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 business objective as a multifamily focused REIT is to generate stable and increasing cash flow and portfolio value for our 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;

5

•  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, we expect that 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. Our Board of Trustees has approved a $500 million unsecured senior note repurchase program. We repurchased $195.0 million principal amount of unsecured senior notes of our operating partnership during 2008 at a weighted-average discount of 9.1% to par value. We will continue to selectively repurchase the unsecured debt of our operating partnership 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 our Board of Trustees 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 the distribution by a REIT 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.

6

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 Note 11 — “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. Our Board of Trustees 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.

7

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 Units/		Total
	Location		Square Feet (1)		Cost
					(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.

8

(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.

9

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.

10

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,” we have postponed any future development activities (including future development projects identified below) until we determine 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
	Location		Feet (1)		Estimated		Total Costs		to Date
			(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.

11

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, we 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 our 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 any 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
	Location		Square Feet (1)		to Date
			(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

12

					Costs
			Total Units/		Capitalized
	Location		Square Feet (1)		to Date
			(Unaudited)		(In thousands)
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

13

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 CRLP and existing holders of units in CRLP.

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,
	2008
	(Amounts in thousands)
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

14

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, our Board of Trustees 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 shareholders’ 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, was appointed to the position of Chief Executive Officer and C. Reynolds Thompson, III, formerly our Chief Executive Officer, was appointed to the positions of President and Chief Financial Officer. Mr. Lowder served as our Chief Executive Officer from July 1993 until April 2006 and has been the Chairman of our Board of Trustees since our formation in July 1993. Mr. Thompson had served as our Chief Executive Officer since April 2006 and served as our Chief Operating Officer from September 1999 to April 2006.

15

Property Dispositions

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 CRLP’s 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 $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, which we expect to record in the first quarter of 2009. We anticipate costs savings related to this reduction in force to be approximately $2.5 million in 2009.

Distribution

During January 2009, our Board of Trustees declared a cash distribution to our shareholders and the partners of CRLP 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, our Board of Trustees is currently considering paying future distributions to common shareholders, beginning in May 2009, in a combination of common shares and cash. This dividend and the alternative dividend structure would allow us to retain additional capital, thereby strengthening our balance sheet. However, our Board of Trustees reserves the right to pay any future distribution entirely in cash. Our Board of Trustees 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.

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

16

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 considered a corporation for federal income tax purposes. We qualify as a REIT and generally will not be subject to federal income tax to the extent we distribute our REIT taxable income to our shareholders. REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates. We may be subject to certain state and local taxes on our income and property. Distributions to shareholders are generally partially

17

taxable as ordinary income and long-term capital gains, and partially non-taxable as return of capital. During 2008, our total common distributions had the following overall characteristics:

Distribution Per Share	Ordinary Income			Capital Gain			Return of Capital
$0.50		31.73	%		68.27	%		0.00	%
$0.50		31.73	%		68.27	%		0.00	%
$0.50		31.73	%		68.27	%		0.00	%
$0.25		31.73	%		68.27	%		0.00	%

In addition, our 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 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 website address is www.colonialprop.com. The information contained on our 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 our 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 our website, free of charge, are our corporate governance guidelines, the charters of our governance, audit and executive compensation committees of our Board of Trustees and our code of ethics (which applies to all trustees and employees, including our principal executive officer, principal financial officer and principal accounting officer). If you are not able to access our website, the information is available in print form to any shareholder who should request the information directly from us at 1-800-645-3917.

18

Executive Officers of the Company

The following is a biographical summary of our executive officers:

Thomas H. Lowder, 59, was re-appointed Chief Executive Officer effective December 30, 2008. Mr. Lowder has served as Chairman of the Company’s Board of Trustees since the Company’s formation in July 1993. Additionally he served as President and Chief Executive Officer from July 1993 until April 2006. Mr. Lowder became President and Chief Executive Officer of Colonial Properties, Inc., the Company’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 Company 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, one of the Company’s trustees.

C. Reynolds Thompson, III, 45, has served as a trustee since 2007 and was appointed President and Chief Financial Officer effective December 30, 2008. Mr. Thompson previously served as the Company’s Chief Executive Officer since April 2006 and in the following additional positions within the Company 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 our operating segments; investment strategies; market research; due diligence; merger and acquisitions; joint venture development and cross-segment acquisitions. Prior to joining the Company, 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 our Chief Operating Officer since January 2008, and is responsible for all operations of the properties owned and/or managed by the Company. 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 us. He joined us 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 us, 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 our Executive Vice President, Multifamily since January 2008, and is responsible for the operations of all multifamily properties owned/or managed by the Company. Mr. Hutchinson previously served as Senior Vice President, Multifamily since joining the Company 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 Colonial Properties Trust from Summit Properties, (now known as Camden Property Trust), where he held the title of Vice President from 1991 until joining the Company 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.

19

John P. Rigrish, 60, has been our 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 Company, 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 our Executive Vice President, Finance since January 2008, and is responsible for all Corporate Finance and Investor Relations activities of the Company. Mr. Brewer previously served as our Senior Vice President — Corporate Treasury since September 2004. Mr. Brewer joined the Company in February 1999 and served as Vice President of Financial Reporting for the Company until September 2004 and was responsible for overseeing all of the Company’s filings with the Securities and Exchange Commission, and internal and external consolidated financial reporting. Prior to joining the Company, 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 effective January 30, 2009, and is responsible for all accounting operations of the Company 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 our Senior Vice President, Multifamily Accounting and Finance, since joining the Company in 2004, and was responsible for overseeing the accounting operations of the Company’s multifamily operations. Mr. Sandidge is a Certified Public Accountant with over 14 years of real estate experience. Prior to joining the Company, 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.

20

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 trading price of our common shares 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;

•  Risks related to our shares; 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.

21

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.

22

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 REITs require that we hold our 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 shareholders.

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, our Board of Trustees 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

23

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 shareholders’ 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

24

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 re-lease 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,

25

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.

26

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

27

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;

28

•  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 are required to perform under various financial guarantees that we 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,

29

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

30

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 shares and the total market value of our common shares and units of partnership interest of our operating partnership, based on the closing price of our 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

31

•  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, we must distribute to our shareholders each year at least 90% of our 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. 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 may result in substantial dilution of our shareholders’ 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 our 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 our common shares, preferred shares or subordinated notes. The disruptions in the financial markets have had and may continue to have a material adverse effect on the market value of our common shares and other adverse effects on us and our business.

32

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 our trustees and officers have conflicts of interest and could exercise influence in a manner inconsistent with the interests of our shareholders.

As a result of their substantial ownership of common shares and units, Messrs. Thomas Lowder, our Chairman and Chief Executive Officer, James Lowder and Harold Ripps, each of whom is a trustee, 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 our Chairman and Chief Executive Officer, and James Lowder, as a trustee, 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 our charter, our audit committee reviews and discusses with 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 Company may have adverse effects on the value of our common shares.

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

Our Declaration of Trust contains ownership limits and restrictions on transferability.  Our Declaration of Trust contains certain restrictions on the number of common shares and preferred shares that individual shareholders may own, which is intended to ensure that we maintain our qualification as a REIT. In order for us to qualify as a REIT, no more than 50% of the value of our 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, our Declaration of Trust contains provisions restricting the ownership and transfer of shares in certain circumstances. These

33

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 our outstanding shares;

•  5% in number or value (whichever is more restrictive), of our outstanding common shares and any outstanding excess shares; 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 our Board of Trustees 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.

Our Declaration of Trust permits our Board of Trustees to issue preferred shares with terms that may discourage a third party from acquiring us.  Our Declaration of Trust permits the Board of Trustees 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. Thus, the Board of Trustees 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.

Our Declaration of Trust and Bylaws contain other possible anti-takeover provisions.  Our 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 Company, and, as a result could prevent our shareholders from being paid a premium for their common shares 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 Declaration of Trust relating to the removal of trustees, the termination of the Company 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 our Board of Trustees. 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, we 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. Our Board of Trustees 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.

34

Risks Related to Our Shares

Market interest rates and low trading volume may have an adverse effect on the market value of our common shares.

The market price of shares of a REIT may be affected by the distribution rate on those shares, as a percentage of the price of the shares, relative to market interest rates. If market interest rates increase, prospective purchasers of our shares may expect a higher annual distribution rate. Higher interest rates would not, however, result in more funds for us to distribute and, in fact, would likely increase our borrowing costs and potentially decrease funds available for distribution. This could cause the market price of our common shares to go down. In addition, although our common shares are listed on the New York Stock Exchange, the daily trading volume of our shares may be lower than the trading volume for other industries. As a result, our investors who desire to liquidate substantial holdings may find that they are unable to dispose of their shares in the market without causing a substantial decline in the market value of the shares.

A large number of shares available for future sale could adversely affect the market price of our common shares and may be dilutive to current shareholders.

The sales of a substantial number of common shares, or the perception that such sales could occur, could adversely affect prevailing market prices for shares. In addition to the possibility that we may sell our shares in a public offering at any time, or issue shares pursuant to share option and share purchase plans, as of December 31, 2008 we may issue up to 8,860,971 common shares upon redemption of currently outstanding units. No prediction can be made about the effect that future distribution or sales of common shares will have on the market price of our common shares.

We may change our dividend policy.

The company intends to continue to declare quarterly distributions on its common shares. Future distributions will be declared and paid at the discretion of the company’s Board of Trustees and the amount and timing of distributions will depend upon cash generated by operating activities, the company’s financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as our Board of Trustees deem relevant. Moreover, in light of recent Internal Revenue procedure changes, our Board of Trustees is currently considering paying future distributions to common shareholders, beginning in May 2009, in a combination of common shares and cash. This dividend and the alternative dividend structure would allow us to retain additional capital, thereby strengthening our balance sheet. However, our Board of Trustees reserves the right to pay any future distribution entirely in cash. Our Board of Trustees 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.

Changes in market conditions or a failure to meet the market’s expectations with regard to our earnings and cash distributions could adversely affect the market price of our common shares.

We believe that the market value of a REIT’s equity securities is based primarily upon the market’s perception of the REIT’s growth potential and its current and potential future cash distributions, and is secondarily based upon the real estate market value of the underlying assets. For that reason, our shares may trade at prices that are higher or lower than the net asset value per share. To the extent we retain operating cash flow for investment purposes, working capital reserves or other purposes, these retained funds, while increasing the value of our underlying assets, may not correspondingly increase the market price of our common shares. In addition, we are subject to the risk that our cash flow will be insufficient to meet the required payments on our preferred shares and the Operating Partnership’s preferred units. Our failure to meet the market’s expectations with regard to future earnings and cash distributions would likely adversely affect the market price of our shares.

The stock markets, including The New York Stock Exchange (NYSE), on which we list our common shares, have experienced significant price and volume fluctuations. As a result, the market price of our common shares could be similarly volatile, and investors in our common shares may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. Among the market conditions that may affect the market price of our publicly traded securities are the following:

•  our financial condition and operating performance and the performance of other similar companies;

35

•  actual or anticipated differences in our quarterly operating results;

•  changes in our revenues or earnings estimates or recommendations by securities analysts;

•  publication of research reports about us or our industry by securities analysts;

•  additions and departures of key personnel;

•  strategic decisions by us or our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;

•  the reputation of REITs generally and the reputation of REITs with portfolios similar to ours;

•  the attractiveness of the securities of REITs in comparison to securities issued by other entities (including securities issued by other real estate companies);

•  an increase in market interest rates, which may lead prospective investors to demand a higher distribution rate in relation to the price paid for our shares;

•  the passage of legislation or other regulatory developments that adversely affect us or our industry;

•  speculation in the press or investment community;

•  actions by institutional shareholders or hedge funds;

•  changes in accounting principles;

•  terrorist acts; and

•  general market conditions, including factors unrelated to our performance.

In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.

Risks Associated with Income Tax Laws

Our failure to qualify as a REIT would decrease the funds available for distribution to our shareholders and adversely affect the market price of our common shares.

We believe that we have qualified for taxation as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 1993. We intend to continue to meet the requirements for taxation as a REIT, but we cannot assure shareholders that we will qualify as a REIT. We have not requested and do not plan to request a ruling from the IRS that we qualify as a REIT, and the statements in this Form 10-K are not binding on the IRS or any court. As a REIT, we generally will not be subject to federal income tax on our income that we distribute currently to our shareholders. Many of the REIT requirements are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances that may not be totally within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from sources that are itemized in the REIT tax laws. We generally are 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.” We are also required to distribute to shareholders at least 90% of our REIT taxable income (excluding capital gains). The fact that we hold most of our assets through the Operating Partnership further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our 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 us to remain qualified as a REIT.

If we fail to qualify as a REIT for federal income tax purposes, and are unable to avail ourselves of certain savings provisions set forth in the Internal Revenue Code, we would be subject to federal income tax at regular corporate rates. As a taxable corporation, we would not be allowed to take a deduction for distributions to shareholders in computing our taxable income or pass through long term capital gains to individual shareholders at favorable rates. We also could be subject to the federal alternative minimum tax and possibly increased state and local taxes. We would not be able to elect to be taxed as a REIT for four years following the year we first failed to qualify unless the IRS were to grant us relief under certain statutory provisions. If we failed to qualify as a REIT, we would have to pay significant income taxes, which would reduce our net earnings available for investment or

36

distribution to our shareholders. This likely would have a significant adverse effect on our earnings and the value of our common shares. In addition, we would no longer be required to pay any distributions to shareholders. If we fail to qualify as a REIT for federal income tax purposes and are able to avail ourselves of one or more of the statutory savings provisions in order to maintain our REIT status, we would nevertheless be required to pay penalty taxes of at least $50,000 or more for each such failure. Moreover, our 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 we qualify as a REIT, we will be required to pay some taxes (particularly related to our taxable REIT subsidiary).

Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income (including capital gains). Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. However, we will not be treated as a dealer in real property with respect to a property that we sell for the purposes of the 100% tax if (i) we have held the property for at least two years for the production of rental income prior to the sale, (ii) capitalized expenditures on the property in the two years preceding the sale are less than 30% of the net selling price of the property, and (iii) we either (a) have seven or fewer sales of property (excluding certain property obtained through foreclosure) for the year of sale or (b) the aggregate tax basis of property sold during the year of sale is 10% or less of the aggregate tax basis of all of our assets as of the beginning of the taxable year or (c) the fair market value of the property sold during the year of sale is 10% or less of the aggregate fair market value of all of our assets as of the beginning of the taxable year and in the case of (b) or (c), substantially all of the marketing and development expenditures with respect to the property sold are made through an independent contractor from whom we derive no income. The sale of more than one property to one buyer as part of one transaction constitutes one sale for purposes of this “safe harbor.” We intend to hold our properties, and CRLP intends to hold its properties, for investment with a view to long-term appreciation, to engage in the business of acquiring, developing, owning and operating properties, and to make occasional sales of properties as are consistent with our investment objectives. However, not all of our sales will satisfy the “safe harbor” requirements described above. Furthermore, there are certain interpretive issues related to the application of the “safe harbor” that are not free from doubt under the federal income tax law. While we acquire and hold our properties with an investment objective and do not believe they constitute dealer property, we cannot provide any assurance that the IRS might not contend that one or more of these sales are subject to the 100% penalty tax or that the IRS would not challenge our interpretation of, or any reliance on, the “safe harbor” provisions.

In addition, 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 our taxable REIT subsidiaries, will be subject to federal and possibly state corporate income tax. We have elected to treat Colonial Properties Services, Inc. as a taxable REIT subsidiary, and we 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 our income even though as a REIT we are 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 are required to pay federal, state and local taxes, we will have less cash available for distributions to our shareholders.

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 meet the distribution requirements of a REIT.

37

Accordingly, we could be required to borrow funds or liquidate investments on adverse terms in order to meet these distribution requirements.

Tax Elections Regarding Distributions May Impact our Future Liquidity.

Under certain circumstances, we may make a tax election to treat future distributions to shareholders as distributions in the current year. This election may allow us to avoid increasing our dividends or paying additional income taxes in the current year. However, this could result in a constraint on our ability to decrease our dividends in future years without creating risk of either violating the REIT distribution requirements or generating additional income tax liability.

Item 1B.   Unresolved Staff Comments.

None.

38

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.

39

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
Consolidated Multifamily		Year	of		Rentable Area		Percent			Rate
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				—		—		—			—
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

40

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

41

(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
Unconsolidated Multifamily		Year		of		Rentable Area		Percent			Rate
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.

42

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.

43

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
Consolidated		Year		Area		Percent			Annualized		Leased
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
Unconsolidated		Year		Area		Percent			Annualized		Leased
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

44

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

45

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

46

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

47

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
			Year		GRA (Sq Ft)		GRA (Sq Ft)		Number					Total		Leased
Consolidated			Completed		CLP		Anchor		Of		Percent			Annualized		Square
Retail Property(1)	Location		(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.

48

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
Unconsolidated			Year		CLP		Anchor		Of		Percent			Annualized		Square
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.

49

(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.

50

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.

51

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)		NRA		GRA
State	(1)		(Office)(2)		(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

52

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.

							Anticipated Annual
				Principal Balance			Debt Service				Balance Due on
Property(1)	Interest Rate			(as of 12/31/08)			(1/1/09 - 12/31/09)		Maturity Date		Maturity
	(dollars in thousands)
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 shareholders during the fourth quarter of 2008.

53

PART II

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

Our common shares are traded on the New York Stock Exchange under the symbol “CLP”. The following sets forth the high and low sale prices for the common shares for each quarter in the two-year period ended December 31, 2008, as reported by the New York Stock Exchange Composite Tape, and the distributions paid by us with respect to each such period.

Calendar Period	High		Low		Distribution
2008:
First Quarter	$	27.44	$	19.46	$	0.50
Second Quarter	$	26.35	$	19.11	$	0.50
Third Quarter	$	21.66	$	16.70	$	0.50
Fourth Quarter	$	18.84	$	3.43	$	0.25
2007:
First Quarter	$	50.09	$	43.59	$	0.68
Second Quarter(1)	$	50.20	$	35.27	$	11.43
Third Quarter	$	38.87	$	31.44	$	0.68
Fourth Quarter	$	37.49	$	21.35	$	0.50

(1) Includes a special distribution paid during the second quarter of 2007 of $10.75 (see Note 2 to our Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K).

On February 25, 2009, the last reported sale price of the common shares on the New York Stock Exchange was $4.54. On February 25, 2009, we had approximately 3,900 shareholders of record.

In addition to the 564,515 common shares of beneficial interest issued in exchange for common units of CRLP previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on November 12, 2008, during November and December 2008, the Company issued an aggregate of 103,960 common shares of beneficial interest in exchange for an equivalent number of common units of CRLP. The following table sets forth the specific dates and number of shares issued upon exchange of the 103,960 common units of CRLP:

	Units Exchanged/
Date	Shares Issued
November 24, 2008		11,730
December 2, 2009		60,000
December 7, 2008		10,500
December 8, 2008		10,000
December 9, 2008		11,730

The units were tendered for redemption by certain limited partners of CRLP in accordance with the terms of the agreement of limited partnership of CRLP. These common shares were issued in private placement transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, based on an exchange ratio of one common share for each common unit of CRLP.

We intend to continue to declare quarterly distributions on our common shares. In order to maintain our qualification as a REIT, we must make annual distributions to shareholders of at least 90% of our taxable income. Future distributions will be declared and paid at the discretion of our Board of Trustees and the amount and timing of distributions will depend upon cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as our Board of Trustees deem relevant. Moreover, in light of recent Internal Revenue procedure changes, our Board of Trustees is currently considering paying future distributions to common shareholders, beginning in May 2009, in a combination of common shares and cash. This dividend and the alternative dividend structure would allow us to retain additional capital, thereby strengthening our balance sheet. However, our Board of Trustees reserves the right to pay any future distribution entirely in cash. Our Board of Trustees 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.

54

Issuer Purchases of Equity Securities

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

					Shares Purchased as		Maximum Number of
	Total Number of Shares				Part of Publicly		Shares that may yet
	Purchased		Average Price Paid		Announced Plans or		be Purchased Under
	(1)		per Share		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 shares acquired by us from employees as payment of applicable statutory minimum withholding taxes owed upon vesting of restricted stock granted under our Third Amended and Restated Stock Option and Restricted Stock Plan.

Performance Graph

The following graph compares the percentage change in the cumulative total shareholder return on our common shares with the cumulative total return of the S&P 500 Stock Index and the NAREIT Equity Index for the period December 31, 2003 through December 31, 2008, assuming an initial investment of $100 on December 31, 2003 in stock or index, including reinvestment of dividends. The share performance shown on the graph is not necessarily indicative of future performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Colonial Properties Trust, The S&P 500 Index

And the FTSE NAREIT Equity Index

* $100 invested on 12/31/03 in stock or index-including reinvestment of dividends. Fiscal year ending December 31.

55

Item 6.   Selected Financial Data.

The following table sets forth selected financial and operating information on a historical basis 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).

	2008			2007			2006			2005			2004
	(In thousands, except per share data)
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 and other losses		116,550			44,129			1,600			—			—
Other operating		185,719			229,859			223,349			159,282			95,625
Income (loss) from operations		(63,323	)		28,799			97,539			71,164			68,822
Interest expense		75,153			92,475			121,441			112,798			64,107
Interest income		2,776			8,359			7,754			4,354			1,046
Gains from sales of property		3,799			314,217			66,794			105,608			4,748
Other income, net		29,083			10,393			33,292			(834	)		4,716
Income (loss) from continuing operations		(90,039	)		275,072			72,208			48,210			9,679
Income from discontinued operations		43,410			80,829			131,271			171,431			44,940
Dividends to preferred shareholders		8,773			13,439			20,902			22,391			14,781
Distributions to preferred unitholders		7,251			7,250			7,250			7,250			7,493
Net income (loss) available to common shareholders		(55,429	)		342,102			180,449			197,250			39,838
Per share — basic:
Income (loss) from continuing operations	$	(2.09	)	$	5.64		$	1.08		$	0.68		$	(0.19	)
Income from discontinued operations		0.92			1.74			2.89			4.50			1.66
Net income per share — basic	$	(1.17	)	$	7.38		$	3.97		$	5.18		$	1.47
Per share — diluted:
Income (loss) from continuing operations	$	(2.09	)	$	5.56		$	1.07		$	0.68		$	(0.19	)
Income from discontinued operations		0.92			1.72			2.85			4.45			1.66
Net income per share — diluted	$	(1.17	)	$	7.28		$	3.92		$	5.13		$	1.47
Dividends declared per common share(1)	$	1.75		$	13.29		$	2.72		$	2.70		$	2.68
BALANCE SHEET DATA
Land, buildings and equipment, net	$	2,594,034		$	2,394,589		$	3,562,954		$	3,888,932		$	2,426,381
Total assets		3,155,169			3,229,830			4,431,777			4,499,258			2,801,343
Total long-term liabilities		1,762,019			1,641,839			2,397,906			2,494,350			1,855,787
OTHER DATA
Funds from operations(2)*	$	1,637		$	101,192		$	215,460		$	177,931		$	137,610
Total market capitalization(3)		2,440,502			3,162,836			5,386,888			5,242,012			3,621,947
Cash flow provided by (used in) Operating activities		117,659			99,030			171,796			154,174			139,241
Investing activities		(167,497	)		657,456			135,418			(310	)		(446,035	)
Financing activities		(34,010	)		(751,100	)		(250,182	)		(133,974	)		309,449
Total properties (at end of year)		192			200			223			261			153

(1) For 2007, includes a special distribution paid of $10.75 per share 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).

56

(2)	Funds from Operations (FFO), as defined by the National Association of Real Estate Investment Trusts (NAREIT), means income (loss) before minority interest (determined in accordance with GAAP), excluding gains (losses) from debt restructuring and sales of depreciated property, plus real estate depreciation and after adjustments for unconsolidated partnerships and joint ventures. FFO is presented to assist investors in analyzing our performance. We believe that FFO is useful to investors because it provides an additional indicator of our financial and operating performance. This is because, by excluding the effect of real estate depreciation and gains (or losses) from sales of properties (all of which are based on historical costs which may be of limited relevance in evaluating current performance), FFO can facilitate comparison of operating performance among equity REITs. FFO is a widely recognized measure in the company’s industry. We believe that the line on its consolidated statement of operations entitled “net income available to common shareholders” is the most directly comparable GAAP measure to FFO. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income. Management believes that the use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. In addition to company management evaluating the operating performance of its reportable segments based on FFO results, management uses FFO and FFO per share, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to key employees. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO should not be considered (A) as an alternative to net income (determined in accordance with GAAP), (B) as an indicator of financial performance, (C) as cash flow from operating activities (determined in accordance with GAAP) or (D) as a measure of liquidity nor is it indicative of sufficient cash flow to fund all of the company’s needs, including our ability to make distributions.
(3)	Total market capitalization is defined as the market value of outstanding common shares of the Company and operating partnership units of CRLP, plus the market value of preferred equity and outstanding principal balance of consolidated debt of the Company. This amount was calculated assuming the conversion of 8,860,971, 10,052,778, 10,579,261, 10,872,568 and 10,372,650 operating partnership units in CRLP into the Company’s common shares as of December 31, 2008, 2007, 2006, 2005, and 2004, respectively, based on the closing price of our common shares on the last trading day of the applicable year.
*	Non-GAAP financial measure. See Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds from Operations” for reconciliation.

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 the Company 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.

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.

We are the direct general partner of, and as of December 31, 2008, held approximately 84.6% of the interests in, Colonial Realty Limited Partnership, a Delaware limited partnership (“CRLP”). We conduct all of our business through CRLP, Colonial Properties Services Limited Partnership (“CPSLP”), which provides management services for our properties, and Colonial Properties Services, Inc. (“CPSI”), which provides management services for properties owned by third parties.

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

57

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, our Board of Trustees 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, our Board of Trustees is currently considering paying future distributions to common shareholders, beginning in May 2009, in a combination of common shares and cash. This dividend and the alternative dividend structure would allow us to retain additional capital, thereby strengthening our balance sheet. However, our Board of Trustees reserves the right to pay any future distribution entirely in cash. Our Board of Trustees 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. We also intend to look for opportunities to repurchase additional outstanding unsecured senior notes and Series D preferred depositary shares at appropriate prices and as circumstances warrant. 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, 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, the Company may contemplate strategically repurchasing its publicly traded unsecured debt at a discount to par and may consider paying a portion of the 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

58

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 shareholders of $(55.4) million, or $(1.17) per diluted share, compared with net income of $342.1 million, or $7.28 per diluted share, 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 our results from operations, results for the prior year include a gain recognized from the office and retail joint venture transactions that occurred in the second quarter of 2007, partially offset by the impairment charges of $43.3 million.

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;

•  We repurchased 988,750 of our outstanding 81/8% Series D Preferred depositary shares for an aggregate purchase price of $24.0 million at a 3% discount to the liquidation preference price. 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.

59

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
	2008			2007			2006			2008 v 2007			2007 v 2006
	(Amounts in thousands)
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			8,359			7,754			(5,583	)		605
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			314,217			66,794			(310,418	)		247,423
Income taxes and other		1,001			15,743			(189	)		(14,742	)		15,932
Total other income (expense)		(39,495	)		247,033			(7,365	)		(286,528	)		254,398
Income (loss) before minority interest and discontinued operations		(102,818	)		275,832			90,174			(378,650	)		185,658
Minority interest of limited partners		15			(1,335	)		766			1,350			(2,101	)
Minority interest in CRLP — common unitholders		20,015			7,825			(11,482	)		12,190			19,307
Minority interest in CRLP — preferred unitholders		(7,251	)		(7,250	)		(7,250	)		(1	)		—
Income (loss) from continuing operations		(90,039	)		275,072			72,208			(365,111	)		202,864
Income from discontinued operations		43,410			80,829			131,271			(37,419	)		(50,442	)
Net income (loss)		(46,629	)		355,901			203,479			(402,530	)		152,422
Dividends to preferred shareholders		(8,773	)		(13,439	)		(20,902	)		4,666			7,463
Preferred share issuance costs write-off, net of discount		(27	)		(360	)		(2,128	)		333			1,768
Net income (loss) available to common shareholders	$	(55,429	)	$	342,102		$	180,449		$	(397,531	)	$	161,653

60

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.

61

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, we 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.

62

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 the conclusion that it is probable that we will not make interest payments associated with previously hedged debt as a result of repurchases under our senior note repurchase program.

Gains from sales of property

Gains from sales of property for the year ended December 31, 2008 was $3.8 million, a decrease of $310.4 million from the comparable prior year period. The decrease was primarily the result of a reduction in property sales in 2008 compared to 2007. In 2007, we recognized net gains of approximately $276.5 million in connection with the sale of our 69.8% interest in the DRA/CLP JV and our 69.8% interest in the OZRE JV during June 2007 as a part of our strategic transactions.

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 $43.4 million, a decrease of $37.4 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

63

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.

Dividends to preferred shareholders

Dividends to preferred shareholders for the year ended December 31, 2008 was $8.8 million, a decrease of $4.7 million from the comparable prior year period. The decrease was the result of the repurchase of 988,750 shares of our outstanding 81/8% Series D preferred depositary shares during 2008 and the redemption of the outstanding Series E Cumulative Redeemable Preferred Shares of Beneficial Interest on May 30, 2007.

Operating Results — 2007 compared to 2006

Minimum rent

Minimum rent for the year ended December 31, 2007 was $320.2 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.

64

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.

65

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 was $314.2 million, an increase of $247.4 million from the comparable prior year period, which represents an increase of $247.4 million primarily as a result of net gains of approximately $276.5 million recognized in connection with the sale of our 69.8% interest in the DRA/CLP JV and our 69.8% interest in the OZRE JV during June 2007 as part of our strategic transactions. The remaining gains in 2007 relate to the outright sale of 12 multifamily communities and 15 retail assets and the sale of our 90% interest in Village on the Parkway in 2007. 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. We also recognized additional gain of $8.5 million representing previously deferred gain related to the office and retail joint venture transactions attributable to a reduction in certain obligations and contingencies with the newly formed entities.

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 $50.4 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 $1.8 million) 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

66

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.

Dividends to preferred shareholders

Dividends to preferred shareholders 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. 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, our Board of Trustees 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 shareholders’ 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, which are currently anticipated to result in costs 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.

67

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2008 increased to $115.9 million from $99.0 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 (i.e., decreases in prepaid expenses and other assets coupled with increases in accounts payable), partially 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 we expect to be partially offset by reduced overhead expenses.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2008 was $165.7 million compared to net cash provided of $657.5 million for the comparable prior year period. The change was primarily due to the disposition activity as a result of the office and retail joint venture transactions that occurred in June 2007. In addition, the $50.8 million decrease in repayments of notes receivable and the $67.4 million decrease in distributions from unconsolidated entities was primarily a result of debt proceeds received from the office and retail joint ventures during the year ended December 31, 2007. 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 $34.0 million from $751.0 million for the comparable prior year period. The decrease was primarily due to $506.5 million used to fund 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. 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 81/8% Series D preferred depositary shares in privately negotiated transactions during the year ended December 31, 2008. For 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 having to access the capital markets in 2009.

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 shareholders and holders of partnership units in CRLP. 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

68

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 issuance of our common shares, preferred shares or 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.

We have 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 we qualify for taxation as a REIT, we generally will not be subject to Federal income tax to the extent we distribute at least 90% of our REIT taxable income to our shareholders. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property and to federal income and excise taxes on our undistributed income.

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, 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 having to access 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.

Our 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 our company and the current trading price of our 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 our common shares, to fluctuate substantially and have adversely affected the market value of our 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 our common shares, preferred shares or 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.

69

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 dividend on our common shares was $0.50 per share per quarter for the first three quarters of 2008 and $0.25 per share for the fourth quarter of 2008, or $1.75 per share during 2008. The reduced dividend will allow us to retain more capital, thereby improving our balance sheet. We also pay regular quarterly dividends on our preferred shares and units. The maintenance of these dividends is subject to various factors, including the discretion of our Board of Trustees, our ability to pay dividends under Alabama law, the availability of cash to make the necessary dividend payments and the effect of REIT distribution requirements, which require at least 90% of our taxable income to be distributed to shareholders. We also make regular quarterly distributions on units in our operating partnership.

Moreover, in light of recent Internal Revenue procedure changes, our Board of Trustees is currently considering paying future distributions to common shareholders, beginning in May 2009, in a combination of common shares and cash. This dividend and the alternative dividend structure would allow us to retain additional capital, thereby strengthening our balance sheet. However, our Board of Trustees reserves the right to pay any future distribution entirely in cash. Our Board of Trustees 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

70

borrowings on our unsecured credit facility, 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 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, CRLP, with the Trust as guarantor, has 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 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, 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, however, no assurance can be given that we will be able to remain in compliance with these covenants particularly given the ongoing recession and continued uncertainty in the stock and credit markets.

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

71

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, our Board of Trustees authorized the repurchase of up to $25.0 million of our 81/8% 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 our 81/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share. During 2008, we repurchased 988,750 shares of our outstanding 81/8% 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. We 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, our Board of Trustees authorized a repurchase program which allows us to repurchase up to an additional $25.0 million of our outstanding 81/8% Series D preferred depositary shares over a 12 month period. 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 us 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. We will continue to monitor the equity markets and repurchase preferred shares if the repurchases meet our required criteria, as funds are available. If we were to repurchase outstanding Series D depositary shares, we 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, our Board of Trustees authorized us to repurchase up to $50.0 million of outstanding unsecured senior notes of CRLP. On April 2008, our Board of Trustees authorized a senior note repurchase program to allow us to repurchase up to an additional $200.0 million of outstanding unsecured senior notes of CRLP from time to time through December 31, 2009. In December 2008, our Board of Trustees 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.

72

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.

73

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
	2009		2010		2011		2012		2013		Thereafter		Total		Value
	(In thousands)
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 shareholders’ 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

74

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.

75

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
	Total		2009		2010		2011		2012		2013		Thereafter
	(In thousands)
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
	Committed		2009		2010		2011		2012		2013		Thereafter
	(In thousands)
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

76

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.

77

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 the Company 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 the Company.

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

78

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 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, 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

79

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

80

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.

81

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 — We currently sponsor 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, 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.” 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 defines an operating segment as a component of an enterprise that engages in

82

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 Statement of Financial Accounting Standards 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

83

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 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 it will continue to classify our noncontrolling interest as “temporary equity” in our consolidated balance sheet. We are 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, 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.

84

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 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. 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, among 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 debt (82%). As it relates to the short-term, an increase in interest expense resulting from increasing inflation is anticipated to be less than future increases in income before interest.

Funds from Operations

Funds from Operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (NAREIT), means income (loss) before minority interest (determined in accordance with GAAP), excluding gains (losses) from debt restructuring and sales of depreciated property, plus real estate depreciation and after adjustments for unconsolidated partnerships and joint ventures. FFO is presented to assist investors in analyzing our performance. We believe that FFO is useful to investors because it provides an additional indicator of our financial and operating performance. This is because, by excluding the effect of real estate depreciation and gains (or losses) from sales of properties (all of which are based on historical costs which may be of limited relevance in evaluating current performance), FFO can facilitate comparison of operating performance among equity REITs. FFO is a widely recognized measure in the company’s industry. We believe that the line on our consolidated statement of operations entitled “net income available to common shareholders” is the most directly comparable GAAP measure to FFO. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of

85

REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income. Management believes that the use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. In addition to company management evaluating the operating performance of our reportable segments based on FFO results, management uses FFO and FFO per share, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to key employees. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO should not be considered (1) as an alternative to net income (determined in accordance with GAAP), (2) as an indicator of financial performance, (3) as cash flow from operating activities (determined in accordance with GAAP) or (4) as a measure of liquidity nor is it indicative of sufficient cash flow to fund all of the company’s needs, including our ability to make distributions.

The following information is provided to reconcile net income available to common shareholders, the most comparable GAAP financial measure, to FFO, and to show the items included in our FFO for the years ended December 31, 2008, 2007, 2006, 2005 and 2004.

	2008			2007			2006			2005			2004
	(In thousands, except per share and unit data)
Net income (loss) available to common shareholders	$	(55,429	)	$	342,102		$	180,449		$	197,250		$	39,837
Adjustments (consolidated):
Minority interest in CRLP		(11,225	)		10,099			42,135			56,578			15,202
Minority interest in gain on sale of undepreciated property		—			1,340			1,967			5,241			—
Real estate depreciation		101,035			112,475			147,898			135,121			90,659
Real estate amortization		1,272			9,608			21,915			58,029			9,482
Consolidated gains from sales of property, net of income tax and minority interest		(49,851	)		(401,420	)		(201,413	)		(288,621	)		(18,473	)
Gains from sales of undepreciated property, net of income tax and minority interest		7,335			20,240			44,502			8,063			3,313
Adjustments (unconsolidated subsidiaries):
Real estate depreciation		18,744			16,563			15,576			7,501			4,562
Real estate amortization		8,699			7,481			5,713			969			89
Gains from sales of property		(18,943	)		(17,296	)		(43,282	)		(2,200	)		(7,061	)
Funds from operations	$	1,637		$	101,192		$	215,460		$	177,931		$	137,610
Funds from operations per share and unit — basic	$	0.03		$	1.78		$	3.84		$	3.65		$	3.67
Funds from operations per share and unit — diluted	$	0.03		$	1.76		$	3.80		$	3.62		$	3.64
Weighted average common shares outstanding — basic		47,231			46,356			45,484			38,071			27,121
Weighted average partnership units outstanding — basic(1)		9,673			10,367			10,678			10,740			10,347
Weighted average shares and units outstanding — basic		56,904			56,723			56,162			48,811			37,468
Effect of diluted securities		—			653			536			391			341
Weighted average shares and units outstanding — diluted		56,904			57,376			56,698			49,202			37,809

(1) Represents the weighted average of outstanding units of minority interest in CRLP.

86

Item 7A.   Quantitative and Qualitative Disclosures about Market Risk

The information required by this item is incorporated by reference from “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk”.

Item 8.   Financial Statements and Supplementary Data

The following are filed as a part of this report:

Financial Statements:

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 Shareholders’ 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

87

COLONIAL PROPERTIES TRUST

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2008			2007
	(In thousands, except per share data)
ASSETS
Land, buildings and equipment	$	2,897,779		$	2,431,082
Undeveloped land and construction in progress		380,676			531,410
Less: Accumulated depreciation		(406,444	)		(290,134	)
Real estate assets held for sale, net		102,699			253,641
Net real estate assets		2,974,710			2,925,999
Cash and cash equivalents		9,185			93,033
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			15,636
Investment in partially-owned unconsolidated entities		46,221			69,682
Deferred tax asset		9,311			19,897
Other assets		37,813			30,443
Total assets	$	3,155,169		$	3,229,830
LIABILITIES AND SHAREHOLDERS’ 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		53,565			69,051
Accrued interest		20,717			23,064
Accrued expenses		7,521			16,425
Other liabilities		38,890			19,123
Total liabilities		1,882,712			1,769,502
Minority interest:
Preferred units		100,000			100,000
Common units		165,753			217,104
Limited partners’ interest in consolidated partnership		1,943			2,439
Total minority interest		267,696			319,543
Preferred shares of beneficial interest, $.01 par value, 20,000,000 shares authorized:
81/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25 per depositary share, 4,011,250 and 5,000,000 depositary shares issued and outstanding at
December 31, 2008 and 2007, respectively		4			5
Common shares of beneficial interest, $.01 par value, 125,000,000 shares authorized; 54,169,418 and 52,839,699 shares issued at December 31, 2008 and 2007, respectively		542			528
Additional paid-in capital		1,578,992			1,577,030
Cumulative earnings		1,281,330			1,320,710
Cumulative distributions		(1,700,739	)		(1,601,267	)
Treasury shares, at cost; 5,623,150 shares at December 31, 2008 and 2007		(150,163	)		(150,163	)
Accumulated other comprehensive loss		(5,205	)		(6,058	)
Total shareholders’ equity		1,004,761			1,140,785
Total liabilities and shareholders’ equity	$	3,155,169		$	3,229,830

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

88

COLONIAL PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data)

				For The Years Ended
	December 31,			December 31,			December 31,
	2008			2007			2006
Revenue:
Minimum rent	$	276,039		$	319,141		$	362,297
Minimum 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 and debt cost amortization		(75,153	)		(92,475	)		(121,441	)
Gains (losses) on retirement of debt		15,951			(10,363	)		(641	)
Interest income		2,776			8,359			7,754
Income from partially-owned unconsolidated entities		12,516			11,207			34,823
Gains (losses) 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			314,217			66,794
Income taxes and other		1,001			15,743			(189	)
Total other income (expense)		(39,495	)		247,033			(7,365	)
Income (loss) before minority interest and discontinued operations		(102,818	)		275,832			90,174
Minority interest in CRLP — common unitholders		20,015			7,825			(11,482	)
Minority interest in CRLP — preferred unitholders		(7,251	)		(7,250	)		(7,250	)
Minority interest of limited partners		15			(1,335	)		766
Income (loss) from continuing operations		(90,039	)		275,072			72,208
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 in CRLP from discontinued operations		(8,790	)		(17,923	)		(30,653	)
Minority interest of limited partners in discontinued operations		(95	)		(3,989	)		(2,591	)
Income from discontinued operations		43,410			80,829			131,271
Net income (loss)		(46,629	)		355,901			203,479
Dividends to preferred shareholders		(8,773	)		(13,439	)		(20,902	)
Preferred share issuance costs write-off		(27	)		(360	)		(2,128	)
Net income (loss) available to common shareholders	$	(55,429	)	$	342,102		$	180,449
Net income (loss) per common share — basic:
Income (loss) from continuing operations	$	(2.09	)	$	5.64		$	1.08
Income from discontinued operations		0.92			1.74			2.89
Net income (loss) per common share — basic	$	(1.17	)	$	7.38		$	3.97
Net income (loss) per common share — diluted:
Income (loss) from continuing operations	$	(2.09	)	$	5.56		$	1.07
Income from discontinued operations		0.92			1.72			2.85
Net income (loss) per common share — diluted	$	(1.17	)	$	7.28		$	3.92
Weighted average common shares outstanding — basic		47,231			46,356			45,484
Weighted average common shares outstanding — diluted		47,231			47,009			46,020
Net income (loss)	$	(46,629	)	$	355,901		$	203,479
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)	$	(46,729	)	$	357,981		$	200,689

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

89

COLONIAL PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except per share data)

For the Years Ended December 31, 2008, 2007 and 2006
	Preferred Shares of						Common Shares of					Additional												Deferred			Accumulated Other			Total
	Beneficial Interest						Beneficial Interest					Paid-In			Cumulative			Cumulative			Treasury			Compensation on			Comprehensive			Shareholders’
	Shares			Par Value			Shares			Par Value		Capital			Earnings			Distributions			Shares			Restricted Shares			Loss			Equity
Balance December 31, 2005		2,553		$	26			50,638		$	506	$	1,684,853		$	747,186		$	(803,133	)	$	(150,163	)	$	(3,646	)	$	(915	)	$	1,474,714
Distributions on common shares ($2.72 per share)																			(124,286	)											(124,286	)
Distributions on preferred shares																			(23,036	)											(23,036	)
Distributions on preferred units of Colonial Realty Limited Partnership																			(7,250	)											(7,250	)
Income before preferred unit distributions																210,733															210,733
Adoption of SFAS No. 123R													(3,821	)											3,646						(175	)
Issuance of Restricted Common Shares of Beneficial Interest								188			2		924																		926
Amortization of stock based compensation													5,488																		5,488
Redemption of Series C preferred shares of beneficial interest		(2,000	)		(20	)							(48,110	)																	(48,130	)
Redemption of Series E preferred shares of beneficial interest		(14	)										(28,334	)																	(28,334	)
Cancellation of vested restricted shares to pay taxes								(26	)				(1,001	)																	(1,001	)
Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan								426			4		18,324																		18,328
Issuance of common shares of beneficial interest through options exercised								243			3		9,144																		9,147
Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership								299			3		13,128																		13,131
Unrealized loss on derivative financial instruments																												(3,029	)		(3,029	)
Reclassification adjustment for amounts included in net income																												(2,386	)		(2,386	)
Adoption of SFAS No. 158																												(2,615	)		(2,615	)
Change in the additional minimum pension liability																												239			239
Adjustments to minority interest in Colonial Realty Limited Partnership at dates of capital transactions													(5,896	)																	(5,896	)
Balance December 31, 2006		539		$	6			51,768		$	518	$	1,644,699		$	957,919		$	(957,705	)	$	(150,163	)	$	—		$	(8,706	)	$	1,486,568
Distributions on common shares ($2.54 per share)																			(116,358	)											(116,358	)
Distributions on preferred shares																			(13,439	)											(13,439	)
Special Distribution																			(506,515	)											(506,515	)
Distributions on preferred units of Colonial Realty Limited Partnership																			(7,250	)											(7,250	)
Income before preferred unit distributions																362,791															362,791
Issuance of Restricted Common Shares of Beneficial Interest								224			2		5,363																		5,365
Amortization of stock based compensation													6,727																		6,727
Redemption of Series E preferred shares of beneficial interest		(39	)		(1	)							(104,436	)																	(104,437	)
Cancellation of vested restricted shares to pay taxes								(9	)				(1,207	)																	(1,207	)
Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan								200			2		9,811																		9,813
Issuance of common shares of beneficial interest through options exercised								131			1		3,568																		3,569
Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership								526			5		(2,279	)																	(2,274	)
Unrealized loss on derivative financial instruments																												(535	)		(535	)
Reclassification adjustment for amounts included in net income																												568			568
Termination of pension plan																												2,615			2,615
Adjustments to minority interest in Colonial Realty Limited Partnership at dates
of capital transactions													14,784																		14,784
Balance December 31, 2007		500		$	5			52,840		$	528	$	1,577,030		$	1,320,710		$	(1,601,267	)	$	(150,163	)	$	—		$	(6,058	)	$	1,140,785
Distributions on common shares ($1.75 per share)																			(83,421	)											(83,421	)
Distributions on preferred shares																			(8,800	)											(8,800	)
Distributions on preferred units of Colonial Realty Limited Partnership																			(7,251	)											(7,251	)
Income before preferred unit distributions																(39,380	)														(39,380	)
Issuance of Restricted Common Shares of Beneficial Interest								112			1		(2,416	)																	(2,415	)
Amortization of stock based compensation													4,556																		4,556
Redemption of Series D preferred shares of beneficial interest		(99	)		(1	)							(23,843	)																	(23,844	)
Cancellation of vested restricted shares to pay taxes								(32	)				(710	)																	(710	)
Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan								26			1		575																		576
Issuance of common shares of beneficial interest through options exercised								33					696																		696
Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership								1,192			12		(7,584	)																	(7,572	)
Unrealized loss on derivative financial instruments																												(100	)		(100	)
Reclassification adjustment for amounts included in net income																												953			953
Adjustments to minority interest in Colonial Realty Limited Partnership at dates of capital transactions													30,688																		30,688
Balance December 31, 2008		401		$	4			54,171		$	542	$	1,578,992		$	1,281,330		$	(1,700,739	)	$	(150,163	)	$	—		$	(5,205	)	$	1,004,761

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

90

COLONIAL PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31, 2008, 2007 and 2006
	2008			2007			2006
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	(46,629	)	$	355,901		$	203,480
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		107,610			123,811			166,628
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
Minority interest in CRLP		(11,225	)		10,099			42,135
Gains from sales of property		(52,652	)		(413,823	)		(213,383	)
Impairment		116,900			46,629			1,600
(Gain) loss on retirement of debt		(16,021	)		12,521			—
Prepayment penalties		—			(29,207	)		—
Distributions on preferred units of CRLP		7,251			7,250			7,250
Other, net		1,519			(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		217			(12,700	)		(12,450	)
Increase (decrease) in:
Accounts payable		6,821			(3,912	)		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		117,659			99,030			171,796
Cash flows from investing activities:
Acquisition of properties		(7,369	)		(125,400	)		(350,306	)
Development expenditures paid to non-affiliates		(280,492	)		(314,298	)		(309,923	)
Development expenditures paid to affiliates		(50,605	)		(77,036	)		(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			1,134,225			865,918
Distributions from partially-owned unconsolidated entities		32,734			100,131			92,242
Capital contributions to partially-owned unconsolidated entities		(13,363	)		(43,142	)		(17,336	)
(Purchase) sales of investments		5,757			(7,379	)		—
Net cash provided by (used in) investing activities		(167,497	)		657,456			135,418
Cash flows from financing activities:
Principal reductions of debt		(223,295	)		(655,076	)		(260,594	)
Proceeds from additional borrowings		71,302			818,748			274,011
Net change in revolving credit balances and overdrafts		259,311			(147,143	)		(24,656	)
Dividends paid to common and preferred shareholders, and distributions to preferred unitholders		(99,472	)		(137,047	)		(152,489	)
Distributions to common unitholders minority interest partners		(17,010	)		(32,679	)		(28,976	)
Payment of debt issuance costs		(2,272	)		—			—
Special distribution		—			(506,515	)		—
Proceeds from dividend reinvestment plan and exercise of stock options		1,270			13,382			27,475
Redemption of Preferred Series C shares		—			—			(50,083	)
Redemption of Preferred Series D shares		(23,844	)		—			—
Redemption of Preferred Series E shares		—			(105,157	)		(28,444	)
Other financing activities, net		—			387			(6,426	)
Net cash used in financing activities		(34,010	)		(751,100	)		(250,182	)
Increase (Decrease) in cash and cash equivalents		(83,848	)		5,386			57,032
Cash and cash equivalents, beginning of period		93,033			87,647			30,615
Cash and cash equivalents, end of period	$	9,185		$	93,033		$	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.

91

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

1.   Organization and Basis of Presentation

As used herein, “the Company” or “Colonial” means Colonial Properties Trust, an Alabama real estate investment trust (“REIT”), together with its subsidiaries, including Colonial Realty Limited Partnership, a Delaware limited partnership (“CRLP”), Colonial Properties Services, Inc. (“CPSI”), Colonial Properties Services Limited Partnership (“CPSLP”) and CLNL Acquisition Sub, LLC (“CLNL”). The Company 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 Company 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. The Company’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, the Company 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 Company 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 Company completed two joint venture transactions, one involving 26 properties and the other involving 11 properties. In addition, in July 2007, the Company 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 Company 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 Company 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. The Company, through 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 Company, DRA purchased an aggregate of 2.6% of the interests in the DRA/CLP JV from 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 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 Company recorded a net gain of approximately $211.8 million on the sale of its 69.8% interest to DRA. The Company also deferred a gain of approximately $7.2 million as a result of certain obligations it assumed in the transaction. During 2007, the Company recognized approximately $3.0 million of this deferred gain as a result of a reduction of the related obligations. The Company 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%. The Company’s ownership interest in the DRA/CLP JV remained at 15.0%.

On June 20, 2007, the Company completed its retail joint venture transaction with OZRE Retail, LLC (“OZRE”). The Company 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. The Company, through CRLP, retained a 15% minority interest in the OZRE JV (see Note 10), as well as management and leasing responsibilities for the 11

92

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

properties. In addition to the approximate 69.8% interest purchased from the Company, 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 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 Company recorded a net gain of approximately $64.7 million on the sale of its 69.8% interest to OZRE. The Company also deferred a gain of approximately $8.5 million as a result of certain obligations it assumed in the transaction. During 2007, the Company recognized approximately $5.5 million of this deferred gain as a result of a reduction of the related obligations. The Company did not recognize any of this deferred gain during 2008; however, the Company 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 the Company’s ownership interest from 15.0% to 17.1%.

In July 2007, the Company 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, the Company 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 Company 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 Company paid a special dividend of $10.75 per share on June 27, 2007. The remaining proceeds from these transactions were used to pay down a portion of the Company’s outstanding indebtedness (see Note 12). During 2007, the Company 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, the Company 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.

3.   Summary of Significant Accounting Policies

Basis of Presentation — The Company owns substantially all of its assets and conducts all of its operations through CRLP. The Company is the sole general partner of CRLP and owned an approximate 84.6% and 82.5% interest in CRLP at December 31, 2008 and 2007, respectively. Due to the Company’s ability as general partner to control CRLP and various other subsidiaries, each such entity has been consolidated for financial reporting purposes. CRLP, an SEC registrant, files separate financial statements under the Securities and Exchange Act of 1934, as amended. The Company allocates income to the minority interest in CRLP based on the weighted average minority ownership percentage for the periods presented in the Consolidated Statements of Operations and Comprehensive Income (Loss). At the end of each period, the Company adjusts the Consolidated Balance Sheet for CRLP’s minority interest balance based on the minority ownership percentage at the end of the period.

The Company also consolidates other entities in which it has a controlling interest or entities where it is 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

93

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 the Company’s and its other partners’ rights, obligations and economic interests in such entities. Where the Company has less than a controlling financial interest in an entity or the Company is not the primary beneficiary of the entity under FIN 46R, the entity is accounted for on the equity method of accounting. Accordingly, the Company’s share of net earnings or losses of these entities is included in consolidated net income. A description of the Company’s investments accounted for using the equity method of accounting is included in Note 10. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company recognizes minority interest in its Consolidated Balance Sheets for partially-owned entities that the Company consolidates. The minority partners’ share of current operations is reflected in “Minority interest of limited partners” in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Federal Income Tax Status — The Company, which is considered a corporation for federal income tax purposes, qualifies as a REIT 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 Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate rates. The Company may also be subject to certain federal, state and local taxes on its income and property and to federal income and excise taxes on its undistributed income even if it does qualify as a REIT. For example, the Company will be subject to income tax to the extent it distributes less than 100% of its REIT taxable income (including capital gains), and the Company has certain gains that, if recognized, will be subject to corporate tax because it acquired the assets in tax-free acquisitions of non-REIT corporations.

The Company’s consolidated 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 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 the Company and engages in for-sale development and conversion activity. The Company generally reimburses CPSI for payroll and other costs incurred in providing services to the Company. 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, the Company has a net deferred tax asset of approximately $9.3 million, which resulted primarily from the impairment charge related to the Company’s for-sale residential properties. The Company 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 the Company on January 1, 2007. The adoption did not have a material impact on the Company’s consolidated financial statements. The Company has concluded that there are no significant uncertain tax positions requiring disclosure, and there are no material amounts of unrecognized tax benefits.

94

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

The Company 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 the Company 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. 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 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. The Company 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. The Company’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, the Company recorded a $116.9 million impairment charge related to certain of the Company’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 the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) and $2.0 million is included in “Income from discontinued operations” on the Company’s Consolidated Statements of Opertions and Comprehensive Income (Loss). The Company 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 the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss).

During June 2007, the Company 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 the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). During September 2007, the Company recorded an impairment charge of $43.3 million related to its 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.

95

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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— The Company 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. The Company 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.

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 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. 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 quality and

96

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 the Company’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, the Company 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, the Company 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, the Company 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 the Company has identified a development site, determined that a project is feasible and concluded that it is probable that the project will proceed. While the Company 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 — The Company includes highly liquid marketable securities and debt instruments purchased with a maturity of three months or less in cash equivalents. The majority of the Company’s cash and equivalents are held at major commercial banks.

The Company 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 the Company’s Balance Sheet includes $20.2 million of community development district special assessment bonds (see Note 20).

97

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

The Company 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, the Company performs credit review and analysis on all commercial tenants and significant leases before they are executed. The Company evaluates the collectability of outstanding receivables and records allowances as appropriate. The Company’s policy is to record allowances for all outstanding invoices greater than 60 days past due at its office and retail properties.

The Company 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. The Company records notes receivable at cost. The Company 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 the Company 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) The Company had a promissory note of approximately $29.5 million related to a for-sale residential project in which the Company had a 40% interest. During 2008, the Regents Park Joint Venture defaulted on this note. As a result, the Company converted the outstanding notes receivable due from the Regents Park Joint Venture (Phase I) to preferred equity in the same joint venture. The Company did not record a gain or loss upon conversion of the outstanding notes receivable balance to preferred equity. Because of these events, the Company has consolidated this joint venture in its financial statements as of December 31, 2008 (see Note 10).

(2) The Company 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.

The Company 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, the Company 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.

The Company provided first mortgage financing to third parties in 2008 as discussed above. In 2007, the Company provided first mortgage financing to third parties of $17.5 million and received principal payments of $7.3 million on these loans. The Company provided subordinated financing to third parties of $1.3 million and $8.6 million in 2008 and 2007, respectively. The Company 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, the Company 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 the Company to originate a lease, which are amortized on a straight-line basis over the terms of the related leases.

98

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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. The Company 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.

The Company 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, the Company 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. The Company 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 Company 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, the Company uses 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 the Company owns a minority interest.

The Company, 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 Share — Basic net income per common share is computed by dividing the net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing the net income available to common shareholders by

99

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the weighted average number of common shares 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 — The Company 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 — The Company 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. The Company 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 the Company contributes assets to a joint venture, the Company’s investment in the joint venture is recorded at the Company’s cost basis in the assets that were contributed to the joint venture. To the extent that the Company’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 the Company’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, the Company 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 the Company’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. The Company 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. The Company 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 the Company determines that it is probable that it will not develop a particular project, any related pre-development costs previously incurred are immediately expensed. The Company 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, the Company 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

100

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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 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 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 (see above). The Company 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. 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 (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. 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.

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 the Company’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 the Company’s evaluation of SFAS No. 160, the Company has concluded that it will continue to classify its noncontrolling interest as “temporary equity” in its consolidated

101

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

balance sheet. The Company 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. The Company is currently evaluating the impact of SFAS No. 141(R) on the Company’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. The Company is currently evaluating how this standard will impact the Company’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 the Company 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. The Company 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 Company 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 Company does not expect the application of EITF 08-6 to have a material impact on its consolidated financial statements.

102

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.   Restructuring Charges

Effective December 30, 2008, Weston M. Andress resigned from the Company, including his positions as President and Chief Financial Officer and as a member of the Board of Trustees of the Company. In connection with his resignation, the Company 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 the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) reducing the Company’s overall expense.

In addition, in light of the ongoing recession and credit crisis, during the fourth quarter of 2008, the Company 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, the Company reduced its workforce by an additional 87 employees through the elimination of certain positions resulting in the Company 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 the Company’s multifamily segment, $0.2 million with the Company’s office segment, $0.3 million with the Company’s retail segment and $0.4 million of these restructuring costs were non-divisional charges.

As a result of the actions noted above, the Company recognized $1.0 million of restructuring charges during 2008, of which $0.5 million is accrued in “Accrued expenses” on the Company’s Consolidated Balance Sheet at December 31, 2008.

During 2007, as a direct result of the strategic initiative to become a multifamily focused REIT, the Company 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 the Company’s multifamily segment, $0.7 million with the Company’s office segment, $0.3 million with the Company’s retail segment and $0.3 million with the Company’s for-sale residential segment. The remainder of these restructuring costs was non-divisional charges.

The expenses of the Company’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 year 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 Company has renewed its focus on liquidity, maintaining a strong balance sheet, addressing its near term debt maturities, managing its existing properties and operating its portfolio efficiently and reducing its overhead. To help implement the Company’s plans to strengthen the balance sheet and deleverage the company, the Board of Trustees decided to accelerate plans to dispose of its 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 the Company determines that the current economic environment has sufficiently improved.

Further, during 2008, the Company 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 Company’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;

103

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$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 the Company’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. The Company also incurred $4.4 million of abandoned pursuit costs as a result of the Company’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 the Company’s development staff and other overhead personnel.

During 2007, the Company 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, the Company 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 the Company made a strategic decision to convert this property into a multifamily community.

The Company 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. The Company will continue to monitor the specific facts and circumstances at the Company’s 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 the Company can sell, the timing of the sales and/or the prices at which the Company can sell them in future periods. If the Company is unable to sell projects, the Company 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 the Company’s assets as reflected on the balance sheet and adversely affect net income and shareholders’ 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, the Company 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 the Company as a 25% partner) and $7.4 million of cash. During 2007, the Company 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 the Company as a 35% partner) and $125.4 million of cash. Also, during 2007, the Company 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, the Company 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

104

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2006, the Company 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 the Company. The cash paid to acquire these properties is included in the consolidated statements of cash flows. The Company 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:

	2008			2007			2006
	(In thousands)
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, the Company 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.

105

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	***** Pro Forma (Unaudited) *****
	Year			Year		Year
	Ended December 31,			Ended December 31,		Ended December 31,
	2008			2007		2006
	In thousands, except per share data
Total revenue	$	344,586		$	406,097	$	481,252
Net income (loss) available to common shareholders	$	(55,445	)	$	341,423	$	181,860
Net income (loss) per common share — dilutive	$	(1.17	)	$	7.26	$	3.95

Property Dispositions — Continuing Operations

During 2008, 2007 and 2006, the Company 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 the Company’s unsecured credit facility and to support its investment activities and for general corporate purposes.

During 2008, the Company 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. The Company’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 the Company’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, the Company sold a majority interest in three development properties representing a total of 786,500 square feet, including anchor-owned square footage. The Company’s interests in these properties were sold for approximately $93.8 million (see Development Dispositions below). Also during 2007, the Company sold a wholly-owned retail asset containing 131,300 square feet. The Company’s interest in this property was sold for approximately $20.6 million. Because the Company retained management and leasing responsibilities for this property, the gain on the sale was included in continuing operations.

During 2006, the Company sold an 85% interest in an office complex representing approximately 877,000 square feet to a joint venture formed by the Company and unrelated parties for approximately $140.6 million. The Company 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 the Company’s 85% interest is included in “Gains from sales of property” in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). The Company 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 the Company retained management and leasing responsibilities for these three properties, the gains on the sales are included in continuing operations.

Also during 2006, the Company 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. The Company’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 the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss)(see Note 10).

Also during 2006, the Company sold 90% of its interest in four retail properties representing approximately 0.7 million square feet to a joint venture formed by the Company and unrelated parties for approximately $114.6 million. The Company 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 the Company’s 90% interest is included in “Gains from sales of property” in

106

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the Company’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 the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) (see Note 10).

Property Dispositions — Discontinued Operations

During 2008, the Company sold six wholly-owned multifamily apartment communities representing 1,746 units for a total cost of approximately $139.5 million. The Company 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 the Company’s unsecured credit facility and fund future investments and for general corporate purposes.

During 2007, the Company 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 the Company’s unsecured credit facility and fund future investments.

During 2006, the Company 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 price of $445.4 million, which was used to repay a portion of the borrowings under the Company’s unsecured credit facility and fund future investments.

In some cases, the Company uses 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. The Company 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 expected to occur in the fourth quarter of 2008. The payment was a requirement under a contribution agreement between CRLP and existing holders of units in CRLP.

In accordance with SFAS No. 144, net income (loss) and gain (loss) on disposition of operating properties sold through December 31, 2008, in which the Company does not maintain continuing involvement, are reflected in its Consolidated Statements of Operations and Comprehensive Income (Loss) on a comparative basis as “Income from

107

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

discontinued operations” for the years ended December 31, 2008, 2007 and 2006. Following is a listing of the properties the Company disposed of in 2008, 2007 and 2006 that are classified as discontinued operations:

				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

108

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

				Units/Square
Property	Location	Date		Feet
				(Unaudited)
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, the Company 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 the Company’s commercial developments that were sold in previous periods.

In addition, the Company 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, the Company 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 the Company and Watson LLC (Watson). The retail assets include 418,500 square feet, including anchor-owned square-footage, and are located in Birmingham, Alabama. The Company’s interest was sold for approximately $48.1 million. The Company recognized a gain of approximately $8.3 million after tax and minority interest on the sale. The Company’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 the Company 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, the Company 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. The Company 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 the Company retained an interest in this property, the gain on the sale was included in continuing operations.

During December 2006, the Company sold Colonial Pinnacle Tutwiler Farm located in Birmingham, Alabama. The retail shopping center development includes 450,000 square feet, including anchor-owned square footage. The Company 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 the Company sold this property outright, gains from the sale of this property are included in “Income from discontinued operations” on the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss).

109

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Held for Sale

The Company classifies real estate assets as held for sale, only after the Company has received approval by its internal investment committee, has commenced an active program to sell the assets, and in the opinion of the Company’s management it is probable the asset will sell within the next 12 months.

At December 31, 2008, the Company 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, the Company 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:

	Year Ended December 31,
	2008			2007			2006
	(Amounts in thousands)
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 in CRLP from discontinued operations		(8,790	)		(17,923	)		(30,653	)
Minority interest to limited partners		(95	)		(3,989	)		(2,591	)
Income from discontinued operations	$	43,410		$	80,829		$	131,271

110

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7.   For-Sale Activities

During 2008, 2007 and 2006, the Company, through CPSI, sold three, 262 and 607 condominium units, respectively, at its condominium conversion properties. During 2008, the Company, through CPSI, also sold one residential lot and 76 condominium units at its for-sale residential development properties. During 2007, the Company, through CPSI, also sold 14 residential lots and 101 condominium units at its for-sale residential development properties. During 2006, the Company, 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,
	2008			2007			2006
	(Amounts in thousands)
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 the Company 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, the Company sold an option to purchase land for a total sales price of $3.2 million. The Company recognized a gain, net of income taxes, of $1.5 million on the sale, which is included in “Gains from sales of property” in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss).

For cash flow statement purposes, the Company 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.

111

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8.   Land, Buildings and Equipment

Land, buildings, and equipment consist of the following at December 31, 2008 and 2007:

	Useful Lives	2008			2007
		(In thousands)
Buildings	20 to 40 years	$	2,196,794		$	1,821,988
Furniture and fixtures	5 or 7 years		104,440			81,824
Equipment	3 or 5 years		32,064			26,036
Land improvements	10 or 15 years		184,501			159,622
Tenant improvements	Life of lease		42,076			41,234
			2,559,875			2,130,704
Accumulated depreciation			(406,444	)		(290,134	)
			2,153,431			1,840,570
Real estate assets held for sale, net			102,699			253,641
Land			337,904			300,378
		$	2,594,034		$	2,394,589

9.   Undeveloped Land and Construction in Progress

During 2008, the Company 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:

	Location	Units		Total Costs
		(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).

112

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition to the multifamily developments, the Company 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
	Location	Square Feet(1)		Total Cost
		(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 the Company’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, the Company 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. The Company 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 million, of the $12.3 million, of economic grant proceeds related to the condominium portion of Metropolitan. The Company 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 the Company’s Balance Sheet as of December 31, 2008.

The Company 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, the Company 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. The Company also completed the development of Colonial Grand at Canyon Creek, a multifamily apartment community in which the Company owns a 25% interest. The Company’s portion of the total cost of the project totaled $7.9 million.

During 2007, the Company 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

113

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, the Company 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. The Company 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, the Company 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, the Company completed the construction of Colonial Pinnacle Tutwiler Farm, located in Birmingham, Alabama, and Colonial Pinnacle Turkey Creek, in which the Company 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.

The Company’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		Estimated		Capitalized
	Location	Feet (1)		Completion		Total Costs		to Date
		(Unaudited)				(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.

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.

The Company owns approximately $151.2 million of land parcels that are held for future developments. The Company expects to defer developments of land parcels held for future development (other than land parcels held

114

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

for future sale and for-sale residential and mixed-use developments , which the Company plans to sell, as further discussed in Note 5) until the economy improves. These developments and undeveloped land include:

				Costs
		Total Units/		Capitalized
	Location	Square Feet(1)		to Date
		(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 discussion at Footnote 5 “Impairment”) 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.

10.   Investment in Partially-Owned Entities and Other Arrangements

Investments in Consolidated Partially-Owned Entities

During the third quarter of 2008, the Company 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. The Company 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 the Company’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). The Company also amended the Joint Venture operating agreement to expressly grant the Company control rights with respect to the management and future funding of this project. As a result of the foregoing, the Company began consolidating this joint venture in its financial statements as of September 30, 2008.

During July 2007, the Company disposed of its 90% interest in Village on the Parkway, a 380,500 square foot retail asset located in Dallas, Texas. The Company sold the property for approximately $74.4 million and recognized a gain of approximately $15.7 million from the sale. The Company recorded minority interest of approximately

115

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$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, the Company 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, the Company 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:

	Percent			December 31,			December 31,
	Owned			2008			2007
	(In thousands)
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

116

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Percent			December 31,			December 31,
	Owned			2008			2007
	(In thousands)
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

(1)	The Company sold its 10% interest in Arbors at Windsor Lake during January 2008.
(2)	The Company sold its 15% interest in Auberry at Twin Creeks during January 2008.
(3)	The Company 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 the Company has a 15% partnership interest.
(5)	The Company 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)	The Company sold its 15% interest in Fairmont at Fossil Creek during January 2008.
(8)	The Company sold its 10% interest in Park Crossing during February 2008.

(9) The Company 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 the Company’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. The Company sold its 15% interest in Decoverly, located in Rockville, Maryland, during May 2008.
(12)	Amount includes the Company’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)	The Company 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 the Company’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, the Company’s percentage ownership increased from 15.0% to 17.1% (see Note 2).
(15)	As of November 1, 2008, the Company’s interest in Parkway Place limited partnership increased from 45.00% to 50.0%, due to a JV Partner executing a put option.

117

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During January and February 2008, the Company 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 the Company’s share of the sales proceeds. The properties sold include:

	Location		Units		Sales Price
			(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, the Company 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). The Company’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 the Company). Subsequently, DRA purchased the Company’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, the Company disposed of its 10% interest in Stone Ridge, a 191-unit multifamily apartment community located in Columbia, South Carolina. The Company’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, the Company 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 located in Birmingham, Alabama. The Company’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, the Company disposed of a portion of its interest in the Huntsville TIC through a series of ten transactions. As a result of these transactions, the Company’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 the Company’s unsecured line of credit.

During January 2007, the Company 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 the Company’s unsecured credit facility.

During February 2007, the Company acquired a 15% interest in Fairmont at Fossil Creek, a 240-unit multifamily apartment community located in Fort Worth, Texas. The Company’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 the Company’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 the Company’s 15% interest in the sales proceeds. The Company used the proceeds from the sale to repay a collateralized mortgage loan.

118

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During February 2007, the Company acquired a 15% interest in Auberry at Twin Creeks, a 216-unit multifamily apartment community located in Dallas, Texas. The Company’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 the Company’s unsecured credit facility.

During February 2007, the Company 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. The Company 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. The Company’s initial investment in this joint venture was $3.0 million in cash and the Company 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, the Company will receive distributions of 50% of the gains upon the sale of the property.

During May 2007, the Company acquired a 20% interest in Colonial Village at Cary, a 319-unit multifamily apartment community located in Raleigh, North Carolina. The Company’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 the Company’s unsecured credit facility.

During May 2007, the Company acquired the remaining 65% interest in Merritt at Godley Station from our joint venture partner. The Company’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 the Company’s unsecured credit facility.

During June 2007, the Company completed its office joint venture transaction with DRA. The Company 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. The Company, through 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, the Company completed its retail joint venture transaction with OZRE. The Company 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. The Company, through 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, the Company 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. The Company sold its 15% interest in the property for approximately $34.6 million and recognized a gain of 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. The Company 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 (the Company’s 15% interest in these assets totaled approximately $31.4 million). As part of the transaction, the Company acquired a 40% interest

119

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(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. The Company 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, the Company 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, the Company 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. The Company’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, the Company 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. The Company 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. The Company’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 the Company’s investments in unconsolidated partially-owned entities since the date of the Company’s acquisitions is as follows:

	As of December 31,
	2008		2007
	(In thousands)
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

(1)	The Company’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 the Company’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 the Company’s dispositions of joint-venture interests and amortization of basis differences which are not reflected in the table above.

120

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes balance sheet financial data of significant unconsolidated partially-owned entities in which the Company 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)	The Company sold its interest in this joint venture in February 2008.
(2)	During 2008, the Company 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 the Company 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)	The Company sold its interest in this joint venture in February 2008 and recognized a gain of approximately $12.2 million.
(4)	The Company 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

The Company evaluates all transactions and relationships with variable interest entities (VIEs) to determine whether the Company 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 the Company 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 the Company considers consist of the following:

•  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 the Company’s involvement with the entity;

•  whether control of the entity may be achieved through arrangements that do not involve voting equity;

121

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

•  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, the Company evaluates whether it is the primary beneficiary by considering the following significant factors and judgments:

•  whether the Company’s variable interest absorbs the majority of the VIE’s expected losses,

•  whether the Company’s variable interest receives the majority of the VIE’s expected returns, and

•  whether the Company has the ability to make decisions that significantly affect the VIE’s results and activities.

Based on the Company’s evaluation of the above factors and judgments, as of December 31, 2008, the Company does not have a controlling interest nor is the Company the primary beneficiary of any VIEs for which there is a significant variable interest. Also, as of December 31, 2008, the Company has interests in three VIEs with significant variable interests for which the Company is not the primary beneficiary.

Unconsolidated Variable Interest Entities

As of December 31, 2008, the Company has interests in three VIEs with significant variable interests for which the Company is not the primary beneficiary. The following is summary information as of December 31, 2008 regarding these unconsolidated VIEs:

					Maximum
	Carrying Amount		Potential Additional		Exposure to
VIE	of Investment		Support Obligation		Loss
	(In thousands)
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 the Company’s investment in DRA/CRT JV, the Company 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, the Company, through 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.

The Company 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 the Company’s proportionate interest in this joint venture. Accordingly, this investment qualifies as a VIE. However, the Company 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.

The Company 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. The Company 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 the Company 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.

122

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11.   Segment Information

Since 2007, the Company has had four operating segments: multifamily, office, retail and for-sale residential. Prior to 2007, the Company 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 the Company’s for-sale residential projects, the Company’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. The Company 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 the Company 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

123

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

segment assets to total assets as of December 31, 2008 and 2007. Additionally, the Company’s net gains / losses on for-sale residential projects for the years ended December 31, 2008, 2007 and 2006 are presented below:

	For The Year Ended December 31,
	2008			2007			2006
	(In thousands)
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	)		—
Impairment and other losses — 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 development		(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	)		247,033			(7,365	)
Income (Loss) before minority interest and discontinued operations	$	(102,818	)	$	275,832		$	90,174

124

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31,		December 31,
Assets	2008		2007
	(In thousands)
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)		172,879		335,980
	$	3,155,169	$	3,229,830

(1)	The impairment charge recorded during 2008 is related to two of the Company’s condominium conversion properties. The impairment charge recorded during 2007 is related to a retail asset sold during 2007.
(2)	During 2008, the Company recorded a $114.9 million impairment charge related to the Company’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 the Company’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 the Company’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,
	2008			2007			2006
	(In thousands)
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) The Company has established a partial valuation allowance for the portion of the net deferred tax asset in excess of the amount that 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:

	2008		2007
	(In thousands)
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, the Company, together with CRLP, added $175 million of additional borrowing capacity through the accordion feature of the Company’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

125

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 Company 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 the Company 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 the Company’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 the Company’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, the Company 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.

The Credit Facility and cash management line, which is primarily used by the Company 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 the Company; and generally not paying the Company’s debts as they become due. At December 31, 2008, the Company was in compliance with these covenants. Specific financial ratios with which the Company 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 the Company’s earnings before interest, taxes, depreciation and amortization be at least equal 1.5 times the Company’s Fixed Charges. Fixed Charges generally include interest payments (including capitalized interest) and preferred dividends. The Debt to Total Asset Value ratio generally requires the Company’s debt to be less than 60% of its total asset value. The Company does not anticipate any events of noncompliance with either of these ratios in 2009. 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 the Company 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 the Company under the Credit Facility, the cash management line or otherwise. If these lenders become unable to fund the Company’s borrowings pursuant to the financial institutions’ commitments, the Company may need to obtain replacement financing, and such financing, if available, may not be available on commercially attractive terms.

During March 2008, the Company 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. The Company 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 the Company’s unsecured line of credit.

During September 2008, the Company 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

126

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 the Company’s Credit Facility, were used to repay the $14.3 million outstanding mortgage.

In January 2008, the Company’s Board of Trustees authorized the Company to repurchase up to $50.0 million of outstanding unsecured senior notes of CRLP. In April 2008, the Board of Trustees authorized a senior note repurchase program to allow the Company to repurchase up to $200.0 million of outstanding unsecured senior notes of CRLP from time to time through December 31, 2009. In December 2008, the Board of Trustees 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 the Company 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, the Company 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, the Company recognized an aggregate gain of $16.0 million, which is included in “Gains (losses) on retirement of debt” on the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). The Company will continue to monitor the debt markets and repurchase certain senior notes that meet the Company’s required criteria, as funds are available.

During June 2007, the Company repaid $409.0 million of collateralized mortgages associated with 37 multifamily communities with proceeds from asset sales. In conjunction with the repayment, the Company 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%.

During July 2007, the Company 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, the Company 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, the Company received a distribution of approximately $13.8 million (see Note 2).

At December 31, 2008, the Company had $1.7 billion in unsecured indebtedness including balances outstanding on its Credit Facility and certain other notes payable. The remainder of the Company’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.

127

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The aggregate maturities of notes and mortgages payable, including the Company’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 the Company’s credit facility as of December 31, 2008, which matures in June 2012.

Based on borrowing rates available to the Company for notes and mortgages payable with similar terms, the estimated fair value of the Company’s notes and mortgages payable at December 31, 2008 and 2007 was approximately $1.5 billion and $1.7 billion, respectively.

See Note 23 — “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, the Company 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. The Company 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.

The Company’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, the Company primarily uses interest rate swaps (including forward 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, the Company 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. The Company 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 shareholders’ 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

128

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

($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 the Company’s hedges are designated as cash flow hedges under SFAS No. 133, and the Company 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 the Company’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 the Company’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 the Company’s senior note repurchase program was $0.3 million during 2008, with no impact during 2007 and 2006.

During May 2007, the Company 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 the Company’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 the Company’s then-pending joint venture transactions (see Note 2) and the expected resulting pay down of the Company’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, the Company 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, the Company 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, the Company 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 the Company’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 the Company. 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, the Company 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, the Company 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, the Company settled this forward starting swap agreement as a result of its determination that the forecasted debt issuance was no longer probable due to the Company’s strategic shift (see Note 2). In December 2006, the Company

129

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

made the determination that it was probable that the forecasted debt issuance would not occur. As a result, the Company reversed the $2.9 million in other comprehensive income to other income during December of 2006.

Further, the Company 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, the Company 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

Company ownership is maintained through common shares of beneficial interest (the “common shares”), preferred shares of beneficial interest (the “preferred shares”) and minority interest in CRLP (the “units”). Common shareholders represent public equity owners and common unitholders represent minority interest owners. Each unit may be redeemed for either one common share or, at the option of the Company, cash equal to the fair market value of a common share at the time of redemption. When a common unitholder redeems a unit for a common share or cash, minority interest is reduced. In addition, the Company has acquired properties since its formation by issuing distribution paying and non-distribution paying units. The non-distribution paying units convert to distribution paying units at various dates subsequent to their original issuance. At December 31, 2008 and 2007, 8,860,971 and 10,052,778 units were outstanding, respectively, all of which were distribution paying units.

In February 1999, through CRLP, the Company issued 2.0 million units of $50 par value 8.875% Series B Cumulative Redeemable Perpetual Preferred Units (the “Preferred Units”), valued at $100.0 million in a private placement, 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 Company, in whole or in part at anytime on or after January 1, 2014, at the option of the holders.

On November 1, 2008, the Company’s Rights Agreement, dated November 2, 1998, as amended, between the Company and BankBoston, N.A. as rights agent (the “Rights Plan”), expired by its terms. Under the Rights Plan, rights had been issued to purchase, on the occurrence of certain specified events, shares of the Company’s Series 1998 Junior Participating Preferred Shares of Beneficial Interest, par value $.01 per share (the “1998 Preferred Shares”). The Rights Plan expired without any rights to purchase having become exercisable to purchase 1998 Preferred Shares. On February 3, 2009, the 1998 Preferred Shares were reclassified as authorized but unissued preferred shares of the company without designation as to series.

15.   Equity Offerings

In April 2003, the Company 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 the Company 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 Company.

In January 2008, the Board of Trustees authorized the repurchase of up to $25.0 million of the Company’s 81/8% Series D preferred depositary shares in a limited number of separate, privately negotiated transactions. In October 2008, the Board of Trustees authorized a repurchase program which allows the repurchase of up to an additional $25.0 million of the Company’s outstanding 81/8% Series D preferred depositary shares over a 12 month period. The Series D preferred depositary shares may be repurchased from time to time over the next 12 months 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 Company to repurchase any specific

130

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

amounts of preferred shares, and repurchases pursuant to the program may be suspended or resumed at any time without further notice or announcement. The Company will continue to monitor the equity markets and repurchase preferred shares if the repurchases meet the required criteria, as funds are available. If the Company 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 Company repurchased 988,750 of its outstanding 81/8% 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. The Company 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 limited partners of CRLP were distributed units in the DRA/CLP JV and the OZRE JV based on 85% of their ownership interest in CRLP. The Company recorded this distribution at book value, which reduced common unit equity by approximately $41.0 million during 2007 (see Note 2).

In April 2005, in connection with the Cornerstone acquisition, the Company 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 Company. In February 2006, the Company announced the Board of Trustees’ authorization of the repurchase of up to $65.0 million of the Company’s Series E depositary shares. During 2006, the Company repurchased 1,135,935 million Series E depositary shares for a total cost of approximately $28.5 million. The Company wrote off approximately $0.3 million of issuance costs associated with this redemption. In April 2007, the Company’s Board of Trustees authorized the redemption of, and in May 2007 the Company redeemed all of, its remaining outstanding 4,190,414 Series E depositary shares for a total cost of $104.8 million. In connection with this redemption, the Company 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 Company 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 Company 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 Company. The Series C Preferred Shares have a liquidation preference of $25.00 per share. In April 2006, the Board of Trustees authorized the redemption of the Company’s 9.25% Series C Cumulative Redeemable Preferred Shares. The redemption of approximately $50.0 million occurred on June 30, 2006. The Company wrote off approximately $1.9 million of issuance costs associated with this redemption.

16.   Share-based Compensation

Effective January 1, 2006, the Company 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 Company 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 Company’s accounting for share-based compensation. In prior years, the Company 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 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.

131

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Incentive Share Plans

On March 7, 2008, the Board of Trustees approved the 2008 Omnibus Incentive Plan (the “2008 Plan”). The 2008 Plan was approved by the Company’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 Company 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 shares 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 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 Company’s current historical yield. Expected volatility was based on the historical volatility of the Company’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 Company’s historical data for prior period share option exercises and forfeiture activity.

During the year ended December 31, 2008, the Company granted share options to purchase 215,279 common shares to the Company’s employees and trustees. For the years ended December 31, 2008, 2007 and 2006, the Company 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 Company’s restructuring), $0.7 million and $0.8 million, respectively. Upon the exercise of share options, the Company 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:

	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 Company related to the recapitalization during 2007 (see Note 2), the exercise price of all of the Company’s then outstanding options has been reduced by $10.63 per share for all periods presented as required under the terms of the Company’s option plans.

132

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 Company 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 Company’s restructuring during 2008.

The following table presents the change in nonvested restricted share awards:

	For The Year Ended			Weighted Average
	December 31,			Grant Date
	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

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 Company 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 Company’s restructuring), $3.9 million and $3.0 million, respectively. For the years ended December 31, 2008, 2007 and 2006, the Company 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 Company adopted a new incentive program in which seven executive officers of the Company 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

133

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

•  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 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 Company 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 Company and its peer companies (as defined by the Board of Trustees of the Company) 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 Company’s Board of Trustees as a peer, the Company 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.

Due to the fact that the form of payout (cash, common shares, or a combination of the two) is determined solely by the Company’s Board of Trustees, and not the employee, the grant was valued as an equity award.

For the years ended December 31, 2008, 2007 and 2006, the Company 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 Company reduced compensation expense by $1.0 million during 2008. As of December 31, 2008, these awards have been fully expensed.

134

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Employee Share Purchase Plan

The Company maintains an Employee Share Purchase Plan (the “Purchase Plan”). The Purchase Plan permits eligible employees of the Company, 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 Company 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 the Company 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. The Company’s policy is to fund the minimum required contribution under ERISA and the Internal Revenue Code. The Company uses a December 31 measurement date for its plan.

During 2007, the Company’s Board of Trustees approved the termination of its noncontributory defined benefit pension plan. Accordingly, during 2007, the Company 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. 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 the Company.

	2007
	(In thousands)
Change in benefit obligation
Benefit obligation at beginning of year	$	15,662
Service cost		253
Interest cost		758
Curtailment (gain) loss		(4,087	)
Settlement (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	)

135

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amounts recognized in the consolidated balance sheet as of December 31, 2007 consist of:

	2007
	(In thousands)
Amounts recognized in the consolidated balance sheets
Other liabilities	$	(663	)

	2007
Amounts recognized in accumulated other comprehensive income
Net (gain) loss	$	—
Prior service cost		—
Net amount recognized	$	—

The Company’s accumulated benefit obligations as of December 31, 2007 are as follows:

	2007
	(In thousands)
Accumulated benefit obligation	$	715

Components of the Company’s net periodic benefit cost for 2007 are as follows:

	2007
	(In thousands)
Components of Net Periodic Benefit Cost
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

Additional supplemental disclosures required by SFAS No. 158 are as follows:

	2007
	(In thousands)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
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	)

	(In thousands)
Estimated amortization from accumulated other comprehensive income into net periodic pension cost over the next twelve months
Amortization of net (gain) loss	$	—
Amortization of prior service cost	$	—

136

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The weighted-average assumptions used to determine benefit obligations and net costs are as follows:

	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:

Contributions	Employer
	(In thousands)
2006	$	814
2007	$	3,100
Benefit payments (including termination settlement payments)
2007	$	14,084

401(k) Plan

The Company 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 the Company 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 the Company matching one-half of such contributions up to 6%, solely at its discretion. Contributions by the Company 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

The Company, which is considered a corporation for federal income tax purposes, has elected to be taxed and qualifies to be taxed as a REIT 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 Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate rates and may not be able to qualify as a REIT for four subsequent taxable years. The Company may also be subject to certain state and local taxes on its income and property, and to federal income taxes and excise taxes on its undistributed taxable income.

In the preparation of income tax returns in federal and state jurisdictions, the Company and its taxable REIT subsidiaries assert certain tax positions based on their understanding and interpretation of the income tax law. The taxing authorities may challenge such positions, and the resolution of such matters could result in recognition of additional income tax expense. Management believes it has used reasonable judgments and conclusions in the preparation of its income tax returns.

137

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income Tax Characterization of Distributions

Distributions to shareholders are generally partially taxable as ordinary income, long-term capital gains and unrecaptured Section 1250 gains, and partially non-taxable as return of capital. During 2008, 2007 and 2006 the Company’s total common distributions had the following overall characteristics:

	Distribution		Ordinary			Return of			Long-Term			Unrecaptured
	Per Share		Income			Capital			Capital Gain			Sec. 1250 Gains
2008	$	1.75		31.73	%		0.00	%		38.86	%		29.41	%
2007	$	0.68		20.99	%		0.00	%		67.46	%		11.55	%
2007	$	0.68		4.49	%		0.00	%		66.86	%		28.65	%
2007	$	8.08		3.53	%		21.20	%		52.69	%		22.58	%
2007	$	2.67		3.53	%		21.20	%		52.69	%		22.58	%
2007	$	0.68		3.21	%		28.33	%		47.92	%		20.53	%
2007	$	0.50		3.21	%		28.33	%		47.92	%		20.53	%
2006	$	2.72		14.75	%		0.00	%		57.77	%		27.48	%

Taxable REIT Subsidiary

The Company’s consolidated financial statements include the operations of its 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 the Company. In addition, the Company performs all of its for-sale residential and condominium conversion activities through CPSI. The Company generally reimburses CPSI for payroll and other costs incurred in providing services to the Company. 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:

	2008			2007			2006
	(In thousands)
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).

138

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The components of CPSI’s deferred income tax assets and liabilities at December 31, 2008 and 2007 were as follows:

	2008			2007
	(In thousands)
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, the Company 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. The Company 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 the Company’s ability to carryback losses to prior periods. Based on this evaluation, the Company expects that it is more likely than not that the Company will be able to recover approximately $9.3 million of its net deferred tax asset. The portion of the net deferred tax asset that the Company deems recoverable approximates the amount of unutilized carryback potential to the 2007 tax year. Accordingly, the Company 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.

	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.

139

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

19.   Leasing Operations

The Company’s business includes leasing and management of multifamily, office, and retail property. For properties owned by the Company, 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 the Company’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

The Company 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 the Company is a majority owner. The contractor is affiliated with the Company’s joint venture partner.

•  In connection with the dispute, in January 2008, the contractor filed a lawsuit against the Company 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. The Company 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.

The Company is continuing to evaluate its options and investigate these claims, including possible claims against the contractor and other parties. The Company 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, the Company 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. The Company has guaranteed the shortfall, if any, of tax

140

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, the Company recorded restricted cash and other liabilities for the $24.0 million bond issuance. This transaction has been treated as a non-cash transaction in the Company’s Consolidated Statement of Cash Flows for the twelve months ended December 31, 2008. During 2008, the Company 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, the Company 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, the Company 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, the Company 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. The Company is continuing to evaluate various alternatives for this development.

In connection with the office and retail joint venture transactions (see Note 2) above, the Company 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, the Company received notification related to an unclaimed property audit for the States of Alabama and Tennessee. As of December 31, 2008, the Company has accrued an estimated liability.

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.

Guarantees and Other Arrangements

During April 2007, the Company 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. The Company 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, the Company 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. The Company 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, the Company 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

141

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

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, the Company executed a guarantee, pursuant to which the Company 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. The Company’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.

In connection with the contribution of certain assets to CRLP, certain partners of CRLP have guaranteed indebtedness of the Company 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 the Company.

As discussed above, in connection with certain retail developments, the Company 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. The Company has guaranteed the shortfall, if any, of tax revenues to the debt service requirements on the bonds.

21.   Related Party Transactions

The Company has implemented a specific procedure for reviewing and approving related party construction activities. The Company historically has used Brasfield & Gorrie LLC, a construction company controlled by Mr. M. Miller Gorrie (a trustee of the Company), 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, the Company negotiates the fees and contract prices of each development, re-development or expansion project with this company in compliance with the Company’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 Company) presents each project to the independent members of the Executive Committee of the Board of Trustees for final approval.

The Company 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. The Company 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 consistent with the procedure described above.

142

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company 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 the Company retained a 15% interest. The Company 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, the Company leased space to certain entities in which Mr. Thomas H. Lowder (the Company’s Chairman and Chief Executive Officer) and Mr. James K. Lowder (a trustee of the Company), have an interest. The Company received market rent from these entities of approximately $2.0 million during the year ended December 31, 2006. Additionally, the Company entered into management and leasing services agreements with certain entities in which Mr. Thomas H. Lowder and Mr. James K. Lowder had an interest. The Company received fees from these entities under these existing arrangements of approximately $15,000 during the year ended December 31, 2006.

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 the Company. As part of this service, the Company 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 the Company 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 a specific procedure for reviewing and approving related party construction activities, the Company has not adopted a formal policy for the review and approval of related persons’ transactions generally. Pursuant to its charter, its 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 the Company’s financial statements. The Company’s policies and practices may not be successful in eliminating the influence of conflicts.

22.   Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	2008			2007			2006
	(In thousands)
Numerator:
Income (Loss) from continuing operations	$	(90,039	)	$	275,072		$	72,208
Less:
Preferred stock dividends		(8,773	)		(13,439	)		(20,902	)
Preferred share issuance costs write-off		(27	)		(360	)		(2,128	)
Income (Loss) from continuing operations available to common shareholders	$	(98,839	)	$	261,273		$	49,178
Denominator:
Denominator for basic net income per share — weighted average common shares		47,231			46,356			45,484
Effect of dilutive securities		—			653			536
Denominator for diluted net income per share — adjusted weighted average common shares		47,231			47,009			46,020

143

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the year ended December 31, 2008, the Company reported a net loss from continuing operations (after preferred dividends), and as such, 63,214 dilutive share equivalents (stock options and restricted stock), have been excluded from per share computations because including such shares would be anti-dilutive. For the years ended December 31, 2007 and 2006, there were 285,800 and 112,601 outstanding share equivalents (stock options and restricted stock), respectively, excluded from the computation of diluted net income per share for 2007 and 2006, respectively, because the grant date prices were greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive. In connection with the special distribution paid by the Company during the year ended December 31, 2007 (see Note 2), the exercise price of all of the Company’s then outstanding options has been reduced by $10.63 per share for all periods presented as required under the terms of the Company’s option plans.

23.   Subsequent Events

Property Disposition

On February 2, 2009, the Company disposed of Colonial Promenade at Fultondale, a 159,000 square-foot (excluding anchor-owned) retail asset, located in Birmingham, Alabama. The Company 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 the Company’s unsecured credit facility.

Financing Activities

In the first quarter of 2009, the Company anticipates completing 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 the Company’s unsecured line of credit, provide additional liquidity that can be used toward completion of the remaining ongoing developments and provide additional funding for the Company’s unsecured bond repurchase program.

In addition to the Fannie Mae facility, the Company 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 the Company’s existing other multifamily properties. However, no assurance can be given that the Company will be able to consummate these additional financing arrangements. Any proceeds received from these financing transactions would be used to provide additional liquidity for the Company’s unsecured bond repurchase program and to provide liquidity for debt maturities through 2010.

During February 2009, the Company repurchased $71.3 million of its outstanding unsecured senior notes in separate transactions under the Company’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, the Company recognized an aggregate gain of $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 Company 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 Company’s multifamily segment, $0.1 million with the Company’s office segment and $0.3 million with the Company’s retail segment.

Distribution

During January 2009, the Board of Trustees declared a cash distribution on the common shares of the Company and on the common units of CRLP in the amount of $0.25 per share and per partnership unit, totaling an aggregate of approximately $14.3 million. The distribution was made to shareholders and partners of record as of February 9,

144

COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2009, and was paid on February 17, 2009. Moreover, in light of recent Internal Revenue procedure changes, our Board of Trustees is currently considering paying future distributions to common shareholders, beginning in May 2009, in a combination of common shares and cash. This dividend and the alternative dividend structure would allow us to retain additional capital, thereby strengthening our balance sheet. However, our Board of Trustees reserves the right to pay any future distribution entirely in cash. Our Board of Trustees 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.

24.   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
	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	(In thousands, except per share data)
Revenues	$	88,991		$	84,073		$	86,165			85,229
Income (loss) from continuing operations		12,079			1,886			(658	)		(103,346	)
Income from discontinued operations		4,819			9,451			29,671			(531	)
Net income (loss)		16,898			11,337			29,013			(103,877	)
Dividends to preferred shareholders		(2,488	)		(2,180	)		(2,037	)		(2,068	)
Preferred share issuance costs write-off		(184	)		(83	)		240			—
Net income (loss) available to common shareholders		14,226			9,074			27,216			(105,945	)
Net income (loss) per share:
Basic	$	0.30		$	0.19		$	0.57		$	(2.22	)
Diluted	$	0.30		$	0.19		$	0.57		$	(2.22	)
Weighted average common shares outstanding:
Basic		46,854			46,927			47,369			47,796
Diluted		47,015			46,927			47,369			47,796

	2007
	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	(In thousands, except per share data)
Revenues	$	125,611		$	120,012		$	89,805		$	87,511
Income (loss) from continuing operations		3,257			275,878			(7,850	)		3,787
Income from discontinued operations		33,090			33,256			12,165			2,318
Net income		36,347			309,134			4,315			6,105
Dividends to preferred shareholders		(4,491	)		(3,870	)		(2,539	)		(2,539	)
Preferred share issuance costs write-off		—			(330	)		(30	)		—
Net income available to common shareholders		31,856			304,934			1,746			3,566
Net income per share:
Basic	$	0.69		$	6.60		$	0.03		$	0.07
Diluted	$	0.69		$	6.51		$	0.03		$	0.07
Weighted average common shares outstanding:
Basic		45,964			46,222			46,574			46,656
Diluted		45,964			46,875			46,574			47,080

145

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders

  of Colonial Properties Trust:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Colonial Properties Trust 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

146

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 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, our 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 Colonial Properties 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. The 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.

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 the Company’s annual financial statements, management has undertaken an assessment of the effectiveness of the Company’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.

Based on our assessment under the criteria set forth in COSO, management has concluded that, as of December 31, 2008, Colonial Properties Trust maintained effective internal control over financial reporting.

The effectiveness of the Company’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.

147

PART III

Item 10.   Trustees, Executive Officers and Corporate Governance.

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 is hereby incorporated by reference from the material appearing in our 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”, “Information Regarding Trustees and Corporate Governance — Committee Membership”, respectively. Information required by this item with respect to executive officers is provided in Item 1 of this Form 10-K. See “Executive Officers of the Company.” Information required by this item with respect to the availability of our 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, our code of ethics on our 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 information pertaining to security ownership of certain beneficial owners and management required by this item is hereby incorporated by reference from the material appearing in the Proxy Statement under the caption “Voting Securities Held by Principal Shareholders and Management.”

The following table summarizes information, as of December 31, 2008, relating to our 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 Issuance
	Number of Securities to be			Weighted-Average Exercise			Under Equity Compensation
	Issued Upon Exercise of			Price of Outstanding Options,			Plans (Excluding Securities
Plan Category	Outstanding Options, Warrants and Rights(a)			Warrants and Rights(b)			Reflected 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 our 2008 Omnibus Incentive Plan, our Third Amended and Restated Employee Share Option and Restricted Share Plan, as amended in 1998 and 2006, our Non-Employee Trustee Share Plan, as amended in 1997, and our 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 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 then outstanding options was reduced by $10.63 per share as required under the terms of the option plans. Weighted-average exercise price of outstanding options also excludes value of outstanding restricted shares.

148

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 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”.

149

Part IV

Item 15.   Exhibits and Financial Statement Schedules

15(a)(1) Financial Statements

The following financial statements of the Company 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 Shareholders’ 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 Company, CLNL Acquisition Sub LLC and Cornerstone Realty Income Trust, Inc.	Incorporated by reference to Exhibit 2.1 to the Company’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 Company’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 Company, CLNL Acquisition Sub LLC and Cornerstone Realty Income Trust, Inc.	Incorporated by reference to Exhibit 2.2 to the Company’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 Company’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 Company’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 Company’s Current Report on Form 8-K filed with the SEC on June 21, 2007
	3	.1	Declaration of Trust of Company, as amended	Filed herewith
	3	.2	Bylaws of the Company, as amended	Filed herewith
	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 Company’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 Company, whose file number is 1-12358)
	4	.5	Deposit Agreement for Series D depository shares by and among the Company and Equiserve Trust Company, N.A. and Equiserve, Inc.	Incorporated by reference to Exhibit 4.4 to the Company’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 Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007

150

Exhibit
No.			Exhibit	Reference
	10	.2	Registration Rights and Lock-Up Agreement dated September 29, 1993, among the Company and the persons named therein	Incorporated by reference to Exhibit 10.2 to the Company’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 Company and the persons named therein	Incorporated by reference to Exhibit 10.2.2 to the Company’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 Company, whose file number is 1-12358)
	10	.4	Registration Rights and Lock-Up Agreement dated November 4, 1994, among the Company and the persons named therein	Incorporated by reference to Exhibit 10.2.3 to the Company’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 Company, whose file number is 1-12358)
	10	.5	Supplemental Registration Rights and Lock-Up Agreement dated August 20, 1997, among the Company and the persons named therein	Incorporated by reference to Exhibit 10.2.4 to the Company’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 Company, whose file number is 1-12358)
	10	.6	Supplemental Registration Rights and Lock-Up Agreement dated November 1, 1997, among the Company, CRLP and B&G Properties Company LLP	Incorporated by reference to Exhibit 10.2.5 to the Company’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 Company, whose file number is 1-12358)
	10	.7	Supplemental Registration Rights and Lock-Up Agreement dated July 1, 1997, among the Company, CRLP and Colonial Commercial Investments, Inc.	Incorporated by reference to Exhibit 10.2.6 to the Company’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 Company, whose file number is 1-12358)
	10	.8	Supplemental Registration Rights and Lock-Up Agreement dated July 1, 1996, among the Company and the persons named therein	Incorporated by reference to Exhibit 10.2.7 to the Company’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 Company, whose file number is 1-12358)
	10	.9	Registration Rights Agreement dated February 23, 1999, among the Company, Belcrest Realty Corporation, and Belair Real Estate Corporation	Incorporated by reference to Exhibit 10.2.8 to the Company’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 Company, whose file number is 1-12358)
	10	.10	Registration Rights and Lock-Up Agreement dated July 1, 1998, among the Company and the persons named therein	Incorporated by reference to Exhibit 10.2.9 to the Company’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 Company and the persons named therein	Incorporated by reference to Exhibit 10.2.10 to the Company’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 Company, whose file number is 1-12358)
	10	.12	Supplemental Registration Rights and Lock-Up Agreement dated November 18, 1998, among the Company, CRLP and Colonial Commercial Investments, Inc.	Incorporated by reference to Exhibit 10.2.11 to the Company’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 Company, whose file number is 1-12358)

151

Exhibit
No.			Exhibit	Reference
	10	.13	Registration Rights and Lock-Up Agreement dated April 30, 1999, among the Company, CRLP and MJE, L.L.C.	Incorporated by reference to Exhibit 10.2.13 to the Company’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 Company, 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 Company’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 Company’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 Company’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 Company’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 Company’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 Company’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 Company’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 Company’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 Company’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 Company’s Annual Report on Form 10-K for the period ending December 31, 2006
	10	.18	Annual Incentive Plan †	Incorporated by reference to Exhibit 10.16 to the Company’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 Company’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 Company, whose file number is 1-12358)
	10	.20	Non-employee Trustee Option Agreement †	Incorporated by reference to Exhibit 10.5 to the Company’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 Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007
	10	.22	Retirement Agreement between the Company and Howard B. Nelson, Jr. †	Incorporated by reference to Exhibit 10.26 to the Company’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 Company’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 Company’s Registration Statement on Form S-11/A, No. 33-65954, filed September 21, 1993

152

Exhibit
No.			Exhibit	Reference
	10	.24.1	First Amendment to Partnership Agreement of CPSLP	Incorporated by reference to Exhibit 10.28.1 to the Company’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 Company’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 Company, whose file number is 1-12358)
	10	.26	Bylaws of predecessor of Colonial Real Estate Services, Inc., predecessor of CPSI	Incorporated by reference to Exhibit 10.10 to the Company’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 Company’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 Company, Wachovia Bank, National Association as Agent for the Lenders and the Lenders named therein	Incorporated by reference to Exhibit 10.2 to the Company’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 Company, Wachovia Bank, National Association as Agent for the Lenders and the Lenders named therein	Incorporated by reference to Exhibit 10.1 to the Company’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 Company, as Guarantor, SouthTrust Bank, as Agent for Lenders, and the Lenders names therein	Incorporated by reference to Exhibit 10.37 to the Company’s Current Report on Form 8-K filed with the SEC on November 3, 2004
	10	.29	Facility and Guaranty Agreement among the Company, 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 Company’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 Company, CRLP, Bank One, N.A. and certain lenders	Incorporated by reference to Exhibit 10.16 to the Company’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 Company, 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 Company’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 Company’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 Company’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 Company’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 Company’s Current Report on Form 8-K filed with the SEC on May 3, 2005
	10	.36	Form of Share Option Agreement (20% per year vesting) †	Incorporated by reference to Exhibit 10.6 to the Company’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 Company’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 Company’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 Company’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 Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2006

153

Exhibit
No.			Exhibit	Reference
	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 Company’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 Company’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 Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2006
	10	.44	2008 Omnibus Incentive Plan	Filed herewith
	10	.44.1	Summary of 2008 Annual Incentive Plan †	Incorporated by reference to Exhibit 10.1 to the Company’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 Company’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 Company’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 Company’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 Company’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 Company, CPSI and Weston Andress †	Filed herewith
	10	.46	Severance Agreement, dated as of December 30, 2008, among the Company, CPSI and Weston Andress †	Filed herewith
	10	.47	Settlement Agreement and General Release, dated as of March 31, 2008 between the Company and Charles McGehee †	Filed herewith
	12	.1	Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Share Distributions	Filed herewith
	21	.1	List of Subsidiaries	Filed herewith
	23	.1	Consent of PricewaterhouseCoopers LLP	Filed herewith
	23	.2	Consent of Weiser LLP	Filed herewith
	23	.3	Consent of PricewaterhouseCoopers LLP	Filed herewith
	31	.1	CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
	31	.2	CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
	32	.1	CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
	32	.2	CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

†  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.

154

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 27, 2009.

Colonial Properties Trust

By:  /s/  Thomas H. Lowder

     Thomas H. Lowder

     Chairman of the Board and

     Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 27, 2009.

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

155

Signature
/s/  Claude B. Nielsen Claude B. Nielsen	Trustee
/s/  Harold W. Ripps Harold W. Ripps	Trustee
/s/  John W. Spiegel John W. Spiegel	Trustee

156

Colonial Properties Trust

Index to Financial Statement Schedules

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

157

Appendix S-1

DRA/CLP Office LLC
and Subsidiaries

Consolidated Financial Statements

For the Year Ended December 31, 2008

(Not Covered by the Report Included Herein)

and the Period from June 13, 2007

(Inception) to December 31, 2007

DRA/CLP OFFICE LLC and Subsidiaries

Contents

Consolidated Financial Statements

For the Year Ended December 31, 2008

(Not Covered by the Report Included Herein) and the Period from

June 13, 2007 (Inception) to December 31, 2007

	Page(s)
Report of Independent Registered Public Accounting Firm		1
Audited Consolidated Financial Statements:
Balance Sheets		2
Statements of Income		3
Statements of Changes in Temporary Equity and Equity		4
Statements of Cash Flows		5
Notes to Consolidated Financial Statements		6-14

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 herein on the financial statements of DRA/LLP Office LLC and Subsidiaries as of, and for the year ended December 31, 2008.

/s/  Weiser LLP

New York, NY

February 26, 2008

1

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

2

DRA/CLP Office LLC and Subsidiaries

Consolidated Statements of Income

(in thousands)

	(Not Covered by			For the Period from
	the Report Included Herein)			June 13, 2007
	For the Year Ended			(Inception) to
	December 31, 2008			December 31, 2007
Revenues
Rent	$	98,591		$	54,106
Tenant escalations		12,538			6,296
Other		6,316			2,410
Total revenues		117,445			62,812
Property operating expenses
General operating expenses		15,770			8,290
Management fees paid to affiliate		4,390			2,384
Repairs and maintenance		11,073			5,114
Taxes, licenses and insurance		13,638			8,258
General and administrative		2,467			1,424
Depreciation and amortization		46,495			23,670
Total property operating expenses		93,833			49,140
Income from operations		23,612			13,672
Other income (expense)
Interest expense		(42,315	)		(22,662	)
Interest income		811			743
Total other income(expense)		(41,504	)		(21,919	)
Loss from continuing operations		(17,892	)		(8,247	)
Income from discontinued operations		—			6,565
Net loss	$	(17,892	)	$	(1,682	)

3

Consolidated Statements of Changes in Temporary Equity and Equity
For the Year Ended December 31, 2008
(Not Covered by the Report Included Herein) and
the period from June 13, 2007 (inception)
to December 31, 2007
(in thousands)

	Equity
	G&I VI
	Investment			Temporary Equity
	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

4

DRA/CLP Office LLC and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

	(Not Covered
	by the Report
	Included			For the Period from
	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		$	—

5

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.

6

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,
	2008		2007
	(In thousands)
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

7

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.

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.

8

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)

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.

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

9

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)

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 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.

10

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 in-place leases and acquired net below-market leases for each of the next five years and thereafter is estimated as follows:

			Acquired
	In-Place		Net Below
For The Year Ended December 31,	Leases		Market Leases
	(In thousands)
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.

6.   Discontinued Operations

Discontinued operations for the year ended December 31, 2008 and period ended December 31, 2007 are summarized as follows:

	2008		2007
	(In thousands)
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

11

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)

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

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

12

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)

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.

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

13

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)

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.

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.

14

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 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.

15

Appendix S-2

OZ/CLP Retail LLC
and Subsidiaries

Consolidated Financial Statements
For the Periods Ended December 31, 2008
(Not Covered by the Report Included Herein) and 2007

OZ/CLP Retail LLC and Subsidiaries

Contents
Consolidated Financial Statements
For the Year Ended December 31, 2008
(Not Covered by the Report Included Herein)
and the Period from
June 15, 2007 (Inception) to December 31, 2007

	Page(s)
Report of Independent Registered Public Accounting Firm		1
Audited Consolidated Financial Statements:
Balance Sheets		2
Statements of Operations		3
Statements of Members’ Equity and Temporary Equity		4
Statements of Cash Flows		5
Notes to Consolidated Financial Statements		6-16

Report of Independent Registered Public Accounting Firm

To the Members of OZ/CLP Retail LLC:

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, members’ equity and temporary equity and cash flows present fairly, in all material respects, the financial position of OZ/CLP Retail LLC and its subsidiaries (the “Company”) at December 31, 2007, and the results of their operations and their cash flows for the period from June 15, 2007 (inception) to December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/  PricewaterhouseCoopers LLP

Birmingham, Alabama

February 29, 2008

1

OZ/CLP Retail LLC and Subsidiaries

Consolidated Balance Sheets
As of December 31, 2008 and 2007
(in thousands)

	(Not Covered
	by the Report
	Included
	Herein)
	2008		2007
Assets
Land, buildings, and equipment, net	$	324,738	$	333,067
Cash and cash equivalents		3,230		3,915
Restricted cash		2,217		1,882
Accounts receivable, net		2,095		1,348
Deferred lease costs, net		7,014		8,160
Deferred mortgage costs, net		738		872
In place leases, net		16,404		21,452
Acquired above market leases, net		6,085		7,101
Other assets		1,068		700
Total assets	$	363,589	$	378,497
Liabilities, Temporary Equity and Members’ Equity
Mortgages payable	$	284,000	$	284,000
Accounts payable and accrued expenses		1,672		1,763
Unpaid redemption value of redeeming Rollover LP members		8,713		—
Accrued interest		1,245		1,245
Acquired below market leases, net		14,272		16,249
Tenant deposits		420		442
Unearned rent		1,121		1,172
Total liabilities		311,443		304,871
Commitment and Contingencies (Note 7)
Temporary Equity — Redeemable Common Units
Redeemable common units (Redemption value of $137)		137		9,849
Equity — Nonredeemable Common Units		52,009		63,777
Total liabilities, temporary equity and members’ equity	$	363,589	$	378,497

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

2

OZ/CLP Retail LLC and Subsidiaries

Consolidated Statements of Operations
For the Periods Ended December 31, 2008 and 2007
(in thousands)

	(Not Covered
	by the Report
	Included
	Herein)			For the Period From
	For the Period			June 15, 2007
	Ended December 31,			(Inception) to
	2008			December 31, 2007
Revenues
Rent	$	27,004		$	14,681
Percentage rent		118			18
Tenant recoveries		6,746			3,591
Other		739			405
Total revenues		34,607			18,695
Property operating expenses
General operating expenses		1,401			655
Management fees paid to affiliate		1,149			699
Repairs and maintenance		2,310			1,245
Taxes, licenses and insurance		4,050			2,112
General and administrative		706			436
Depreciation		9,450			5,861
Amortization		7,010			3,236
Total property operating expenses		26,076			14,244
Income from operations		8,531			4,451
Other income (expense)
Interest expense		(18,532	)		(9,817	)
Interest income		85			52
Total other expense		(18,447	)		(9,765	)
Net loss	$	(9,916	)	$	(5,314	)

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

3

OZ/CLP Retail LLC and Subsidiaries

Consolidated Statements of Members’ Equity and Temporary Equity
For the Periods Ended December 31, 2008 (Not Covered by
the Report Included Herein) and 2007
(in thousands)

										Temporary
	Equity									Equity
				Colonial Retail
	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

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

4

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
	Included			For the Period From
	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.

5

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.

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

6

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)

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.

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.

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:

	December 31,			December 31,
	2008			2007
	(In thousands)
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

7

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

8

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)

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 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:

	2008		2007
	(In thousands)
Financing Costs	$	940	$	940
Leasing Costs		9,142		8,924
		10,083		9,864
Less Accumulated Amortization		2,331		832
	$	7,752	$	9,032

9

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.

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.

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.

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 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

10

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.

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 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.

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 the Company’s 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

11

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)

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 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.

12

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)

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-Place		Above (Below)
	Leases		Market Leases
	(In thousands)
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

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.

13

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 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.

14

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)

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.

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.

15

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)

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.

16

Appendix S-3

Schedule II — Valuation and Qualifying Accounts and Reserves

(in thousands)

					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 minimum rent in the Consolidated Statements of Operations and Comprehensive Income (Loss)
(4)	Amounts reversed upon sale of property or property deferred rent equals zero.

17

Appendix S-4

SCHEDULE III
COLONIAL PROPERTIES TRUST
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2008

			Initial Cost						Gross Amount at Which
			to Company				Cost		Carried at Close of Period
					Buildings		Capitalized				Buildings							Date Completed/
					and		Subsequent to				and				Accumulated			Placed in		Date		Depreciable
Description	Encumbrances(1)		Land		Improvements		Acquisition		Land		Improvements		Total(2)		Depreciation			Service		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

1

			Initial Cost						Gross Amount at Which
			to Company				Cost		Carried at Close of Period
					Buildings		Capitalized				Buildings							Date Completed/
					and		Subsequent to				and				Accumulated			Placed in		Date		Depreciable
Description	Encumbrances(1)		Land		Improvements		Acquisition		Land		Improvements		Total(2)		Depreciation			Service		Acquired		Lives—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
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

2

			Initial Cost							Gross Amount at Which
			to Company				Cost			Carried at Close of Period
					Buildings		Capitalized					Buildings								Date Completed/
					and		Subsequent to					and					Accumulated			Placed in		Date		Depreciable
Description	Encumbrances(1)		Land		Improvements		Acquisition			Land		Improvements			Total(2)		Depreciation			Service		Acquired		Lives—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
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

3

			Initial Cost							Gross Amount at Which
			to Company				Cost			Carried at Close of Period
					Buildings		Capitalized					Buildings								Date Completed/
					and		Subsequent to					and					Accumulated			Placed in		Date		Depreciable
Description	Encumbrances(1)		Land		Improvements		Acquisition			Land		Improvements			Total(2)		Depreciation			Service		Acquired		Lives—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:		—		—		—		17,726,380			—		17,726,380			17,726,380		(8,207,310	)		N/A		N/A		3-7 Years
	$	103,786,024	$	611,257,694	$	1,818,658,875	$	951,236,684		$	604,893,203	$	2,776,260,054		$	3,381,153,257	$	(406,443,910	)

4

NOTES TO SCHEDULE III
COLONIAL PROPERTIES TRUST
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, the Company 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		(113,891,020	)		(1,729,326,540	)		(882,116,541	)
Balance at end of year	$	3,381,153,254		$	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		(18,290,444	)		(281,558,337	)		(116,728,000	)
Balance at end of year	$	406,443,915		$	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.

5

Colonial Properties Trust

Index to Exhibits

3	.1	Declaration of Trust of Company, as amended
3	.2	Bylaws of the Company, as amended
10	.44	2008 Omnibus Incentive Plan
10	.45	Consulting Agreement, dated as of December 30, 2008, among the Company, CPSI and Weston Andress
10	.46	Severance Agreement, dated as of December 30, 2008, among the Company, CPSI and Weston Andress
10	.47	Settlement Agreement and General Release, dated as of March 31, 2008 between the Company and Charles McGehee
12	.1	Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Share Distributions
21	.1	List of Subsidiaries
23	.1	Consent of PricewaterhouseCoopers LLP
23	.2	Consent of Weiser LLP
23	.3	Consent of PricewaterhouseCoopers LLP
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

6

EX-3.1

Exhibit 3.1

COLONIAL PROPERTIES TRUST
DECLARATION OF TRUST

Dated August 21, 1995

          This DECLARATION OF TRUST (this “Declaration of Trust”) is made as of the date set forth above by the undersigned trustee.

          WHEREAS, the Trustees (as defined herein) desire that this trust qualify as a “real estate investment trust” under the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder (the “Code”), and under the Alabama Real Estate Investment Trust Act (the “Act”); and

          WHEREAS, the beneficial interests in the real estate investment trust shall be divided into transferable shares of one or more classes evidenced by certificates.

          NOW, THEREFORE, the Trustees hereby declare that they will hold all property which they have or may hereafter acquire as such Trustees, together with the proceeds thereof, in trust, and manage the Trust Property (as defined herein) for the benefit of the Shareholders (as hereinafter defined) as provided by this Declaration of Trust.

ARTICLE I

THE TRUST; DEFINITIONS

          SECTION 1.1 Name. The name of the trust (the “Trust”) is:

Colonial Properties Trust

So far as may be practicable, the business of the Trust shall be conducted and transacted under that name, which name (and the word “Trust” wherever used in this Declaration of Trust, except where the context otherwise requires) shall refer to the Trustees collectively but not individually or personally and shall not refer to the Shareholders or to any officers, employees or agents of the Trust or of such Trustees.

          Under circumstances in which the Trustees determine that the use of the name “Colonial Properties Trust” is not practicable, they may use any other designation or name for the Trust.

          Where the context so requires, references to the “Trust” shall include the Trust’s predecessor entity, Colonial Properties Trust, a Maryland real estate investment trust.

          SECTION 1.2 Resident Agent. The name and address of the resident agent for service of process of the Trust in the State of Alabama is Thomas H. Lowder, Energen Plaza, 2101 Sixth Avenue North, Suite 750, Birmingham, Alabama 35203. The Trust may have such offices or places of business within or without the State of Alabama as the Trustees may from time to time determine.

          SECTION 1.3 Nature of Trust. The Trust is a real estate investment trust within the meaning of the Act. The Trust shall not be deemed to be a general partnership, limited partnership, joint venture, joint stock company or a corporation (but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the Code).

          SECTION 1.4 Powers. The Trust shall have all of the powers granted to real estate investment trusts pursuant to the Act or any successor statute and shall have any other and further powers as are not inconsistent with and are appropriate to promote and attain the purposes set forth in this Declaration of Trust.

          SECTION 1.5 Definitions. As used in this Declaration of Trust, the following terms shall have the following meanings unless the context otherwise requires (certain other terms used in Section 6.4 and/or Section 6.7 hereof are defined in Sections 6.2, 6.3 and 6.7(a) hereof):

          “Adviser” means the Person, if any, appointed, employed or contracted with by the Trust pursuant to Section 4.1 hereof.

          “Affiliate” or “Affiliated” means, as to any individual, corporation, partnership, trust or other association (other than the Trust), any Person (i) that holds beneficially, directly or indirectly, 5% or more of the outstanding stock or equity interests thereof or (ii) who is an officer, director, partner or trustee thereof or of any Person which controls, is controlled by, or is under common control with, such corporation, partnership, trust or other association or (iii) which controls, is controlled by or under common control with, such corporation, partnership, trust or other association.

          “Excess Shares” shall mean the Shares described in Section 6.4.

          “Mortgages” means mortgages, deeds of trust or other security interests on or applicable to Real Property.

          “Person” shall mean an individual, trust, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; but does not include an underwriter which participates in a public offering of Shares for a period of 90 days following the purchase by such underwriter of the Shares, provided that the ownership of Shares by such underwriter would not result in the Trust being “closely held” within the meaning of Section 856(h) of the Code, or would otherwise result in the Trust failing to qualify as a REIT.

          “Real Property” or “Real Estate” means land, rights in land (including leasehold interests), and any buildings, structures, improvements, furnishings, fixtures and equipment located on or used in connection with land and rights or interests in land.

          “REIT” shall mean a “real estate investment trust” under Section 856 of the Code.

          “REIT Provisions of the Code” means Sections 856 through 860 of the Code and any successor or other provisions of the Code relating to real estate investment trusts (including provisions as to the attribution of ownership of beneficial interests therein) and the regulations promulgated thereunder.

          “Securities” means Shares, any stock, shares or other evidence of equity or beneficial or other interests, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire, any of the foregoing.

          “Securities of the Trust” means any Securities issued by the Trust.

          “Shareholders” means holders of record of outstanding Shares.

          “Shares” means transferable shares of beneficial interest of the Trust of any class or series.

          “Trustees” or “Board of Trustees” means, collectively, the individuals named in Section 2.2 of this Declaration of Trust so long as they continue in office and all other individuals who have been duly elected and qualify as trustees of the Trust hereunder.

          “Trust Property” means any and all property, real, personal or otherwise, tangible or intangible, which is transferred or conveyed to the Trust or the Trustees (including all rents, income, profits and gains therefrom), which is owned or held by, or for the account of, the Trust or the Trustees.

ARTICLE II

TRUSTEES

          SECTION 2.1 Number. The number of Trustees initially shall be one (1) and may thereafter be increased or decreased from time to time by a two-thirds vote of the Trustees then in office or by a majority vote of the Shareholders; provided, however, that the total number of Trustees shall be not fewer than three (3) and not more than fifteen (15). No reduction in the number of Trustees shall cause the removal of any Trustee from office prior to the expiration of his term.

          SECTION 2.2 Initial Board; Term. The initial Trustee (the “Initial Trustee”) is Thomas H. Lowder, only for so long as he shall continue to serve as a Trustee of the Trust hereunder. The term of the Initial Trustee shall continue until the annual meeting of Shareholders in 1997 and until his successor shall have been duly elected and shall have qualified. The Trustees shall be divided into three classes, as

nearly equal in number as possible with the term of office of one class expiring each year.

          Beginning with the annual meeting of Shareholders in 1996 and at each succeeding annual meeting of Shareholders, the Trustees of the class of Trustees whose term expires at such meeting will be elected to hold office for a term expiring at the third succeeding annual meeting. Each Trustee will hold office for the term for which he is elected and until his successor is duly elected and qualified.

          SECTION 2.3 Resignation, Removal or Death. Any Trustee may resign by written notice to the Board of Trustees, effective upon execution and delivery to the Trust of such written notice or upon any future date specified in the notice. A Trustee may be removed from office with or without cause only at a meeting of the 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. Upon the resignation or removal of any Trustee, or his otherwise ceasing to be a Trustee, he shall automatically cease to have any right, title or interest in and to the Trust Property and shall execute and deliver such documents as the remaining Trustees require for the conveyance of any Trust Property held in his name, and shall account to the remaining Trustees as they require for all property which he holds as Trustee. Upon the incapacity or death of any Trustee, his legal representative shall perform the acts described in the foregoing sentence.

          SECTION 2.4 Legal Title. Legal title to all Trust Property shall be vested in the Trustees, but they may cause legal title to any Trust Property to be held by or in the name of any Trustee, or the Trust, or any other Person as nominee. The right, title and interest of the Trustees in and to the Trust Property shall automatically vest in successor and additional Trustees upon their qualification and acceptance of election or appointment as Trustees, and they shall thereupon have all the rights and obligations of Trustees, whether or not conveyancing documents have been executed and delivered pursuant to Section 2.3 hereof or otherwise. Written evidence of the qualification and acceptance of election or appointment of successor and additional Trustees may be filed with the records of the Trust and in such other offices, agencies or places as the Trustees may deem necessary or desirable.

ARTICLE III

POWERS OF TRUSTEES

          SECTION 3.1 General. Subject to the express limitations herein, (1) the business and affairs of the Trust shall be managed under the direction of the Board of Trustees and (2) the Trustees shall have full, exclusive and absolute power, control and authority over the Trust Property and over the business of the Trust as if they, in their own right, were the sole owners thereof. The Trustees may take any actions that, in their sole judgment and discretion, are necessary or desirable to conduct the business of the Trust. This Declaration of Trust shall be construed with a presumption in favor of the grant of power and authority to the Trustees. Any construction of this

Declaration of Trust or determination made in good faith by the Trustees concerning their powers and authority hereunder shall be conclusive. The enumeration and definition of particular powers of the Trustees included in this Article III shall in no way be limited or restricted by reference to or inference from the terms of this or any other provision of this Declaration of Trust or construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Trustees under the general laws of the State of Alabama as now or hereafter in force.

          SECTION 3.2 Specific Powers and Authority. Subject only to the express limitations herein, and in addition to all other powers and authority conferred by this Declaration of Trust or by law, the Trustees, without any vote, action or consent by the Shareholders, shall have and may exercise, at any time or times, in the name of the Trust or on its behalf the following powers and authorities:

          (a) Investments. Subject to Section 8.5 hereof, to invest in, purchase or otherwise acquire and to hold real, personal or mixed, tangible or intangible, property of any kind wherever located, or rights or interests therein or in connection therewith, all without regard to whether such property, interests or rights are authorized by law for the investment of funds held by trustees or other fiduciaries, or whether obligations the Trust acquires have a term greater or lesser than the term of office of the Trustees or the possible termination of the Trust, for such consideration as the Trustees may deem proper (including cash, property of any kind or Securities of the Trust); provided, however, that the Trustees shall take such actions as they deem necessary and desirable to comply with any requirements of the Act relating to the types of assets held by the Trust.

          (b) Sale, Disposition and Use of Property. Subject to Article V and Sections 8.5 and 9.3 hereof, to sell, rent, lease, hire, exchange, release, partition, assign, mortgage, grant security interests in, encumber, negotiate, dedicate, grant easements in and options with respect to, convey, transfer (including transfers to entities wholly or partially owned by the Trust or the Trustees) or otherwise dispose of any or all of the Trust Property by deeds (including deeds in lieu of foreclosure with or without consideration), trust deeds, assignments, bills of sale, transfers, leases, mortgages, financing statements, security agreements and other instruments for any of such purposes executed and delivered for and on behalf of the Trust or the Trustees by one or more of the Trustees or by a duly authorized officer, employee, agent or nominee of the Trust, on such terms as they deem appropriate; to give consents and make contracts relating to the Trust Property and its use or other property or matters; to develop, improve, manage, use, alter or otherwise deal with the Trust Property; and to rent, lease or hire from others property of any kind; provided, however, that the Trust may not use or apply land for any purposes not permitted by applicable law.

          (c) Financings. To borrow or in any other manner raise money for the purposes and on the terms they determine, and to evidence the same by issuance of Securities of the Trust, which may have such provisions as the Trustees determine; to reacquire such Securities of the Trust; to enter into other contracts or obligations on behalf of the Trust; to guarantee, indemnify or act as surety with respect to

payment or performance of obligations of any Person; to mortgage, pledge, assign, grant security interests in or otherwise encumber the Trust Property to secure any such Securities of the Trust, contracts or obligations (including guarantees, indemnifications and suretyships); and to renew, modify, release, compromise, extend, consolidate or cancel, in whole or in part, any obligation to or of the Trust or participate in any reorganization of obligors to the Trust.

          (d) Loans. Subject to the provisions of Section 8.5 hereof, to lend money or other Trust Property on such terms, for such purposes and to such Persons as they may determine.

          (e) Issuance of Securities. Subject to the provisions of Article VI hereof, to create and authorize and direct the issuance (on either a pro rata or a non-pro rata basis) by the Trust, in shares, units or amounts of one or more types, series or classes, of Securities of the Trust, which may have such voting rights, dividend or interest rates, preferences, subordinations, conversion or redemption prices or rights, maturity dates, distribution, exchange, or liquidation rights or other rights as the Trustees may determine, without vote of or other action by the Shareholders, to such Persons for such consideration, at such time or times and in such manner and on such terms as the Trustees determine; to list any of the Securities of the Trust on any securities exchange; and to purchase or otherwise acquire, hold, cancel, reissue, sell and transfer any Securities of the Trust.

          (f) Expenses and Taxes. To pay any charges, expenses or liabilities necessary or desirable, in the sole discretion of the Trustees, for carrying out the purposes of this Declaration of Trust and conducting the business of the Trust, including compensation or fees to Trustees, officers, employees and agents of the Trust, and to Persons contracting with the Trust, and any taxes, levies, charges and assessments of any kind imposed upon or chargeable against the Trust, the Trust Property or the Trustees in connection therewith; and to prepare and file any tax returns, reports or other documents and take any other appropriate action relating to the payment of any such charges, expenses or liabilities.

          (g) Collection and Enforcement. To collect, sue for and receive money or other property due to the Trust; to consent to extensions of the time for payment, or to the renewal, of any Securities or obligations; to engage or to intervene in, prosecute, defend, compound, enforce, compromise, release, abandon or adjust any actions, suits, proceedings, disputes, claims, demands, security interests or things relating to the Trust, the Trust Property or the Trust’s affairs; to exercise any rights and enter into any agreements and take any other action necessary or desirable in connection with the foregoing.

          (h) Deposits. To deposit funds or Securities constituting part of the Trust Property in banks, trust companies, savings and loan associations, financial institutions and other depositories, whether or not such deposits will draw interest, subject to withdrawal on such terms and in such manner as the Trustees determine.

          (i) Allocation; Accounts. To determine whether moneys, profits or other assets of the Trust shall be charged or credited to,

or allocated between, income and capital, including whether or not to amortize any premium or discount and to determine in what manner any expenses or disbursements are to be borne as between income and capital (regardless of how such items would normally or otherwise be charged to or allocated between income and capital without such determination); to treat any dividend or other distribution on any investment as, or apportion it between, income and capital; in their discretion to provide reserves for depreciation, amortization, obsolescence or other purposes in respect of any Trust Property in such amounts and by such methods as they determine; to determine what constitutes net earnings, profits or surplus; to determine the method or form in which the accounts and records of the Trust shall be maintained; and to allocate to the Shareholders equity account less than all of the consideration paid for Shares and to allocate the balance to paid-in capital or capital surplus.

          (j) Valuation of Property. To determine the value of all or any part of the Trust Property and of any services, Securities, property or other consideration to be furnished to or acquired by the Trust, and to revalue all or any part of the Trust Property, all in accordance with such appraisals or other information as are reasonable, in their sole judgment.

          (k) Ownership and Voting Powers. To exercise all of the rights, powers, options and privileges pertaining to the ownership of any Mortgages, Securities, Real Estate and other Trust Property to the same extent that an individual owner might, including without limitation to vote or give any consent, request or notice or waive any notice, either in person or by proxy or power of attorney, which proxies and powers of attorney may be for any general or special meetings or action, and may include the exercise of discretionary powers.

          (l) Officers, Etc.; Delegation of Powers. To elect, appoint or employ such officers for the Trust and such committees of the Board of Trustees with such powers and duties as the Trustees may determine or the bylaws of the Trust (the “Bylaws”) provide; to engage, employ or contract with and pay compensation to any Person (including subject to Section 8.5 hereof, any Trustee and any Person who is an Affiliate of any Trustee) as agent, representative, Adviser, member of an advisory board, employee or independent contractor (including advisers, consultants, transfer agents, registrars, underwriters, accountants, attorneys-at-law, real estate agents, property and other managers, appraisers, brokers, architects, engineers, construction managers, general contractors or otherwise) in one or more capacities, to perform such services on such terms as the Trustees may determine; to delegate to one or more Trustees, officers or other Persons engaged or employed as aforesaid or to committees of Trustees or to the Adviser, the performance of acts or other things (including granting of consents), the making of decisions and the execution of such deeds, contracts or other instruments, either in the names of the Trust, the Trustees or as their attorneys or otherwise, as the Trustees may determine; and to establish such committees as they deem appropriate.

          (m) Associations. Subject to Section 8.5 hereof, to cause the Trust to enter into joint ventures, general or limited

partnerships, participation or agency arrangements or any other lawful combinations, relationships, or associations of any kind.

          (n) Reorganizations, Etc. Subject to Sections 9.2 and 9.3 hereof, to cause to be organized or assist in organizing any Person under the laws of any jurisdiction to acquire all or any part of the Trust Property, carry on any business in which the Trust shall have an interest or otherwise exercise the powers the Trustees deem necessary, useful or desirable to carry on the business of the Trust or to carry out the provisions of this Declaration of Trust; to merge or consolidate the Trust with any Person; to sell, rent, lease, hire, convey, negotiate, assign, exchange or transfer all or any part of the Trust Property to or with any Person in exchange for Securities of such Person or otherwise; and to lend money to, subscribe for and purchase the Securities of, and enter into any contracts with, any Person in which the Trust holds, or is about to acquire, Securities or any other interests.

          (o) Insurance. To purchase and pay for out of Trust Property insurance policies insuring the Trust and the Trust Property against any and all risks, and insuring the Shareholders, Trustees, officers, employees and agents of the Trust individually against all claims and liabilities of every nature arising by reason of holding or having held any such status, office or position or by reason of any action alleged to have been taken or omitted (including those alleged to constitute misconduct, gross negligence, reckless disregard of duty or bad faith) by any such Person in such capacity, whether or not the Trust would have the power to indemnify such Person against such claim or liability.

          (p) Executive Compensation, Pension and Other Plans. To adopt and implement executive compensation, pension, profit sharing, share option, share bonus, share purchase, share appreciation rights, restricted share, savings, thrift, retirement, incentive or benefit plans, trusts or provisions, applicable to any or all Trustees, officers, employees or agents of the Trust, or to other Persons who have benefited the Trust, all on such terms and for such purposes as the Trustees may determine.

          (q) Distributions. To declare and pay dividends or other distributions to Shareholders, subject to the provisions of Section 6.5 hereof.

          (r) Indemnification. In addition to the indemnification provided for in Section 8.4 hereof, to indemnify any Person, including any Adviser or independent contractor, with whom the Trust has dealings.

          (s) Charitable Contributions. To make donations for the public welfare or for community, charitable, religious, educational, scientific, civic or similar purposes, regardless of any direct benefit to the Trust.

          (t) Discontinue Operations; Bankruptcy. To discontinue the operations of the Trust (subject to Section 10.2 hereof); to petition or apply for relief under any provision of federal or state bankruptcy, insolvency or reorganization laws or similar laws for the relief of

debtors; to permit any Trust Property to be foreclosed upon without raising any legal or equitable defenses that may be available to the Trust or the Trustees or otherwise defending or responding to such foreclosure; to confess judgment against the Trust; or to take such other action with respect to indebtedness or other obligations of the Trustees, in such capacity, the Trust Property or the Trust as the Trustees in their discretion may determine.

          (u) Termination of Status. To terminate the status of the Trust as a real estate investment trust under the REIT Provisions of the Code; provided, however, that the Board of Trustees shall take no action to terminate the Trust’s status as a real estate investment trust under the REIT Provisions of the Code until such time as (i) the Board of Trustees adopts a resolution recommending that the Trust terminate its status as a real estate investment trust under the REIT Provisions of the Code, (ii) the Board of Trustees presents the resolution at an annual or special meeting of the Shareholders and (iii) such resolution is approved by the holders of a majority of the issued and outstanding Common Shares (as defined in Section 6.2 hereof).

          (v) Fiscal Year. Subject to the Code, to adopt, and from time to time change, a fiscal year for the Trust.

          (w) Seal. To adopt and use a seal, but the use of a seal shall not be required for the execution of instruments or obligations of the Trust.

          (x) Bylaws. To adopt, implement and from time to time alter, amend or repeal Bylaws of the Trust relating to the business and organization of the Trust which are not inconsistent with the provisions of this Declaration of Trust.

          (y) Voting Trust. To participate in, and accept Securities issued under or subject to, any voting trust.

          (z) Proxies. To solicit proxies of the Shareholders at the expense of the Trust.

          (aa) Further Powers. To do all other acts and things and execute and deliver all instruments incident to the foregoing powers, and to exercise all powers which they deem necessary, useful or desirable to carry on the business of the Trust or to carry out the provisions of this Declaration of Trust, even if such powers are not specifically provided hereby.

          SECTION 3.3 Determination of Best Interest of Trust. In determining what is in the best interest of the Trust, a Trustee shall consider the interests of the Shareholders of the Trust and applicable legal requirements (including contractual obligations to parties other than shareholders) and, in his or her sole and absolute discretion, may consider (a) the interests of the Trust’s employees, suppliers, creditors and customers, (b) the economy of the nation, (c) community and societal interests and (d) the long-term as well as short-term interests of the Trust and its Shareholders, including the possibility that these interests may be best served by the continued independence of the Trust.

ARTICLE IV

ADVISER

          SECTION 4.1 Appointment. The Trustees are responsible for setting the general policies of the Trust and for the general supervision of its business conducted by officers, agents, employees, advisers or independent contractors of the Trust. However, the Trustees are not required personally to conduct the business of the Trust, and they may (but need not) appoint, employ or contract with any Person (including a Person Affiliated with any Trustee) as an Adviser and may grant or delegate such authority to the Adviser as the Trustees may, in their sole discretion, deem necessary or desirable. The Trustees may determine the terms of retention and the compensation of the Adviser and may exercise broad discretion in allowing the Adviser to administer and regulate the operations of the Trust, to act as agent for the Trust, to execute documents on behalf of the Trust and to make executive decisions which conform to general policies and principles established by the Trustees.

          SECTION 4.2 Affiliation and Functions. The Trustees, by resolution or in the Bylaws, may provide guidelines, provisions, or requirements concerning the affiliation and functions of the Adviser.

ARTICLE V

INVESTMENT POLICY

          The fundamental investment policy of the Trust is to make investments in such a manner as to comply with the REIT Provisions of the Code and with the requirements of the Act, with respect to the composition of the Trust’s investments and the derivation of its income. Subject to Section 3.2(u) hereof, the Trustees will use their best efforts to carry out this fundamental investment policy and to conduct the affairs of the Trust in such a manner as to continue to qualify the Trust for the tax treatment provided in the REIT Provisions of the Code; provided, however, no Trustee, officer, employee or agent of the Trust shall be liable for any act or omission resulting in the loss of tax benefits under the Code, except to the extent provided in Section 8.2 hereof. The Trustees may change from time to time by resolution or in the Bylaws of the Trust, such investment policies as they determine to be in the best interests of the Trust, including prohibitions or restrictions upon certain types of investments.

ARTICLE VI

SHARES

          SECTION 6.1 Authorized Shares. The beneficial interest in the Trust shall be divided into Shares. The total number of Shares which the Trust is authorized to issue is fifty million (50,000,000) shares, and shall consist of common shares and such other types or classes of Securities of the Trust as the Trustees may create and authorize from time to time and designate as representing a beneficial

interest in the Trust. Shares may be issued for such consideration as the Trustees determine or, if issued as a result of a Share dividend or Share split, without any consideration, in which case all Shares so issued shall be fully paid and nonassessable.

          SECTION 6.2 Common Shares. Common Shares (“Common Shares”) shall have a par value of $.01 per share and shall entitle the holders to one vote per share on all matters upon which Shareholders are entitled to vote pursuant to Section 7.2 hereof, and shares of a particular class of issued Common Shares shall have equal dividend, distribution, liquidation and other rights, and shall have no reference, cumulative, preemptive, appraisal, conversion or exchange rights. The Trustees may classify or reclassify any unissued Common Shares by setting or changing the number, designation, preferences, conversion or other rights voting powers, restrictions, limitations as to dividends qualifications or terms or conditions of redemption of any such Common Shares and in such event, the Trust shall file for record with the judge of probate in the county in which its principal place of business is located articles supplementary in substance and form as prescribed by the Act, including Section 7(b) thereof.

          SECTION 6.3 Preferred Shares. The Trustees are hereby expressly granted the authority to authorize from time to time the issuance of one or more series of preferred Shares (“Preferred Shares”) and with respect to any such series to fix the numbers, designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption of such series. The Trustees may classify or reclassify any unissued Preferred Shares by setting or changing the number, designation, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of any such Preferred Shares and in such event, the Trust shall file for record with the judge of probate in the county in which its principal place of business is located articles supplementary in substance and form as prescribed by the Act, including Section 7(b) thereof.

          SECTION 6.4 Excess Shares. The following is a description of the voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the Excess Shares (“Excess Shares”) of the Trust (certain capitalized terms used in this Section 6.4 and not previously defined are defined in Section 6.7(a)):

          (a) Ownership in Trust. Without limiting subparagraph (b) and (c) of Section 6.7, upon any purported Transfer or other event that results in the issuance of Excess Shares pursuant to subparagraph (d) of Section 6.7, such Excess Shares shall be deemed to have been Transferred to the Trust, as trustee of an Excess Shares Trust for the exclusive benefit of the Beneficiary or Beneficiaries to whom an interest in such Excess Shares Trust may later be transferred pursuant to subparagraph (e) of Section 6.4. Excess Shares so held in trust shall be issued and outstanding shares of the Trust but shall not be considered issued and outstanding for purposes of any shareholder vote. The Purported Record Transferee or, in the case of Excess Shares resulting from an event other than a Transfer, the Purported Record Holder, shall have no rights in such Excess Shares. The Purported

Beneficial Transferee or, in the case of Excess Shares resulting from an event other than a Transfer, the Purported Beneficial Holder, shall have no rights in such Excess Shares except as provided in subparagraph (e) of Section 6.4.

          (b) No Dividend Rights. Excess Shares shall not be entitled to any dividend or other periodic distributions. Any dividend or distribution paid with respect to Common Shares or Preferred Shares prior to the discovery by the Trust that such Shares previously were converted into and exchanged for Excess Shares pursuant to subparagraph (d) of Section 6.7 shall be repaid to the Trust upon demand, and any dividend or distribution declared but unpaid shall be void ab initio with respect to such Excess Shares.

          (c) Liquidation Rights. In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Trust, each Excess Share in trust shall be entitled to (i) if such Excess Share results from an exchange of a Common Share, that portion of the assets of the Trust which a Common Share that was exchanged for such Excess Share would have been entitled had the Common Share remained outstanding, or (ii) if such Excess Share results from an exchange of a Preferred Share, that portion of the assets of the Trust which a Preferred Share that was exchanged for such Excess Share would have been entitled had the Preferred Share remained outstanding. The Trust, as holder of the Excess Shares in trust, or if the Trust has been dissolved, any trustee appointed by the Trust prior to its dissolution, shall ratably distribute to the Beneficiaries of the Excess Shares Trust, when and if determined in accordance with subparagraph (e) of Section 6.4, any such assets received in respect of the Excess Shares in any liquidation, dissolution or winding up of, or any distribution of the assets, of the Trust.

          (d) Voting Rights. The Excess Shares shall not have voting rights on any matters.

          (e) Restrictions on Transfer; Designation of Beneficiary. Excess Shares shall not be transferable. The Trust shall have the sole right to designate one or more Beneficiaries of an interest in the Excess Shares Trust (representing the number of Excess Shares held by the Excess Shares Trust attributable to the purported Transfer or other event that resulted in the issuance of such Excess Shares), subject to the condition that the Excess Shares held in the Excess Shares Trust would not be Excess Shares in the hands of any such Beneficiary. Any consideration payable by such Beneficiary or Beneficiaries in connection with such designation up to the “Excess Share Limitation Price,” shall be paid to the Purported Beneficial Transferee or, in the case of Excess Shares resulting from an event other than a transfer, the Purported Beneficial Holder. The Excess Share Limitation Price is the lesser of (1) (x) in the case of Excess Shares resulting from a Transfer for value, the price per Share that the Purported Beneficial Transferee paid for the Shares in the purported Transfer that resulted in the issuance of the Excess Shares, or, (y) in the case of Excess Shares resulting from (I) a Transfer other than for value (such as a gift, devise or similar Transfer) or (II) an event other than a Transfer, a price per share equal to the Market Price of the Shares that were exchanged for such Excess Shares on the date of the

purported Transfer or other event that resulted in the issuance of the Excess Shares or (2) a price per share equal to the Market Price of the Shares on the date of the designation of the Beneficiary of the interest in the Excess Shares Trust. If the consideration payable by the designated Beneficiary of an interest in the Excess Shares Trust exceeds the Excess Share Limitation Price, the amount by which such consideration exceeds the Excess Share Limitation Price shall be paid to the Trust. The Trust must designate a Beneficiary of the interest in the Excess Shares Trust within 30 days from the later of (i) the date of the Transfer that resulted in the issuance of the Excess Shares, or in the case of Excess Shares resulting from an event other than a Transfer, the date of such other event, and (ii) if the Trust does not receive actual notice of a Transfer or other event pursuant to subparagraph (e) of Section 6.7, the date the Board of Trustees determines in good faith that such a Transfer or other event resulting in the issuance of Excess Shares has occurred. Upon the designation of a Beneficiary of an interest in the Trust, the corresponding Excess Shares in the Excess Shares Trust shall be automatically exchanged (i) for an equal number of Common Shares if such Excess Shares resulted from an exchange of Common Shares or (ii) for an equal number of Preferred Shares if such Excess Shares resulted from an exchange of Preferred Shares, and such Common Shares or Preferred Shares, as the case may be, shall be transferred of record to the Beneficiary of the interest in the Excess Shares Trust designated by the Trust as described above so long as such Common Shares or Preferred Shares, as the case may be, would not be Excess Shares in the hands of such Beneficiary.

          (f) Purchase Right in Excess Shares. Notwithstanding subparagraph (e)of Section 6.4, Excess Shares shall be deemed to have been offered for sale to the Trust, or its designee, at a price per share equal to the Excess Share Limitation Price (determined by substituting “the date on which the Trust, or its designee, accepts the offer to sell” for “the date of the designation of the Beneficiary of the interest in the Excess Shares Trust” in clause (2) of the definition of Excess Share Limitation Price in subparagraph (e) of Section 6.4). The Trust shall have the right to accept such offer for a period of thirty days after the later of (i) the date of the Transfer or other event which resulted in the issuance of such Excess Shares and (ii) if the Trust does not receive actual notice of a Transfer or other event pursuant to subparagraph (e) of Section 6.7, the date the Board of Trustees determines in good faith that such a Transfer or other event resulting in the issuance of Excess Shares has occurred.

          SECTION 6.5 Dividends or Distributions. The Trustees may from time to time declare and pay to Shareholders such dividends or distributions in cash, property or other assets of the Trust or in Securities of the Trust or from any other source as the Trustees in their discretion shall determine. The Trustees shall endeavor to declare and pay such dividends and distributions as shall be necessary for the Trust to qualify as a real estate investment trust under the REIT Provisions of the Code; provided, however, Shareholders shall have no right to any dividend or distribution unless and until declared by the Trustees. The exercise of the powers and rights of the Trustees pursuant to this section shall be subject to the provisions of any class or series of Shares at the time outstanding. The receipt by any Person in whose name any Shares are registered on the records of the

Trust or by his duly authorized agent shall be a sufficient discharge for all dividends or distributions payable or deliverable in respect of such Shares and from all liability to see to the application thereof.

          SECTION 6.6 General Nature of Shares. All Shares shall be personal property entitling the Shareholders only to those rights provided in this Declaration of Trust, the Act or in the resolution creating any class or series of Shares. The legal ownership of the Trust Property and the right to conduct the business of the Trust are vested exclusively in the Trustees; the Shareholders shall have no interest therein other than the beneficial interest in the Trust conferred by their Shares and shall have no right to compel any partition, division, dividend or distribution of the Trust or any of the Trust Property. The death of a Shareholder shall not terminate the Trust or give his legal representative any rights against other Shareholders, the Trustees or the Trust Property, except the right, exercised in accordance with applicable provisions of the Bylaws, to receive a new certificate for Shares in exchange for the certificate held by the deceased Shareholder. Holders of Shares shall not have any preemptive or other right to purchase or subscribe for any class of securities of the Trust which the Trust may at any time issue or sell.

          SECTION 6.7 Restrictions On Ownership and Transfer.

          (a) Certain Definitions. The following terms shall have the following meanings:

          (1) “Acquire” shall mean the acquisition of Beneficial or Constructive Ownership of Shares by any means including, without limitation, (i) the acquisition of direct ownership of shares by any Person, including through the exercise of Acquisition Rights or any other option, warrant, pledge, other security interest or similar right to acquire shares, and (ii) the acquisition of indirect ownership of shares (taking into account the constructive ownership rules of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code) by a Person who is an individual within the meaning of Section 542(a)(2) of the Code, including, without limitation, through the acquisition by any Person of Acquisition Rights or any option, warrant, pledge, security interest, or similar right to acquire shares. The term “Acquisition” shall have the correlative meaning.

          (2) “Acquisition Rights” shall mean rights to Acquire Shares pursuant to: (i) exercise of any option to acquire Shares or (ii) any pledge of Shares.

          (3) “Aggregate Ownership Limit” shall mean 9.8% either in number of Shares or value (whichever is more restrictive) of the outstanding Shares of the Trust.

          (4) “Beneficial Ownership” shall mean, with respect to any Person, ownership of Shares by that Person equal to the sum of (i) the Shares directly owned by such Person and (ii) the Shares indirectly owned by such Person (if such Person is an “individual” as defined in Section 542(a)(2) of the Code) taking into account constructive ownership determined under Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code (except where expressly provided otherwise). The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

          (5) “Beneficiary” shall mean a beneficiary of the Excess Shares Trust as determined pursuant to subparagraph (e) of Section 6.4.

          (6) “Common Shares Ownership Limit” shall mean not more than 5.0% in value or in number (whichever is more restrictive) of the aggregate of the outstanding Common Shares of the Trust and the outstanding Excess Shares of the Trust.

          (7) “Constructive Ownership” shall mean ownership of Shares either directly by a Person or constructively by a Person through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Owns,” and “Constructively Owned” shall have the correlative meanings.

          (8) “Constructive Ownership Prohibitions” shall mean as follows: no Person (other than an Excluded Holder) shall be permitted to Acquire Shares (whether by reason of exercise of the Redemption Right or otherwise) if, after giving effect to and as a result of such acquisition, such Person would Constructively Own more than 9.8% of the outstanding Shares.

          (9) “Excess Share Limitation Price” shall have the meaning set forth in subparagraph (e) of Section 6.4.

          (10) “Excess Shares Trustee” shall mean the Trust, acting as trustee for any of the Excess Shares Trusts or any successor trustee appointed by the Trust.

          (11) “Excluded Holder” shall mean Catherine K. Lowder, Thomas H. Lowder, Robert E. Lowder, James K. Lowder, Colonial Properties, Inc., The Colonial Company, Equity Partners II Joint Venture, Colonial Commercial Investments, Inc., CBC Realty, Inc., and Colonial Properties Management Association (and any Person who is or would be a Beneficial Owner of Shares as a result of the Beneficial Ownership of Shares by any such Person) (collectively, the “Excluded Holders”).

          (12) “Excluded Holder Limit” shall mean as follows: (i) no Excluded Holder, nor any Person whose ownership of Shares would cause an Excluded Holder to be considered to Constructively Own such Shares, nor any Person who would be considered to Constructively Own Shares Constructively Owned by an Excluded Holder, shall be permitted to Acquire Shares (whether by reason of the exercise the Redemption Right or otherwise) if, after giving effect to such acquisition (A) The Colonial Company or any direct or indirect subsidiary of The Colonial Company would be regarded as a “related party tenant” of the Trust for purposes of Section 856(d)(2)(B) of the Code and (B) the total rental income considered derived by the Trust for the calendar year of such acquisition or any calendar year thereafter from all “related party tenants” could reasonably be expected to exceed one percent (1%) of the gross income of the Trust (as determined for purposes of Section 856(c)(2) of the Code) for such calendar year; and (ii) no Excluded Holder, nor any Person whose ownership of Shares would cause an Excluded Holder to be considered to Beneficially Own such Shares, nor any Person who would be considered to Beneficially Own Shares Beneficially Owned by an Excluded Holder shall be permitted to Acquire

Shares (whether by reason of the exercise the Redemption Right or otherwise) if, after giving effect to such acquisition (A) any single Person described in this clause (ii) who is considered an “individual” for purposes of Section 542(a)(2) of the Code would be considered to Beneficially Own more than twenty-nine percent (29%)of the outstanding Shares (as determined for purposes of Sections 542(a)(2) and 856(a)(6) of the Code), (B) any two Persons described in this clause (ii) who are considered “individuals” for purposes of Section 542(a)(2) of the Code would be considered to Beneficially Own more than 34 percent of the outstanding Shares (as determined for purposes of Sections 542(a)(2) and 856(a)(6) of the Code), (C) any three Persons described in this clause (ii) who are considered “individuals” for purposes of Section 542(a)(2) of the Code would be considered to Beneficially Own more than 39 percent of the outstanding Shares (as determined for purposes of Sections 542(a)(2) and 856(a)(6) of the Code), or (D) any four Persons described in this clause (ii) who are considered “individuals” for purposes of Section 542(a)(2)of the Code would be considered to Beneficially Own more than 44 percent of the outstanding Shares (as determined for purposes of Sections 542(a)(2) and 856(a)(6) of the Code).

          (13) “Market Price” on any date shall mean, with respect to any class or series of outstanding Shares, the average of the Closing Price for such Shares for the five consecutive Trading Days ending on such date. The “Closing Price” on any date shall mean the last sale price for such Shares, regular way, or, in case no such sale takes place on such date, the average of the closing bid and asked prices, regular way, for such Shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Shares in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange (the “NYSE”) or, if such Shares are not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Shares are listed or admitted to trading or, if such Shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation systems that may then be in use or, if such Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Shares selected by the Board of Trustees of the Trust. The term “Trading Day” shall mean a day on which the principal national securities exchange on which the applicable Shares are listed or admitted to trading is open for the transaction of business, or, if such Shares are not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

          (14) “Preferred Shares Ownership Limit” shall mean with respect to each series or class of Preferred Shares, not more than 9.8% in value or in number of Shares (whichever is more restrictive) of the aggregate of the outstanding Preferred Shares of the Trust of such class or series.

          (15) “Purported Beneficial Holder” shall mean, with respect to any event other than a purported Transfer which results in Excess Shares, the person for whom the applicable Purported Record Holder held the Shares that were, pursuant to subparagraph (d) of Section 6.7, automatically exchanged for Excess Shares upon the occurrence of such event. The Purported Beneficial Holder and the Purported Record Holder may be the same Person.

          (16) “Purported Beneficial Transferee” shall mean, with respect to any purported Transfer which results in Excess Shares, the purported beneficial transferee for whom the Purported Record Transferee would have acquired Shares if such Transfer had not violated the provisions of subparagraph (b) of Section 6.7. The Purported Beneficial Transferee and the Purported Record Transferee may be the same Person.

          (17) “Purported Record Holder” shall mean, with respect to any event other than a purported Transfer which results in Excess Shares, the record holder of the Shares that were, pursuant to subparagraph (d) of Section 6.7, automatically exchanged for Excess Shares upon the occurrence of such event. The Purported Record Holder and the Purported Beneficial Holder may be the same Person.

          (18) “Purported Record Transferee” shall mean, with respect to any purported Transfer which results in Excess Shares, the Person who would have been the record holder of the Shares if such Transfer had not violated the provisions of subparagraph (b) of Section 6.7. The Purported Beneficial Transferee and the Purported Record Transferee may be the same Person.

          (19) “Redemption Right” shall mean the right set forth in Section 8.6 of the Second Amended and Restated Agreement of Limited Partnership of Colonial Realty Limited Partnership, as effective from time to time, including any modification of such right by contract or otherwise.

          (20) “Restriction Termination Date” shall mean the first day after the effective date hereof on which the Trust determines pursuant to subparagraph (u) of Section 3.2 hereof that it is no longer in the best interests of the Trust to attempt to, or continue to, qualify as a REIT.

          (21) “Transfer” shall mean any sale, transfer, gift, assignment, devise or other disposition of Shares that results in a change in the record, Beneficial or Constructive Ownership of Shares or the right to vote or receive dividends on Shares (including without limitation (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Shares or the right to vote or receive dividends on Shares or (ii) the sale, transfer, assignment or other disposition or grant of any Acquisition

Rights or other securities or rights convertible into or exchangeable for Shares, or the right to vote or receive dividends on Shares), whether voluntary or involuntary, whether of record, Beneficially or Constructively and whether by operation of law or otherwise.

          (22) “Units” shall mean Partnership Units as that term is defined in the Second Amended and Restated Agreement of Limited Partnership of Colonial Realty Limited Partnership, a Delaware limited partnership, as effective on the effective date hereof.

          (b) Restrictions.

          (1) Except as provided in subparagraph (k) of Section 6.7 hereof, during the period prior to the Restriction Termination Date:

          (i) No Person (other than in the case of Common Shares, an Excluded Holder) shall Acquire or Beneficially Own any Shares if, as the result of such Acquisition or Beneficial Ownership, such Person would Beneficially Own Shares in excess of either the Common Shares Ownership Limit or the Aggregate Ownership Limit;

          (ii) No Person shall Acquire or Beneficially Own any series or class of Preferred Shares if, as the result of such Acquisition or Beneficial Ownership, such Person would Beneficially Own Shares of such series or class of Preferred Shares in excess of the Preferred Shares Ownership Limit;

          (iii) No Person (other than, in the case of Common Shares, an Excluded Holder) shall Acquire or Constructively Own any Shares if, as the result of such Acquisition or Constructive Ownership any Person would Constructively Own Shares in violation of the Constructive Ownership Prohibitions.

          (iv) No Person shall Acquire any Shares if, as a result of such Acquisition, the Shares would be Beneficially Owned by less than 100 Persons (determined without reference to any rules of attribution);

          (v) No Person shall Acquire or Beneficially Own any Shares if, as a result of such Acquisition or Beneficial Ownership, the Trust would be “closely held” within the meaning of Section 856(h) of the Code or otherwise fail to qualify as a REIT; and

          (vi) No Excluded Holder shall Acquire or Beneficially Own any Shares if, as the result of such Acquisition or Beneficial Ownership, such Excluded Holder would Beneficially Own Shares in excess of the Excluded Holder Limit.

          (2) Any Transfer (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE) that, if effective, would result in a violation of the restrictions in subparagraph (b) (1) of Section 6.7, shall be void ab initio as to the Transfer of such Shares that would cause the violation of the applicable restriction in subparagraph (b) (1) of Section 6.7, and the intended transferee shall acquire no rights in such Shares. (c) Remedies for Breach. If the Board of Trustees or a committee thereof shall at any time determine in good faith that a purported Transfer or

other event has taken place in violation of subparagraph (b) (1) of Section 6.7 or that a Person intends to Acquire or has attempted to Acquire Beneficial Ownership or Constructive Ownership of any Shares of the Trust that will result in violation of subparagraph (b) (1) of Section 6.7 (whether or not such violation is intended), the Board of Trustees or a committee thereof shall take such action as it or they deem advisable to refuse to give effect to or to prevent such Transfer or other event, including, but not limited to, refusing to give effect to such Transfer on the books of the Trust or instituting proceedings to enjoin such Transfer; provided, however, that any Acquisition in violation of subparagraph (b) (l) of Section 6.7 shall automatically result in the exchange described in subparagraph (d) of Section 6.7, irrespective of any action (or non-action) by the Board of Trustees or a committee thereof.

          (d) Exchange for Excess Shares. If, at any time prior to the Restriction Termination Date, there is a purported Transfer whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE) or other event such that one or more of the restrictions on Beneficial Ownership, Constructive Ownership and Transfer of the Shares described in subparagraph (b) of Section 6.7 would have been violated, then, except as otherwise provided in subparagraph (k) of Section 6.7, the Shares being Transferred (or, in the case of an event other than a Transfer, the Shares Beneficially Owned or Constructively Owned, which would cause one or more of such restrictions to be violated (rounded up to the nearest whole share)) shall be automatically converted into and exchanged for an equal number of Excess Shares. Such conversion and exchange shall be effective as of the close of business on the business day prior to the date of such purported Transfer or other event.

          (e) Notice of Restricted Transfer. Any Person who Acquires or attempts or intends to Acquire Shares in violation of subparagraph (b) of Section 6.7 or any Person who is a transferee in a Transfer or is otherwise affected by an event other than a Transfer that results in the issuance of Excess Shares pursuant to subparagraph (d) of Section 6.7, shall immediately give written notice to the Trust of such Transfer or other event and shall provide to the Trust such other information as the Trust may request in order to determine the effect, if any, of such Transfer or attempted, intended or purported Transfer or other event on the Trust’s status as a REIT.

          (f) Owners Required To Provide Information. Prior to the Restriction Termination Date:

          (1) every shareholder of record of more than 5% (or such lower percentage as required by the Code or regulations promulgated thereunder) of the number or value of the outstanding Shares of the Trust shall, within 30 days after December 31 of each year, give written notice to the Trust stating the name and address of such record shareholder, the number of Shares Beneficially Owned by it, and a description of how such Shares are held; provided that a shareholder of record who holds outstanding Shares of the Trust as nominee for another person, which other person is required to include in gross income, for U.S. federal income tax purposes, the dividends received on such Shares (an “Actual Owner”), shall give written notice to the Trust stating the name and address of such Actual

Owner and the number of shares of such Actual Owner with respect to which the shareholder of record is nominee.

          (2) every Actual Owner of more than 5% (or such lower percentage as required by the Code or regulations promulgated thereunder) of the number or value of the outstanding Shares of the Trust who is not a shareholder of record of the Trust, shall within 30 days after December 31 of each year give written notice to the Trust stating the name and address of such Actual Owner, the number of Shares Beneficially Owned, and a description of how such Shares are held.

          (3) each person who is a Beneficial Owner or Constructive Owner of Shares and each Person (including the shareholder of record) who is holding Shares for a Beneficial Owner or Constructive Owner shall provide to the Trust such information as the Trust may request, in good faith, in order to determine the Trust’s compliance with the REIT Provisions of the Code.

          (g) Remedies Not Limited. Subject to Section (m), nothing contained in this Section 6.7 shall limit the authority of the Board of Trustees to take such other action as it deems necessary or advisable to protect the Trust and the interests of its shareholders in preserving the Trust’s status as a REIT.

          (h) No Remedy Against Transferor. A purported transferee shall have no claim, cause of action, or any other recourse whatsoever against a transferor of Shares acquired by such purported transferee in violation of subparagraph (b) of Section 6.7. The purported transferee’s or holder’s sole right with respect to such shares shall be to receive, at the Trust’s sole and absolute discretion, either (i) consideration for such shares upon the resale of the shares as directed by the Trust pursuant to subparagraph (e) of Section 6.4 or (ii) the Excess Share Limitation Price pursuant to subparagraph (e) of Section 6.4. Notwithstanding the foregoing, no Trustee or officer of the Trust shall be liable to the Trust for any damages, costs or expenses arising from any dividend or other distribution paid by the Trust to such purported holder prior to the discovery by such director or officer that such purported holder was not entitled to receive such dividend or distribution by virtue of the provisions of subparagraph (b) of Section 6.4, and no corporate action authorized by the shareholders of the Trust prior to the discovery that a purported holder is not entitled to vote Shares shall be void or voidable as a result of the inclusion of the vote of such purported holder in approving a Trust action or on determining the presence of a quorum prior to the discovery that such purported holder was not entitled to vote by virtue of the provisions of subparagraph (d)of Section 6.4.

          (i) Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Section 6.7, including any definition contained in subparagraph (a) of Section 6.7 (or Section 6.4, relating to Excess Shares), the Board of Trustees shall have the power to determine the application of the provisions of this Section 6.6 and Section 6.4 with respect to any situation based on the facts known to it.

          (j) Waiver. The Trust shall have authority at any time to waive the requirements that Excess Shares be issued or be deemed outstanding in accordance with the provisions of Section 6.7 if the Trust determines, based on an opinion of nationally recognized tax counsel, that the issuance of such Excess Shares or the fact that such Excess Shares are deemed to be outstanding would jeopardize the status of the Trust as a REIT for federal income tax purposes.

          (k) Exception. The Board of Trustees, in its sole and absolute discretion, may exempt a Person from the Aggregate Ownership Limit, the Common Shares Ownership Limit, the Preferred Shares Ownership Limit, the Constructive Ownership Prohibitions or the Excluded Holder Limits, as the case may be, with respect to Shares to be Acquired, Beneficially Owned, or Constructively Owned by such Person (A) if such Person is not an individual for purposes of Section 542(a)(2) of the Code and the Board of Trustees obtains such representations and undertakings from such Person as it determines are reasonably necessary to ascertain that no individual’s Beneficial or Constructive Ownership of such Shares will violate the Aggregate Ownership Limit, the Common Shares Ownership Limit, the Preferred Shares Ownership Limit, the Constructive Ownership Prohibitions or the Excluded Holder Limits, as the case may be, or otherwise violate subparagraph (b) of Section 6.7, (B) if such Person does not own, actually or Constructively, an interest in a tenant of the Trust (or a tenant of an entity owned or controlled by the Trust) that would cause the Trust to own, actually or Constructively, more than a 9.8% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board of Trustees obtains such representations and undertakings from such Person as it determines are reasonably necessary to ascertain this fact, and (C) if such Person agrees that any violation of such representations or undertaking (or other action which is contrary to the restrictions contained in this Section 6.7) or attempted violation will result in such Shares being exchanged for Excess Shares in accordance with subparagraph (d) of Section 6.7. Prior to granting any exception pursuant to this subparagraph (k) of Section 6.7, the Board of Trustees may require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in form and substance satisfactory to the Board of Trustees in its sole and absolute discretion, as it may deem necessary or advisable in order to determine or ensure the Trust’s status as a REIT. Notwithstanding the receipt of any ruling or opinion, the Board of Trustees may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.

          (l) Legend. Each certificate for Shares shall bear substantially the following legend:

          “The shares represented by this certificate are subject to restrictions on transfer and ownership for the purpose of assisting the Trust in maintaining its status as a Real Estate Investment Trust under the Internal Revenue Code of 1986, as amended. Subject to certain further restrictions and except as expressly provided in the Trust’s Declaration of Trust, no Person may Beneficially Own Shares of the Trust in excess of 9.8 percent in number or value of the outstanding Shares of the Trust, no Person (other than an Excluded Holder) may own Common Shares in excess of 5.0 percent in number or value of the outstanding Common Shares of the Trust and no Person may Beneficially

Own Shares of any class or series of Preferred Shares of the Trust in excess of 9.8 percent of the aggregate of the outstanding Preferred Shares of such class or series. Separate restrictions set forth in Section 6.7 of the Declaration of Trust apply to restrict the permissible Constructive Ownership of Shares. Any Person who Beneficially Owns or attempts to Beneficially Own Shares in excess of the above limitations must immediately notify the Trust, any Shares so held may be subject to mandatory redemption or sale in certain events, certain purported acquisitions of Shares in excess of such limitations shall be void ab initio, and any Shares purported to be Acquired or Beneficially Owned in excess of such limitation will be automatically converted into and exchanged for shares of Excess Shares. Excess Shares have limited economic rights, no dividend rights and no voting rights. A Person who attempts to Beneficially Own Shares in violation of the ownership limitations set forth in subparagraph (b) of Section 6.7 of the Declaration of Trust of the Trust shall have no claim, cause of action, or any other recourse whatsoever against a transferor of such shares. All capitalized terms in this legend have the meanings defined in the Trust’s Declaration of Trust, a copy of which, including the restrictions on transfer, will be sent without charge to each shareholder who so requests.”

          (m) NYSE Settlement. Nothing in this Section 6.7 shall preclude the settlement of any transaction with respect to the Shares entered into through the facilities of the NYSE, provided that any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Section 6.7.

          SECTION 6.8 Severability. If any provision of this Article VI or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.

ARTICLE VII

SHAREHOLDERS

          SECTION 7.1 Meetings of Shareholders. There shall be an annual meeting of the Shareholders, to be held at such time and place as shall be determined by or in the manner prescribed in the Bylaws, at which the Trustees shall be elected and any other proper business may be conducted. Prior to or at such annual meetings, the Trust shall provide each Shareholder a copy of its most recent annual report of operations. Except as otherwise provided in this Declaration of Trust, special meetings of Shareholders may be called in the manner provided in the Bylaws. If there are no Trustees, the officers of the Trust shall promptly call a special meeting of the Shareholders entitled to vote for the election of successor Trustees. Any meeting may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws.

          SECTION 7.2 Voting Rights of Shareholders. Subject to the provisions of any class or series of Shares then outstanding and the mandatory provisions of any applicable laws or regulations, the Shareholders shall be entitled to vote only on the following matters: (a) an increase or decrease in the number of Trustees as provided in Section 2.1 hereof; (b) election or removal of Trustees as provided in Sections 7.1 and 2.3 hereof; (c) amendment of this Declaration of Trust as provided in Section 9.1 hereof; (d) termination of the Trust as provided in Section 10.2 hereof; (e) reorganization of the Trust as provided in Section 9.2 hereof; (f) merger, consolidation or sale or other disposition of all or substantially all of the Trust Property, as provided in Section 9.3 hereof; and (g) termination of the Trust’s status as a real estate investment trust under the REIT Provisions of the Code, as provided in Section 3.2(u) hereof. Except with respect to the foregoing matters, no action taken by the Shareholders at any meeting shall in any way bind the Trustees.

          SECTION 7.3 Shareholder Action to be Taken by Meeting. Any action required or permitted to be taken by the Shareholders of the Trust must be effected at a duly called annual or special meeting of Shareholders of the Trust and may not be effected by any consent in writing of such Shareholders.

          SECTION 7.4 Right of Inspection. Each Shareholder shall have such rights to inspect the Trust’s accounts, books and records as are required in Article 16 of Chapter 2B of Title 10 of the Code of Alabama, 1975, which rights shall not be abolished or limited by the Trust’s By-laws or this Declaration.

ARTICLE VIII

LIABILITY OF SHAREHOLDERS, TRUSTEES, OFFICERS,
EMPLOYEES AND AGENTS;
TRANSACTIONS BETWEEN AFFILIATES AND THE TRUST

          SECTION 8.1 Limitation of Shareholder Liability. No Shareholder or beneficial owner of Shares shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Trust by reason of his being a Shareholder or beneficial owner of Shares, nor shall any Shareholder or beneficial owner of Shares be subject to any personal liability whatsoever, in tort, contract or otherwise, to any Person in connection with the Trust Property or the affairs of the Trust by reason of his being a Shareholder or beneficial owner of Shares.

          SECTION 8.2 Limitation of Trustee and Officer Liability. To the maximum extent that Alabama law in effect from time to time permits limitation of the liability of trustees and officers of a real estate investment trust, no Trustee or officer of the Trust shall be liable to the Trust or to any Shareholder for money damages. Neither the amendment nor repeal of this Section 8.2, nor the adoption or amendment of any other provision of this Declaration of Trust inconsistent with this Section 8.2, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. In the absence of any Alabama statute limiting the liability of trustees and officers of an Alabama real estate investment trust for

money damages in a suit by or on behalf of the Trust or by any Shareholder, no Trustee or officer of the Trust shall be liable to the Trust or to any Shareholder for money damages except to the extent that (i) the Trustee or officer actually received an improper benefit or profit in money, property, or services, for the amount of the benefit or profit in money, property, or services actually received, or (ii) a judgment or other final adjudication adverse to the Trustee or officer is entered in a proceeding based on a finding in the proceeding that the Trustee’s or officer’s action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.

          SECTION 8.3 Express Exculpatory Clauses in Instruments. Neither the Shareholders nor the Trustees, officers, employees or agents of the Trust shall be liable under any written instrument creating an obligation of the Trust by reason of their being Shareholders, Trustees, officers, employees or agents of the Trust, and all Persons shall look solely to the Trust Property for the payment of any claim under or for the performance of that instrument. The omission of the foregoing exculpatory language from any instrument shall not affect the validity or enforceability of such instrument and shall not render any Shareholder, Trustee, officer, employee or agent liable thereunder to any third party, nor shall the Trustees or any officer, employee or agent of the Trust be liable to anyone as a result of such omission.

          SECTION 8.4 Indemnification. The Trust shall indemnify (i) its Trustees and officers, whether serving the Trust or at its request any other entity, to the full extent required or permitted by the laws of the State of Alabama applicable to business corporations now or hereafter in force, including the advance of expenses under the procedures and to the full extent permitted by such laws, and (ii) the Shareholders and other employees and agents of the Trust to such extent as shall be authorized by the Trustees or the Bylaws and as permitted by law. Nothing contained herein shall be construed to protect any Person against any liability to the extent such protection would violate Alabama statutory or decisional law applicable to real estate investment trusts organized under the Act or any successor provision. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled. The Trustees may take such action as is necessary to carry out these indemnification provisions and are expressly empowered to adopt, approve and amend from time to time such bylaws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. No amendment of this Declaration of Trust or repeal of any of its provisions shall limit or eliminate the right of indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal.

          SECTION 8.5. Transactions Between the Trust and its Trustees, Officers, Employees and Agents. Subject to any express restrictions in this Declaration of Trust or adopted by the Trustees in the Bylaws or by resolution, the Trust (which, for purposes of this Section 8.5, shall include the Trust and any of its subsidiaries) may enter into any contract or transaction of any kind (including without limitation for the purchase or sale of property or for any type of services, including those in connection with underwriting or the offer

or sale of Securities of the Trust) with any Person, including any Trustee, officer, employee or agent of the Trust or any Person Affiliated with the Trust or a Trustee, officer, employee or agent of the Trust, whether or not any of them has a financial interest in such transaction.

ARTICLE IX

AMENDMENT; REORGANIZATION; MERGER, ETC.

          SECTION 9.1 Amendment.

               (a) Subject to Section 6.3 hereof, this Declaration of Trust may be amended by (i) the adoption of a proposed amendment by the Trustees and submission of such proposed amendment to the Shareholders for their consideration, and (ii) the affirmative vote of the holders of not less than a majority of the Shares then outstanding and entitled to vote thereon, except that Sections 2.3 and 10.2 hereof and this Section 9.1 shall not be amended (or any other provision of this Declaration of Trust be amended or any provision of this Declaration of Trust be added that would have the effect of amending such sections) without the affirmative vote of the holders of two-thirds of the Shares then outstanding and entitled to vote thereon.

               (b) The Trustees, by a two-thirds vote, may amend provisions of this Declaration of Trust from time to time as necessary to enable the Trust to qualify as a real estate investment trust under the REIT Provisions of the Code or under the Act.

               (c) The Trustees, by a two-thirds vote, may amend this Declaration of Trust from time to time as necessary to increase or decrease the aggregate number of Shares or the number of Shares of any class that the Trust has authority to issue.

               (d) An amendment to this Declaration of Trust shall become effective as provided in Section 11.5.

               (e) This Declaration of Trust may not be amended except as provided in this Section 9.1.

          SECTION 9.2 Reorganization. Subject to the provisions of any class or series of Shares at the time outstanding, the Trustees shall have the power (i) to cause the organization of a corporation, association, trust or other organization to take over the Trust Property and carry on the affairs of the Trust, or (ii) merge the Trust into, or sell, convey and transfer the Trust Property to, any such corporation, association, trust or organization in exchange for Securities thereof or beneficial interests therein, and the assumption by the transferee of the liabilities of the Trust, and upon the occurrence of (i) or (ii) above terminate the Trust and deliver such Securities or beneficial interests ratably among the Shareholders according to the respective rights of the class or series of Shares held by them; provided, however, that any such action shall have been approved, at a meeting of the Shareholders called for that purpose, by the affirmative vote of the holders of not less than a majority of the Shares then outstanding and entitled to vote thereon.

          SECTION 9.3 Merger, Consolidation or Sale of Trust Property. Subject to the provisions of any class or series of Shares at the time outstanding, the Trustees shall have the power to (i) merge the Trust into another entity, (ii) consolidate the Trust with one or more other entities into a new entity or (iii) sell or otherwise dispose of all or substantially all of the Trust Property; provided, however, that such action shall have been approved, at a meeting of the Shareholders called for that purpose, by the affirmative vote of the holders of not less than a majority of the Shares then outstanding and entitled to vote thereon.

ARTICLE X

DURATION AND TERMINATION OF TRUST

          SECTION 10.1 Duration of Trust. The Trust shall continue perpetually unless terminated pursuant to Section 10.2 or pursuant to any applicable provision of the Act.

          SECTION 10.2 Termination of Trust.

               (a) Subject to the provisions of any class or series of Shares at the time outstanding, the Trust may be terminated at any meeting of Shareholders called for that purpose, by the affirmative vote of the holders of not less than two-thirds of the Shares outstanding and entitled to vote thereon. Upon the termination of the Trust:

                    (i) The Trust shall carry on no business except for the purpose of winding up its affairs;

                    (ii) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under this Declaration of Trust shall continue, including the powers to fulfill or discharge the Trust’s contracts, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining Trust Property to one or more Persons at public or private sale for consideration which may consist in whole or in part of cash, Securities or other property of any kind, discharge or pay its liabilities and do all other acts appropriate to liquidate its business; and

                    (iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and agreements as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property, in cash or in kind or partly each, among the Shareholders according to their respective rights, so that after payment in full or the setting apart for payment of such preferential amounts, if any, to which the holders of any Shares (other than Common Shares) at the time outstanding shall be entitled, the remaining Trust Property available for payment and distribution to Shareholders shall, subject to any participating or similar rights of Shares (other than Common Shares) at the time outstanding, be distributed ratably among the holders of Common Shares at the time outstanding.

               (b) After termination of the Trust, the liquidation of its business, and the distribution to the Shareholders as herein provided, a majority of the Trustees shall execute and file with the Trust’s records a document certifying that the Trust has been duly terminated, and the Trustees shall be discharged from all liabilities and duties hereunder, and the rights and interests of all Shareholders shall cease.

ARTICLE XI

MISCELLANEOUS

          SECTION 11.1 Governing Law. This Declaration of Trust is executed by the undersigned Trustees and delivered in the State of Alabama with reference to the laws thereof, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the laws of the State of Alabama without regard to conflicts of laws provisions thereof.

          SECTION 11.2 Reliance by Third Parties. Any certificate shall be final and conclusive as to any persons dealing with the Trust if executed by an individual who, according to the records of the Trust or of any recording office in which this Declaration of Trust may be recorded, appears to be the Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying to: (i)the number or identity of Trustees, officers of the Trust or shareholders; (ii)the due authorization of the execution of any document; (iii) the action or vote taken, and the existence of a quorum, at a meeting of Trustees or Shareholders; (iv) a copy of this Declaration or of the Bylaws as a true and complete copy as then in force; (v) an amendment to this Declaration of Trust; (vi) the termination of the Trust; or (vii) the existence of any fact or facts which relate to the affairs of the Trust. No purchaser. lender, transfer agent or other person shall be bound to make any inquiry concerning the validity of any transaction purporting to be made on behalf of the Trust by the Trustees or by any duly authorized officer, employee or agent of the Trust.

          SECTION 11.3 Provisions in Conflict with Law or Regulations.

               (a) The provisions of this Declaration of Trust are severable, and if the Trustees shall determine that any one or more of such provisions are in conflict with the REIT Provisions of the Code, the Act or other applicable federal or state laws, the conflicting provisions shall be deemed never to have constituted a part of this Declaration of Trust, even without any amendment of this Declaration pursuant to Section 9.1 hereof; provided, however, that such determination by the Trustees shall not affect or impair any of the remaining provisions of this Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination. No Trustee shall be liable for making or failing to make such a determination.

               (b) If any provision of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such holding shall not in any manner affect or render invalid or unenforceable such

provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction.

          SECTION 11.4 Construction. In this Declaration of Trust, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include all genders. The title and headings of different parts are inserted for convenience and shall not affect the meaning, construction or effect of this Declaration. In defining or interpreting the powers and duties of the Trust and its Trustees and officers, reference may be made, to the extent appropriate and not inconsistent with the Code or the Act, to Chapter 2B, Title 10, of the Code of Alabama, 1975, as amended.

          SECTION 11.5 Recordation. This Declaration of Trust and any amendment hereto shall be filed for record with the judge of probate in the county in which the Trust’s place of business is located in accordance with the requirements of the Act and may also be filed or recorded in such other places as the Trustees deem appropriate, but failure to file for record this Declaration or Trust or any amendment hereto in any office other than the judge of probate in the county in which the Trust’s place of business is located shall not affect or impair the validity or effectiveness of this Declaration of Trust or any amendment hereto. A restated Declaration of Trust shall, upon filing, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration of Trust and the various amendments thereto.

          IN WITNESS WHEREOF, this Declaration of Trust has been signed on this 21st day of August, 1995 by the undersigned Trustee, who acknowledges, under penalty of perjury, that this document is his free act and deed, and that to the best of his knowledge, information and belief, the matters and facts set forth herein are true in all material respects.

/s/ Thomas H. Lowder  

Thomas H. Lowder 

STATE OF ALABAMA	)
ss: COUNTY OF	)

          On the 21st day of August, 1995, before me personally came Thomas H. Lowder, to me known, who, being by me duly sworn, did depose and say that he is Chairman of the Board of Trustees, President and Chief Executive Officer of Colonial Properties Trust, and that he as such officer, being authorized to do so, executed the foregoing instrument for the purposes therein contained.

          IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

(Notarial Seal)	/s/ Notary Public
	Notary Public

STATE OF ALABAMA	)
JEFFERSON COUNTY	)

ARTICLES OF AMENDMENT
TO
DECLARATION OF TRUST
OF
COLONIAL PROPERTIES TRUST

     Pursuant to Section 10-13-14 of the Code of Alabama 1975, Colonial Properties Trust, a real estate investment trust organized and existing under the laws of Alabama (the “Company”), hereby submits the following:

     1. The name of the real estate investment trust is Colonial Properties Trust.

     2. The Declaration of Trust shall be amended as follows:

          The Declaration of Trust is hereby amended by deleting Sections 6.1 and 6.3 of Article VI thereof in their entirety and inserting in lieu thereof the following new Sections 6.1 and 6.3:

          SECTION 6.1 Authorized Shares. The beneficial interest in the Trust shall be divided into Shares. The total number of Shares which the Trust is authorized to issue is seventy-five million (75,000,000), consisting of sixty-five million (65,000,000) common Shares and ten million (10,000,000) preferred Shares. The Trust also is authorized to issue Excess Shares, which shall constitute a separate class of shares of the Trust, in such number as is necessary to permit the conversion of outstanding Shares into Excess Shares in accordance with Section 6.7(d) hereof. Any Excess Shares issued with respect to an outstanding class or series of common Shares or preferred Shares shall constitute a separate series of Excess Shares, with the number of permitted series of Excess Shares equaling the aggregate number of classes and series of common Shares and preferred Shares of the Trust at any time outstanding. Any issuance of Excess Shares shall, for so long as such Excess Shares are outstanding, reduce the number of authorized Shares of the class or series so converted into Excess Shares by the number of Excess Shares so issued. Shares may be issued for such consideration as the Trustees determine or, if issued as a result of a Share dividend or Share split, without any consideration, in which case all Shares so issued shall be fully paid and nonassessable.

          SECTION 6.3. Preferred Shares. Subject to any shareholder approval required by the Constitution of the State of Alabama, the Trustees are hereby expressly granted the authority to authorize from time to time the issuance of one or more series of preferred Shares (“Preferred Shares”) and with respect to any such series to fix the numbers, designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption of such series. Subject to any shareholder approval required by the Constitution of the State of

Alabama, the Trustees may classify or reclassify any unissued Preferred Shares by setting or changing the number, designation, preferences, conversion or other rights, voting powers, restrictions, limitation as to dividends, qualification or terms or conditions of redemption of any such Preferred Shares and in such event, the Trust shall file for record with the judge of probate in the county in which its principal place of business is located articles supplementary in substance and form as prescribed by the Act, including Section 7(b) thereof.

     The Declaration of Trust is hereby further amended by deleting Section 3.2(e) of Article III thereof in its entirety and inserting in lieu thereof the following new Section 3.2(e) (language added is underlined): (e) Issuance of Securities. Subject to the provisions f Article VI hereof, to create and authorize and direct the issuance (on either a pro rata or a non-pro rata basis) by the Trust, in shares, units or amounts of one or more types, series or classes, of Securities of the Trust, which may have such voting rights, dividend or interest rates, preferences, subordinations, conversion or redemption prices or rights, maturity dates, distribution, exchange, or liquidation rights or other rights as the Trustees may determine, without vote of or other action by the Shareholders except as may be required by the Constitution of the State of Alabama, to such Persons for such consideration, at such time or times and in such manner and on such terms as the Trustees determine; to list any of the Securities of the Trust on any securities exchange; and to purchase or otherwise acquire, hold, cancel, reissue, sell and transfer any Securities of the Trust.

     3. The Board of Trustees of the Company adopted a resolution setting forth the foregoing amendment and declared it advisable in a Unanimous Written Consent of Trustees dated as of August 29, 1997.

     4. There were 20,934,055 of the Company’s common shares of beneficial interest, par value $.01 per share (“Common Shares”), outstanding as of September 22, 1997, the record date for the special meeting held on October 23, 1997, to consider the foregoing amendment (the “Special Meeting”). Common Shares represented the only class of securities entitled to vote at the Special Meeting, and each share thereof entitled its holder to one vote. Of the 20,934,055 votes entitled to be cast on the foregoing amendment, 15,124,025 were indisputably represented at the Special Meeting. The total number of undisputed votes cast FOR the foregoing amendment at the Special Meeting was 11,953,101, which number was sufficient for approval of the foregoing amendment by the holders of Common Shares.

     5. The foregoing amendment was duly adopted in accordance with the applicable provisions of Section 10-13-14 of the Code of Alabama, 1975 and of Sections 234 and 237 of the Constitution of the State of Alabama.

     These Articles of Amendment are being filed in the Office of the Judge of Probate of Jefferson County, Alabama, for the purpose of effecting the foregoing amendment in accordance with the Code of Alabama 1975, Sections 10-2B-1.25 and 10-13-14(f).

     IN WITNESS WHEREOF, the Company, by its duly authorized officer and with full authority, has executed these Articles of Amendment as of this 23rd day of October, 1997.

COLONIAL PROPERTIES TRUST
By:	/s/ Thomas H. Lowder
	Thomas H. Lowder
	President and Chief Executive Officer

ARTICLES SUPPLEMENTARY OF
8 3/4% SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES
OF BENEFICIAL INTEREST OF
COLONIAL PROPERTIES TRUST

Pursuant to Sections 10-13-7 and 13-7B of the

Code of Alabama 1975

     Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), hereby certifies that on November 3, 1997, pursuant to authority conferred by Sections 3.2(e) and 6.3 of the Charter (as defined below) and in accordance with Section 10-13-17 of the Code of Alabama 1975, a committee of the Board of Trustees, pursuant to authority expressly delegated by the Board of Trustees on October 23, 1997, duly classified unissued Preferred Shares of the Company, and the description of such Preferred Shares, including the number, designation, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption thereof, as set by the committee of the Board of Trustees, are as follows:

     Section 1. Number of Shares and Designation.

This series of Preferred Shares shall be designated as 8 3/4% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share (the “Series A Preferred Shares”). The number of Preferred Shares constituting the Series A Preferred Shares is 5,000,000.

     Section 2. Definitions.

The following terms shall have the following meanings herein:

     (a) “Board of Trustees” shall mean the Board of Trustees of the Company or any committee authorized by the Board of Trustees to perform any of its responsibilities with respect to the Series A Preferred Shares.

     (b) “Business Day” shall mean any day other than a Saturday, Sunday or day on which state or federally chartered banking institutions in New York City, New York are not required to be open.

     (c) “Call Date” shall have the meaning set forth in Section 6(b).

     (d) “Capital Gains Amount” shall have the meaning set forth in Section 3(d).

     (e) “Charter” means the Declaration of Trust of the Company, as amended to the date hereof and as the same may be amended hereafter from time to time.

     (f) “Code” shall have the meaning set forth in Section 12.

     (g) “Common Shares” shall mean the Company’s common shares of beneficial interest, par value $.01 per share.

     (h) “Dividend Payment Date” shall mean the last day (or, if such day is not a Business Day, the next Business Day thereafter) of each March, June, September and December, commencing on December 31, 1997.

     (i) “Dividend Periods” shall mean quarterly dividend periods commencing on January 1, April 1, July 1 and October 1 of each year and

ending on and including the next succeeding Dividend Payment Date (other than the initial Dividend Period, which shall commence on the Issue Date, and other than the Dividend Period during which any Series A Preferred Shares shall be redeemed pursuant to Section 6, which shall end on and include the Call Date with respect to the Series A Preferred Shares being redeemed).

     (j) “Fully Junior Shares” shall mean the Common Shares and any other class or series of shares of beneficial interest of the Company now or hereafter issued and outstanding over which the Series A Preferred Shares has preference or priority in both (i) the payment of dividends and (ii) the distribution of assets on any liquidation, dissolution or winding up of the Company.

     (k) “Issue Date” shall mean the first date on which the pertinent Series A Preferred Shares are issued and sold.

     (l) “Junior Shares” shall mean the Common Shares and any other class or series of shares of beneficial interest of the Company now or hereafter issued and outstanding over which the Series A Preferred Shares have preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Company.

     (m) “Parity Shares” shall have the meaning set forth in Section 8(b).

     (n) “Preferred Shares” shall mean the Company’s preferred shares of beneficial interest, par value $.01 per share.

     (o) “Series A Preferred Shares” shall have the meaning set forth in Section 1.

     (p) “set apart for payment” shall be deemed to include, without any action other than the following, the recording by the Company in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Trustees, the allocation of funds to be so paid on any series or class of shares of beneficial interest of the Company; provided, however, that if any funds for any class or series of Junior Shares or Fully Junior Shares or any class or series of shares of beneficial interest ranking on a parity with the Series A Preferred Shares as to the payment of dividends are placed in a separate account of the Company or delivered to a disbursing, paying or other similar agent, then “set apart for payment” with respect to the Series A Preferred Shares shall mean placing such funds in such separate account or delivering such funds to a disbursing, payingor other similar agent.

     (q) “Total Dividends” shall have the meaning set forth in Section 3(d).

     (r) “Transfer Agent” means BankBoston, N.A., Boston, Massachusetts, or such other agent or agents of the Company as may be designated by the Board of Trustees or their designee as the transfer agent, registrar and dividend disbursing agent for the Series A Preferred Shares.

     Section 3. Dividends.

     (a) The holders of Series A Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Trustees out of funds legally available for that purpose, cumulative, preferential dividends payable in cash at the rate of $2.1875 per annum per share. Such dividends shall begin to accrue and shall be fully cumulative from the Issue Date, whether or not in any Dividend Period or Periods there shall be funds of the Company legally available for the payment of such dividends, and shall be payable quarterly, when, as and if declared by the Board of Trustees, in arrears on Dividend Payment Dates, commencing on the first Dividend Payment Date after the Issue Date. Such dividends shall be payable in arrears to the holders of record of Series A Preferred Shares, as they appear on the share records of the Company at the close of business on the record date, not more than 30 nor less than 10 days preceding the relevant Dividend Payment Date, as shall be fixed by the Board of Trustees. Accrued and unpaid dividends for any past Dividend Periods may be declared and paid on any date and for such interim periods, without reference to any regular Dividend Payment Date, to holders of record on such date, not more than 30 nor less than 10 days preceding the payment date thereof, as may be fixed by the Board of Trustees. Any dividend payment made on the Series A Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due with respect to the Series A Preferred Shares which remains payable.

     (b) The amount of dividends referred to in Section 3(a) payable for each full Dividend Period for the Series A Preferred Shares shall be computed by dividing the annual dividend rate by four, except that the amount of dividends payable for the initial Dividend Period, and for any Dividend Period shorter than a full Dividend Period, for the Series A Preferred Shares shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Holders of Series A Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or shares of stock, in excess of cumulative dividends, as herein provided, on the Series A Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Shares that may be in arrears.

     (c) Dividends on Series A Preferred Shares will accrue whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared.

     (d) If, for any taxable year, the Company elects to designate as “capital gain dividends” (as defined in Section 857 of the Code), any portion (the “Capital Gains Amount”) of the total dividends (within the meaning of the Code) paid or made available for the year to holders of all classes of capital stock (the “Total Dividends”), then the portion of the Capital Gains Amount that shall be allocable to holders of Series A Preferred Shares shall be in the same portion that the Total Dividends paid or made available to the holders of Series A Preferred Shares for the year bears to the Total Dividends.

     (e) So long as any Series A Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be declared or paid or set apart for payment on any class or series of Parity Shares for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for

the payment thereof set apart for such payment on the Series A Preferred Shares for all Dividend Periods terminating on or prior to the dividend payment date for such class or series of Parity Shares. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon Series A Preferred Shares and all dividends declared upon any other class or series of Parity Shares shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series A Preferred Shares and accumulated and unpaid on such Parity Shares.

     (f) So long as any Series A Preferred Shares are outstanding, no dividends (other than dividends or distributions paid solely in, or options, warrants or rights to subscribe for or purchase, Fully Junior Shares) shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Shares or Fully Junior Shares, nor shall any Junior Shares or Fully Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of any employee incentive or benefit plan of the Company or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such shares) by the Company, directly or indirectly (except by conversion into or exchange for Fully Junior Shares), unless in each case (i) the full cumulative dividends on all outstanding Series A Preferred Shares and any Parity Shares shall have been or contemporaneously are declared and paid or declared and set apart for payment for all past Dividend Periods with respect to the Series A Preferred Shares and all past dividend periods with respect to such Parity Shares and (ii) sufficient funds shall have been or contemporaneously are declared and paid or declared and set apart for the payment of the dividend for the current Dividend Period with respect to the Series A Preferred Shares and the current dividend period with respect to such Parity Shares.

     (g) No dividends on Series A Preferred Shares shall be declared by the Board of Trustees or paid or set apart for payment by the Company at such time as the terms and provisions of any agreement of the Company, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law.

     Section 4. Liquidation Rights.

     (a) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of Junior Shares, the holders of the Series A Preferred Shares shall be entitled to receive Twenty Five Dollars ($25.00) per Series A Preferred Share plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the Series A Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of the Series A Preferred Shares and any such Parity Shares ratably in accordance with the

respective amounts that would be payable on such Series A Preferred Shares and any such Parity Shares if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Company with one or more corporations, real estate investment trusts, or other entities and (ii) a sale, lease or transfer of all or substantially all of the Company’s assets shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company.

     (b) Subject to the rights of the holders of any series or class or classes of shares of beneficial interest ranking on a parity with or prior to the Series A Preferred Shares upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to the holders of the Series A Preferred Shares, as provided in this Section 4, any other series or class or classes of Junior Shares or Fully Junior Shares shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series A Preferred Shares shall not be entitled to share therein.

     Section 5. Conversion.

The Series A Preferred Shares are not convertible into or exchangeable for any other property or securities of the Company.

     Section 6. Redemption at the Option of the Company.

     (a) The Series A Preferred Shares shall not be redeemable by the Company prior to November 6, 2002. On and after November 6, 2002, the Company, at its option, may redeem the Series A Preferred Shares, in whole or in part, at any time or from time to time, for cash at a redemption price of Twenty Five Dollars ($25.00) per Series A Preferred Share, plus the amounts indicated in Section 6(b).

     (b) Upon any redemption of the Series A Preferred Shares pursuant to this Section 6, the Company shall pay all accrued and unpaid dividends, if any, thereon ending on or prior to the date of such redemption (the “Call Date”), without interest. If the Call Date falls after a dividend payment record date and prior to the corresponding Dividend Payment Date, then each holder of Series A Preferred Shares at the close of business on such dividend payment record date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares before such Dividend Payment Date. Except as provided above, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series A Preferred Shares called for redemption.

     (c) If full cumulative dividends on the Series A Preferred Shares and any class or series of Parity Shares of the Company have not been declared and paid or declared and set apart for payment, the Series A Preferred Shares or Parity Shares may not be redeemed under this Section 6 in part and the Company may not purchase or otherwise acquire any Series A Preferred Shares or any Parity Shares, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of Series A Preferred Shares or Parity Shares, as the case may be.

     (d) The redemption price of any Series A Preferred Shares called for redemption pursuant to this Section 6 (other than any portion thereof consisting of accrued dividends) shall be paid solely from the sale proceeds

of other capital stock of the Company and not from any other source. For purposes of the preceding sentence, “capital stock” means any Common Shares, Preferred Shares, depositary shares, interests, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.

     (e) Notice of the redemption of any Series A Preferred Shares under this Section 6 shall be given by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the Call Date. A similar notice furnished by the Company will be mailed by first-class mail, postage prepaid, by the registrar to each holder of record of Series A Preferred Shares to be redeemed at the address of each such holder as shown on the share transfer books of the Company, not less than 30 nor more than 60 days prior to the Call Date. No failure to give any notice required by this Section 6(d), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each notice shall state: (i) the Call Date, (ii) the number of Series A Preferred Shares to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price per share, (iv) the place or places at which certificates for such shares are to be surrendered for payment of the redemption price, and (v) that dividends on the shares to be redeemed shall cease to accrue on such Call Date. Notice having been given as aforesaid, from and after the Call Date, (1) dividends on the Series A Preferred Shares so called for redemption shall cease to accrue, (2) such Series A Preferred Shares shall no longer be deemed to be outstanding, and (3) all rights of the holders thereof as holders of Series A Preferred Shares of the Company (except the right to receive the cash redemption price payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon) shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Company) on the Company’s books. The Company’s obligation to provide cash in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Company shall deposit with a bank or trust company (which may be an affiliate of the Company) that has, or is an affiliate of a bank or trust company that has, capital and surplus of at least $50,000,000, the amount of cash necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the Series A Preferred Shares so called for redemption. No interest shall accrue for the benefit of the holders of Series A Preferred Shares to be redeemed on any cash so set aside by the Company. If the Company elects to so deposit the cash necessary for the redemption of the called Series A Preferred Shares, any notice to the holders of Series A Preferred Shares called for redemption required by this Section 6(d) shall (x) state the date of such deposit, (y) specify the office of such bank or trust company as the place of payment of the redemption price and (z) call upon such holders to surrender the share certificates representing such shares at such place on or about the date fixed in such notice (which shall not be later than the Call Date) against payment of the redemption price (including all accrued and unpaid dividends up to the Call Date). Subject

to applicable escheat laws, any cash so deposited which remains unclaimed at the end of two years from the Call Date shall revert to the general funds of the Company, after which reversion, again subject to applicable escheat laws, the holders of such shares so called for redemption shall look only to the general funds of the Company for the payment of such cash.

     As promptly as practicable after the surrender in accordance with said notice of the certificates for any such shares so redeemed (properly endorsed or assigned for transfer, if the Company shall so require and if the notice shall so state), such shares shall be exchanged for any cash (without interest thereon) for which such shares have been redeemed. If fewer than all the outstanding Series A Preferred Shares are to redeemed, the shares to be redeemed shall be determined pro rata (as nearly as practicable without creating fractional shares) or by lot or in such other equitable manner as prescribed by the Company’s Board of Trustees in its sole discretion to be equitable. If fewer than all the Series A Preferred Shares represented by any certificate are redeemed, then new certificates representing the unredeemed shares shall be issued without cost to the holder thereof.

     Section 7. Shares to be Retired.

All Series A Preferred Shares which shall have been issued and reacquired in any manner by the Company shall be restored to the status of authorized but unissued Preferred Shares of the Company, without designation as to class or series.

     Section 8. Ranking.

Any class or series of shares of beneficial interest of the Company shall be deemed to rank:

     (a) prior to the Series A Preferred Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series of shares of beneficial interest shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series A Preferred Shares;

     (b) on a parity with the Series A Preferred Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series A Preferred Shares, if the holders of such class or series of shares of beneficial interest and the Series A Preferred Shares shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other (“Parity Shares”);

     (c) junior to the Series A Preferred Shares, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such shares of beneficial of interest shall be Junior Shares; and

     (d) junior to the Series A Preferred Shares, as to the payment of dividends and as to the distribution of assets upon liquidation dissolution or winding up, if such shares of stock shall be Fully Junior Shares.

     Section 9. Voting.

     (a) If and whenever dividends on the Series A Preferred Shares are in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full) for six or more quarterly periods, whether or not such quarterly periods are consecutive, the number of Trustees then constituting the Board of Trustees shall be increased by two, and the holders of Series A Preferred Shares, together with the holders of shares of every series of Parity Shares upon which like voting rights have been conferred and are exercisable, voting as a single class regardless of series, shall be entitled to elect the two additional Trustees to serve on the Board of Trustees at any annual meeting of shareholders or special meeting held in place thereof, or at a special meeting of the holders of the Series A Preferred Shares and such Parity Shares called as hereinafter provided. Whenever all arrears in dividends on the Series A Preferred Shares and such Parity Shares then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the Series A Preferred Shares and such Parity Shares to elect such additional two Trustees shall immediately cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all persons elected as Trustees by the holders of the Series A Preferred Shares and such Parity Shares shall immediately terminate and the number of the Board of Trustees shall be reduced accordingly. At any time after such voting rights shall have been so vested in the holders of Series A Preferred Shares and such Parity Shares, the secretary of the Company may, and upon the written request of any holder of Series A Preferred Shares (addressed to the secretary at the principal office of the Company) shall, call a special meeting of the holders of the Series A Preferred Shares and of such Parity Shares for the election of the two Trustees to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Company for a special meeting of the shareholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the secretary within 20 days after receipt of any such request, then any holder of Series A Preferred Shares may call such meeting, upon the notice above provided, and for that purpose shall have access to the share records of the Company. The Trustees elected at any such special meeting shall hold office until the next annual meeting of the shareholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the Trustees elected by the holders of the Series A Preferred Shares and such Parity Shares, a successor shall be elected by the Board of Trustees, upon the nomination of the then-remaining director elected by the holders of the Series A Preferred Shares and such Parity Shares or the successor of such remaining Trustee, to serve until the next annual meeting of the shareholders or special meeting held in place thereof if such office shall not have previously terminated as provided above.

     (b) So long as any Series A Preferred Shares remain outstanding, the Company will not, without the affirmative vote or consent of the holders of at least two-thirds of the Series A Preferred Shares outstanding at the time, given in person or by proxy, either in writing or at a meeting (such

series voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of capital shares ranking prior to the Series A Preferred Shares with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized shares of the Company into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Charter, including these Articles Supplementary, whether by merger, consolidation or otherwise (an “Event”), so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred Shares or the holders thereof; provided, however, with respect to the occurrence of any of the Events set forth in (ii) above, that so long as the Series A Preferred Shares remain outstanding with the terms thereof materially unchanged, taking into account that upon the occurrence of an Event, the Company may not be the surviving entity, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of Series A Preferred Shares and provided further that (x) any increase in the amount of the authorized Preferred Shares or the creating or issuance of any other series of Preferred Shares, or (y) any increase in the amount of authorized Series A Preferred Shares or any other series of Preferred Shares, in each case ranking on a parity with or junior to the Series A Preferred Shares with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. The voting provisions set forth in this paragraph (b) will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series A Preferred Shares shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption.

     (c) For purposes of the foregoing provisions of this Section 9, each Series A Preferred Share shall have one (1) vote per share, except that when any other series of Preferred Shares shall have the right to vote with the Series A Preferred Shares as a single class on any matter, then the Series A Preferred Shares and such other series shall have with respect to such matters one (1) vote per $25.00 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the Series A Preferred Shares shall not have any relative, participating, optional or other special voting rights and powers, and the consent of the holders thereof shall not be required for the taking of any corporate action.

     Section 10. Record Holders.

The Company and the Transfer Agent may deem and treat the record holder of any Series A Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Company nor the Transfer Agent shall be affected by any notice to the contrary.

     Section 11. Sinking Fund.

The Series A Preferred Shares shall not be entitled to the benefits of any retirement or sinking fund.

     Section 12. Restrictions on Ownership and Transfer.

The beneficial ownership and transfer of the Series A Preferred Shares shall in all respects be subject to the applicable provisions of Section 6.7 of the Charter.

     IN WITNESS WHEREOF, the Company has caused these Articles Supplementary to be signed in its name and on its behalf by its Chief Financial Officer as of November 3, 1997.

COLONIAL PROPERTIES TRUST
By:	/s/ Howard B. Nelson, Jr.
	Howard B. Nelson, Jr.
	Chief Financial Officer

ARTICLES SUPPLEMENTARY OF
SERIES 1998 JUNIOR PARTICIPATING PREFERRED SHARES
OF BENEFICIAL INTEREST OF
COLONIAL PROPERTIES TRUST

Pursuant to Sections 10-13-7 of the
Code of Alabama 1975

     Colonial Properties Trust, an Alabama real estate investment trust(the “Company”), hereby certifies that on October 22, 1998, pursuant to authority conferred by Sections 3.2(e) and 6.3 of the Declaration of Trust of the Company, as amended to the date hereof and as the same may be amended hereafter from time to time (the “Declaration of Trust”), and in accordance with Section 10-13-7 of the Code of Alabama 1975, the Board of Trustees duly classified unissued preferred shares of beneficial interest (“Preferred Shares”)of the Company, and the description of such Preferred Shares, including the designation and amount thereof and the voting rights or powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof, as set by
the Board of Trustees, are as follows:

     Section 1. Designation and Amount. The shares of such series of Preferred Shares, par value $.01 per share, shall be designated as “Series 1998 Junior Participating Preferred Shares of Beneficial Interest” (the “Series 1998 Junior Participating Preferred Shares”), and the number of shares constituting such series shall be 6,500. Such number of shares may be increased or decreased by resolution of the Board of Trustees; provided, that no decrease shall reduce the number of Series 1998 Junior Participating Preferred Shares to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series 1998 Junior Participating Preferred Shares.

     Section 2. Distributions.

     (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Shares ranking prior and superior to the Series 1998 Junior Participating Preferred Shares with respect to distributions, the holders of Series 1998 Junior Participating Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Trustees out of funds legally available for the purpose, quarterly distributions payable in cash on the 15th day of November, February, May and August in each year (each such date being referred to herein as a “Quarterly distribution Payment Date”), commencing on the first Quarterly Distribution Payment Date after first issuance of a share or fraction of a share of Series 1998 Junior Participating Preferred Shares, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $100.00 or (b) subject to the provision for adjustment hereinafter set forth, 10,000 times the aggregate per share amount of all cash distributions, and 10,000 times the aggregate

per share amount (payable in kind) of all non-cash distributions or other distributions, other than a distribution payable in common shares of beneficial interest, par value $.01 per share, of the Company (the “Common Shares”), or a subdivision of the outstanding Common Shares (by reclassification or otherwise), declared on the Common Shares, since the immediately preceding Quarterly Distribution Payment Date, or, with respect to the first Quarterly Distribution Payment Date, since the first issuance of any share or fraction of a share of Series 1998 Junior Participating Preferred Shares. In the event the Company shall at any time after October 22, 1998 (the “Rights Dividend Declaration Date”) (i) declare or pay any distribution on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the amount to which holders of Series 1998 Junior Participating Preferred Shares were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.

     (B) The Company shall declare a distribution on the Series 1998 Junior Participating Preferred Shares as provided in paragraph (A) above immediately after it declares a distribution on the Common Shares (other than a distribution payable in Common Shares); provided that, in the event no distribution shall have been declared on the Common Shares during the period between any Quarterly Distribution Payment Date and the next subsequent Quarterly Distribution Payment Date, a distribution of $100.00 per share on the Series 1998 Junior Participating Preferred Shares shall nevertheless be payable on such subsequent Quarterly Distribution Payment Date.

     (C) Distributions shall begin to accrue and be cumulative on outstanding Series 1998 Junior Participating Preferred Shares from the Quarterly Distribution Payment Date next preceding the date of issue of such Series 1998 Junior Participating Preferred Shares, unless the date of issue of such shares is prior to the record date set for the first Quarterly Distribution Payment Date, in which case distributions on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Distribution Payment Date or is a date after the record date for the determination of holders of Series 1998 Junior Participating Preferred Shares entitled to receive a quarterly distribution and before such Quarterly Distribution Payment Date, in either of which events such distributions shall begin to accrue and be cumulative from such Quarterly Distribution Payment Date. Accrued but unpaid distributions shall not bear interest. Distributions paid on
the Series 1998 Junior Participating Preferred Shares in an amount less than the total amount of such distributions at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Trustees may fix a record date for the determination of holders of Series 1998 Junior Participating Preferred Shares entitled to receive payment of a distribution declared thereon, which record

date shall be no more than 50 days prior to the date fixed for the payment thereof.

     Section 3. Voting Rights. The holders of Series 1998 Junior Participating Preferred Shares shall have the following voting rights:

     (A) Subject to the provision for adjustment hereinafter set forth, each Series 1998 Junior Participating Preferred Share shall entitle the holder thereof to one vote on all matters submitted to a vote of the shareholders of the Company. In the event the Company shall at any time after the Rights Dividend Declaration Date (i) declare any distribution on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the number of votes per share to which holders of Series 1998 Junior Participating Preferred Shares were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.

     (B) Except as otherwise provided by law or in any other Articles Supplementary of the Company creating a series of Preferred Shares, whether now existing or hereafter created, the holders of Series 1998 Junior Participating Preferred Shares and the holders of Common Shares shall vote together as one class on all matters submitted to a vote of shareholders of the Company.

     (C) Except as set forth herein, holders of Series 1998 Junior Participating Preferred Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Shares as set forth herein) for taking any trust action.

     Section 4. Certain Restrictions.

     (A) Whenever distributions payable on the Series 1998 Junior Participating Preferred Shares as provided in Section 2 are not paid, thereafter and until such distributions, whether or not declared, on Series 1998 Junior Participating Preferred Shares outstanding shall have been paid in full, the Company shall not:

          (i) declare or pay distributions on, or make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of beneficial interest ranking junior (either as to distributions or upon liquidation, dissolution or winding up) to the Series 1998 Junior Participating Preferred Shares; or

          (ii) declare or pay distributions on, or make any other distributions on, any shares of beneficial interest ranking on a parity (either as to distributions or upon liquidation, dissolution or winding up) with the Series 1998 Junior Participating Preferred Shares, except distributions paid ratably on the Series 1998 Junior Participating Preferred Shares and all such parity shares of beneficial

interest on which distributions are payable in proportion to the total amounts to which the holders of all such shares are then entitled; or

          (iii) redeem or purchase or otherwise acquire for consideration shares of beneficial interest ranking on a parity (either as to distributions or upon liquidation, dissolution or winding up) with the Series 1998 Junior Participating Preferred Shares, provided that the Company may at any time redeem, purchase or otherwise acquire any such parity shares of beneficial interest in exchange for any shares of beneficial interest of the Company ranking junior (either as to distributions or upon dissolution, liquidation or winding up) to the Series 1998 Junior Participating Preferred Shares; or

          (iv) redeem or purchase or otherwise acquire for consideration any Series 1998 Junior Participating Preferred Shares, or any shares of beneficial interest ranking on a parity with the Series 1998 Junior Participating Preferred Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Trustees) to all holders of such shares upon such terms as the Board of Trustees, after consideration of the respective annual distribution rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

     (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of beneficial interest of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

     Section 5. Reacquired Shares. Any Series 1998 Junior Participating Preferred Shares purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Shares and may be reissued as part of a new series of Preferred Shares to be created by resolution or resolutions of the Board of Trustees, subject to the conditions and restrictions on issuance set forth herein.

     Section 6. Liquidation, Dissolution or Winding Up.

     (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to the holders of shares of beneficial interest ranking junior (either as to distributions or upon liquidation, dissolution or winding up) to the Series 1998 Junior Participating Preferred Shares unless, prior thereto, the holders of Series 1998 Junior Participating Preferred Shares shall have received $920,000 per share, plus any unpaid distributions payable thereon, whether or not declared, to the date of such payment (the “Series 1998 Liquidation Preference”). Following the payment of the full amount of the Series 1998 Liquidation Preference, no additional distributions shall be made to the holders of Series 1998 Junior Participating Preferred Shares unless, prior thereto, the holders of Common Shares shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the

Series 1998 Liquidation Preference by (ii) 10,000 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as share splits, share distributions and recapitalizations with respect to the Common Shares) (such number in clause (ii) immediately above being referred to as the “Adjustment Number”). Following the payment of the full amount of the Series 1998 Liquidation Preference and the Common Adjustment in respect of all outstanding Series 1998 Junior Participating Preferred Shares and Common Shares, respectively, holders of Series 1998 Junior Participating Preferred Shares and holders of Common Shares shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to one (1) with respect to such Preferred Shares and Common Shares, on a per share basis, respectively.

     (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series 1998 Liquidation Preference and the liquidation preferences of all other series of Preferred Shares, if any, which rank on a parity with the Series 1998 Junior Participating Preferred Shares, then such remaining assets shall be distributed ratably to the holders of such parity shares of beneficial interest in proportion to their respective liquidation preferences. In the event, however, that there are sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Shares.

     (C) In the event the Company shall at any time after the Rights Dividend Declaration Date (i) declare any distribution on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.

     Section 7. Consolidation, Merger, etc. In case the Company shall enter into any consolidation, merger, combination or other transaction in which the Common Shares are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the Series 1998 Junior Participating Preferred Shares shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 10,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each Common Share is changed or exchanged. In the event the Company shall at any time after the Rights Dividend Declaration Date (i) declare any distribution on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series 1998 Junior Participating Preferred Shares shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and

the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.

     Section 8. Redemption. The outstanding Series 1998 Junior Participating Preferred Shares may be redeemed as a whole, but not in part, at any time, or from time to time, at the option of the Board of Trustees, at a cash price per share equal to 105 percent of (i) the product of the Adjustment Number times the Average Market Value (as such term is hereinafter defined) of the Common Shares, plus (ii) all distributions which on the redemption date are payable on the shares to be redeemed and have not been paid or declared, and a sum sufficient for the payment thereof set apart, without interest. The “Average Market Value” is the average of the closing sale prices of the Common Shares during the 30 day period immediately preceding the date before the redemption date on the New York Stock Exchange, or if the Common Shares are not listed on the New York Stock Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which the Common Shares are listed, or, if the Common Shares are not listed on any such exchange, or if no such quotations are available, the fair market value of the Common Shares as determined by the Board of Trustees in good faith.

     Section 9. Ranking. Notwithstanding anything contained herein to the contrary, the Series 1998 Junior Participating Preferred Shares shall rank junior to all other series of the Company’s Preferred Shares as to the payment of distributions and the distribution of assets in liquidation, unless the terms of any such series shall provide otherwise.

     Section 10. Amendment. The Declaration of Trust shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series 1998 Junior Participating Preferred Shares so as to affect them adversely without the affirmative vote of the holders of at least a majority of the outstanding Series 1998 Junior Participating Preferred Shares, voting separately as a class.

     Section 11. Fractional Shares. Series 1998 Junior Participating Preferred Shares may be issued in fractions of a share which shall entitle the holders, in proportion to such holders fractional shares, to exercise voting rights, receive distributions, participate in distributions and to have the benefit of all other rights of holders of Series 1998 Junior Participating Preferred Shares.

     Section 12. Restrictions on Ownership and Transfer. The beneficial ownership and transfer of the Series 1998 Junior Participating Preferred Shares shall in all respects be subject to the applicable provisions of Section 6.7 of the Declaration of Trust.

     IN WITNESS WHEREOF, the Company has caused these Articles Supplementary to be signed in its name and on its behalf by its Chief Financial Officer as of October 26, 1998.

COLONIAL PROPERTIES TRUST
By:	/s/ Howard B. Nelson, Jr.
	Howard B. Nelson, Jr.
	Chief Financial Officer

COLONIAL PROPERTIES TRUST
ARTICLES SUPPLEMENTARY
2,000,000 SHARES
8.875% SERIES B CUMULATIVE REDEEMABLE PERPETUAL
PREFERRED SHARES

     Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), hereby certifies that on February 23, 1999, pursuant to authority conferred by Sections 3.2(e) and 6.3 of the Declaration of Trust of the Company, as amended to the date hereof and as the same may be amended hereafter from time to time (the “Declaration of Trust”), and in accordance with Section 10-13-7 of the Code of Alabama 1975, the Board of Trustees duly classified unissued preferred shares of beneficial interest (“Preferred Shares”) of the Company, and the description of such Preferred Shares, including the designation and amount thereof and the voting rights or powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof, as set by the Board of Trustees, are as follows:

     FIRST: The Board of Trustees unanimously adopted resolutions designating the aforesaid class of Preferred Shares as the “8.875% Series B Cumulative Redeemable Perpetual Preferred Shares,” setting the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of redemption and other terms and conditions of such 8.875% Series B Cumulative Redeemable Perpetual Preferred Shares and authorizing the issuance of up to 2,000,000 shares of 8.875% Series B Cumulative Redeemable Perpetual Preferred Shares.

     SECOND: The class of Preferred Shares of the Company created by the resolutions duly adopted by the Board of Trustees of the Company referred to in the FIRST Article of these Articles Supplementary shall have the following designation, number of shares, preferences, conversion and other rights, voting powers, restrictions and limitation as to dividends, qualifications, terms and conditions of redemption and other terms and conditions:

     Section 1. Designation and Number.

A series of Preferred Shares, designated the “8.875% Series B Cumulative Redeemable Perpetual Preferred Shares” (the “Series B Preferred Shares”) is hereby established. The number of shares of Series B Preferred Shares shall be 2,000,000.

     Section 2. Rank.

The Series B Preferred Shares will, with respect to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Company, or both, rank senior to all classes or series of Common Shares (as defined in the Declaration of Trust) and to all classes or series of equity securities of the Company now or hereafter authorized, issued or outstanding, other than any class or series of equity securities of the Company expressly designated as ranking on a parity with or senior to the Series B Preferred Shares as to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Company.

For purposes of these Articles Supplementary, the term “Parity Preferred Shares” shall be used to refer to any class or series of equity securities of the Company now or hereafter authorized, issued or outstanding expressly designated by the Company to rank on a parity with Series B Preferred Shares with respect to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Company including, without limitation, that certain “8 3/4% Series A Cumulative Redeemable Preferred Shares” of the Company, authorized pursuant to Articles Supplementary dated November 3, 1997. The term “equity securities” does not include debt securities, which will rank senior to
the Series B Preferred Shares prior to conversion.

     Section 3. Distributions.

     (a) Payment of Distributions. Subject to the rights of holders of Parity Preferred Shares and holders of equity securities ranking senior to the Series B Preferred Shares, holders of Series B Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Trustees of the Company, out of funds legally available for the payment of distributions, cumulative preferential cash distributions at the rate per annum of 8.875% of the $50 liquidation preference per share of Series B Preferred Shares. Such distributions shall be cumulative, shall accrue from the original date of issuance and will be payable (A) quarterly (such quarterly periods for purposes of payment and accrual will be the quarterly periods ending on the dates specified in this sentence and not calendar quarters) in arrears, on March 31, June 30, September 30 and December 31 of each year commencing on the first of such dates to occur after the original date of issuance and, (B) in the event of a redemption, on the redemption date (each a “Preferred Shares Distribution Payment Date”). The amount of the distribution payable for any period will be computed on the basis of a 360-day year of twelve 30-day months and for any period shorter than a full quarterly period for which distributions are computed, the amount of the distribution payable will be computed on the basis of the actual number of days elapsed in such a 30-day month. If any date on which distributions are to be made on the Series B Preferred Shares is not a Business Day (as defined herein), then payment of the distribution to be made on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. Distributions on the Series B Preferred Shares will be made to the holders of record of the Series B Preferred Shares on the relevant record dates to be fixed by the Board of Trustees of the Company, which record dates shall in no event exceed 15 Business Days prior to the relevant Preferred Shares Distribution Payment Date (each a “Distribution Record Date”). Notwithstanding anything to the contrary set forth herein, each share of Series B Preferred Shares shall also continue to accrue all accrued and unpaid distributions, whether or not declared, up to the exchange date on any Series B Preference Unit (as defined in the Second Amended and Restated Agreement of Limited Partnership of Colonial Realty Limited Partnership (the “Partnership Agreement”), as amended through the date hereof) validly exchanged into such share of Series B Preferred Shares in accordance with the provisions of such Partnership Agreement.

     The term “Business Day” shall mean each day, other than a Saturday or a Sunday, which is not a day on which banking institutions in New

York, New York are authorized or required by law, regulation or executive order to close.

          (b) Distributions Cumulative. Distributions on the Series B Preferred Shares will accrue whether or not the terms and provisions of any agreement of the Company, including any agreement relating to its indebtedness at any time prohibit the current payment of distributions, whether or not the Company has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized or declared. Accrued but unpaid distributions on the Series B Preferred Shares will accumulate as of the Preferred Shares Distribution Payment Date on which they first become payable. Distributions on account of arrears for any past distribution periods may be declared and paid at any time, without reference to a regular Preferred Shares Distribution Payment Date to holders of record of the Series B Preferred Shares on the record date fixed by the Board of Trustees which date shall not exceed 15 Business Days prior to the payment date. Accumulated and unpaid distributions will not bear interest.

          (c) Priority as to Distributions. (i) So long as any Series B Preferred Shares are outstanding, no distribution of cash or other property shall be authorized, declared, paid or set apart for payment on or with respect to any class or series of Common Shares or any class or series of other shares of the Company ranking junior as to the payment of distributions or rights upon voluntary or involuntary dissolution, liquidation or winding up of the Partnership to the Series B Preferred Shares (such Common Shares or other junior shares, including, without limitation Series 1998 Junior Participating Preferred Shares authorized pursuant to Articles Supplementary dated October 26, 1998, collectively, “Junior Shares”), nor shall any cash or other property be set aside for or applied to the purchase, redemption or other acquisition for consideration of any Series B Preferred Shares, any Parity Preferred Shares or any Junior Shares, unless, in each case, all distributions accumulated on all Series B Preferred Shares and all classes and series of outstanding Parity Preferred Shares have been paid in full. The foregoing sentence will not prohibit (i) distributions payable solely in Junior Shares (or options, warrants or rights to subscribe for Junior Shares), (ii) the conversion of Series B Preferred Shares, Junior Shares or Parity Preferred Shares into shares of the Company ranking junior to the Series B Preferred Shares as to distributions and upon liquidation, winding-up or dissolution, and (iii) purchase by the Company of such Series B Preferred Shares, Parity Preferred Shares or Junior Shares pursuant to Article VI of the Declaration of Trust to the extent required to preserve the Company’s status as a real estate investment trust.

     (ii) So long as distributions have not been paid in full (or a sum sufficient for such full payment is not irrevocably deposited in trust for payment) upon the Series B Preferred Shares, all distributions authorized and declared on the Series B Preferred Shares and all classes or series of outstanding Parity Preferred Shares with respect to distributions shall be authorized and declared so that the amount of distributions authorized and declared per share of Series B Preferred Shares and such other classes or series of Parity Preferred Shares shall in all cases bear to each other the same ratio that accrued distributions per share on the Series B Preferred Shares and such other classes or series of Parity Preferred Shares (which shall not include any accumulation in respect of unpaid distributions for prior distribution periods if such class or series of Parity Preferred Shares do not have cumulative distribution rights) bear to each other.

     (e) No Further Rights. Holders of Series B Preferred Shares shall not be entitled to any distributions, whether payable in cash, other property or otherwise, in excess of the full cumulative distributions described herein.

     Section 4. Liquidation Preference.

     (a) Payment of Liquidating Distributions. Subject to the rights of holders of Parity Preferred Shares with respect to rights upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company and subject to equity securities ranking senior to the Series B Preferred Shares with respect to rights upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the holders of Series B Preferred Shares shall be entitled to receive out of the assets of the Company legally available for distribution or the proceeds thereof, after payment or provision for debts and other liabilities of the Company, but before any payment or distributions of the assets shall be made to holders of Common Shares or any other class or series of shares of the Company that ranks junior to the Series B Preferred Shares as to rights upon liquidation, dissolution or winding-up of the Company, an amount equal to the sum of (i) a liquidation preference of $50.00 per share of Series B Preferred Shares, and (ii) an amount equal to any accumulated and unpaid distributions thereon, whether or not declared, to the date of payment. In the event that, upon such voluntary or involuntary liquidation, dissolution or winding-up, there are insufficient assets to permit full payment of liquidating distributions to the holders of Series B Preferred Shares and any Parity Preferred Shares as to rights upon liquidation, dissolution or winding-up of the Company, all payments of liquidating distributions on the Series B Preferred Shares and such Parity Preferred Shares shall be made so that the payments on the Series B Preferred Shares and such Parity Preferred Shares shall in all cases bear to each other the same ratio that the respective rights of the Series B Preferred Shares and such other Parity Preferred Shares (which shall not include any accumulation in respect of unpaid distributions for prior distribution periods if such Parity Preferred Shares do not have cumulative distribution rights) upon liquidation, dissolution or winding-up of the Company bear to each other.

     (b) Notice. Written notice of any such voluntary or involuntary liquidation, dissolution or winding-up of the Company, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by (i) fax and (ii) by first class mail, postage pre-paid, not less than 30 and not more than 60 days prior to the payment date stated therein, to each record holder of the Series B Preferred Shares at the respective addresses of such holders as the same shall appear on the share transfer records of the Company.

     (c) No Further Rights. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series B Preferred Shares will have no right or claim to any of the remaining assets of the Company.

     (d) Consolidation, Merger or Certain Other Transactions. The voluntary sale, conveyance, lease, exchange or transfer (for cash,

shares, securities or other consideration) of all or substantially all of the property or assets of the Company to, or the consolidation or merger or other business combination of the Company with or into, any corporation, trust or other entity (or of any corporation, trust or other entity with or into the Company) or a statutory share exchange shall not be deemed to constitute a liquidation, dissolution or winding-up of the Company.

     Section 5. Optional Redemption.

     (a) Right of Optional Redemption. The Series B Preferred Shares may not, subject to Section 7 hereof, be redeemed prior to February 23, 2004. On or after such date, the Company shall have the right to redeem the Series B Preferred Shares, in whole or in part, at any time or from time to time, upon not less than 30 nor more than 60 days’ written notice, at a redemption price, payable in cash, equal to $50.00 per share of Series B Preferred Shares plus accumulated and unpaid distributions, whether or nor declared, to the date of redemption. If fewer than all of the outstanding shares of Series B Preferred Shares are to be redeemed, the shares of Series B Preferred Shares to be redeemed shall be selected pro rata (as nearly as practicable without creating fractional units).

     (b) Limitation on Redemption. (i) The redemption price of the Series B Preferred Shares (other than the portion thereof consisting of accumulated but unpaid distributions) will be payable solely out of the sale proceeds of capital shares of the Company and from no other source. For purposes of the preceding sentence, “capital shares” means any equity securities (including Common Shares and Preferred Shares), shares, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.(ii) Subject to Section 7 hereof, the Company may not redeem fewer than all of the outstanding shares of Series B Preferred Shares unless all accumulated and unpaid distributions have been paid on all outstanding Series B Preferred Shares for all quarterly distribution periods terminating on or prior to the date of redemption.

     (c) Procedures for Redemption. (i) Notice of redemption will be (i) faxed, and (ii) mailed by the Company, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series B Preferred Shares to be redeemed at their respective addresses as they appear on the transfer records of the Company. No failure to give or defect in such notice shall affect the validity of the proceedings for the redemption of any Series B Preferred Shares except as to the holder to whom such notice was defective or not given. In addition to any information required by law or by the applicable rules of any exchange upon which the Series B Preferred Shares may be listed or admitted to trading, each such notice shall state: (i) the redemption date, (ii) the redemption price, iii) the number of shares of Series B Preferred Shares to be redeemed, (iv)the place or places where such shares of Series B Preferred Shares are to be surrendered for payment of the redemption price,(v) that distributions on the Series B Preferred Shares to be redeemed will cease to accumulate on such redemption date and (vi) that payment of the redemption price and any accumulated and unpaid distributions will be made upon presentation and surrender of such Series B Preferred Shares. If fewer than all of the shares of Series B Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series B Preferred Shares held by such holder to be redeemed. (ii) If the Company gives a notice of

redemption in respect of Series B Preferred Shares (which notice will be irrevocable) then, by 12:00 noon, New York City time, on the redemption date, the Company will deposit irrevocably in trust for the benefit of the Series B Preferred Shares being redeemed funds sufficient to pay the applicable redemption price, plus any accumulated and unpaid distributions, whether or not declared, if any, on such shares to the date fixed for redemption, without interest, and will give irrevocable instructions and authority to pay such redemption price and any accumulated and unpaid distributions, if any, on such shares to the holders of the Series B Preferred Shares upon surrender of the certificate evidencing the Series B Preferred Shares by such holders at the place designated in the notice of redemption. If fewer than all Series B Preferred Shares evidenced by any certificate is being redeemed, a new certificate shall be issued upon surrender of the certificate evidencing all Series B Preferred Shares, evidencing the unredeemed Series B Preferred Shares without cost to the holder thereof. On and after the date of redemption, distributions will cease to accumulate on the Series B Preferred Shares or portions thereof called for redemption, unless the Company defaults in the payment thereof. If any date fixed for redemption of Series B Preferred Shares is not a Business Day, then payment of the redemption price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the redemption price or any accumulated or unpaid distributions in respect of the Series B Preferred Shares is improperly withheld or refused and not paid by the Company, distributions on such Series B Preferred Shares will continue to accumulate from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the applicable redemption price and any accumulated and unpaid distributions.

          (d) Status of Redeemed Shares.

Any Series B Preferred Shares that shall at any time have been redeemed shall after such redemption, have the status of authorized but unissued Preferred Shares, without designation as to class or series until such shares are once more designated as part of a particular class or series by the Board of Trustees.

     Section 6. Voting Rights.

          (a) General. Holders of the Series B Preferred Shares will not have any voting rights, except as set forth below.

          (b) Right to Elect Trustees. (i) If at any time distributions shall be in arrears with respect to six (6) prior quarterly distribution periods (including quarterly periods on the Series B Preferred Units prior to the exchange into Series B Preferred Shares), whether or not consecutive, and shall not have been paid in full (a “Preferred Distribution Default”), the authorized number of members of the Board of Trustees shall automatically be increased by two and the holders of record of such Series B Preferred Shares, voting together as a single class with the holders of each class or series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable, will be entitled to fill the vacancies so created by electing two additional

trustees to serve on the Company’s Board of Trustees (the “Preferred Shares Trustees”) at a special meeting called in accordance with Section 6(b)(ii) at the next annual meeting of shareholders, and at each subsequent annual meeting of shareholders or special meeting held in place thereof, until all such distributions in arrears and distributions for the current quarterly period on the Series B Preferred Shares and each such class or series of Parity Preferred Shares have been paid in full. (ii) At any time when such voting rights shall have vested, a proper officer of the Company may, and, upon written request (addressed to the Secretary at the principal office of the Company) of holders of record of at least 10% of the outstanding Shares of Series B Preferred Shares, shall call or cause to be called a special meeting of the holders of Series B Preferred Shares and all the series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable collectively, the “Parity Securities”) by notice similar to that provided in the Bylaws of the Company for a special meeting of shareholders or as required by law. The record date for determining holders of the Parity Securities entitled to notice of and to vote at such special meeting will be the close of business on the third Business Day preceding the day on which such notice is mailed. If any such special meeting required to be called as above provided shall not be called by the Secretary within twenty (20) days after receipt of any such request, then any holder of Series B Preferred Shares may call such meeting, upon the notice above provided, and for that purpose shall have access to the share records of the Company. At any such special meeting, all of the holders of the Parity Securities, by plurality vote, voting together as a single class without regard to series will be entitled to elect two trustees on the basis of one vote per $50.00 of liquidation preference to which such Parity Securities are entitled by their terms (excluding amounts in respect of accumulated and unpaid dividends) and not cumulatively. The holder or holders of one-third of the Parity Securities then outstanding, present in person or by proxy, will constitute a quorum for the election of the Preferred Shares Trustees except as otherwise provided by law. Notice of all meetings at which holders of the Series B Preferred Shares shall be entitled to vote will be given to such holders at their addresses as they appear in the transfer records. At any such meeting or adjournment thereof in the absence of a quorum, subject to the provisions of any applicable law, a majority of the holders of the Parity Securities present in person or by proxy shall have the power to adjourn the meeting for the election of the Preferred Shares Trustees, without notice other than an announcement at the meeting, until a quorum is present. If a Preferred Distribution Default shall terminate after the notice of a special meeting has been given but before such special meeting has been held, the Company shall, as soon as practicable after such termination, mail or cause to be mailed notice of such termination to holders of the Series B Preferred Shares that would have been entitled to vote at such special meeting. iii) If and when all accumulated distributions and the distribution for the current distribution period on the Series B Preferred Shares shall have been paid in full or a sum sufficient for such payment is irrevocably deposited in trust for payment, the holders of the Series B Preferred Shares shall be divested of the voting rights set forth in Section 6(b) herein (subject to revesting in the event of each and every Preferred Distribution Default) and, if all distributions in arrears and the distributions for the current distribution period have been paid in full or set aside for payment in full on all other classes or series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable, the term and office of each Preferred Shares Trustee so elected shall terminate. Any Preferred Shares Trustee may be removed at

any time with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding Series B Preferred Shares when they have the voting rights set forth in Section 6(b) (voting separately as a single class with all other classes or series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable). So long as a Preferred Distribution Default shall continue, any vacancy in the office of a Preferred Shares Trustee may be filled by written consent of the Preferred Shares Trustee remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding Series B Preferred Shares when they have the voting rights set forth in Section 6(b) (voting separately as a single class with all other classes or series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable). The Preferred Shares Trustee shall each be entitled to one vote per trustee on any matter.

          (c) Certain Voting Rights.

So long as any Series B Preferred Shares remain outstanding, the Company shall not, without the affirmative vote of the holders of at least two-thirds of the Series B Preferred Shares outstanding at the time (i) designate or create, or increase the authorized or issued amount of, any class or series of shares ranking prior to the Series B Preferred Shares with respect to payment of distributions or rights upon liquidation, dissolution or winding-up or reclassify any authorized shares of the Company into any such shares, or create, authorize or issue any obligations or security convertible into or evidencing the right to purchase any such shares, or (ii)amend, alter or repeal the provisions of the Company’s Declaration of Trust (including these Articles Supplementary) or By-laws, whether by merger, consolidation or otherwise, in each case that would materially and adversely affect the powers, special rights, preferences, privileges or voting power of the Series B Preferred Shares or the holders thereof; provided, however, that with respect to the occurrence of a merger or consolidation, so long as (a) the Company is the surviving entity and the Series B Preferred Shares remain outstanding with the terms unchanged, or (b) the resulting or surviving entity is a corporation or trust organized under the laws of any state and substitutes for the Series B Preferred Shares other preferred shares having substantially the same terms and same rights as the Series B Preferred Shares, including with respect to distributions, voting rights and rights upon liquidation, dissolution or winding-up, then the occurrence of any such event shall not be deemed to materially and adversely affect such rights, privileges or voting powers of the holders of the Series B Preferred Shares and provided further that any increase in the amount of authorized Preferred Shares or the creation or issuance of any other class or series of Preferred Shares, or any increase in an amount of authorized shares of each class or series, in each case ranking either (a) junior to the Series B Preferred Shares with respect to payment of distributions and the distribution of assets upon liquidation, dissolution or winding-up, or (b) on a parity with the Series B Preferred Shares with respect to payment of distributions or the distribution of assets upon liquidation, dissolution or winding-up shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.

     Section 7. Restrictions on Ownership and Transfer to Preserve Tax Benefit.

     The beneficial ownership and transfer of the Series B Preferred Shares shall in all respects be subject to the applicable provisions of Section 6.7 of the Declaration of Trust; provided, however, pursuant to and in accordance with Section 6.7(k) of the Declaration of Trust: (i) the holders of Series B Preferred Shares shall, provided that the provisions of clauses (A), (B) and (C) of Section 6.7(k) are satisfied, be exempt from the Preferred Shares Ownership Limit, (ii) in imposing requirements in respect of the Series B Preferred Shares pursuant to the last two sentences of Section 6.7(k) of the Declaration of Trust as in effect on the date hereof, the Company shall, notwithstanding anything to the contrary set forth in such sentences act in a reasonable and customary manner and (iii) the legend required pursuant to Section 6.7(l) of the Declaration of Trust shall be modified to reflect the foregoing.

     Section 8. No Conversion Rights.

The holders of the Series B Preferred Shares shall not have any rights to convert such shares into shares of any other class or series of shares or into any other securities of, or interest in, the Company.

     Section 9. No Sinking Fund.

No sinking fund shall be established for the retirement or redemption of Series B Preferred Shares.

     Section 10. No Preemptive Rights.

No holder of the Series B Preferred Shares of the Company shall, as such holder, have any preemptive rights to purchase or subscribe for additional shares of the Company or any other security of the Company which it may issue or sell.

     THIRD: The Series B Preferred Shares have been classified and designated by the Board of Trustees under the authority contained in the Declaration of Trust.

     FOURTH: These Articles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law.

     FIFTH: The undersigned President of the Company acknowledges these Articles Supplementary to be the act of the Company and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

IN WITNESS WHEREOF, the Company has caused Articles Supplementary to be executed under seal in its name and on its behalf by its President and attested to by its Secretary on this 23rd day of February, 1999.

COLONIAL PROPERTIES TRUST
By:	/s/ Thomas H. Lowder
Name:  Thomas H. Lowder
Title:    President
ATTEST:
By:	/s/ Howard B. Nelson, Jr.
Name:  Howard B. Nelson, Jr.
Title:    Secretary

ARTICLES SUPPLEMENTARY OF
9.25% SERIES C CUMULATIVE REDEEMABLE PREFERRED SHARES
OF BENEFICIAL INTEREST OF
COLONIAL PROPERTIES TRUST

Pursuant to Sections 10-13-7 of the

Code of Alabama 1975

     Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), hereby certifies that on June 14, 2001, pursuant to authority conferred by Sections 3.2(e) and 6.3 of the Charter (as defined below)and in accordance with Section 10-13-7 of the Code of Alabama 1975, a committee of the Board of Trustees, pursuant to authority expressly delegated by the Board of Trustees on October 23, 1997, duly classified unissued Preferred Shares (as defined below) of the Company, and the description of such Preferred Shares (as defined below), including the number, designation, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption thereof, as set by the committee of the Board of Trustees, are as follows:

     Section 1. NUMBER OF SHARES AND DESIGNATION.

This series of Preferred Shares shall be designated as 9.25% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share (the “Series C Preferred Shares”). The number of Preferred Shares constituting the Series C Preferred Shares is 2,300,000.

     Section 2. DEFINITIONS.

The following terms shall have the following meanings herein:

     (a) “Board of Trustees” shall mean the Board of Trustees of the Company or any committee authorized by the Board of Trustees to perform any of its responsibilities with respect to the Series C Preferred Shares.

     (b) “Business Day” shall mean any day other than a Saturday, Sunday or day on which state or federally chartered banking institutions in New York City, New York are not required to be open.

     (c) “Call Date” shall have the meaning set forth in Section 6(b).

     (d) “Capital Gains Amount” shall have the meaning set forth in Section 3(d).

     (e) “Charter” means the Declaration of Trust of the Company, as amended to the date hereof and as the same may be amended hereafter from time to time.

     (f) “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute thereto.

     (g) “Common Shares” shall mean the Company’s common shares of beneficial interest, par value $.01 per share.

     (h) “Dividend Payment Date” shall mean the last day (or, if such day is not a Business Day, the next Business Day thereafter) of each March, June, September and December, commencing on September 30, 2001 (October 1, 2001 because September 30, 2001 is a Sunday).

     (i) “Dividend Periods” shall mean quarterly dividend periods commencing on January 1, April 1, July 1 and October 1 of each year and ending on and including the next succeeding Dividend Payment Date (other than the initial Dividend Period, which shall commence on the Issue Date, and other than the Dividend Period during which any Series C Preferred Shares shall be redeemed pursuant to Section 6, which shall end on and include the Call Date with respect to the Series C Preferred Shares being redeemed).

     (j) “Fully Junior Shares” shall mean the Common Shares and any other class or series of shares of beneficial interest of the Company now or hereafter issued and outstanding over which the Series C Preferred Shares have preference or priority in both (i) the payment of dividends and (ii) the distribution of assets on any liquidation, dissolution or winding up of the Company.

     (k) “Issue Date” shall mean the first date on which the pertinent Series C Preferred Shares are issued and sold.

     (l) “Junior Shares” shall mean the Common Shares and any other class or series of shares of beneficial interest of the Company now or hereafter issued and outstanding over which the Series C Preferred Shares have preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Company.

     (m) “Parity Shares” shall have the meaning set forth in Section 8(b).

     (n) “Preferred Shares” shall mean the Company’s preferred shares of beneficial interest, par value $.01 per share.

     (o) “Series C Preferred Shares” shall have the meaning set forth in Section 1.

     (p) “Set apart for payment” shall be deemed to include, without any action other than the following, the recording by the Company in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Trustees, the allocation of funds to be so paid on any series or class of shares of beneficial interest of the Company; PROVIDED, HOWEVER, that if any funds for any class or series of Junior Shares or Fully Junior Shares or any class or series of shares of beneficial interest ranking on a parity with the Series C Preferred Shares as to the payment of dividends are placed in a separate account of the Company or delivered to a disbursing, paying or other similar agent, then “set apart for payment” with respect to the Series C Preferred Shares shall mean placing such funds in such separate account or delivering such funds to a disbursing, paying or other similar agent.

     (q) “Total Dividends” shall have the meaning set forth in Section 3(d).

     (r) “Transfer Agent” means BankBoston, N.A., Boston, Massachusetts, or such other agent or agents of the Company as may be designated by the Board of Trustees or their designee as the transfer agent, registrar and dividend disbursing agent for the Series C Preferred Shares.

     Section 3. DIVIDENDS.

     (a) The holders of Series C Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Trustees out of funds legally available for that purpose, cumulative, preferential dividends payable in cash at the rate of $2.3125 per annum per share. Such dividends shall begin to accrue and shall be fully cumulative from the Issue Date, whether or not in any Dividend Period or Periods there shall be funds of the Company legally available for the payment of such dividends, and shall be payable quarterly, when, as and if declared by the Board of Trustees, in arrears on Dividend Payment Dates, commencing on the first Dividend Payment Date after the Issue Date. Such dividends shall be payable in arrears to the holders of record of Series C Preferred Shares, as they appear on the share records of the Company at the close of business on the record date, not more than 30 nor less than 10 days preceding the relevant Dividend Payment Date, as shall be fixed by the Board of Trustees. Accrued and unpaid dividends for any past Dividend Periods may be declared and paid on any date and for such interim periods, without reference to any regular Dividend Payment Date, to holders of record on such date, not more than 30 nor less than 10 days preceding the payment date thereof, as may be fixed by the Board of Trustees. Any dividend payment made on the Series C Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due with respect to the Series C Preferred Shares which remains payable.

     (b) The amount of dividends referred to in Section 3(a) payable for each full Dividend Period for the Series C Preferred Shares shall be computed by dividing the annual dividend rate by four, except that the amount of dividends payable for the initial Dividend Period, and for any Dividend Period shorter than a full Dividend Period, for the Series C Preferred Shares shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Holders of Series C Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or shares of stock, in excess of cumulative dividends, as herein provided, on the Series C Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series C Preferred Shares that may be in arrears.

     (c) Dividends on Series C Preferred Shares will accrue whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared.

     (d) If, for any taxable year, the Company elects to designate as “capital gain dividends” (as defined in Section 857 of the Code), any portion (the “Capital Gains Amount”) of the total dividends (within the meaning of the Code) paid or made available for the year to holders of all classes of capital stock (the “Total Dividends”), then the portion of the Capital Gains Amount that shall be allocable to holders of Series C Preferred Shares shall be in the same portion that the Total Dividends paid or made available to the holders of Series C Preferred Shares for the year bears to the Total Dividends.

     (e) So long as any Series C Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be declared or paid or set apart for payment on any class or series of Parity Shares for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series C Preferred Shares for all Dividend Periods terminating on or prior to the dividend payment date for such class or series of Parity Shares. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon Series C Preferred Shares and all dividends declared upon any other class or series of Parity Shares shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series C Preferred Shares and accumulated and unpaid on such Parity Shares.

     (f) So long as any Series C Preferred Shares are outstanding, no dividends (other than dividends or distributions paid solely in, or options, warrants or rights to subscribe for or purchase, Fully Junior Shares) shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Shares or Fully Junior Shares, nor shall any Junior Shares or Fully Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of any employee incentive or benefit plan of the Company or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such shares) by the Company, directly or indirectly (except by conversion into or exchange for Fully Junior Shares), unless in each case (i) the full cumulative dividends on all outstanding Series C Preferred Shares and any Parity Shares shall have been or contemporaneously are declared and paid or declared and set apart for payment for all past Dividend Periods with respect to the Series C Preferred Shares and all past dividend periods with respect to such Parity Shares and (ii) sufficient funds shall have been or contemporaneously are declared and paid or declared and set apart for the payment of the dividend for the current Dividend Period with respect to the Series C Preferred Shares and the current dividend period with respect to such Parity Shares.

     (g) No dividends on Series C Preferred Shares shall be declared by the Board of Trustees or paid or set apart for payment by the Company at such time as the terms and provisions of any agreement of the Company, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law.

     Section 4. LIQUIDATION RIGHTS.

     (a) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of Junior Shares, the holders of the Series C Preferred Shares shall be entitled to receive Twenty Five Dollars ($25.00) per Series C Preferred Share plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or

winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the Series C Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of the Series C Preferred Shares and any such Parity Shares ratably in accordance with the respective amounts that would be payable on such Series C Preferred Shares and any such Parity Shares if all amounts payable thereon were paid in full. For the purposes of this Section 4,(i) a consolidation or merger of the Company with one or more corporations, real estate investment trusts, or other entities and (ii) a sale, lease or transfer of all or substantially all of the Company’s assets shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company.

     (b) Subject to the rights of the holders of any series or class or classes of shares of beneficial interest ranking on a parity with or prior to the Series C Preferred Shares upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to the holders of the Series C Preferred Shares, as provided in this Section 4, any other series or class or classes of Junior Shares or Fully Junior Shares shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series C Preferred Shares shall not be entitled to share therein.

     Section 5. CONVERSION.

The Series C Preferred Shares are not convertible into or exchangeable for any other property or securities of the Company.

     Section 6. REDEMPTION AT THE OPTION OF THE COMPANY.

     (a) The Series C Preferred Shares shall not be redeemable by the Company prior to June 19, 2006. On and after June 19, 2006, the Company, at its option, may redeem the Series C Preferred Shares, in whole or in part, at any time or from time to time, for cash at a redemption price of Twenty Five Dollars ($25.00) per Series C Preferred Share, plus the amounts indicated in Section 6(b).

     (b) Upon any redemption of the Series C Preferred Shares pursuant to this Section 6, the Company shall pay all accrued and unpaid dividends, if any, thereon ending on or prior to the date of such redemption (The “Call Date”), without interest. If the Call Date falls after a dividend payment record date and prior to the corresponding Dividend Payment Date, then each holder of Series C Preferred Shares at the close of business on such dividend payment record date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares before such Dividend Payment Date. Except as provided above, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series C Preferred Shares called for redemption.

     (c) If full cumulative dividends on the Series C Preferred Shares and any class or series of Parity Shares of the Company have not been declared and paid or declared and set apart for payment, the Series C Preferred Shares or Parity Shares may not be redeemed under this Section 6 in

part and the Company may not purchase or otherwise acquire any Series C Preferred Shares or any Parity Shares, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of Series C Preferred Shares or Parity Shares, as the case may be.

     (d) The redemption price of any Series C Preferred Shares called for redemption pursuant to this Section 6 (other than any portion thereof consisting of accrued dividends) shall be paid solely from the sale proceeds of other capital stock of the Company and not from any other source. For purposes of the preceding sentence, “capital stock” means any Common Shares, Preferred Shares, depositary shares, interests, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.

     (e) Notice of the redemption of any Series C Preferred Shares under this Section 6 shall be given by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the Call Date. A similar notice furnished by the Company will be mailed by first-class mail, postage prepaid, by the registrar to each holder of record of Series C Preferred Shares to be redeemed at the address of each such holder as shown on the share transfer books of the Company, not less than 30 nor more than 60 days prior to the Call Date. No failure to give any notice required by this Section 6(e), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each notice shall state: (i) the Call Date, (ii) the number of Series C Preferred Shares to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price per share, (iv) the place or places at which certificates for such shares are to be surrendered for payment of the redemption price, and (v) that dividends on the shares to be redeemed shall cease to accrue on such Call Date. Notice having been given as aforesaid, from and after the Call Date, (1) dividends on the Series C Preferred Shares so called for redemption shall cease to accrue, (2) such Series C Preferred Shares shall no longer be deemed to be outstanding, and (3) all rights of the holders thereof as holders of Series C Preferred Shares of the Company (except the right to receive the cash redemption price payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon) shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Company) on the Company’s books. The Company’s obligation to provide cash in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Company shall deposit with a bank or trust company (which may be an affiliate of the Company) that has, or is an affiliate of a bank or trust company that has, capital and surplus of at least $50,000,000, the amount of cash necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the Series C Preferred Shares so called for redemption. No interest shall accrue for the benefit of the holders of Series C Preferred Shares to be redeemed on any cash so set aside by the Company. If the Company elects to so deposit the cash necessary for the redemption of the called

Series C Preferred Shares, any notice to the holders of Series C Preferred Shares called for redemption required by this Section 6(e) shall
(x) state the date of such deposit, (y) specify the office of such bank or trust company as the place of payment of the redemption price and (z) call upon such holders to surrender the share certificates representing such shares at such place on or about the date fixed in such notice (which shall not be later than the Call Date) against payment of the redemption price (including all accrued and unpaid dividends up to the Call Date). Subject to applicable escheat laws, any cash so deposited which remains unclaimed at the end of two years from the Call Date shall revert to the general funds of the Company, after which reversion, again subject to applicable escheat laws, the holders of such shares so called for redemption shall look only to the general funds of the Company for the payment of such cash.

     As promptly as practicable after the surrender in accordance with said notice of the certificates for any such shares so redeemed (properly endorsed or assigned for transfer, if the Company shall so require and if the notice shall so state), such shares shall be exchanged for any cash (without interest thereon) for which such shares have been redeemed. If fewer than all the outstanding Series C Preferred Shares are to be redeemed, the shares to be redeemed shall be determined pro rata (as nearly as practicable without creating fractional shares) or by lot or in such other equitable manner as prescribed by the Company’s Board of Trustees in its sole discretion to be equitable. If fewer than all the Series C Preferred Shares represented by any certificate are redeemed, then new certificates representing the unredeemed shares shall be issued without cost to the holder thereof.

     Section 7. SHARES TO BE RETIRED.

All Series C Preferred Shares which shall have been issued and reacquired in any manner by the Company shall be restored to the status of authorized but unissued Preferred Shares of the Company, without designation as to class or series.

     Section 8. RANKING.

Any class or series of shares of beneficial interest of the Company shall be deemed to rank:

     (a) prior to the Series C Preferred Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series of shares of beneficial interest shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series C Preferred Shares;

     (b) on a parity with the Series C Preferred Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series C Preferred Shares, if the holders of such class or series of shares of beneficial interest and the Series C Preferred Shares shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other (“Parity Shares”);

     (c) junior to the Series C Preferred Shares, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such shares of beneficial of interest shall be Junior Shares; and

     (d) junior to the Series C Preferred Shares, as to the payment of dividends and as to the distribution of assets upon liquidation dissolution or winding up, if such shares of stock shall be Fully Junior Shares.

     Section 9. VOTING.

     (a) If and whenever dividends on the Series C Preferred Shares are in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full) for six or more quarterly periods, whether or not such quarterly periods are consecutive, the number of Trustees then constituting the Board of Trustees shall be increased by two, and the holders of Series C Preferred Shares, together with the holders of shares of every series of Parity Shares upon which like voting rights have been conferred and are exercisable, voting as a single class regardless of series, shall be entitled to elect the two additional Trustees to serve on the Board of Trustees at any annual meeting of shareholders or special meeting held in place thereof, or at a special meeting of the holders of the Series C Preferred Shares and such Parity Shares called as hereinafter provided. Whenever all arrears in dividends on the Series C Preferred Shares and such Parity Shares then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the Series C Preferred Shares and such Parity Shares to elect such additional two Trustees shall immediately cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all persons elected as Trustees by the holders of the Series C Preferred Shares and such Parity Shares shall immediately terminate and the number of the Board of Trustees shall be reduced accordingly. At any time after such voting rights shall have been so vested in the holders of Series C Preferred Shares and such Parity Shares, the secretary of the Company may, and upon the written request of any holder of Series C Preferred Shares (addressed to the secretary at the principal office of the Company) shall, call a special meeting of the holders of the Series C Preferred Shares and of such Parity Shares for the election of the two Trustees to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Company for a special meeting of the shareholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the secretary within 20 days after receipt of any such request, then any holder of Series C Preferred Shares may call such meeting, upon the notice above provided, and for that purpose shall have access to the share records of the Company. The Trustees elected at any such special meeting shall hold office until the next annual meeting of the shareholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the Trustees elected by the holders of the Series C Preferred Shares and such Parity Shares, a successor shall be elected by the Board of Trustees, upon the nomination of the then-remaining director elected by the holders of the Series C Preferred Shares and such Parity Shares or the successor of such remaining Trustee, to serve until the next annual meeting

of the shareholders or special meeting held in place thereof if such office shall not have previously terminated as provided above.

     (b) So long as any Series C Preferred Shares remain outstanding, the Company will not, without the affirmative vote or consent of the holders of at least two-thirds of the Series C Preferred Shares outstanding at the time, given in person or by proxy, either in writing or at a meeting (such series voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of capital shares ranking prior to the Series C Preferred Shares with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized shares of the Company into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Charter, including these Articles Supplementary, whether by merger, consolidation or otherwise (an “Event”), so as to materially and adversely affect any right, preference, privilege or voting power of the Series C Preferred Shares or the holders thereof; provided, however, with respect to the occurrence of any of the Events set forth in (ii) above, that so long as the Series C Preferred Shares remain outstanding with the terms thereof materially unchanged, taking into account that upon the occurrence of an Event, the Company may not be the surviving entity, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of Series C Preferred Shares and provided further that (x) any increase in the amount of the authorized Preferred Shares or the creating or issuance of any other series of Preferred Shares, or (y) any increase in the amount of authorized Series C Preferred Shares or any other series of Preferred Shares, in each case ranking on a parity with or junior to the Series C Preferred Shares with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. The voting provisions set forth in this paragraph (b) will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series C Preferred Shares shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption.

     (c) For purposes of the foregoing provisions of this Section 9, each Series C Preferred Share shall have one (1) vote per share, except that when any other series of Preferred Shares shall have the right to vote with the Series C Preferred Shares as a single class on any matter, then the Series C Preferred Shares and such other series shall have with respect to such matters one (1) vote per $25.00 of stated liquidation preference. Except as otherwise required by applicable law or as set forth herein, the Series C Preferred Shares shall not have any relative, participating, optional or other special voting rights and powers, and the consent of the holders thereof shall not be required for the taking of any corporate action.

     Section 10. RECORD HOLDERS.

The Company and the Transfer Agent may deem and treat the record holder of any Series C Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Company nor the Transfer Agent shall be affected by any notice to the contrary.

     Section 11. SINKING FUND.

The Series C Preferred Shares shall not be entitled to the benefits of any retirement or sinking fund.

     Section 12. RESTRICTIONS ON OWNERSHIP AND TRANSFER.

The beneficial ownership and transfer of the Series C Preferred Shares shall in all respects be subject to the applicable provisions of Section 6.7 of the Charter.

     IN WITNESS WHEREOF, the Company has caused these Articles Supplementary to be signed in its name and on its behalf by its Chief Financial Officer as of June 14, 2001.

COLONIAL PROPERTIES TRUST
By:	/s/ HOWARD B. NELSON, JR.
	Howard B. Nelson, Jr.
	Chief Financial Officer

ARTICLES SUPPLEMENTARY OF
8¹/₈ % SERIES D CUMULATIVE REDEEMABLE PREFERRED SHARES
OF BENEFICIAL INTEREST OF
COLONIAL PROPERTIES TRUST

Pursuant to Section 10-13-7 of the

Code of Alabama 1975

     Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), hereby certifies that on April 3, 2003, pursuant to authority conferred by Sections 3.2(e) and 6.3 of the Charter (as defined below) and in accordance with Section 10-13-7 of the Code of Alabama 1975, a committee of the Board of Trustees, pursuant to authority expressly delegated by the Board of Trustees on April 1, 2003, duly classified unissued Preferred Shares (as defined below) of the Company, and the description of such Preferred Shares (as defined below), including the number, designation, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption thereof, as set by the committee of the Board of Trustees, are as follows:

     Section 1. Number of Shares and Designation. This series of Preferred Shares shall be designated as 8¹/₈ % Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share (the “Series D Preferred Shares”). The number of Preferred Shares constituting the Series D Preferred Shares is 500,000.

     Section 2. Definitions. The following terms shall have the following meanings herein:

     (a) “Board of Trustees” shall mean the Board of Trustees of the Company or any committee authorized by the Board of Trustees to perform any of its responsibilities with respect to the Series D Preferred Shares.

     (b) “Business Day” shall mean any day other than a Saturday, Sunday or day on which state or federally chartered banking institutions in New York City, New York are not required to be open.

     (c) “Call Date” shall have the meaning set forth in Section 6(b).

     (d) “Capital Gains Amount” shall have the meaning set forth in Section 3(d).

     (e) “Charter” means the Declaration of Trust of the Company, as amended to the date hereof and as the same may be amended hereafter from time to time.

     (f) “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute thereto.

     (g) “Common Shares” shall mean the Company’s common shares of beneficial interest, par value $.01 per share.

     (h) “Dividend Payment Date” shall mean the last day (or, if such day is not a Business Day, the succeeding Business Day) of each January, April, July and October, commencing on July 31, 2003.

     (i) “Dividend Periods” shall mean quarterly dividend periods commencing on February 1, May 1, August 1 and November 1 of each year and ending on and including the next succeeding Dividend Payment Date (other than the initial Dividend Period, which shall commence on the Issue Date, and other than the Dividend Period during which any Series D Preferred Shares shall be redeemed pursuant to Section 6, which shall end on and include the Call Date with respect to the Series D Preferred Shares being redeemed).

     (j) “Fully Junior Shares” shall mean the Common Shares and any other class or series of shares of beneficial interest of the Company now or hereafter issued and outstanding over which the Series D Preferred Shares have preference or priority in both (i) the payment of dividends and (ii) the distribution of assets on any liquidation, dissolution or winding up of the Company.

     (k) “Issue Date” shall mean the first date on which the pertinent Series D Preferred Shares are issued and sold.

     (l) “Junior Shares” shall mean the Common Shares and any other class or series of shares of beneficial interest of the Company now or hereafter issued and outstanding over which the Series D Preferred Shares have preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Company.

     (m) “Parity Shares” shall have the meaning set forth in Section 8(b).

     (n) “Preferred Shares” shall mean the Company’s preferred shares of beneficial interest, par value $.01 per share.

     (o) “Series D Preferred Shares” shall have the meaning set forth in Section 1.

     (p) “set apart for payment” shall be deemed to include, without any action other than the following, the recording by the Company in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Trustees, the allocation of funds to be so paid on any series or class of shares of beneficial interest of the Company; provided, however, that if any funds for any class or series of Junior Shares or Fully Junior Shares or any class or series of shares of beneficial interest ranking on a parity with the Series D Preferred Shares as to the payment of dividends are placed in a separate account of the Company or delivered to a disbursing, paying or other similar agent, then “set apart for payment” with respect to the Series D Preferred Shares shall mean placing such funds in such separate account or delivering such funds to a disbursing, paying or other similar agent.

     (q) “Total Dividends” shall have the meaning set forth in Section 3(d).

     (r) “Transfer Agent” means EquiServe Trust Company, N.A., or such other agent or agents of the Company as may be designated by the Board of Trustees or their designee as the transfer agent, registrar and dividend disbursing agent for the Series D Preferred Shares.

     Section 3. Dividends.

     (a) The holders of Series D Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Trustees out of funds legally available for that purpose, cumulative, preferential dividends payable in cash at the rate of 8¹/ 8 % of the $250.00 liquidation preference per year per share (equivalent to a fixed annual rate of $20.3125 per share). Such dividends shall begin to accrue and shall be fully cumulative from the Issue Date, whether or not in any Dividend Period or Periods there shall be funds of the Company legally available for the payment of such dividends, and shall be payable quarterly, when, as and if declared by the Board of Trustees, in arrears on Dividend Payment Dates, commencing on the first Dividend Payment Date after the Issue Date. Such dividends shall be payable in arrears to the holders of record of Series D Preferred Shares, as they appear on the share records of the Company at the close of business on the record date, which shall be the 15^th day of the calendar month in which the applicable Dividend Payment Date falls or such other date designated by the Board of Trustees that is not more than 30 nor less than 10 days preceding the relevant Dividend Payment Date. Accrued and unpaid dividends for any past Dividend Periods may be declared and paid on any date and for such interim periods, without reference to any regular Dividend Payment Date, to holders of record on such date, not more than 30 nor less than 10 days preceding the payment date thereof, as may be fixed by the Board of Trustees. Any dividend payment made on the Series D Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due with respect to the Series D Preferred Shares which remains payable.

     (b) The amount of dividends referred to in Section 3(a) payable for each full Dividend Period for the Series D Preferred Shares shall be computed by dividing the annual dividend rate by four, except that the amount of dividends payable for the initial Dividend Period, and for any Dividend Period

2

shorter than a full Dividend Period, for the Series D Preferred Shares shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Holders of Series D Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or shares of stock, in excess of cumulative dividends, as herein provided, on the Series D Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series D Preferred Shares that may be in arrears.

     (c) Dividends on Series D Preferred Shares will accrue whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared.

     (d) If, for any taxable year, the Company elects to designate as “capital gain dividends” (as defined in Section 857 of the Code), any portion (the “Capital Gains Amount”) of the total dividends (within the meaning of the Code) paid or made available for the year to holders of all classes of capital stock (the “Total Dividends”), then the portion of the Capital Gains Amount that shall be allocable to holders of Series D Preferred Shares shall be in the same portion that the Total Dividends paid or made available to the holders of Series D Preferred Shares for the year bears to the Total Dividends.

     (e) So long as any Series D Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be declared or paid or set apart for payment on any class or series of Parity Shares for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series D Preferred Shares for all Dividend Periods terminating on or prior to the dividend payment date for such class or series of Parity Shares. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon Series D Preferred Shares and all dividends declared upon any other class or series of Parity Shares shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series D Preferred Shares and accumulated and unpaid on such Parity Shares.

     (f) So long as any Series D Preferred Shares are outstanding, no dividends (other than dividends or distributions paid solely in, or options, warrants or rights to subscribe for or purchase, Fully Junior Shares) shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Shares or Fully Junior Shares, nor shall any Junior Shares or Fully Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of any employee incentive or benefit plan of the Company or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such shares) by the Company, directly or indirectly (except by conversion into or exchange for Fully Junior Shares), unless in each case (i) the full cumulative dividends on all outstanding Series D Preferred Shares and any Parity Shares shall have been or contemporaneously are declared and paid or declared and set apart for payment for all past Dividend Periods with respect to the Series D Preferred Shares and all past dividend periods with respect to such Parity Shares and (ii) sufficient funds shall have been or contemporaneously are declared and paid or declared and set apart for the payment of the dividend for the current Dividend Period with respect to the Series D Preferred Shares and the current dividend period with respect to such Parity Shares.

     (g) No dividends on Series D Preferred Shares shall be declared by the Board of Trustees or paid or set apart for payment by the Company at such time as the terms and provisions of any agreement of the Company, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law.

3

     Section 4. Liquidation Rights.

     (a) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of Junior Shares, the holders of the Series D Preferred Shares shall be entitled to receive Two Hundred Fifty Dollars ($250.00) per Series D Preferred Share plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of such liquidation, dissolution or winding up, but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the Series D Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of the Series D Preferred Shares and any such Parity Shares ratably in accordance with the respective amounts that would be payable on such Series D Preferred Shares and any such Parity Shares if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Company with one or more corporations, real estate investment trusts, or other entities and (ii) a sale, lease or transfer of all or substantially all of the Company’s assets shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company.

     (b) Subject to the rights of the holders of any series or class or classes of shares of beneficial interest ranking on a parity with or prior to the Series D Preferred Shares upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to the holders of the Series D Preferred Shares, as provided in this Section 4, any other series or class or classes of Junior Shares or Fully Junior Shares shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series D Preferred Shares shall not be entitled to share therein.

     Section 5. Conversion. The Series D Preferred Shares are not convertible into or exchangeable for any other property or securities of the Company.

     Section 6. Redemption at the Option of the Company.

     (a) The Series D Preferred Shares shall not be redeemable by the Company prior to April 30, 2008. On and after April 30, 2008, the Company, at its option, may redeem the Series D Preferred Shares, in whole or in part, at any time or from time to time, for cash at a redemption price of Two Hundred Fifty Dollars ($250.00) per Series D Preferred Share, plus the amounts indicated in Section 6(b). The Company may, however, redeem, purchase or acquire the Series D Preferred Shares at any time in accordance with Section 6.7 of Article VI of the Charter in order to ensure that the Company remains qualified as a real estate investment trust (“REIT”) for United States federal income tax purposes.

     (b) Upon any redemption of the Series D Preferred Shares pursuant to this Section 6, the Company shall pay all accrued and unpaid dividends, if any, thereon ending on or prior to the date of such redemption (the “Call Date”), without interest. If the Call Date falls after a dividend payment record date and prior to the corresponding Dividend Payment Date, then each holder of Series D Preferred Shares at the close of business on such dividend payment record date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares before such Dividend Payment Date. Except as provided above, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series D Preferred Shares called for redemption.

4

     (c) If full cumulative dividends on the Series D Preferred Shares and any class or series of Parity Shares of the Company have not been declared and paid or declared and set apart for payment, the Series D Preferred Shares or Parity Shares may not be redeemed under this Section 6 in part and the Company may not purchase or otherwise acquire any Series D Preferred Shares or any Parity Shares, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of Series D Preferred Shares or Parity Shares, as the case may be; provided, however, that the foregoing shall not prevent the redemption, purchase or acquisition of Series D Preferred Shares by the Company in accordance with the terms of Article VI of the Charter or otherwise in order to ensure that the Company remains qualified as a REIT for United States federal income tax purposes.

     (d) Notice of the redemption of any Series D Preferred Shares under this Section 6 shall be given by the Company by first-class mail, postage prepaid, by the registrar to each holder of record of Series D Preferred Shares to be redeemed at the address of each such holder as shown on the share transfer books of the Company, not less than 30 nor more than 60 days prior to the Call Date, or by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the Call Date. No failure to give any notice required by this Section 6(d), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each notice shall state: (i) the Call Date, (ii) the number of Series D Preferred Shares to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price per share, (iv) the place or places at which certificates for such shares are to be surrendered for payment of the redemption price, and (v) that dividends on the shares to be redeemed shall cease to accrue on such Call Date. Notice having been given as aforesaid, from and after the Call Date, (1) dividends on the Series D Preferred Shares so called for redemption shall cease to accrue, (2) such Series D Preferred Shares shall no longer be deemed to be outstanding, and (3) all rights of the holders thereof as holders of Series D Preferred Shares of the Company (except the right to receive the cash redemption price payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon) shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Company) on the Company’s books.

     (e) On or before the Call Date, the Company may elect to deposit with a bank or trust company (which may be an affiliate of the Company) or an affiliate of a bank or trust company, the amount of cash necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the Series D Preferred Shares so called for redemption. No interest shall accrue for the benefit of the holders of Series D Preferred Shares to be redeemed on any cash so set aside by the Company. If the Company elects to so deposit the cash necessary for the redemption of the called Series D Preferred Shares, any notice to the holders of Series D Preferred Shares called for redemption required by this Section 6(e) shall (x) specify the office of such bank or trust company as the place of payment of the redemption price and (y) call upon such holders to surrender the share certificates representing such shares at such place on or about the date fixed in such notice (which shall not be later than the Call Date) against payment of the redemption price (including all accrued and unpaid dividends up to the Call Date). Subject to applicable escheat laws, any cash so deposited which remains unclaimed at the end of two years from the Call Date shall revert to the general funds of the Company, after which reversion, again subject to applicable escheat laws, the holders of such shares so called for redemption shall look only to the general funds of the Company for the payment of such cash.

5

     As promptly as practicable after the surrender in accordance with said notice of the certificates for any such shares so redeemed (properly endorsed or assigned for transfer, if the Company shall so require and if the notice shall so state), such shares shall be exchanged for any cash (without interest thereon) for which such shares have been redeemed. If fewer than all the outstanding Series D Preferred Shares are to be redeemed, the shares to be redeemed shall be determined pro rata (as nearly as practicable without creating fractional shares) or by lot or in such other equitable manner as prescribed by the Company’s Board of Trustees in its sole discretion to be equitable. If fewer than all the Series D Preferred Shares represented by any certificate are redeemed, then new certificates representing the unredeemed shares shall be issued without cost to the holder thereof.

     Section 7. Shares to be Retired. If and when approved by the Board of Trustees, all Series D Preferred Shares which shall have been issued and reacquired in any manner by the Company shall be restored to the status of authorized but unissued Preferred Shares of the Company, without designation as to class or series.

     Section 8. Ranking. Any class or series of shares of beneficial interest of the Company shall be deemed to rank:

     (a) prior to the Series D Preferred Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series of shares of beneficial interest shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series D Preferred Shares;

     (b) on a parity with the Series D Preferred Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series D Preferred Shares, if the holders of such class or series of shares of beneficial interest and the Series D Preferred Shares shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other (“Parity Shares”);

     (c) junior to the Series D Preferred Shares, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such shares of beneficial of interest shall be Junior Shares; and

     (d) junior to the Series D Preferred Shares, as to the payment of dividends and as to the distribution of assets upon liquidation dissolution or winding up, if such shares of stock shall be Fully Junior Shares.

     Section 9. Voting.

     (a) If and whenever dividends on the Series D Preferred Shares are in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full) for six or more quarterly periods, whether or not such quarterly periods are consecutive, the number of Trustees then constituting the Board of Trustees shall be increased by two, and the holders of Series D Preferred Shares, together with the holders of shares of every series of Parity Shares upon which like voting rights have been conferred and are exercisable, voting as a single class regardless of series, shall be entitled to elect the two additional Trustees to serve on the Board of Trustees at any annual meeting of shareholders or special meeting held in place thereof, or at a special meeting of the holders of the Series D Preferred Shares and such Parity Shares called as hereinafter provided. Whenever all arrears in dividends on the Series D Preferred Shares and such Parity Shares then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the Series D Preferred Shares and such

6

Parity Shares to elect such additional two Trustees shall immediately cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all persons elected as Trustees by the holders of the Series D Preferred Shares and such Parity Shares shall immediately terminate and the number of the Board of Trustees shall be reduced accordingly. At any time after such voting rights shall have been so vested in the holders of Series D Preferred Shares and such Parity Shares, the secretary of the Company may, and upon the written request of the holders of record of at least 10% of the outstanding Series D Preferred Shares and the holders of Parity Shares (addressed to the secretary at the principal office of the Company) shall, call a special meeting of the holders of the Series D Preferred Shares and of such Parity Shares for the election of the two Trustees to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Company for a special meeting of the shareholders or as required by law. The Trustees elected at any such special meeting shall hold office until the next annual meeting of the shareholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the Trustees elected by the holders of the Series D Preferred Shares and such Parity Shares, a successor shall be elected by the Board of Trustees, upon the nomination of the then-remaining Trustee elected by the holders of the Series D Preferred Shares and such Parity Shares or the successor of such remaining Trustee, to serve until the next annual meeting of the shareholders or special meeting held in place thereof if such office shall not have previously terminated as provided above.

     (b) So long as any Series D Preferred Shares remain outstanding, the Company will not, without the affirmative vote or consent of the holders of at least two-thirds of the Series D Preferred Shares outstanding at the time, given in person or by proxy, either in writing or at a meeting (such series voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of capital shares ranking prior to the Series D Preferred Shares with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized shares of the Company into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Charter, including these Articles Supplementary, whether by merger, consolidation, or transfer or conveyance of substantially all of the Company’s assets or otherwise (an “Event”), so as to materially and adversely affect any right, preference, privilege or voting power of the Series D Preferred Shares or the holders thereof; provided, however, with respect to the occurrence of any of the Events set forth in (ii) above, that so long as the Series D Preferred Shares remain outstanding with the terms thereof materially unchanged, taking into account that upon the occurrence of an Event, the Company may not be the surviving entity, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of Series D Preferred Shares and provided further that (x) any increase in the amount of the authorized Preferred Shares or the creating or issuance of any other series of Preferred Shares, or (y) any increase in the amount of authorized Series D Preferred Shares or any other series of Preferred Shares, in each case ranking on a parity with or junior to the Series D Preferred Shares with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. The voting provisions set forth in this paragraph (b) will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series D Preferred Shares shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption.

     (c) For purposes of the foregoing provisions of this Section 9, each Series D Preferred Share shall have one (1) vote per share. Except as otherwise required by applicable law or as set forth herein, the Series D Preferred Shares shall not have any relative, participating, optional or other special voting rights and powers, and the consent of the holders thereof shall not be required for the taking of any corporate action.

     Section 10. Record Holders. The Company and the Transfer Agent may deem and treat the record holder of any Series D Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Company nor the Transfer Agent shall be affected by any notice to the contrary.

     Section 11. Sinking Fund. The Series D Preferred Shares shall not be entitled to the benefits of any retirement or sinking fund.

     Section 12. Restrictions on Ownership and Transfer. The beneficial ownership and transfer of the Series D Preferred Shares shall in all respects be subject to the applicable provisions of Section 6.7 of the Charter.

7

     IN WITNESS WHEREOF, the Company has caused these Articles Supplementary to be signed in its name and on its behalf by its Chief Financial Officer and Secretary as of April 22, 2003.

COLONIAL PROPERTIES TRUST
By:	/s/ HOWARD B. NELSON, JR.
	Howard B. Nelson, Jr.
	Chief Financial Officer and Secretary

COLONIAL PROPERTIES TRUST

STATEMENT OF CANCELLATION

Dated September 24, 2003

     This STATEMENT OF CANCELLATION (the “Statement of Cancellation”) is made as of the date set forth above by Colonial Properties Trust.

     WHEREAS, Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), duly authorized and issued 5,000,000 preferred shares of beneficial interest designated as 8 3/4% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest of the Company (the “Series A Preferred Shares”);

     WHEREAS, the Company redeemed and reacquired all 5,000,000 Series A Preferred Shares on May 7, 2003, which shares are currently held as treasury stock of the Company; and

     WHEREAS, the Board of Trustees of the Company (the “Board of Trustees”) desires to cancel the Series A Preferred Shares and thereby restore them to the status of authorized and unissued shares of the Company.

     NOW THEREFORE, in accordance with Section 6.32(b) of Chapter 2B of Title 10 of the Code of Alabama, the Board of Trustees does hereby set forth and certify the following information:

     1. The name of the trust is Colonial Properties Trust.

     2. 5,000,000 shares of Series A Preferred Shares of the Company were reacquired by the Company on May 7, 2003, and were subsequently cancelled pursuant to resolutions of the Board of Trustees adopted at a meeting held on April 24, 2003.

     3. The aggregate number of issued shares of the Company after giving effect to the cancellation of the Series A Preferred Shares is as follows:

Common Shares of Beneficial Interest	31,505,802
9.25 % Series C Cumulative	2,000,000
Redeemable Preferred Shares of Beneficial Interest
8 1/8 % Series D Cumulative	500,000
Redeemable Preferred Shares of Beneficial Interest

[SIGNATURE PAGE TO FOLLOW]

     IN WITNESS WHEREOF, this Statement of Cancellation has been signed on this ___ day of September, 2003, on behalf of the Company, by the undersigned officer, who acknowledges, under penalty of perjury, that this document is his free act and deed, and that to the best of his knowledge, information and belief, the matters and facts set forth herein are true in all material respects.

COLONIAL PROPERTIES TRUST
	/s/ Howard B. Nelson, Jr.
By:	Howard B. Nelson, Jr.
Title: Chief Financial Officer

STATE OF ALABAMA       )

COUNTY OF JEFFERSON )

     I, the undersigned, a notary public in and for said county in said state, hereby certify that Howard B. Nelson, Jr., whose name as Chief Financial Officer of Colonial Properties Trust, an Alabama real estate investment trust, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said real estate investment trust, acting in his capacity of said real estate investment trust for and as the act of said real estate investment trust.

     Given under my hand and official seal this 24^th day of September, 2003.

/s/ Kimberly A. Keuter  

Notary Public 

[NOTARIAL SEAL] My commission expires: 9-10-2007

2

COLONIAL PROPERTIES TRUST

ARTICLES SUPPLEMENTARY

2,000,000 SHARES

7.25% SERIES B CUMULATIVE REDEEMABLE PERPETUAL
PREFERRED SHARES

          Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), hereby certifies that on February 18, 2004, pursuant to authority conferred by Sections 3.2 (e) and 6.3 of the Declaration of Trust of the Company, as amended to the date hereof and as the same may be amended hereafter from time to time (the “Declaration of Trust”), and in accordance with Section 10-13-7 of the Code of Alabama 1975, the Board of Trustees duly classified unissued preferred shares of beneficial interest (“Preferred Shares”) of the Company, and the description of such Preferred Shares, including the designation and amount thereof and the voting rights or powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof, as set by the Board of Trustees, are as follows:

          FIRST: The Board of Trustees unanimously adopted resolutions designating the aforesaid class of Preferred Shares as the “7.25% Series B Cumulative Redeemable Perpetual Preferred Shares,” setting the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of redemption and other terms and conditions of such 7.25% Series B Cumulative Redeemable Perpetual Preferred Shares and authorizing the issuance of up to 2,000,000 shares of 7.25% Series B Cumulative Redeemable Perpetual Preferred Shares.

          SECOND: The class of Preferred Shares of the Company created by the resolutions duly adopted by the Board of Trustees of the Company referred to in the FIRST Article of these Articles Supplementary shall have the following designation, number of shares, preferences, conversion and other rights, voting powers, restrictions and limitation as to dividends, qualifications, terms and conditions of redemption and other terms and conditions:

          Section 1. Designation and Number. A series of Preferred Shares, designated the “7.25% Series B Cumulative Redeemable Perpetual Preferred Shares” (the “Series B Preferred Shares”) is hereby established. The number of shares of Series B Preferred Shares shall be 2,000,000.

          Section 2. Rank. The Series B Preferred Shares will, with respect to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Company, or both, rank senior to all classes or series of Common Shares (as defined in the Declaration of Trust) and to all classes or series of equity securities of the Company now or hereafter authorized, issued or outstanding, other than any class or series of equity securities of the Company expressly designated as ranking on a parity with or senior to the Series B Preferred Shares as to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Company. For purposes of these Articles Supplementary, the term “Parity Preferred Shares” shall be used to refer to any class or series of equity securities of the Company now or hereafter authorized, issued or outstanding expressly designated by the Company to rank on a parity with Series B Preferred Shares with respect to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Company including, without limitation, that certain “9.25% Series C Cumulative Redeemable Preferred Shares” of the Company, authorized pursuant to Articles Supplementary dated June 14, 2001 and that certain “8 1/8% Series D Cumulative Redeemable Preferred Shares” of the Company, authorized pursuant to Articles Supplementary dated April 22, 2003. The term “equity securities” does not include debt securities, which will rank senior to the Series B Preferred Shares prior to conversion.

          Section 3. Distributions. (a) Payment of Distributions. Subject to the rights of holders of Parity Preferred Shares and holders of equity securities ranking senior to the Series B Preferred Shares, holders of Series B Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Trustees of the Company, out of funds legally available for the payment of distributions, cumulative preferential cash distributions at the rate per annum of 8.875% of the $50 liquidation preference per share of Series B Preferred Shares for the period up to and including February 23, 2004, and at the rate per annum of 7.25% of the $50 liquidation preference per share of Series B Preferred Shares for the period from and after February 24, 2004. Such distributions shall be cumulative, shall accrue from the original date of issuance and will be payable (A) quarterly (such quarterly periods for purposes of payment and accrual will be the quarterly periods ending on the dates specified in this sentence and not calendar quarters) in arrears, on March 31, June 30, September 30 and December 31 of each year commencing on the first of such dates to occur after the original date of issuance and, (B) in the event of a redemption, on the redemption date (each a “Preferred Shares Distribution Payment Date”). The amount of the distribution payable for any period will be computed on the basis of a 360-day year of twelve 30-day months (or actual days for any month which is shorter than a full monthly period), and for any period shorter than a full quarterly period for which distributions are computed, the amount of the distribution payable will be computed on the basis of the actual number of days elapsed in such a 30-day month. The amount of the distribution payable on March 31, 2004 under these Articles Supplementary shall be $1.0277 per Series B Preferred Share, representing the conversion of the distribution rate from 8.875% per annum to 7.25% per annum during the quarterly period ended on such date, calculated as follows: (x) the month of January 2004 is counted as a 30-day month with a distribution rate of 8.875% per annum and the period from and including February 1, 2004 to and including February 23, 2004 is counted as a 23-day period of a 29-day month with a distribution rate of 8.875% per annum, (y) the period from and including February 24, 2004 to and including February 29, 2004 is counted as a six-day period of a 29-day month with a distribution rate of 7.25% per annum and the month of March 2004 is counted as a 30-day month with a distribution rate of 7.25% per annum, and (z) the amounts for the periods described in the preceding clauses (x) and (y) were added to obtain the distribution payable per Series B Preferred Share on March 31, 2004. If any date on which distributions are to be made on the Series B Preferred Shares is not a Business Day (as defined herein), then payment of the distribution to be made on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. Distributions on the Series B Preferred Shares will be made to the holders of record of the Series B Preferred Shares on the relevant record dates to be fixed by the Board of Trustees of the Company, which record dates shall in no event exceed 15 Business Days prior to the relevant Preferred Shares Distribution Payment Date (each a “Distribution Record Date”). Notwithstanding anything to the contrary set forth herein, each s hare of Series B Preferred Shares shall also continue to accrue all accrued and unpaid distributions, whether or not declared, up to the exchange date on any Series B Preference Unit (as defined in the Third Amended and Restated Agreement of Limited Partnership of Colonial Realty Limited Partnership (the “Partnership Agreement”), as amended through the date hereof) validly exchanged into such share of Series B Preferred Shares in accordance with the provisions of such Partnership Agreement.

          The term “Business Day” shall mean each day, other than a Saturday or a Sunday, which is not a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close.

          (b) Distributions Cumulative. Distributions on the Series B Preferred Shares will accrue whether or not the terms and provisions of any agreement of the Company, including any agreement relating to its indebtedness at any time prohibit the current payment of distributions, whether or not the Company has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized or declared. Accrued but unpaid distributions on the Series B Preferred Shares will accumulate as of the Preferred Shares Distribution Payment Date on which they first become payable. Distributions on account of arrears for any past distribution periods may be declared and paid at any time, without reference to a regular Preferred Shares Distribution Payment Date to holders of record of the Series B Preferred Shares on the record date fixed by the Board of Trustees which date shall not exceed 15 Business Days prior to the payment date. Accumulated and unpaid distributions will not bear interest.

          (c) Priority as to Distributions. (i) So long as any Series B Preferred Shares are outstanding, no distribution of cash or other property shall be authorized, declared, paid or set apart for payment on or with respect to

any class or series of Common Shares or any class or series of other shares of the Company ranking junior as to the payment of distributions or rights upon voluntary or involuntary dissolution, liquidation or winding up of the Partnership to the Series B Preferred Shares (such Common Shares or other junior shares, including, without limitation Series 1998 Junior Participating Preferred Shares authorized pursuant to Articles Supplementary dated October 26, 1998, collectively, “Junior Shares”), nor shall any cash or other property be set aside for or applied to the purchase, redemption or other acquisition for consideration of any Series B Preferred Shares, any Parity Preferred Shares or any Junior Shares, unless, in each case, all distributions accumulated on all Series B Preferred Shares and all classes and series of outstanding Parity Preferred Shares have been paid in full. The foregoing sentence will not prohibit (i) distributions payable solely in Junior Shares (or options, warrants or rights to subscribe for Junior Shares), (ii) the conversion of Series B Preferred Shares, Junior Shares or Parity Preferred Shares into shares of the Company ranking junior to the Series B Preferred Shares as to distributions and upon liquidation, winding-up or dissolution, and (iii) purchase by the Company of such Series B Preferred Shares, Parity Preferred Shares or Junior Shares pursuant to Article VI of the Declaration of Trust to the extent required to preserve the Company’s status as a real estate investment trust.

               (ii) So long as distributions have not been paid in full (or a sum sufficient for such full payment is not irrevocably deposited in trust for payment) upon the Series B Preferred Shares, all distributions authorized and declared on the Series B Preferred Shares and all classes or series of outstanding Parity Preferred Shares with respect to distributions shall be authorized and declared so that the amount of distributions authorized and declared per share of Series B Preferred Shares and such other classes or series of Parity Preferred Shares shall in all cases bear to each other the same ratio that accrued distributions per share on the Series B Preferred Shares and such other classes or series of Parity Preferred Shares (which shall not include any accumulation in respect of unpaid distributions for prior distribution periods if such class or series of Parity Preferred Shares do not have cumulative distribution rights) bear to each other.

          (e) No Further Rights. Holders of Series B Preferred Shares shall not be entitled to any distributions, whether payable in cash, other property or otherwise, in excess of the full cumulative distributions described herein.

          Section 4. Liquidation Preference. (a) Payment of Liquidating Distributions. Subject to the rights of holders of Parity Preferred Shares with respect to rights upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company and subject to equity securities ranking senior to the Series B Preferred Shares with respect to rights upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the holders of Series B Preferred Shares shall be entitled to receive out of the assets of the Company legally available for distribution or the proceeds thereof, after payment or provision for debts and other liabilities of the Company, but before any payment or distributions of the assets shall be made to holders of Common Shares or any other class or series of shares of the Company that ranks junior to the Series B Preferred Shares as to rights upon liquidation, dissolution or winding-up of the Company, an amount equal to the sum of (i) a liquidation preference of $50.00 per share of Series B Preferred Shares, and (ii) an amount equal to any accumulated and unpaid distributions thereon, whether or not declared, to the date of payment. In the event that, upon such voluntary or involuntary liquidation, dissolution or winding-up, there are insufficient assets to permit full payment of liquidating distributions to the holders of Series B Preferred Shares and any Parity Preferred Shares as to rights upon liquidation, dissolution or winding-up of the Company, all payments of liquidating distributions on the Series B Preferred Shares and such Parity Preferred Shares shall be made so that the payments on the Series B Preferred Shares and such Parity Preferred Shares shall in all cases bear to each other the same ratio that the respective rights of the Series B Preferred Shares and such other Parity Preferred Shares (which shall not include any accumulation in respect of unpaid distributions for prior distribution periods if such Parity Preferred Shares do not have cumulative distribution rights) upon liquidation, dissolution or winding-up of the Company bear to each other.

          (b) Notice. Written notice of any such voluntary or involuntary liquidation, dissolution or winding-up of the Company, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by (i) fax and (ii) by first class mail, postage pre-paid, not less than 30 and not more than 60 days prior to the payment date stated therein, to each record holder of the Series B Preferred Shares at the respective addresses of such holders as the same shall appear on the share transfer records of the Company.

          (c) No Further Rights. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series B Preferred Shares will have no right or claim to any of the remaining assets of the Company.

          (d) Consolidation. Merger or Certain Other Transactions. The voluntary sale, conveyance, lease, exchange or transfer (for cash, shares, securities or other consideration) of all or substantially all of the property or assets of the Company to, or the consolidation or merger or other business combination of the Company with or into, any corporation, trust or other entity (or of any corporation, trust or other entity with or into the Company) or a statutory share exchange shall not be deemed to constitute a liquidation, dissolution or winding-up of the Company.

          Section 5. Redemption. (a) Right of Optional Redemption. Except as provided in Section 5(d), the Series B Preferred Shares may not, subject to Section 7 hereof, be redeemed prior to February 24, 2009. On or after such date, the Company shall have the right to redeem the Series B Preferred Shares, in whole or in part, at any time or from time to time, upon not less than 30 nor more than 60 days’ written notice, at a redemption price, payable in cash, equal to $50.00 per share of Series B Preferred Shares plus accumulated and unpaid distributions, whether or nor declared, to the date of redemption. If fewer than all of the outstanding shares of Series B Preferred Shares are to be redeemed, the shares of Series B Preferred Shares to be redeemed shall be selected pro rata (as nearly as practicable without creating fractional units).

          (b) Limitation on Redemption. (i) The redemption price of the Series B Preferred Shares (other than the portion thereof consisting of accumulated but unpaid distributions) will be payable solely out of the sale proceeds of capital shares of the Company and from no other source. For purposes of the preceding sentence, “capital shares” means any equity securities (including Common Shares and Preferred Shares), shares, participation or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable for equity securities) or options to purchase any of the foregoing.

               (ii) Subject to Section 7 hereof, the Company may not redeem fewer than all of the outstanding shares of Series B Preferred Shares unless all accumulated and unpaid distributions have been paid on all outstanding Series B Preferred Shares for all quarterly distribution periods terminating on or prior to the date of redemption.

          (c) Procedures for Redemption. (i) Notice of redemption will be (i) faxed, and (ii) mailed by the Company, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series B Preferred Shares to be redeemed at their respective addresses as they appear on the transfer records of the Company. No failure to give or defect in such notice shall affect the validity of the proceedings for the redemption of any Series B Preferred Shares except as to the holder to whom such notice was defective or not given. In addition to any information required by law or by the applicable rules of any exchange upon which the Series B Preferred Shares may be listed or admitted to trading, each such notice shall state: (i) the redemption date, (ii) the redemption price, (iii) the number of shares of Series B Preferred Shares to be redeemed, (iv) the place or places where such shares of Series B Preferred Shares are to be surrendered for payment of the redemption price, (v) that distributions on the Series B Preferred Shares to be redeemed will cease to accumulate on such redemption date and (vi) that payment of the redemption price and any accumulated and unpaid distributions will be made upon presentation and surrender of such Series B Preferred Shares. If fewer than all of the shares of Series B Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series B Preferred Shares held by such holder to be redeemed.

               (ii) If the Company gives a notice of redemption in respect of Series B Preferred Shares (which notice will be irrevocable) then, by 12:00 noon, New York City time, on the redemption date, the Company will deposit irrevocably in trust for the benefit of the Series B Preferred Shares being redeemed funds sufficient to pay the applicable redemption price, plus any accumulated and unpaid distributions, whether or not declared, if any, on such shares to the date fixed for redemption, without interest, and will give irrevocable instructions and authority to pay such redemption price and any accumulated and unpaid distributions, if any, on such shares to the holders of the Series B Preferred Shares upon surrender of the certificate evidencing the Series B Preferred Shares by such holders at the place designated in the notice of redemption. If fewer than all Series B Preferred Shares evidenced by any certificate is being redeemed, a new certificate shall be issued upon surrender of the certificate evidencing all Series B Preferred Shares, evidencing the unredeemed Series B Preferred Shares without cost to the holder thereof. On

and after the date of redemption, distributions will cease to accumulate on the Series B Preferred Shares or portions thereof called for redemption, unless the Company defaults in the payment thereof. If any date fixed for redemption of Series B Preferred Shares is not a Business Day, then payment of the redemption price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the redemption price or any accumulated or unpaid distributions in respect of the Series B Preferred Shares is improperly withheld or refused and not paid by the Company, distributions on such Series B Preferred Shares will continue to accumulate from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the applicable redemption price and any accumulated and unpaid distributions.

          (d) Mandatory Redemption. Notwithstanding any provision herein to the contrary (including Section (5)(a)), so long as any Series B Preferred Shares remain outstanding, in the event of the occurrence of a Covered Transaction (defined below), the Company shall redeem, on the date such Covered Transaction is completed or occurs, all of the Series B Preferred Shares outstanding at the redemption price, payable in cash, equal to $50.00 per share of Series B Preferred Shares plus accumulated and unpaid distributions, whether or nor declared, to the date of redemption, if redemption of the Series B Preferred Shares was elected in writing by the holders of not less than a majority of the then outstanding Series B Preferred Shares in accordance with this Section (5)(d). The Company shall give written notice of a Covered Transaction to each of the respective holders of record of the Series B Preferred Shares, at their respective addresses as they appear on the transfer records of the Company, not less than thirty (30) days prior to the completion or occurrence of a Covered Transaction. Such notice shall not set forth any non-public information concerning such Covered Transaction. Each of the holders of record of the Series B Preferred Shares shall have until 5:00 p.m. New York City time, on the fifteenth (15th) day following receipt of such notice from the Company, to give the Company notice of such holder’s election that the Series B Preferred Shares be redeemed. Notwithstanding any provision herein to the contrary, with respect to a Covered Transaction that arises under clause (c) of the definition of Covered Transaction set forth below, in the event that the Company so fails to qualify as a real estate investment trust for any reason other than an affirmative election by the Company not to qualify, (a) the Company shall give notice of the occurrence of a Covered Transaction to each of the holders of record of the Series B Preferred Shares within 15 days of discovery of such failure to qualify (provided that, if the Company is pursuing administrative relief from the Internal Revenue Service with respect to such failure to qualify as a real estate investment trust, such notice shall be given upon the earlier of (1) five days after the denial of administrative relief by the Internal Revenue Service or (2) 60 days following the discovery of such failure to qualify), (b) each of the holders of record of the Series B Preferred Shares shall have until 5:00 p.m. New York City time, on the fifteenth (15th) day following receipt of such notice from the Company, to give the Company notice of such holder’s election that the Series B Preferred Shares be redeemed or not redeemed (and if any holder of record of the Series B Preferred Shares fails to give the Company such notice of election, then such holder of record shall be deemed to have given a notice of an election that the Series B Preferred Shares be redeemed) and (c) if the holders of not less than a majority of the then outstanding Series B Preferred Shares have elected to have the Series B Preferred Shares redeemed, the Series B Preferred Shares shall be redeemed on a date not later than 30 days following the date of the Company’s notice referred to in clause (a) above.

               The procedures set forth in Section (5)(c) (other than the requirement that notice of redemption be faxed and mailed not less than 30 days prior to the redemption date) shall apply to a redemption pursuant to this Section (5)(d). On or before the date of redemption, the Company shall give notice of redemption to the respective holders of record of the Series B Preferred Shares, at their respective addresses as they appear on the transfer records of the Company.

               For purposes of this Section (5)(d), the term “Covered Transaction” shall mean (a) the Company’s completion of a “Rule 13e-3 transaction” (as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) in which, as a result of such transaction, the Company’s common stock is no longer registered under Section 12 of the Exchange Act, except that this clause (a) shall not apply to any involuntary delisting of the Company’s common stock from the New York Stock Exchange or any national securities exchange (as defined in the Exchange Act), (b) the completion of any transaction or series of transactions

that would result in a Reorganization Event (defined below) of the Company or Colonial Realty Limited Partnership (the “Partnership”) or (c) the Company’s failure (or election not) to qualify as a real estate investment trust as defined in Section 856 (or any successor section) of the Internal Revenue Code of 1986, as amended.

               For purposes of this Section (5)(d), the term “Reorganization Event” shall mean (x) any sale or other disposition of all or substantially all of the assets of the Partnership or the Company, as the case may be, to an entity (or more than one entity in related transactions) that is not an Affiliate of the Company; or (y) any consolidation, amalgamation, merger, business combination, share exchange, reorganization or similar transaction involving the Partnership or the Company, as the case may be, pursuant to which the partners of the Partnership or the shareholders of the Company, as the case may be, immediately prior to the consummation of such transaction will own less than a majority of the equity interests in the entity surviving such transaction; provided, however, a Reorganization Event shall not include any transaction contemplated by clauses (x) or (y) of this definition if the surviving entity has unsecured debt outstanding which is rated at least the lowest credit rating level established as investment grade by at least two of Standard & Poor’s, Moody’s Investor Service and Fitch Ratings (it being understood that as of the date hereof the lowest investment grade rating of Standard & Poor’s is BBB-, the lowest investment grade rating of Moody’s is Baa3 and the lowest investment grade rating of Fitch Ratings is BBB-) and such rating has been reaffirmed in light of the contemplated transaction.

          (e) Status of Redeemed Shares. Any Series B Preferred Shares that shall at any time have been redeemed shall after such redemption, have the status of authorized but unissued Preferred Shares, without designation as to class or series until such shares are once more designated as part of a particular class or series by the Board of Trustees.

          Section 6. Voting Rights. (a) General. Holders of the Series B Preferred Shares will not have any voting rights, except as set forth below.

          (b) Right to Elect Trustees. (i) If at any time distributions shall be in arrears with respect to six (6) prior quarterly distribution periods (including quarterly periods on the Series B Preferred Units prior to the exchange into Series B Preferred Shares), whether or not consecutive, and shall not have been paid in full (a “Preferred Distribution Default”), the authorized number of members of the Board of Trustees shall automatically be increased by two and the holders of record of such Series B Preferred Shares, voting together as a single class with the holders of each class or series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable, will be entitled to fill the vacancies so created by electing two additional trustees to serve on the Company’s Board of Trustees (the “Preferred Shares Trustees”) at a special meeting called in accordance with Section 6(b)(ii) at the next annual meeting of shareholders, and at each subsequent annual meeting of shareholders or special meeting held in place thereof, until all such distributions in arrears and distributions for the current quarterly period on the Series B Preferred Shares and each such class or series of Parity Preferred Shares have been paid in full.

               (ii) At any time when such voting rights shall have vested, a proper officer of the Company may, and, upon written request (addressed to the Secretary at the principal office of the Company) of holders of record of at least 10% of the outstanding Shares of Series B Preferred Shares, shall call or cause to be called a special meeting of the holders of Series B Preferred Shares and all the series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable (collectively, the “Parity Securities”) by notice similar to that provided in the Bylaws of the Company for a special meeting of shareholders or as required by law. The record date for determining holders of the Parity Securities entitled to notice of and to vote at such special meeting will be the close of business on the third Business Day preceding the day on which such notice is mailed. If any such special meeting required to be called as above provided shall not be called by the Secretary within twenty (20) days after receipt of any such request, then any holder of Series B Preferred Shares may call such meeting, upon the notice above provided, and for that purpose shall have access to the share records of the Company. At any such special meeting, all of the holders of the Parity Securities, by plurality vote, voting together as a single class without regard to series will be entitled to elect two trustees on the basis of one vote per $50.00 of liquidation preference to which such Parity Securities are entitled by their terms (excluding amounts in respect of accumulated and unpaid dividends) and not cumulatively. The holder or holders of one-third of the Parity Securities then outstanding, present in person or by proxy, will constitute a quorum for the election of the Preferred Shares Trustees except as otherwise provided by law. Notice of all meetings at which holders of the Series B Preferred Shares shall be entitled to vote will be given to such holders at their addresses as they appear in the transfer records. At any such meeting or adjournment thereof in the absence of a quorum, subject

to the provisions of any applicable law, a majority of the holders of the Parity Securities present in person or by proxy shall have the power to adjourn the meeting for the election of the Preferred Shares Trustees, without notice other than an announcement at the meeting, until a quorum is present. If a Preferred Distribution Default shall terminate after the notice of a special meeting has been given but before such special meeting has been held, the Company shall, as soon as practicable after such termination, mail or cause to be mailed notice of such termination to holders of the Series B Preferred Shares that would have been entitled to vote at such special meeting.

               (iii) If and when all accumulated distributions and the distribution for the current distribution period on the Series B Preferred Shares shall have been paid in full or a sum sufficient for such payment is irrevocably deposited in trust for payment, the holders of the Series B Preferred Shares shall be divested of the voting rights set forth in Section 6(b) herein (subject to revesting in the event of each and every Preferred Distribution Default) and, if all distributions in arrears and the distributions for the current distribution period have been paid in full or set aside for payment in full on all other classes or series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable, the term and office of each Preferred Shares Trustee so elected shall terminate. Any Preferred Shares Trustee may be removed at any time with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding Series B Preferred Shares when they have the voting rights set forth in Section 6(b) (voting separately as a single class with all other classes or series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable). So long as a Preferred Distribution Default shall continue, any vacancy in the office of a Preferred Shares Trustee may be filled by written consent of the Preferred Shares Trustee remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding Series B Preferred Shares when they have the voting rights set forth in Section 6(b) (voting separately as a single class with all other classes or series of Parity Preferred Shares upon which like voting rights have been conferred and are exercisable). The Preferred Shares Trustee shall each be entitled to one vote per trustee on any matter.

          (c) Certain Voting Rights. So long as any Series B Preferred Shares remain outstanding, the Company shall not, without the affirmative vote of the holders of at least two-thirds of the Series B Preferred Shares outstanding at the time (i) designate or create, or increase the authorized or issued amount of, any class or series of shares ranking prior to the Series B Preferred Shares with respect to payment of distributions or rights upon liquidation, dissolution or winding-up or reclassify any authorized shares of the Company into any such shares, or create, authorize or issue any obligations or security convertible into or evidencing the right to purchase any such shares, or (ii) amend, alter or repeal the provisions of the Company’s Declaration of Trust (including these Articles Supplementary) or By-laws, whether by merger, consolidation or otherwise, in each case that would materially and adversely affect the powers, special rights, preferences, privileges or voting power of the Series B Preferred Shares or the holders thereof; provided, however, that with respect to the occurrence of a merger or consolidation, so long as (a) the Company is the surviving entity and the Series B Preferred Shares remain outstanding with the terms thereof unchanged, or (b) the resulting or surviving entity is a corporation or trust organized under the laws of any state and substitutes for the Series B Preferred Shares other preferred shares having substantially the same terms and same rights as the Series B Preferred Shares, including with respect to distributions, voting rights and rights upon liquidation, dissolution or winding-up, then the occurrence of any such event shall not be deemed to materially and adversely affect such rights, privileges or voting powers of the holders of the Series B Preferred Shares and provided further that any increase in the amount of authorized Preferred Shares or the creation or issuance of any other class or series of Preferred Shares, or any increase in an amount of authorized shares of each class or series, in each case ranking either (a) junior to the Series B Preferred Shares with respect to payment of distributions and the distribution of assets upon liquidation, dissolution or winding-up, or (b) on a parity with the Series B Preferred Shares with respect to payment of distributions or the distribution of assets upon liquidation, dissolution or winding-up shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.

          Section 7. Restrictions on Ownership and Transfer to Preserve Tax Benefit. The beneficial ownership and transfer of the Series B Preferred Shares shall in all respects be subject to the applicable provisions of Section 6.7 of the Declaration of Trust; provided, however, pursuant to and in accordance with Section 6.7(k) of the Declaration of Trust: (i) the holders of Series B Preferred Shares shall, provided that the provisions of clauses (A), (B) and (C) of Section 6.7(k) are satisfied, be exempt from the Preferred Shares Ownership Limit, (ii) in imposing requirements in respect of the Series B Preferred Shares pursuant to the last two sentences of Section 6.7(k) of the Declaration of Trust as in effect on the date hereof, the Company shall, notwithstanding anything to the contrary set

forth in such sentences act in a reasonable and customary manner and (iii) the legend required pursuant to Section 6.7(1) of the Declaration of Trust shall be modified to reflect the foregoing.

          Section 8. No Conversion Rights. The holders of the Series B Preferred Shares shall not have any rights to convert such shares into shares of any other class or series of shares or into any other securities of, or interest in, the Company.

          Section 9. No Sinking Fund. No sinking fund shall be established for the retirement or redemption of Series B Preferred Shares.

          Section 10. No Preemptive Rights. No holder of the Series B Preferred Shares of the Company shall, as such holder, have any preemptive rights to purchase or subscribe for additional shares of the Company or any other security of the Company which it may issue or sell.

          THIRD: The Series B Preferred Shares have been classified and designated by the Board of Trustees under the authority contained in the Declaration of Trust.

          FOURTH: These Articles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law.

          FIFTH: The undersigned President of the Company acknowledges these Articles Supplementary to be the act of the Company and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

          IN WITNESS WHEREOF, the Company has caused Articles Supplementary to be executed under seal in its name and on its behalf by its President and attested to by its Secretary on this third day of March, 2004.

COLONIAL PROPERTIES TRUST

By: /s/ Thomas H. Lowder

Name: Thomas H. Lowder

Title: President

ATTEST:

/s/ John P. Rigrish

Name: John P. Rigrish

Title: Assistant Secretary

STATE OF ALABAMA
JEFFERSON COUNTY

ARTICLES OF AMENDMENT
TO
DECLARATION OF TRUST
OF
COLONIAL PROPERTIES TRUST

     Pursuant to Section 10-13-14 of the Code of Alabama 1975, Colonial Properties Trust, a real estate investment trust organized and existing under the laws of Alabama (the “Company”), hereby submits the following:

1.	The name of the real estate investment trust is Colonial Properties Trust.
2.	The Declaration of Trust is hereby amended by deleting Section 2.2 of Article II thereof in its entirety and inserting in lieu thereof the following new Section 2.2:

Section 2.2. Term. Each Trustee shall hold office for a term expiring at the next succeeding annual meeting of Shareholders and until his successor is duly elected and qualified.

3.	The Board of Trustees of the Company duly adopted a resolution setting forth the foregoing amendment and declared it advisable at a duly called meeting held on January 24, 2004.
4.	There were 26,740,590 of the Company’s common shares of beneficial interest, par value $.01 per share (“Common Shares”), outstanding as of February 17, 2004, the record date for the annual meeting held on April 21, 2004 at which the foregoing amendment was considered (the “Annual Meeting”). Common Shares represented the only class of securities entitled to vote at the Annual Meeting, and each share thereof entitled its holder to one vote. Of the 26,740,590 votes entitled to be cast on the foregoing amendment, 21,687,380 were indisputably represented at the Annual Meeting. The total number of undisputed votes cast FOR the foregoing amendment at the Annual Meeting was 21,426,296, which number was sufficient for approval of the foregoing amendment by the holders of Common Shares.
5.	The foregoing amendment was duly adopted in accordance with the applicable provisions of Section 10-13-14 of the Code of Alabama, 1975 and of Sections 234 and 237 of the Constitution of the State of Alabama.

     These Articles of Amendment are being filed in the Office of the Judge of Probate of Jefferson County, Alabama, for the purpose of effecting the foregoing amendment in accordance with the Code of Alabama 1975, Sections 10-2B-1.25 and 10-13-14(f).

     IN WITNESS WHEREOF, the Company, by its duly authorized officer and with full authority, has executed these Articles of Amendment as of this 11th day of May, 2004.

COLONIAL PROPERTIES TRUST
By:	/s/ Thomas H. Lowder
	Thomas H. Lowder
	President and Chief Executive Officer

COLONIAL PROPERTIES TRUST

ARTICLES SUPPLEMENTARY

RECLASSIFYING

2,000,000 SHARES

8.875% SERIES B CUMULATIVE REDEEMABLE PERPETUAL PREFERRED SHARES

AND

300,000 SHARES

9.25% SERIES C CUMULATIVE REDEEMABLE PREFERRED SHARES

Dated June 8, 2004

          This ARTICLES SUPPLEMENTARY (the “ARTICLES SUPPLEMENTARY”) is made as of the date set forth above by Colonial Properties Trust, an Alabama real estate investment trust (the “COMPANY”).

          WHEREAS, on February 23, 1999, the Company duly classified 2,000,000 unissued preferred Shares (“PREFERRED SHARES”) of the Company, as described in Section 6.3 of the Declaration of Trust of the Company, as amended (the “DECLARATION OF TRUST”), as 8.875% Series B Cumulative Redeemable Perpetual Preferred Shares (“8.875% SERIES B PREFERRED SHARES”), having the designated voting rights, powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof set forth in the Company’s Articles Supplementary dated February 23, 1999;

          WHEREAS, on June 14, 2001, the Company duly classified 2,300,000 unissued Preferred Shares as 9.25% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share (“9.25% SERIES C PREFERRED SHARES”), having the designated voting rights, powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof set forth in the Company’s Articles Supplementary dated June 14, 2001;

          WHEREAS, all 2,000,000 of the 8.875% Series B Preferred Shares and 300,000 of the 9.25% Series C Preferred Shares remain unissued by the Company; and

          WHEREAS, the Board of Trustees of the Company (the “BOARD OF TRUSTEES”) desires to reclassify all 2,000,000 unissued 8.875% Series B Preferred Shares and the 300,000 unissued 9.25% Series C Preferred Shares and restore them to the status of unclassified and unissued Preferred Shares capable of being classified or reclassified from time to time by the Board of Trustees pursuant to the Declaration of Trust;

          NOW THEREFORE, in accordance with Section 10-13-7(b) of the Code of Alabama, the Trustees do hereby set forth and certify the following information:

          1. The name of the trust is Colonial Properties Trust.

          2. Under the authority contained in the Declaration of Trust, the Board of Trustees has reclassified all 2,000,000 unissued 8.875% Series B Preferred Shares and the 300,000 unissued 9.25% Series C Preferred Shares as unclassified preferred Shares, as described in Section 6.3 of the Declaration of Trust.

          3. The aggregate number of issued shares of the Company after giving effect to the reclassification of the aforesaid 8.875% Series B Preferred Shares and 9.25% Series C Preferred Shares is as follows:

Common Shares of Beneficial Interest	32,556,446
9.25% Series C Cumulative Redeemable	2,000,000
Preferred Shares of Beneficial Interest
8 1/8% Series D Cumulative Redeemable	500,000
Preferred Shares of Beneficial Interest

[SIGNATURE PAGE TO FOLLOW]

          IN WITNESS WHEREOF, the Company has caused this Articles Supplementary to be executed under seal on this 8th day of June, 2004 by the undersigned officer, who acknowledges, under penalty of perjury, that this document is his free act and deed, and that to the best of his knowledge, information and belief, the matters and facts set forth herein are true in all material respects.

COLONIAL PROPERTIES TRUST
By:	/s/ John P. Rigrish
	John P. Rigrish
	Executive Vice President and Chief Administrative Officer

ARTICLES SUPPLEMENTARY OF
7.62% SERIES E CUMULATIVE REDEEMABLE PREFERRED SHARES
OF BENEFICIAL INTEREST OF
COLONIAL PROPERTIES TRUST

Pursuant to Section 10-13-7 of the
Code of Alabama 1975

          Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), hereby certifies that on October 25, 2004, pursuant to authority conferred by Sections 3.2(e) and 6.3 of the Charter (as defined below) and in accordance with Section 10-13-7 of the Code of Alabama 1975, a committee of the Board of Trustees, pursuant to authority expressly delegated by the Board of Trustees on October 21, 2004, duly classified unissued Preferred Shares (as defined below) of the Company, and the description of such Preferred Shares (as defined below), including the number, designation, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption thereof, as set by the committee of the Board of Trustees, are as follows:

          Section 1. Number of Shares and Designation. This series of Preferred Shares shall be designated as 7.62% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share (the “Series E Preferred Shares”). The number of Preferred Shares constituting the Series E Preferred Shares is 70,000.

          Section 2. Definitions. The following terms shall have the following meanings herein:

          (a) “Articles” shall mean these Articles Supplementary of 7.62% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest of Colonial Properties Trust.

          (b) “Board of Trustees” shall mean the Board of Trustees of the Company or any committee authorized by the Board of Trustees to perform any of its responsibilities with respect to the Series E Preferred Shares.

          (c) “Business Day” shall mean any day other than a Saturday, Sunday or day on which state or federally chartered banking institutions in New York City, New York are not required to be open.

          (d) “Call Date” shall have the meaning set forth in Section 6(b).

          (e) “Capital Gains Amount” shall have the meaning set forth in Section 3(d).

          (f) “Charter” means the Declaration of Trust of the Company, as amended to the date hereof and as the same may be amended hereafter from time to time.

          (g) “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute thereto.

          (h) “Common Shares” shall mean the Company’s common shares of beneficial interest, par value $.01 per share.

          (i) “Dividend Payment Date” shall mean the last day (or, if such day is not a Business Day, the succeeding Business Day) of each March, June, September and December, commencing on ___, 2005.

          (j) “Dividend Periods” shall mean quarterly dividend periods commencing on, and including, January 1, April 1, July 1 and October 1 of each year and ending on and including the next succeeding Dividend Payment Date (other than the initial Dividend Period, which shall commence on the Initial Dividend Accrual Date, and other than the Dividend Period during which any Series E Preferred Shares shall be redeemed pursuant to Section 6, which shall end on and include the Call Date with respect to the Series E Preferred Shares being redeemed).

          (k) “Fully Junior Shares” shall mean the Common Shares, the Series 1998 Junior Participating Preferred Shares and any other class or series of shares of beneficial interest of the Company now or hereafter issued and outstanding over which the Series E Preferred Shares have preference or priority in both (i) the payment of dividends and (ii) the distribution of assets on any liquidation, dissolution or winding up of the Company.

          (l) “Initial Dividend Accrual Date” shall mean February 4, 2005.

          (m) “Issue Date” shall mean the first date on which the pertinent Series E Preferred Shares are issued.

          (n) “Junior Shares” shall mean the Common Shares, the Series 1998 Junior Participating Preferred Shares and any other class or series of shares of beneficial interest of the Company now or hereafter issued and outstanding over which the Series E Preferred Shares have preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Company.

          (o) “Market Price,” with respect to a Common Share as of any date of determination, shall mean the average of the closing prices of the Common Shares for the 10 consecutive Trading Days ending on date of determination on the New York Stock Exchange (or such other national securities exchange or automated quotation system on which the Common Shares are then listed or authorized for quotation or, if the Common Shares are not so listed or authorized for quotation, an amount determined in good faith by the Board of Trustees to be the fair value of the Common Shares).

          (p) “Parity Shares” shall have the meaning set forth in Section 9(b).

          (q) “Person” means an individual, a corporation, an association, a partnership, a limited liability company, a joint venture, a joint stock company, a trust, an unincorporated organization or any other entity or organization, a government or political subdivision or an agency or instrumentality thereof.

- 2 -

          (r) “Preferred Shares” shall mean the Company’s preferred shares of beneficial interest, par value $.01 per share.

          (s) “Series E Preferred Shares” shall have the meaning set forth in Section 1.

          (t) “set apart for payment” shall be deemed to include, without any action other than the following, the recording by the Company in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Trustees, the allocation of funds to be so paid on any series or class of shares of beneficial interest of the Company; provided, however, that if any funds for any class or series of Junior Shares or Fully Junior Shares or any class or series of shares of beneficial interest ranking on a parity with the Series E Preferred Shares as to the payment of dividends are placed in a separate account of the Company or delivered to a disbursing, paying or other similar agent, then “set apart for payment” with respect to the Series E Preferred Shares shall mean placing such funds in such separate account or delivering such funds to a disbursing, paying or other similar agent.

          (u) “Subsidiary” shall mean, with respect to any Person, (a) any corporation, association or other business entity of which more than fifty percent (50%) of the total voting power of shares of capital stock or other equity interests entitled (without regard to the occurrence of any contingency) to vote generally in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (b) any partnership, (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof).

          (v) “Total Dividends” shall have the meaning set forth in Section 3(d).

           (w) “Trading Day” means a day during which trading in securities generally occurs on the New York Stock Exchange or, if the applicable security is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the applicable security is then listed or, if the applicable security is not listed on a national or regional securities exchange, on Nasdaq or, if the applicable security is not quoted on Nasdaq, on the principal other market on which the applicable security is then traded.

          (x) “Transfer Agent” means EquiServe Trust Company, N.A., or such other agent or agents of the Company as may be designated by the Board of Trustees or their designee as the transfer agent, registrar and dividend disbursing agent for the Series E Preferred Shares.

          Section 3. Dividends.

          (a) The holders of Series E Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Trustees out of funds legally available for that purpose, cumulative preferential dividends payable on each Dividend Payment Date in cash in an amount equal to the sum of (i) $47.625 per share plus (ii) if the sum of all dividends paid on one Common Share during the

- 3 -

preceding Dividend Period (i.e., the Dividend Period ending on the immediately preceding Dividend Payment Date) (such sum, the “Prior Period Dividends”) exceeds the Common Dividend Threshold Amount (as defined below), an amount equal to the product of (x) 50% times (y) the excess of the Prior Period Dividends over the Common Dividend Threshold Amount times (z) the Equalization Factor (as defined below). Such dividends shall begin to accrue and shall be fully cumulative from and including the Initial Dividend Accrual Date, whether or not in any Dividend Period or Periods there shall be funds of the Company legally available for the payment of such dividends, and shall be payable quarterly, when, as and if declared by the Board of Trustees, in arrears on Dividend Payment Dates, commencing on the first Dividend Payment Date after the Issue Date. Such dividends shall be payable in arrears to the holders of record of Series E Preferred Shares, as they appear on the share records of the Company at the close of business on the record date, which shall be the 15^th day of the calendar month in which the applicable Dividend Payment Date falls or such other date designated by the Board of Trustees that is not more than 30 nor less than 10 days preceding the relevant Dividend Payment Date. Accrued and unpaid dividends for any past Dividend Periods may be declared and paid on any date and for such interim periods, without reference to any regular Dividend Payment Date, to holders of record on such date, not more than 30 nor less than 10 days preceding the payment date thereof, as may be fixed by the Board of Trustees. Any dividend payment made on the Series E Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due with respect to the Series E Preferred Shares which remains payable.

          (b) The amount of dividends payable for the initial Dividend Period and for any Dividend Period shorter than a full Dividend Period for the Series E Preferred Shares shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Holders of Series E Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or shares of stock, in excess of cumulative dividends, as herein provided, on the Series E Preferred Shares. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series E Preferred Shares that may be in arrears.

           (c) If the Company, or any of its Subsidiaries, shall, after the Issue Date make a tender or exchange offer for all or any portion of the Company’s Common Shares that involves an aggregate consideration per share in excess of the Market Price per Common Share as of the date immediately preceding the date notice is first given to the public or the holders of Common Shares of such tender or exchange offer (the “Tender Notice Date”), then the amount of the Prior Period Dividends for the Dividend Period ending on or after the expiration date of such tender or exchange offer, shall include an amount equal to the fair market value (to be determined in good faith by the Board of Directors to be the fair market value) of the consideration received in such tender or exchange for each share so tendered less the Market Price per Common Share on the date immediately preceding the Tender Notice Date.

          (d) Dividends on Series E Preferred Shares will accrue whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared.

          (e) If, for any taxable year, the Company elects to designate as “capital gain dividends” (as defined in Section 857 of the Code), any portion (the “Capital Gains Amount”) of the total dividends paid or made available for the year to holders of all classes of capital stock (the “Total Dividends”), then the portion of the Capital Gains Amount that shall be allocable to holders of Series E Preferred Shares shall be in the same portion that the Total Dividends paid or made available

- 4 -

to the holders of Series E Preferred Shares for the year bears to the Total Dividends.

          (f) So long as any Series E Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be declared or paid or set apart for payment on any class or series of Parity Shares for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series E Preferred Shares for all Dividend Periods terminating on or prior to the dividend payment date for such class or series of Parity Shares. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon Series E Preferred Shares and all dividends declared upon any other class or series of Parity Shares shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series E Preferred Shares and accumulated and unpaid on such Parity Shares.

          (g) So long as any Series E Preferred Shares are outstanding, no dividends (other than dividends or distributions paid solely in, or options, warrants or rights to subscribe for or purchase, Fully Junior Shares) shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Shares or Fully Junior Shares, nor shall any Junior Shares or Fully Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of any employee incentive or benefit plan of the Company or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such shares) by the Company, directly or indirectly (except by conversion into or exchange for Fully Junior Shares), unless in each case (i) the full cumulative dividends on all outstanding Series E Preferred Shares and any Parity Shares shall have been or contemporaneously are declared and paid or declared and set apart for payment for all past Dividend Periods with respect to the Series E Preferred Shares and all past dividend periods with respect to such Parity Shares and (ii) sufficient funds shall have been or contemporaneously are declared and paid or declared and set apart for the payment of the dividend for the current Dividend Period with respect to the Series E Preferred Shares and the current dividend period with respect to such Parity Shares.

          (h) No dividends on Series E Preferred Shares shall be declared by the Board of Trustees or paid or set apart for payment by the Company at such time as the terms and provisions of any agreement of the Company, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law.

- 5 -

          (i) For purposes of this Section 3, the following terms shall have the meanings set forth below:

          (i) “Common Dividend Threshold Amount” shall initially mean $0.790; provided that if the Company shall, after the Issue Date, (A) pay a distribution or make a distribution on its Common Shares in Common Shares, (B) subdivide its outstanding Common Shares into a greater number of Common Shares, (C) combine its outstanding Common Shares into a smaller number of Common Shares or (D) issue any Common Shares by reclassification of its Common Shares, the Common Dividend Threshold Amount in effect (x) , in the case of any such distribution, at the opening of business on the day following the date fixed for the determination of holders entitled to receive such distribution or (y), in the case of any such subdivision, combination, or recapitalization, at the opening of business on the Business Day next following the day on which such subdivision, combination or reclassification becomes effective, shall be adjusted by multiplying (1) the Common Dividend Threshold Amount in effect immediately prior to such record date in the case of a distribution or such effective date in the case of a subdivision, combination or reclassification by (2) the Adjustment Factor. So long as any Series E Preferred Shares are outstanding, the Company shall not pay a distribution or make a distribution on its Common Shares in any Junior Shares, Fully Junior Shares, Parity Shares or any other securities, other than Common Shares. The Company shall be entitled, to the extent permitted by law, to make such reductions in the Common Dividend Threshold Amount, in addition to those set forth above, as it in its discretion shall determine to be advisable in order that any share distributions, subdivision of shares, reclassification or combination of shares hereafter made by the Company to its holders shall not be taxable. All calculations of the Common Dividend Threshold Amount shall be made to the nearest $0.001 (with $.0005 being rounded upward).

          (ii) “Equalization Factor” shall initially mean 60.2991; provided that if the Company shall, after the Issue Date, (A) pay a distribution or make a distribution on its Common Shares in Common Shares, (B) subdivide its outstanding Common Shares into a greater number of Common Shares, (C) combine its outstanding Common Shares into a smaller number of Common Shares or (D) issue any Common Shares by reclassification of its Common Shares, the Equalization Factor in effect (x) , in the case of any such distribution, at the opening of business on the day following the date fixed for the determination of holders entitled to receive such distribution or (y), in the case of any such subdivision, combination, or recapitalization, at the opening of business on the Business Day next following the day on which such subdivision, combination or reclassification becomes effective, shall be adjusted by dividing (1) the Equalization Factor in

- 6 -

effect immediately prior to such record date in the case of a distribution or such effective date in the case of a subdivision, combination or reclassification by (2) the Adjustment Factor. All calculations of the Equalization Factor shall be made to the nearest .0001 (with 0.00005 being rounded upward).

          (iii) “Adjustment Factor” shall mean the quotient obtained by dividing (A) the number of Common Shares outstanding immediately prior to (x) the record date, in the case of a distribution of Common Shares for which an adjustment is to be made hereunder, or (y) the effective date, in the case of a subdivision, combination or reclassification for which an adjustment is to be made hereunder, by (B) (x) in the case of any such distribution, the sum of the number of Common Shares outstanding immediately prior to the record date for such distribution plus the number of Common Shares distributed in such distribution or (y) in the case of any such subdivision, combination or reclassification, the number of Common Shares outstanding at the opening of business on the Business Day next following the day on which such subdivision, combination or reclassification becomes effective.

          Section 4. Liquidation Rights.

          (a) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of Junior Shares, the holders of the Series E Preferred Shares shall be entitled to receive Two Thousand Five Hundred Dollars ($2,500.00) per Series E Preferred Share plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of such liquidation, dissolution or winding up, but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the Series E Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of the Series E Preferred Shares and any such Parity Shares ratably in accordance with the respective amounts that would be payable on such Series E Preferred Shares and any such Parity Shares if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Company with one or more corporations, real estate investment trusts, or other entities and (ii) a sale, lease or transfer of all or substantially all of the Company’s assets shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company.

- 7 -

          (b) Subject to the rights of the holders of any series or class or classes of shares of beneficial interest ranking on a parity with or prior to the Series E Preferred Shares upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to the holders of the Series E Preferred Shares, as provided in this Section 4, any other series or class or classes of Junior Shares or Fully Junior Shares shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series E Preferred Shares shall not be entitled to share therein.

          Section 5. Conversion. The Series E Preferred Shares are not convertible into or exchangeable for any other property or securities of the Company.

          Section 6. Redemption at the Option of the Company.

          (a) The Company, at its option, may redeem the Series E Preferred Shares, in whole or in part, at any time or from time to time, for cash at a redemption price of Two Thousand Five Hundred Dollars ($2,500.00) per Series E Preferred Share, plus the amounts indicated in Section 6(b). If the Company, at any time, chooses to redeem the Series E Preferred Shares, in part and not in whole, the Company may not redeem in the aggregate more than 60,000 of the Series E Preferred Shares without redeeming all of the Series E Preferred Shares that are then outstanding.

          (b) Upon any redemption of the Series E Preferred Shares pursuant to this Section 6, the Company shall pay all accrued and unpaid dividends, if any, thereon ending on or prior to the date of such redemption (the “Call Date”), without interest. If the Call Date falls after a dividend payment record date and prior to the corresponding Dividend Payment Date, then each holder of Series E Preferred Shares at the close of business on such dividend payment record date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares before such Dividend Payment Date. Except as provided above, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series E Preferred Shares called for redemption.

          (c) If full cumulative dividends on the Series E Preferred Shares and any class or series of Parity Shares of the Company have not been declared and paid or declared and set apart for payment, the Series E Preferred Shares or Parity Shares may not be redeemed under this Section 6 in part and the Company may not purchase or otherwise acquire any Series E Preferred Shares or any Parity Shares, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of Series E Preferred Shares or Parity Shares, as the case may be;

- 8 -

provided, however, that the foregoing shall not prevent the redemption, purchase or acquisition of Series E Preferred Shares by the Company in accordance with the terms of Article VI of the Charter or otherwise in order to ensure that the Company remains qualified as a real estate investment trust (“REIT”) for United States federal income tax purposes.

          (d) Notice of the redemption of any Series E Preferred Shares under this Section 6 shall be given by the Company by first-class mail, postage prepaid, by the registrar to each holder of record of Series E Preferred Shares to be redeemed at the address of each such holder as shown on the share transfer books of the Company, not less than 30 nor more than 60 days prior to the Call Date, or by publication in a newspaper of general circulation in the City of New York, such publication to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the Call Date. No failure to give any notice required by this Section 6(d), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each notice shall state: (i) the Call Date, (ii) the number of Series E Preferred Shares to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder, (iii) the redemption price per share, (iv) the place or places at which certificates for such shares are to be surrendered for payment of the redemption price, and (v) that dividends on the shares to be redeemed shall cease to accrue on such Call Date. Notice having been given as aforesaid, from and after the Call Date, (1) dividends on the Series E Preferred Shares so called for redemption shall cease to accrue, (2) such Series E Preferred Shares shall no longer be deemed to be outstanding, and (3) all rights of the holders thereof as holders of Series E Preferred Shares of the Company (except the right to receive the cash redemption price payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon) shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Company) on the Company’s books.

          (e) On or before the Call Date, the Company may elect to deposit with a bank or trust company (which may be an affiliate of the Company) or an affiliate of a bank or trust company, the amount of cash necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the Series E Preferred Shares so called for redemption. No interest shall accrue for the benefit of the holders of Series E Preferred Shares to be redeemed on any cash so set aside by the Company. If the Company elects to so deposit the cash necessary for the redemption of the called Series E Preferred Shares, any notice to the holders of Series E Preferred Shares called for redemption

- 9 -

required by this Section 6(e) shall (x) specify the office of such bank or trust company as the place of payment of the redemption price and (y) call upon such holders to surrender the share certificates representing such shares at such place on or about the date fixed in such notice (which shall not be later than the Call Date) against payment of the redemption price (including all accrued and unpaid dividends up to the Call Date). Subject to applicable escheat laws, any cash so deposited which remains unclaimed at the end of two years from the Call Date shall revert to the general funds of the Company, after which reversion, again subject to applicable escheat laws, the holders of such shares so called for redemption shall look only to the general funds of the Company for the payment of such cash.

          As promptly as practicable after the surrender in accordance with said notice of the certificates for any such shares so redeemed (properly endorsed or assigned for transfer, if the Company shall so require and if the notice shall so state), such shares shall be exchanged for any cash (without interest thereon) for which such shares have been redeemed. If fewer than all the outstanding Series E Preferred Shares are to be redeemed, the shares to be redeemed shall be determined pro rata (as nearly as practicable without creating fractional shares) or by lot or in such other equitable manner as prescribed by the Company’s Board of Trustees in its sole discretion to be equitable. If fewer than all the Series E Preferred Shares represented by any certificate are redeemed, then new certificates representing the unredeemed shares shall be issued without cost to the holder thereof.

          Section 7. Mandatory Redemption Upon Change of Control.

          (a) If a Change of Control (as defined below) shall occur at any time after the Issue Date, the Company shall be required to redeem all of the outstanding Series E Preferred Shares on the date (the “Change of Control Redemption Date”) that is 30 calendar days after the date that the Company has mailed written notice of such Change of Control to holders of the Series E Preferred Shares as set forth in Section 7(c), subject to the conditions set forth in Section 7(e) and otherwise in accordance with the provisions of this Section 7. If such 30th calendar day is not a Business Day, the Change of Control Redemption Date will be the next succeeding Business Day. The Company shall redeem the Series E Preferred Shares in exchange for payment, in cash, of $2,500 per share plus the amounts specified in Section 7(b).

          As used herein, a “Change of Control” shall be deemed to have occurred upon the occurrence of any of the following events after the Issue Date:

(i)   any ‘‘person’’ or ‘‘group’’ (within the meaning of Section 13(d) of the Exchange Act) other than the Company, its Subsidiaries or any employee benefit plan of the Company or any of its Subsidiaries files a Schedule TO, Schedule 13D or any schedule, form or report under the

- 10 -

	Exchange Act disclosing that such person or group has become the direct or indirect ultimate “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of shares of Common Shares representing more than 50% of the voting power of the Common Shares entitled to vote generally in the election of trustees or directors; or
(ii)	consummation of any share exchange, consolidation or merger of the Company pursuant to which the Common Shares will be converted into cash, securities or other property or any sale, lease or transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its Subsidiaries, taken as a whole, to any Person other than the Company or one or more of its Subsidiaries; provided, however, that a transaction where the Company is the surviving entity and the holders of the Common Shares immediately prior to such transaction have, directly or indirectly, more than 50% of the aggregate voting power of the voting stock of the Company entitled to vote generally in the election of trustees immediately after such event shall not be a Change of Control, or
(iii)	the Company or a wholly owned Subsidiary of the Company shall cease to be the sole general partner of Colonial Realty Limited Partnership.

          (b) Upon any redemption of the Series E Preferred Shares pursuant to this Section 7, the Company shall pay all accrued and unpaid dividends, if any, thereon ending on or prior to the Change of Control Redemption Date, without interest. If the Change of Control Redemption Date falls after a dividend payment record date and prior to the corresponding Dividend Payment Date, then each holder of Series E Preferred Shares at the close of business on such dividend payment record date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares before such Dividend Payment Date. Except as provided above, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series E Preferred Shares called for redemption.

          (c) Notice of the occurrence of a Change of Control and redemption of the Series E Preferred Shares under this Section 7 shall be given by the Company by first-class mail, postage prepaid, by the registrar to each holder of record of Series E Preferred Shares at the address of each such holder as shown on the share transfer books of the Company, within 15 days after the occurrence of the Change of Control. No failure to give any notice required by this Section 7(c), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each notice shall state: (i) the Change of Control Redemption Date, (ii) the

- 11 -

redemption price per share, (iii) the place or places at which certificates for such shares are to be surrendered for payment of the redemption price, and (iv) that dividends on the shares to be redeemed shall cease to accrue on the Change of Control Redemption Date. Notice having been given as aforesaid, from and after the Change of Control Redemption Date, (x) dividends on the Series E Preferred Shares shall cease to accrue, (y) the Series E Preferred Shares shall no longer be deemed to be outstanding, and (z) all rights of the holders thereof as holders of Series E Preferred Shares of the Company (except the right to receive the cash redemption price payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon) shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Company) on the Company’s books.

          (d) On or before the Change of Control Redemption Date, the Company may elect to deposit with a bank or trust company (which may be an affiliate of the Company) or an affiliate of a bank or trust company, the amount of cash necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the Series E Preferred Shares so called for redemption. No interest shall accrue for the benefit of the holders of Series E Preferred Shares to be redeemed on any cash so set aside by the Company. If the Company elects to so deposit the cash necessary for the redemption of the called Series E Preferred Shares, any notice to the holders of Series E Preferred Shares called for redemption required by this Section 7(d) shall (x) specify the office of such bank or trust company as the place of payment of the redemption price and (y) call upon such holders to surrender the share certificates representing such shares at such place on or about the date fixed in such notice (which shall not be later than the Change of Control Redemption Date) against payment of the redemption price (including all accrued and unpaid dividends up to the Change of Control Redemption Date). Subject to applicable escheat laws, any cash so deposited which remains unclaimed at the end of two years from the Change of Control Redemption Date shall revert to the general funds of the Company, after which reversion, again subject to applicable escheat laws, the holders of such shares so called for redemption shall look only to the general funds of the Company for the payment of such cash. As promptly as practicable after the surrender in accordance with such notice of the certificates for any Series E Preferred Shares (properly endorsed or assigned for transfer, if the Company shall so require and if the notice shall so state), such shares shall be exchanged for cash (without interest thereon) in the amount of the redemption price for the applicable shares represented by each such certificate; provided that, if the Company shall default in the payment of the mandatory redemption amount to the holders of the Series E Preferred Shares as set forth in this Section 7, the Series E Preferred Shares shall be deemed to remain outstanding and the holders of the Series E Preferred Shares shall have all the rights provided in these Articles until such time as such default shall no longer be outstanding.

          (e) The obligation of the Company to redeem the Series E Preferred Shares shall be subject to the rights of any class or series of Parity Shares or Senior Shares and compliance with the provisions of any material debt agreement to which the Company

- 12 -

or any Subsidiary of the Company is a party that would prohibit such redemption or under which such redemption would constitute an event of default. In the event that the Company shall be prohibited from redeeming the Series E Preferred Shares for any of the reasons set forth in the previous sentence, (i) no dividends (other than dividends or distributions paid solely in, or options, warrants or rights to subscribe for or purchase, Fully Junior Shares) shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Shares or Fully Junior Shares, nor shall any Junior Shares or Fully Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of any employee incentive or benefit plan of the Company or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such shares) by the Company, directly or indirectly (except by conversion into or exchange for Fully Junior Shares), in each case until the Company shall have paid the mandatory redemption price for the Series E Preferred Shares in full; and (ii) the Company shall be obligated to redeem the Series E Preferred Shares on the date not later than 45 days following the date on which it is first able to redeem the Series E Preferred Shares by delivering a notice of such redemption in accordance with Section 7(c) within 15 days following such date, in which event the Change of Control Redemption Date shall be the date 30 days after the date of such notice or, if such 30th calendar day is not a Business Day, the Change of Control Redemption Date will be the next succeeding Business Day.

          (f) The Company’s obligation to redeem the Series E Preferred Shares under this Section 7 shall be satisfied if a third party purchases all Series E Preferred Shares presented for redemption in exchange for payment of the redemption price in cash and otherwise complies with the obligations of the Company in connection herewith.

          Section 8. Shares to be Retired. If and when approved by the Board of Trustees, all Series E Preferred Shares which shall have been issued and reacquired in any manner by the Company shall be restored to the status of authorized but unissued Preferred Shares of the Company, without designation as to class or series.

          Section 9. Ranking. Any class or series of shares of beneficial interest of the Company shall be deemed to rank:

          (a) prior to the Series E Preferred Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series of shares of beneficial interest shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series E Preferred Shares;

          (b) on a parity with the Series E Preferred Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series E Preferred Shares, if the holders of such class or series of shares of beneficial interest and the Series E Preferred Shares shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other (“Parity Shares”); as of the date hereof, the Series B Preferred Shares, the Series C Preferred Shares and the Series D Preferred Shares constitute Parity Shares;

- 13 -

          (c) junior to the Series E Preferred Shares, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such shares of beneficial of interest shall be Junior Shares; and

          (d) junior to the Series E Preferred Shares, as to the payment of dividends and as to the distribution of assets upon liquidation dissolution or winding up, if such shares of stock shall be Fully Junior Shares.

          Section 10. Voting.

          (a) If and whenever dividends on the Series E Preferred Shares are in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full) for six or more quarterly periods, whether or not such quarterly periods are consecutive, the number of Trustees then constituting the Board of Trustees shall be increased by two, and the holders of Series E Preferred Shares, together with the holders of shares of every series of Parity Shares upon which like voting rights have been conferred and are exercisable, voting as a single class regardless of series, shall be entitled to elect the two additional Trustees to serve on the Board of Trustees at any annual meeting of shareholders or special meeting held in place thereof, or at a special meeting of the holders of the Series E Preferred Shares and such Parity Shares called as hereinafter provided. Whenever all arrears in dividends on the Series E Preferred Shares and such Parity Shares then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the Series E Preferred Shares and such Parity Shares to elect such additional two Trustees shall immediately cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearages), and the terms of office of all persons elected as Trustees by the holders of the Series E Preferred Shares and such Parity Shares shall immediately terminate and the number of the Board of Trustees shall be reduced accordingly. At any time after such voting rights shall have been so vested in the holders of Series E Preferred Shares and such Parity Shares, the secretary of the Company may, and upon the written request of the holders of record of at least 10% of the outstanding Series E Preferred Shares and the holders of Parity Shares (addressed to the secretary at the principal office of the Company) shall, call a special meeting of the holders of the Series E Preferred Shares and of such Parity Shares for the election of the two Trustees to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Company for a special meeting of the shareholders or as required by law. The Trustees elected at any such special meeting shall hold office until the next annual meeting of the shareholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the Trustees elected by the holders of the Series E Preferred Shares and such Parity Shares, a successor shall be elected by the Board

- 14 -

of Trustees, upon the nomination of the then-remaining Trustee elected by the holders of the Series E Preferred Shares and such Parity Shares or the successor of such remaining Trustee, to serve until the next annual meeting of the shareholders or special meeting held in place thereof if such office shall not have previously terminated as provided above.

          (b) So long as any Series E Preferred Shares remain outstanding, the Company will not, without the affirmative vote or consent of the holders of at least two-thirds of the Series E Preferred Shares outstanding at the time, given in person or by proxy, either in writing or at a meeting (such series voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of capital shares ranking prior to the Series E Preferred Shares with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized shares of the Company into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Charter, including these Articles Supplementary, whether by merger, consolidation, or transfer or conveyance of substantially all of the Company’s assets or otherwise (an “Event”), so as to materially and adversely affect any right, preference, privilege or voting power of the Series E Preferred Shares or the holders thereof; provided, however, with respect to the occurrence of any of the Events set forth in (ii) above, that so long as the Series E Preferred Shares remain outstanding with the terms thereof materially unchanged, taking into account that upon the occurrence of an Event, the Company may not be the surviving entity, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of Series E Preferred Shares and provided further that (x) any increase in the amount of the authorized Preferred Shares or the creating or issuance of any other series of Preferred Shares, or (y) any increase in the amount of authorized Series E Preferred Shares or any other series of Preferred Shares, in each case ranking on a parity with or junior to the Series E Preferred Shares with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. The voting provisions set forth in this paragraph (b) will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series E Preferred Shares shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption.

          (c) For purposes of the foregoing provisions of this Section 10, each Series E Preferred Share shall have one (1) vote per share. Except as otherwise required by applicable law or as set forth herein, the Series E Preferred Shares shall not have any relative, participating, optional or other special voting rights and

- 15 -

powers, and the consent of the holders thereof shall not be required for the taking of any corporate action.

          Section 11. Record Holders. The Company and the Transfer Agent may deem and treat the record holder of any Series E Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Company nor the Transfer Agent shall be affected by any notice to the contrary.

          Section 12. Sinking Fund. The Series E Preferred Shares shall not be entitled to the benefits of any retirement or sinking fund.

          Section 13. Restrictions on Ownership and Transfer. The beneficial ownership and transfer of the Series E Preferred Shares shall in all respects be subject to the applicable provisions of Section 6.7 of the Charter.

          Section 14. Listing on New York Stock Exchange. The Company shall (i) use reasonable best efforts, including timely submission of all required applications and filings and payment of required fees and expenses, to cause the Series E Preferred Shares to be approved for listing on the New York Stock Exchange, subject to official notice of issuance, prior to the Issue Date, and (ii) use reasonable best efforts to maintain the listing of the Series E Preferred Shares on the New York Stock Exchange so long as any Series E Preferred Shares are outstanding.

- 16 -

          IN WITNESS WHEREOF, the Company has caused these Articles Supplementary to be signed in its name and on its behalf by its Chief Financial Officer as of March 15, 2005.

COLONIAL PROPERTIES TRUST
By:	/s/ Weston P. Andress
Name: Weston P. Andress
Title:  Executive Vice President and Chief Financial
	Officer

STATE OF ALABAMA )

JEFFERSON COUNTY )

ARTICLES OF AMENDMENT
TO
DECLARATION OF TRUST
OF
COLONIAL PROPERTIES TRUST

     Pursuant to Section 10-13-14 of the Code of Alabama 1975, Colonial Properties Trust, a real estate investment trust organized and existing under the laws of Alabama (the “Company”), hereby submits the following:

1.	The name of the real estate investment trust is Colonial Properties Trust.
2.	The Declaration of Trust is hereby amended as follows:
	The following sentence in Section 6.1 of Article VI thereof is deleted:

“The total number of Shares which the Trust is authorized to issue is seventy-five million (75,000,000), consisting of sixty-five million (65,000,000) common Shares and ten million (10,000,000) preferred Shares.”

The deleted sentence in Section 6.1 of Article VI is replaced by the following sentence:

“The total number of Shares which the Trust is authorized to issue is one hundred forty-five million (145,000,000), consisting of one hundred twenty-five million (125,000,000) common Shares and twenty million (20,000,000) preferred Shares.”

3.	The Board of Trustees of the Company duly adopted a resolution setting forth the foregoing amendment and declared it advisable at a duly called meeting held on October 21, 2004.
4.	The following shares of beneficial interest of the Company were outstanding as of February 9, 2005, the record date for the special meeting held on April 1, 2005 at which the foregoing amendment was considered (the “Special Meeting”):

Class of Shares	Number of Shares		Value of Shares
Common Shares		27,724,505.5990	$	1,030,242,628.06
Series C Preferred Shares		2,000,000	$	53,480,000.00
Series D Preferred Shares		500,000	$	131,250,000.00
Total		30,224,505.5990	$	1,214,972,628.06

All outstanding shares of beneficial interest were entitled to vote at the Special Meeting. Of the total number of shares having a total value of $1,214,972,628.06 outstanding, 21,344,706.773 shares representing $841,572,620.13 in total value were indisputably represented at the Special Meeting. The total number and value of shares casting undisputed votes FOR the foregoing amendment at the Special Meeting was 18,857,249.92 and $747,477,719.97, respectively, which number and amount was sufficient for approval of the foregoing amendment by the holders of shares of beneficial interest of the Company.

5.

The foregoing amendment was duly adopted in accordance with the applicable provisions of Section 10-13-14 of the Code of Alabama, 1975 and of Section 234 of the Constitution of the State of Alabama.

     These Articles of Amendment are being filed in the Office of the Judge of Probate of Jefferson County, Alabama, for the purpose of effecting the foregoing amendment in accordance with 10-13-14(f) of the Code of Alabama, 1975.

[Signature appears on the following page.]

2

     IN WITNESS WHEREOF, the Company, by its duly authorized officer and with full authority, has executed these Articles of Amendment as of this 5^th day of April, 2005.

COLONIAL PROPERTIES TRUST
By:	/s/ Thomas H. Lowder
	Thomas H. Lowder
	President and Chief Executive Officer

3

COLONIAL PROPERTIES TRUST

STATEMENT OF CANCELLATION

Dated July 3, 2006

     This STATEMENT OF CANCELLATION (the “Statement of Cancellation”) is made as of the date set forth above by Colonial Properties Trust.

     WHEREAS, Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), duly authorized and issued 2,000,000 preferred shares of beneficial interest designated as 9.25% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest of the Company (the “Series C Preferred Shares”);

     WHEREAS, the Company redeemed and reacquired all 2,000,000 Series C Preferred Shares on June 30, 2006; and

     WHEREAS, the Board of Trustees of the Company (the “Board of Trustees”) desires to cancel the Series C Preferred Shares and thereby restore them to the status of authorized and unissued preferred shares of the Company.

     NOW THEREFORE, in accordance with Section 6.32(b) of Chapter 2B of Title 10 of the Code of Alabama, the Board of Trustees does hereby set forth and certify the following information:

     1. The name of the trust is Colonial Properties Trust.

     2. 2,000,000 shares of Series C Preferred Shares of the Company were reacquired by the Company on June 30, 2006, and were subsequently cancelled pursuant to resolutions of the Board of Trustees adopted at a meeting held on April 26, 2006.

     3. The aggregate number of issued shares of the Company after giving effect to the cancellation of the Series C Preferred Shares is as follows:

Common Shares of Beneficial Interest	51,535,303
8 1/8 % Series D Cumulative Redeemable Preferred Shares of Beneficial Interest	500,000
7 3/8 % Series E Cumulative Redeemable Preferred Shares of Beneficial Interest	41,904

[SIGNATURE PAGE TO FOLLOW]

     IN WITNESS WHEREOF, this Statement of Cancellation has been signed on this 3 day of July, 2006, on behalf of the Company, by the undersigned officer, who acknowledges, under penalty of perjury, that this document is his free act and deed, and that to the best of his knowledge, information and belief, the matters and facts set forth herein are true in all material respects. .

COLONIAL PROPERTIES TRUST
By:	/s/ Jerry A. Brewer
Name:	Jerry A. Brewer
Title:	SVP

STATE OF ALABAMA	)
COUNTY OF JEFFERSON	)

     I, the undersigned, a notary public in and for said county in said state, hereby certify that Jerry A. Brewer whose name as SVP of Colonial Propertied Trust, an Alabama real estate investment trust, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said real estate investment trust, acting in his capacity of said real estate investment trust for and as the act of said real estate investment trust.

     Given under my hand and official seal this 3^rd day of July, 2006.

	/s/ Brandi L. Singleton
	Notary Public
[NOTARIAL SEAL]	My commission expires:  3.31.08

2

COLONIAL PROPERTIES TRUST

STATEMENT OF CANCELLATION

Dated June 1, 2007

     This STATEMENT OF CANCELLATION (the “Statement of Cancellation”) is made as of the date set forth above by Colonial Properties Trust.

     WHEREAS, Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), duly authorized and issued 41,905 preferred shares of beneficial interest designated as 7.62% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest of the Company (the “Series E Preferred Shares”);

     WHEREAS, the Company redeemed and reacquired all 41,905 Series E Preferred Shares on May 30, 2007; and

     WHEREAS, the Board of Trustees of the Company (the “Board of Trustees”) desires to cancel the Series E Preferred Shares and thereby restore them to the status of authorized and unissued preferred shares of the Company.

     NOW THEREFORE, in accordance with Section 6.32(b) of Chapter 2B of Title 10 of the Code of Alabama, the Board of Trustees does hereby set forth and certify the following information:

     1. The name of the trust is Colonial Properties Trust.

     2. 41,905 shares of Series E Preferred Shares of the Company were reacquired by the Company on May 30, 2007, and were subsequently cancelled pursuant to resolutions of the Board of Trustees adopted at a meeting held on April 25, 2007.

     3. The aggregate number of issued shares of the Company after giving effect to the cancellation of the Series E Preferred Shares is as follows:

Common Shares of Beneficial Interest	46,557,781
8 1/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest	500,000

[SIGNATURE PAGE TO FOLLOW]

     IN WITNESS WHEREOF, this Statement of Cancellation has been signed on this 1 day of June, 2007, on behalf of the Company, by the undersigned officer, who acknowledges, under penalty of perjury, that this document is his free act and deed, and that to the best of his knowledge, information and belief, the matters and facts set forth herein are true in all material respects.

COLONIAL PROPERTIES TRUST
By :	/s/ Jerry A. Brewer
Name:	Jerry A. brewer
Title:	SVP

STATE OF ALABAMA	)
COUNTY OF JEFFERSON	)

     I the undersigned, a notary public in and for said county in said state, hereby certify that Jerry A. Brewer, whose name as                                                   of Colonial Properties Trust, an Alabama real estate investment trust is signed to the foregoing instrument, and who is known to me, acknowledged before on this day that being informed of the contents of said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said real estate real estate investment trust, acting in his capacity of said real estate investment trust for and as the act of said real estate investment trusted.

     Given under my hand and official seal this 1^st day of June, 2007.

	/s/ Brandi R. Singleton
	Notary Public
[NOTARIAL SEAL]	My commission expires:	3/30/09

2

COLONIAL PROPERTIES TRUST

STATEMENT OF CANCELLATION

Dated December 31, 2008

          This STATEMENT OF CANCELLATION (the “Statement of Cancellation”) is made as of the date set forth above by Colonial Properties Trust.

          WHEREAS, Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), duly authorized and issued 500,000 preferred shares of beneficial interest designated as 8 1/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share, of the Company (the “Series D Preferred Shares”), represented by depositary shares each representing 1/10th of a Series D Preferred Share (the “Series D Depositary Shares”);

          WHEREAS, as of December 31, 2008 the Company had repurchased and reacquired 98,875 Series D Preferred Shares (the “Reacquired Series D Preferred Shares”) and the corresponding Series D Depositary Shares; and

          WHEREAS, the Board of Trustees of the Company (the “Board of Trustees”) desires to cancel the Reacquired Series D Preferred Shares (including the Reacquired Series D Preferred Shares redeemed through the redemption of the Series D Depositary Shares) and thereby restore such shares to the status of authorized but unissued preferred shares of the Company, without designation as to class or series, to be available for future issuance, from time to time, by the Company.

          NOW THEREFORE, in accordance with Section 6.32(b) of Chapter 2B of Title 10 of the Code of Alabama, the Board of Trustees does hereby set forth and certify the following information:

          1. The name of the trust is Colonial Properties Trust.

          2. 98,875 shares of Series D Preferred Shares of the Company were reacquired by the Company as of December 31, 2008 and were subsequently canceled pursuant to resolutions of the Board of Trustees adopted on January 31, 2008.

          3. The aggregate number of issued shares of the Company after giving effect to the cancellation of the Reacquired Series D Preferred Shares is as follows:

Common Shares of Beneficial Interest	48,595,938
Series D Preferred Shares	401,125

[SIGNATURE PAGE TO FOLLOW]

          IN WITNESS WHEREOF, this Statement of Cancellation has been signed on this 31st day of December, 2008, on behalf of the Company, by the undersigned officer, who acknowledges, under penalty of perjury, that this document is his free act and deed, and that to the best of his knowledge, information and belief, the matters and facts set forth herein are true in all material respects.

COLONIAL PROPERTIES TRUST
By: Name:	/s/ Jerry A. Brewer Jerry A. Brewer
Title:	Executive Vice President – Finance

STATE OF ALABAMA	)
COUNTY OF JEFFERSON	)

          I, the undersigned, a notary public in and for said county in said state, hereby certify that Jerry A. Brewer, whose name as Executive Vice President — Finance of Colonial Properties Trust, an Alabama real estate investment trust, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said real estate investment trust, acting in his capacity of said real estate investment trust for and as the act of said real estate investment trust.

          Given under my hand and official seal this 31st day of December, 2008.

	/s/ Natalie L. Crabbe Notary Public
[NOTARIAL SEAL]	My commission expires: 11/22/2010

COLONIAL PROPERTIES TRUST

ARTICLES SUPPLEMENTARY

RECLASSIFYING

6,500 SHARES

SERIES 1998 JUNIOR PARTICIPATING PREFERRED SHARES

Dated February 2, 2009

          These ARTICLES SUPPLEMENTARY (the “Articles Supplementary”) are made as of the date set forth above by Colonial Properties Trust, an Alabama real estate investment trust (the “Company”).

          WHEREAS, on October 22, 1998, in connection with the Rights Agreement, dated November 2, 1998, as amended, between the Company and BankBoston, N.A. as rights agent (the “Rights Agreement”), the Company duly classified 6,500 unissued preferred shares of beneficial interest (“Preferred Shares”) of the Company, as described in Section 6.3 of the Declaration of Trust of the Company, as amended (the “Declaration of Trust”), as Series 1998 Junior Participating Preferred Shares of Beneficial Interest, par value $.01 per share (the “1998 Preferred Shares”), having the designated voting rights and powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions set forth in the Company’s Articles Supplementary, dated October 26, 1998, with such 1998 Preferred Shares to be issued upon the exercise of rights to purchase such 1998 Preferred Shares under the Rights Agreement;

          WHEREAS, the Rights Agreement expired by its terms on November 1, 2008 without any rights to purchase having become exercisable to purchase 1998 Preferred Shares;

          WHEREAS, all 6,500 of the 1998 Preferred Shares remain unissued by the Company; and

          WHEREAS, the Board of Trustees of the Company (the “Board of Trustees”) desires to reclassify all 6,500 unissued 1998 Preferred Shares, constituting such series of Preferred Shares in its entirety, and restore such 1998 Preferred Shares to the status of unclassified and unissued Preferred Shares capable of being classified or reclassified from time to time by the Company pursuant to the Declaration of Trust.

          NOW THEREFORE, in accordance with Section 10-13-7(b) of the Code of Alabama, the Board of Trustees does hereby set forth and certify the following information:

          1. The name of the trust is Colonial Properties Trust.

          2. Under the authority contained in the Declaration of Trust and pursuant to resolutions of the Board of Trustees adopted on January 30, 2009, the Board of Trustees has cancelled and reclassified all 6,500 unissued 1998 Preferred Shares of the Company as authorized but unissued Preferred Shares, without designation as to series, to be available for future issuance, from time to time, by the Company.

          3. The aggregate number of issued shares of the Company after giving effect to the cancellation and reclassification of the 1998 Preferred Shares is as follows:

Common Shares of Beneficial Interest	48,537,095
8 1/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share	401,125

[SIGNATURE PAGE TO FOLLOW]

2

          IN WITNESS WHEREOF, these Articles Supplementary have been signed on this 2nd day of February, 2009, on behalf of the Company, by the undersigned officer, who acknowledges, under penalty of perjury, that this document is his free act and deed, and that to the best of his knowledge, information and belief, the matters and facts set forth herein are true in all material respects.

COLONIAL PROPERTIES TRUST
By: Name:	/s/ John P. Rigrish John P. Rigrish
Title:	Chief Administrative Officer and Corporate Secretary

STATE OF ALABAMA	)
COUNTY OF JEFFERSON	)

          I, the undersigned, a notary public in and for said county in said state, hereby certify that John P. Rigrish, whose name as Chief Administrative Officer and Corporate Secretary of Colonial Properties Trust, an Alabama real estate investment trust, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of said instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said real estate investment trust, acting in his capacity of said real estate investment trust for and as the act of said real estate investment trust.

          Given under my hand and official seal this 2nd day of February, 2009.

	/s/ Kimberly A. Keuter Notary Public
[NOTARIAL SEAL]	My commission expires: September 10, 2011

3

EX-3.2

Exhibit 3.2

COLONIAL PROPERTIES TRUST

BYLAWS

(as amended through January 30, 2009)

          Colonial Properties Trust, a real estate investment trust organized under the laws of the State of Alabama (the “Trust”), hereby adopts the Bylaws of the Trust as follows:

ARTICLE I

OFFICES

          Section 1. PRINCIPAL OFFICE. The principal office of the Trust shall be located at such place or places as the Trustees may designate.

          Section 2. ADDITIONAL OFFICES. The Trust may have additional offices at such places as the Trustees may from time to time determine or the business of the Trust may require.

ARTICLE II

MEETINGS OF SHAREHOLDERS

          Section 1. PLACE. All meetings of shareholders shall be held at the principal office of the Trust or at such other place within the United States as shall be stated in the notice of the meeting.

          Section 2. ANNUAL MEETING. An annual meeting of the shareholders for the election of Trustees and the transaction of any business within the powers of the Trust shall be held during the second calendar quarter of each year on a date and at the time set by the Trustees, beginning with the year 1996.

          Section 3. SPECIAL MEETINGS. Subject to the rights of the holders of any series of Preferred Shares (as defined in the Trust’s Declaration of Trust, as amended (the “Declaration of Trust”)) to elect additional Trustees under specified circumstances, special meetings of the shareholders may be called by the president or the chairman of the Board of Trustees and shall be called by the president, the chairman of the Board of Trustees or the secretary upon the request in writing of shareholders holding outstanding shares representing at least 25% of all votes entitled to be cast on any issue proposed to be considered at any such special meeting.

          Section 4. NOTICE. Not less than 10 nor more than 75 days before each meeting of shareholders, the Trust or other persons calling the meeting shall give to each shareholder entitled to vote at such meeting, and to each shareholder not entitled to vote who is entitled to notice of the meeting, written or printed notice stating the date, time and place of the meeting and, in the case of a special meeting or as otherwise may be required by statute, the purpose for which the meeting is called, either by mail or by presenting it to such shareholder personally or by leaving it at his residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at his post office address as it appears on the records of the Trust, with postage thereon prepaid.

          Section 5. SCOPE OF NOTICE. Subject to Section 12, any business of the Trust may be transacted at an annual meeting of shareholders without being specifically designated in the notice, except such business as is required by statute to be stated in such notice. No business shall be transacted at a special meeting of shareholders except as specifically designated in the notice.

          Section 6. QUORUM. At any meeting of shareholders, the presence in person or by proxy of shareholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this section shall not affect any requirement under any statute or the Declaration of Trust for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the shareholders, the shareholders entitled to vote at such meeting, present in person or by proxy, shall have power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

          Section 7. VOTING. A plurality of all the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to elect a Trustee. Each share may be voted for as many individuals as there are Trustees to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Declaration of Trust. Unless otherwise provided in the Declaration of Trust, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders.

          Section 8. PROXIES. A shareholder may vote the shares owned of record by him or her in person, or a shareholder or his or her agent or attorney-in-fact may appoint a proxy to vote or otherwise act for him or her by signing an appointment form or by means of an electronic transmission. The appointment of a proxy shall be valid for eleven months, unless a longer period is expressly provided in the appointment form. An appointment by electronic transmission must contain or be accompanied by information (such as a pass code or other similar identifier) from which it can be determined that the shareholder, the shareholder’s agent or the shareholder’s attorney-in-fact authorized the transmission.

          As used in these Bylaws, “electronic transmission” means any process of communication not directly involving the physical transfer of paper that is suitable for the retention, retrieval and reproduction of information by the recipient and may include, but shall not be limited to, transmission by telephone, electronic mail, the Internet or other electronic means, as specified by the Board of Trustees.

          Section 9. VOTING OF SHARES BY CERTAIN HOLDERS. Shares registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the chief executive officer or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such shares pursuant to a bylaw or a resolution of the board of directors of such corporation or other entity presents a certified copy of such bylaw or resolution, in which case such person may vote such shares. Any trustee or other fiduciary may vote shares registered in his name as such fiduciary, either in person or by proxy.

          Shares of the Trust directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may

- 2 -

be voted and shall be counted in determining the total number of outstanding shares at any given time.

          The Trustees may adopt by resolution a procedure by which a shareholder may certify in writing to the Trust that any shares registered in the name of the shareholder are held for the account of a specified person other than the shareholder. The resolution shall set forth: the class of shareholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the share transfer books, the time after the record date or closing of the share transfer books within which the certification must be received by the Trust; and any other provisions with respect to the procedure which the Trustees consider necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the shareholder of record of the specified shares in place of the shareholder who makes the certification.

          Section 10. INSPECTORS. At any meeting of shareholders, the chairman of the meeting may, or upon the request of any shareholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting based upon their determination of the validity and effect of proxies, count all votes, report the results and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders.

          Each report of an inspector shall be in writing and signed by him or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

          Section 11. REPORTS TO SHAREHOLDERS.

          (a) Not later than 90 days after the close of each fiscal year of the Trust, the Trustees shall deliver or cause to be delivered a report of the business and operations of the Trust during such fiscal year to the shareholders, containing a balance sheet and a statement of income and surplus of the Trust, accompanied by the certification of an independent certified public accountant, and such further information as the Trustees may determine is required pursuant to any law or regulation to which the Trust is subject. Within the earlier of 20 days after the annual meeting of shareholders or 120 days after the end of the Trust’s fiscal year, a signed copy of the annual report and the accountant’s certificate shall be placed on file at the principal office of the Trust.

          (b) Not later than 45 days after the end of each of the first three quarterly periods of each fiscal year and upon written request by a shareholder, the Trustees shall deliver or cause to be delivered an interim report to such requesting shareholder containing unaudited financial statements for such quarter and for the period from the beginning of the fiscal year to the end of such quarter, and such further information as the Trustees may determine is required pursuant to any law or regulation to which the Trust is subject.

          Section 12. NOMINATIONS AND SHAREHOLDER BUSINESS.

          (a) Annual Meetings of Shareholders.

          (1) Nominations of persons for election to the Board of Trustees and the proposal of business other than nominations of Trustees to be considered by the shareholders at an annual meeting of shareholders shall be made: (i) pursuant to the notice of the

- 3 -

meeting (or any supplement thereto) given by or at the direction of the Board of Trustees, (ii) otherwise by or at the direction of the Board of Trustees, or (iii) by a shareholder of the Trust who was a shareholder of record at the time of the giving of notice of the meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Sections 12(a)(2), (4) and (5), in the case of nominations of Trustees, and Sections 12(a)(3) and (4), in the case of business other than the nomination of Trustees.

          (2) For nominations to be properly brought before an annual meeting by a shareholder pursuant to Section 12(a)(1)(iii), the shareholder must have given timely notice thereof in writing to the secretary of the Trust (the “Shareholder Notice”) containing the information specified in this Section 12(a)(2). To be timely, such Shareholder Notice shall be delivered to the secretary at the principal executive offices of the Trust not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, such Shareholder Notice to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such Shareholder Notice shall set forth: (i) as to each person whom the shareholder proposes to nominate for election or reelection as a Trustee, (A) a description of all agreements, arrangements or understandings between such shareholder and such beneficial owner (if any) on whose behalf the nomination is made, on the one hand, and such potential nominee and any other person or persons (naming such person or persons), on the other hand, pursuant to which the nomination is to be made by such shareholder, and (B) all other information relating to such potential nominee that is required to be disclosed in solicitations of proxies for election of Trustees, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Trustee if elected); and (ii) as to the shareholder giving such Shareholder Notice and the beneficial owner (if any) on whose behalf the nomination is made, the additional information specified in Section 12(a)(4) below.

          (3) For business other than the nomination of Trustees to be properly brought before an annual meeting by a shareholder pursuant to Section 12(a)(1)(iii), the shareholder must have given a timely Shareholder Notice in writing to the secretary of the Trust containing the information specified in this Section 12(a)(3). To be timely, such Shareholder Notice shall be delivered to the secretary at the principal executive offices of the Trust not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, such Shareholder Notice to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such Shareholder Notice shall set forth: (i) a brief description of the business desired to be brought before the meeting (including the complete text of any proposed resolutions or proposed amendments to these Bylaws or other governing documents of the Trust), the reasons for conducting such business at the meeting, a brief written statement of the reasons why the shareholder and the beneficial owner (if any) on whose behalf the proposal is made support such business and any material interest in such business of such shareholder and of such beneficial owner (if any); (ii) a description of any agreement, arrangement or understanding with respect to such business between or among the shareholder and the beneficial owner (if any) on whose behalf the proposal is made, on the one hand, and any of their respective affiliates or

- 4 -

associates and any others (including their names) acting in concert with any of the foregoing, on the other hand, and a representation that such shareholder and such beneficial owner (if any) will notify the Trust in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date is first made; and (iii) as to the shareholder giving such Shareholder Notice and the beneficial owner (if any) on whose behalf the proposal is made, the additional information specified in Section 12(a)(4) below.

          (4) Each Shareholder Notice delivered pursuant to Section 12(a)(2) or Section 12(a)(3) also must contain the following information as to the shareholder giving the Shareholder Notice and the beneficial owner (if any) on whose behalf the nomination is made (in the case of Section 12(a)(2)) or the business other than the nomination of Trustees is desired to be brought (in the case of Section 12(a)(3)):

          (A) the name and address of such shareholder, as they appear on the Trust’ s books, and of such beneficial owner (if any);

          (B) the class or series and number of Shares of the Trust which are, directly or indirectly, owned beneficially and of record by such shareholder and such beneficial owner (if any), including the proportionate interest in Shares of the Trust held, directly or indirectly, by a general or limited partnership in which such shareholder or such beneficial owner (if any) is a general partner or a direct or indirect beneficial owner of an interest in a general partner, as of the date of the Shareholder Notice, and a representation that such shareholder and such beneficial owner (if any) will notify the Trust in writing of the class or series and number of such Shares (including the proportionate interest in Shares held through a general or limited partnership) owned of record and beneficially as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date is first made;

          (C) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into by such shareholder and/or such beneficial owner (if any) as of the date of the Shareholder Notice, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of such shareholder or beneficial owner or any of their respective affiliates, and a representation that such shareholder and such beneficial owner (if any) will notify the Trust in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date on which public announcement of the record date is first made;

          (D) a representation that such shareholder intends to appear at the meeting in person or by proxy to make the nomination or propose the other business specified in such Shareholder Notice, as the case may be; and

          (E) a representation as to whether such shareholder or such beneficial owner (if any) intends, or is or intends to be part of a group (within the meaning ascribed to such term under Section 13(d)(3) of the Exchange Act) that intends, (i) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Trust’s outstanding Shares required to elect the proposed Trustee nominee or to approve or adopt the other business proposal, as the case may be, and/or (ii) otherwise to solicit proxies from shareholders in support of such nominee or other business proposal, as the case may be.

- 5 -

          (5) Notwithstanding anything in the second sentence of Section 12(a)(2) to the contrary, in the event that the number of Trustees to be elected to the Board of Trustees is increased and there is no public announcement naming all of the nominees for Trustee or specifying the size of the increased Board of Trustees made by the Trust at least 70 days prior to the first anniversary of the preceding year’s annual meeting, a Shareholder Notice required by Section 12(a)(2) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive offices of the Trust not later than the close of business on the tenth day following the day on which such public announcement is first made by the Trust.

          (b) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Trust’s notice of meeting. Nominations of persons for election to the Board of Trustees may be made at a special meeting of shareholders at which Trustees are to be elected pursuant to the Trust’s notice of meeting (i) by or at the direction of the Board of Trustees or (ii) provided that the Board of Trustees has determined that Trustees shall be elected at such special meeting, by any shareholder of the Trust who is a shareholder of record at the time of giving of notice provided for in this Section 12(b), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 12(b). In the event the Trust calls a special meeting of shareholders for the purpose of electing one or more Trustees to the Board of Trustees, any such shareholder may nominate a person or persons (as the case may be) for election to such position as specified in the Trust’s notice of meeting, if the shareholder’s notice complies with the Shareholder Notice requirements of Section 12(a)(2) and is delivered to the secretary at the principal executive offices of the Trust not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Trustees to be elected at such meeting.

          (c) General.

          (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 12 shall be eligible to serve as Trustees and only such business shall be conducted and nominations made at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 12. The presiding officer of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 12 and, if any proposed nomination or other business is not in compliance with this Section 12, to declare that such defective nomination or proposal be disregarded.

          (2) For purposes of this Section 12, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Trust with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

          (3) Sections 12(a) and (b) shall be the exclusive means for a shareholder to make nominations or submit business other than nominations of Trustees before an annual meeting of the shareholders (other than matters properly brought under Rule 14a-8 under the Exchange Act or any successor provision then in effect and included in the Trust’s notice of meeting). Notwithstanding the foregoing provisions of this Section 12, a shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth

- 6 -

in this Section 12; provided, however, that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or other business proposals to be considered pursuant to Sections 12(a) and (b). Nothing in this Section 12 shall be deemed to affect any right of a shareholder to request inclusion of a proposal in, nor the right of the Trust to omit a proposal from, the Trust’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act. The requirements of this Section 12 are included to provide the Trust notice of a shareholder’s intention to make Trustee nominations or bring business other than nominations of Trustees before an annual meeting of shareholders, and to provide such notice in a timely manner, and shall in no event be construed as imposing upon any shareholder the requirement to seek approval from the Trust as a condition precedent to making any such nomination or bringing any such business before an annual meeting.

          Section 13. VOTING BY BALLOT. Voting on any question or in any election may be viva voce unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. If so authorized by the Board of Trustees, voting may be by electronic transmission. A vote by electronic transmission must contain or be accompanied by information (such as a pass code or other similar identifier) from which it can be determined that the shareholder or the shareholder’s duly-appointed proxy authorized the electronic transmission.

          Section 14. NO SHAREHOLDER ACTION BY WRITTEN CONSENT. Subject to the rights of the holders of any series of Preferred Shares to elect additional Trustees under specific circumstances, any action required or permitted to be taken by the shareholders of the Trust must be effected at an annual or special meeting of shareholders and may not be effected by any consent in writing by such shareholders.

ARTICLE III

TRUSTEES

          Section 1. GENERAL POWERS; QUALIFICATIONS. The business and affairs of the Trust shall be managed under the direction of its Board of Trustees. A Trustee shall be a natural person at least 19 years of age who is not under legal disability.

          Section 2. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Trustees shall be held immediately after and at the same place as the annual meeting of shareholders, no notice other than this Bylaw being necessary. Regular meetings of the Trustees may be called by or at the request of the chairman of the board, the lead Trustee or the chief executive officer. The Board of Trustees may provide, by resolution, the time and place, either within or without the State of Alabama, for the holding of regular meetings of the Trustees without other notice than such resolution.

          Section 3. SPECIAL MEETINGS. Special meetings of the Trustees may be called by or at the request of the chairman of the board, the lead Trustee, the chief executive officer or by a majority of the Trustees then in office. The person or persons authorized to call special meetings of the Trustees may fix any place, either within or without the State of Alabama, as the place for holding any special meeting of the Trustees called by them.

- 7 -

          Section 4. NOTICE. Notice of any special meeting shall be given by telephone or by written notice delivered personally, transmitted by facsimile, telegraphed, transmitted via electronic mail or mailed or couriered to each Trustee at his business or residence address. Personally delivered, facsimile transmitted, telegraphed, electronically mailed or telephonic notices shall be given at least one day prior to the meeting. Notice by mail shall be given at least five days prior to the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. If given by telegram, such notice shall be deemed to be given when the telegram is delivered to the telegraph company. Telephone notice shall be deemed given when the Trustee is personally given such notice in a telephone call to which he or she is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Trust by the Trustee. Facsimile-transmission notice shall be deemed given upon completion of the transmission of the message to the number given to the Trust by the Trustee and receipt of a completed answer-back indicating receipt. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Trustees need be stated in the notice, unless specifically required by statute or these Bylaws.

          Section 5. QUORUM. A whole number of Trustees equal to at least a majority of the whole Board of Trustees shall constitute a quorum for transaction of business at any meeting of the Trustees; provided, that if less than a quorum are present at said meeting, a majority of the Trustees present may adjourn the meeting from time to time without further notice; and provided further, that if, pursuant to the Declaration of Trust or these Bylaws, the vote of a majority of a particular group of Trustees is required for action, a quorum must also include a majority of such group.

          The Trustees present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough Trustees to leave less than a quorum.

          Section 6. VOTING. The action of the majority of the Trustees present at a meeting at which a quorum is present shall be the action of the Trustees, unless the concurrence of a greater proportion is required for such action by applicable statute, the Declaration of Trust or these Bylaws.

          Section 7. TELEPHONE MEETINGS. Trustees may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

          Section 8. INFORMAL ACTION BY TRUSTEES. Any action required or permitted to be taken at any meeting of the Trustees may be taken without a meeting, if a consent in writing to such action is signed by each Trustee and such written consent is filed with the minutes of proceedings of the Trustees.

          Section 9. VACANCIES. If for any reason any or all the Trustees cease to be Trustees, such event shall not terminate the Trust or affect these Bylaws or the powers of the remaining Trustees hereunder (even if fewer than three Trustees remain). Any vacancy (including a vacancy created by an increase in the number of Trustees) shall be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the Trustees. Any individual so elected as Trustee shall hold office for the unexpired term of the Trustee he is replacing.

          Section 10. COMPENSATION. Trustees shall not receive any stated salary for their services as Trustees but, by resolution of the Trustees, fixed sums per year and/or per meeting. Expenses of attendance, if any, may be allowed to Trustees for attendance at each annual, regular or special meeting of the Trustees or of any committee thereof; but nothing herein contained shall be

- 8 -

construed to preclude any Trustees from serving the Trust in any other capacity and receiving compensation therefor.

          Section 11. REMOVAL OF TRUSTEES. The shareholders may, at any time, remove any Trustee in the manner provided in the Declaration of Trust.

          Section 12. LOSS OF DEPOSITS. No Trustee shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or shares have been deposited.

          Section 13. SURETY BONDS. Unless required by law, no Trustee shall be obligated to give any bond or surety or other security for the performance of any of his duties.

          Section 14. RELIANCE. Each Trustee, officer, employee and agent of the Trust shall, in the performance of his duties with respect to the Trust, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel or upon reports made to the Trust by any of its officers or employees or by a committee of the Board, the adviser, accountants, appraisers or other experts or consultants selected by the Trustees or officers of the Trust, regardless of whether such counsel or expert may also be a Trustee.

          Section 15. CERTAIN RIGHTS OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS. The Trustees shall have no responsibility to devote their full time to the affairs of the Trust. Any Trustee or officer, employee or agent of the Trust, in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to or in addition to those of or relating to the Trust, subject to the adoption of any policies relating to such interests and activities adopted by the Trustees and applicable law.

ARTICLE IV

COMMITTEES

          Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Trustees may, by resolution or resolutions passed by a majority of the whole Board, appoint from among its members an Executive Committee, an Audit Committee, a Governance Committee, an Executive Compensation Committee and other committees, composed of one or more Trustees to serve at the pleasure of the Trustees; provided, that the membership of each of the Audit Committee, the Governance Committee and the Executive Compensation Committee shall consist only of trustees who meet the independence and other requirements applicable to members of such committees under the New York Stock Exchange listing standards and the rules and regulations promulgated under the federal securities laws, and any other independence and other requirements set forth in the Company’s corporate governance guidelines and the applicable committee charters.

          Section 2. POWERS. The Trustees may delegate to committees appointed under Section 1 of this Article IV any of the powers of the Board of Trustees; provided, however, that the Trustees may not delegate to committee the power to declare dividends or other distributions, elect Trustees, issue Preferred or Common Shares (as such terms are defined in the Declaration of Trust) (hereinafter “Shares”) in the Trust other than as provided in the next sentence, approve or recommend to the shareholders any action which requires shareholder approval, amend the Bylaws, approve any merger or share exchange which does not require shareholder approval, or approve the reacquisition of Shares unless pursuant to a formula prescribed by the

- 9 -

Board of Trustees. If the Board of Trustees has given general authorization for the issuance of Shares in the Trust, a committee of the Board, in accordance with a general formula or method specified by the Board by resolution or by adoption of an option or other plan, may fix the terms of the Shares subject to classification or reclassification and the terms on which the shares may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Trustees.

          Section 3. COMMITTEE PROCEDURES. Each Committee may fix rules of procedure for its business. A majority of the members of a committee shall constitute a quorum for the transaction of business and the action of a majority of those present at a meeting at which a quorum is present shall be the action of the committee. Subject to the terms of Section 1 hereof, in the absence of any member of any committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another Trustee to act in the place of such absent member. Any action required or permitted to be taken at a meeting of a committee may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the committee and filed with the minutes of the proceedings of such committee. The members of a committee may conduct any meeting thereof by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by such means shall constitute presence in person at the meeting.

          Section 4. EMERGENCY. In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Trust by its Trustees and officers as contemplated by the Declaration of Trust and these Bylaws, any two or more available members of the then incumbent Executive Committee shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Trust in accordance with the provisions of this Article IV. In the event of the unavailability, at such time, of a minimum of two members of the then incumbent Executive Committee, the available Trustees shall elect an Executive Committee composed of any two members of the Board of Trustees, whether or not they be officers of the Trust, which two members shall constitute the Executive Committee for the full conduct and management of the affairs of the Trust in accordance with the foregoing provisions of this Section 4. This Section 4 shall be subject to implementation by resolution of the Board of Trustees passed from time to time for that purpose, and any provisions of the Bylaws (other than this Section 4) and any resolutions which are contrary to the provisions of this Section 4 or to the provisions of any such implementing resolutions shall be suspended until it shall be determined by any interim Executive Committee acting under this Section 4 that it shall be to the advantage of the Trust to resume the conduct and management of its affairs and business under all the other provisions of these Bylaws.

ARTICLE V

OFFICERS

          Section 1. GENERAL PROVISIONS. The officers of the Trust may consist of a chairman of the board, a chief executive officer, a president, a chief operating officer, one or more vice presidents, a chief financial officer, a secretary, and one or more assistant secretaries, as determined by the Trustees. In addition, the Trustees may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Trust shall be elected annually by the Trustees at the first meeting of the Trustees held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor is elected and qualifies or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices except chief executive officer and vice president may

- 10 -

be held by the same person. In their discretion, the Trustees may leave unfilled any office except that of chief executive officer, chief financial officer and secretary. Election of an officer or agent shall not of itself create contract rights between the Trust and such officer or agent.

          Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Trust may be removed by a majority of the members of the whole Board of Trustees, with or without cause, if in their judgment the best interests of the Trust would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Trust may resign at any time by giving written notice of his resignation to the Trustees, the chairman of the board (if any), the chief executive officer or the secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation.

          Section 3. VACANCIES. A vacancy in any office may be filled by the Trustees for the balance of the term.

          Section 4. CHAIRMAN OF THE BOARD. The chairman of the board shall preside over the meetings of the Trustees and of the shareholders at which he shall be present. The chairman of the board shall perform such other duties as may be assigned to him by the Trustees. Except where by law the signature of the chief executive officer is required, the chairman of the board shall possess the same power as the chief executive officer to sign deeds, mortgages, bonds, contracts or other instruments.

          Section 5. CHIEF EXECUTIVE OFFICER. The Trustees may designate a chief executive officer from among the elected officers. In the absence of such designation, the chairman of the board shall be the chief executive officer of the Trust. The chief executive officer shall in general supervise the management of the business affairs of the Trust and the implementation of the policies of the Trust, as determined by the Trustees. He may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Trustees or by these Bylaws to some other officer or agent of the Trust or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the Trustees from time to time.

          Section 6. PRESIDENT. The president, subject to the control of the Board of Trustees and at the direction of and with the chief executive officer, shall in general supervise and control all of the business and affairs of the Trust. He shall, when present and in the absence of the chairman of the board and the chief executive officer, preside at all meetings of the shareholders and the Board of Trustees. He may sign, with the secretary or any other proper officer of the Trust authorized by the Board of Trustees, certificates for shares of the Trust and deeds, mortgages, bonds, contracts, or other instruments which the Board of Trustees has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Trustees or by these Bylaws to some other officer or agent of the Trust, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the chief executive officer or the Trustees from time to time.

          Section 7. CHIEF OPERATING OFFICER. The chief operating officer, under the direction of the chief executive officer, shall have general management authority and responsibility for the day-to-day implementation of the policies of the Trust. He may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Trustees or by these Bylaws to some other officer or agent of the Trust or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the

- 11 -

office of chief operating officer and such other duties as may be prescribed by the Trustees from time to time.

          Section 8. VICE PRESIDENTS. In the absence of the chief executive officer, the president, the chief operating officer or in the event of a vacancy in all such offices, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the chief executive officer or the president and when so acting shall have all the powers of and be subject to all the restrictions upon the chief executive officer and the president; and shall perform such other duties as from time to time may be assigned to him by the chief executive officer, by the president, by the chief operating officer or by the Trustees. The Trustees may designate one or more vice presidents as executive vice president or as vice president for particular areas of responsibility.

          Section 9. SECRETARY. The secretary shall: (a) keep the minutes of the proceedings of the shareholders, the Trustees and committees of the Trustees in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the trust records and of the seal (if any) of the Trust; (d) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) have general charge of the share transfer books of the Trust; and (f) in general perform such other duties as from time to time may be assigned to him by the chief executive officer, by the president, by the chief operating officer or by the Trustees.

          Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall have the custody of the funds and securities of the Trust and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Trust and shall deposit all moneys and other valuable effects in the name and to the credit of the Trust in such depositories as may be designated by the Trustees. The chief financial officer shall disburse the funds of the Trust as may be ordered by the Trustees, taking proper vouchers for such disbursements, and shall render to the chief executive officer and Trustees, at the regular meetings of the Trustees or whenever they may require it, an account of all his transactions as chief financial officer and of the financial condition of the Trust.

          If required by the Trustees, he shall give the Trust a bond in such sum and with such surety or sureties as shall be satisfactory to the Trustees for the faithful performance of the duties of his office and for the restoration to the Trust, in case of his death, resignation, retirement or removal from office, all books, papers, vouchers, moneys and other property of whatever kind in his possession or under his control belonging to the Trust.

          Section 11. ASSISTANT SECRETARIES. The assistant secretaries, in general, shall perform such duties as shall be assigned to them by the secretary, or by the chief executive officer, the president, or the Trustees.

          Section 12. SALARIES. The salaries of the officers shall be fixed from time to time by the Trustees and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Trustee.

ARTICLE VI

CONTRACTS, LOANS, CHECKS AND DEPOSITS

- 12 -

          Section 1. CONTRACTS. The Trustees may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Trust and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the Trustees or by an authorized person shall be deemed valid and binding upon the Trustees and upon the Trust when so authorized or ratified by action of the Trustees.

          Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Trust shall be signed by such officer or officers, agent or agents of the Trust and in such manner as shall from time to time be determined by the Trustees.

          Section 3. DEPOSITS. All funds of the Trust not otherwise employed shall be deposited from time to time to the credit of the Trust in such banks, trust companies or other depositories as the Trustees may designate.

ARTICLE VII

SHARES

          Section 1. CERTIFICATES. Each shareholder shall be entitled to a certificate or certificates which shall represent and certify the number of shares of each class of beneficial interests held by him in the Trust. Each certificate shall state on its face: (i) the name of the Trust and that it is organized under the laws of Alabama, and (ii) the name of the person to whom such certificate is issued. Each certificate shall be signed by the chief executive officer, the president or a vice president and countersigned by the secretary or an assistant secretary or the chief financial officer and may be sealed with the seal, if any, of the Trust. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Trust shall, from time to time, issue several classes of shares, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Trust, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. In lieu of such statement or summary, the Trust may set forth upon the face or back of the certificate a statement that the Trust will furnish to any shareholder, upon request and without charge, a full statement of such information.

          Section 2. TRANSFERS. Certificates shall be treated as negotiable and title thereto and to the shares they represent shall be transferred by delivery thereof to the same extent as those of an Alabama stock corporation. Upon surrender to the Trust or the transfer agent of the Trust of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Trust shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

          The Trust shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Alabama.

- 13 -

          Section 3. LOST CERTIFICATE. The Trustees may direct a new certificate to be issued in place of any certificate previously issued by the Trust alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, the Trustees may, in their discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or his legal representative to advertise the same in such manner as they shall require and/or to give bond, with sufficient surety, to the Trust to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate.

          Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Trustees may set, in advance, a record date for the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of shareholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 70 days and, in the case of a meeting of shareholders not less than ten days, before the date on which the meeting or particular action requiring such determination of shareholders is to be held or taken.

          In lieu of fixing a record date, the Trustees may provide that the share transfer books shall be closed for a stated period but not longer than 20 days. If the share transfer books are closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days before the date of such meeting.

          If no record date is fixed and the share transfer books are not closed for the determination of shareholders, (a) the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the date on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting, and (b) the record date for the determination of shareholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Trustees declaring the dividend or allotment of rights is adopted.

          When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section 4, such determination shall apply to any adjournment thereof, except where the determination has been made through the closing of the transfer books and the stated period of closing has expired.

          Section 5. SHARE LEDGER. The Trust shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each shareholder and the number of shares of each class held by such shareholder.

          Section 6. FRACTIONAL SHARES; ISSUANCE OF UNITS. Trustees may issue fractional shares or provide for the issuance of’ scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Declaration of Trust or these Bylaws, the Trustees may issue units consisting of different securities of the Trust. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Trust, except that the Trustees may provide that for a specified period securities of the Trust issued in such unit may be transferred on the books of the Trust only in such unit.

ARTICLE VIII

ACCOUNTING YEAR

- 14 -

          The Trustees shall have the power, from time to time, to fix the fiscal year of the Trust by a duly adopted resolution.

ARTICLE IX

DIVIDENDS

          Section 1. DECLARATION. Dividends upon the shares of the Trust may be declared by the Trustees, subject to the provisions of law and the Declaration of Trust. Dividends may be paid in cash, property or shares of the Trust, subject to the provisions of law and the Declaration.

          Section 2. CONTINGENCIES. Before payment of any dividends, there may be set aside out of any funds of the Trust available for dividends such sum or sums as the Trustees may from time to time, in their absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends, for repairing or maintaining any property of the Trust or for such other purpose as the Trustees shall determine to be in the best interest of the Trust, and the Trustees may modify or abolish any such reserve in the manner in which it was created.

ARTICLE X

INVESTMENT POLICY

          Subject to the provisions of the Declaration of Trust, the Trustees may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Trust as they shall deem appropriate in their sole discretion.

ARTICLE XI

SEAL

          Section 1. SEAL. The Trustees may authorize the adoption of a seal by the Trust. The seal shall have inscribed thereon the name of the Trust. The Trustees may authorize one or more duplicate seals and provide for the custody thereof.

          Section 2. AFFIXING SEAL. Whenever the Trust is required to place its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Trust.

ARTICLE XII

INDEMNIFICATION

          To the maximum extent permitted by Alabama law in effect from time to time, the Trust, after a preliminary determination of the ultimate entitlement to indemnification has been made in accordance with Section 8.55 of Chapter 2B, Title 10, of the Code of Alabama, 1975, as

- 15 -

amended, shall indemnify (a) any Trustee, officer or shareholder or any former Trustee, officer or shareholder (including among the foregoing, for all purposes of this Article XII and without limitation, any individual who, while a Trustee and at the request of the Trust, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, partnership, joint venture, trust, employee benefit plan or other enterprise), who has been successful, on the merits or otherwise, in the defense of a proceeding to which he was made a party by reason of such status, against reasonable expenses incurred by him in connection with the proceeding, (b) any Trustee or officer or any former Trustee or officer made a party to a proceeding by reason of such status against reasonable expenses incurred by him in connection with the proceeding, if: (i) he conducted himself in good faith, and (ii) he reasonably believed (A) in the case of conduct in his official capacity with the Trust, that the conduct was in the Trust’s best interests and (B) in all other cases, that the conduct was at least not opposed to its best interests, and (iii) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful, provided, however, that the indemnification provided for in this clause (b) shall not be available if it is established that (1) in connection with a proceeding by or in the right of the Trust, he was adjudged liable to the Trust, or (2) in connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, he was adjudged liable on the basis that personal benefit was improperly received by him, and (c) each shareholder or former shareholder against any claim or liability to which he may become subject by reason of his status as a shareholder or former shareholder. In addition, the Trust shall pay or reimburse, in advance of final disposition of a proceeding, reasonable expenses incurred by a Trustee, officer or shareholder or former Trustee, officer or shareholder made a party to a proceeding by reason of his status as a Trustee, officer or shareholder; provided, that in the case of a Trustee or officer, (i) the Trust shall have received a written affirmation by the Trustee or officer of his good faith belief that he has met the applicable standard of conduct necessary for indemnification by the Trust as authorized by these Bylaws, (ii) the Trust shall have received a written undertaking by or on his behalf to repay the amount paid or reimbursed by the Trust if it shall ultimately be determined that the applicable standard of conduct was not met and (iii) a determination shall have been made, in accordance with Section 8.55 of Chapter 2B, Title 10, of the Code of Alabama, 1975, as amended, that the facts then known to those making the determination would not preclude indemnification under the provisions hereof. The Trust may, with the approval of its Trustees, provide such indemnification and payment or reimbursement of expenses to any Trustee, officer or shareholder or any former Trustee, officer or shareholder who served a predecessor of the Trust and to any employee or agent of the Trust or a predecessor of the Trust. Neither the amendment nor repeal of this Article XII, nor the adoption or amendment of any other provision of the Declaration of Trust or these Bylaws inconsistent with this Article XII, shall apply to or affect in any respect the applicability of this paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. Any indemnification or payment or reimbursement of the expenses permitted by these Bylaws shall be furnished in accordance with the procedures provided for indemnification and payment or reimbursement of expenses under Article 8 of Chapter 2B, Title 10, of the Code of Alabama, 1975. The Trust may provide to Trustees, officers and shareholders such other and further indemnification or payment or reimbursement of expenses as may be permitted by Alabama law, as in effect from time to time, for directors of Alabama corporations.

ARTICLE XIII

WAIVER OF NOTICE

          Whenever any notice is required to be given pursuant to the Declaration of Trust or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice and filed with the minutes or records of the Trust, whether before or

- 16 -

after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

- 17 -

ARTICLE XIV

AMENDMENT OF BYLAWS

          These Bylaws may be amended or repealed by either the affirmative vote of a majority of all shares outstanding and entitled to vote generally in the election of Trustees, voting as a single group, or by an affirmative vote of a majority of the Board of Trustees, unless the shareholders prescribe that any such Bylaw may not be amended or repealed by the Board of Trustees.

          The foregoing are certified as the Bylaws of the Trust, as amended through January 30, 2009.

/s/ John P. Rigrish  

Secretary 

Index of Amendments to Bylaws

          Article IV, Section 1 of the Bylaws of the Trust was amended pursuant to a resolution duly adopted at a meeting of the Board of Trustees on April 22, 1999. Such amendment to Article IV, Section 1 is reflected in the foregoing certified Bylaws.

          Article III, Sections 2, 3 and 4 of the Bylaws of the Trust were amended pursuant to a resolution duly adopted at a meeting of the Board of Trustees on April 25, 2007. Such amendments to Article III, Sections 2, 3 and 4 are reflected in the foregoing certified Bylaws.

          The Preamble, Article II, Sections 5, 8, 12 and 13, and Article IV, Section 1 of the Bylaws of the Trust were amended pursuant to a resolution duly adopted at a meeting of the Board of Trustees on January 30, 2009. Such amendments to the Preamble, Article II, Sections 5, 8, 12 and 13, and Article IV, Section 1 are reflected in the foregoing certified Bylaws.

/s/ John P. Rigrish  

Secretary 

- 18 -

EX-10.44

EXHIBIT 10.44

COLONIAL PROPERTIES TRUST

2008 OMNIBUS INCENTIVE PLAN

EXHIBIT 10.44

COLONIAL PROPERTIES TRUST
2008 OMNIBUS INCENTIVE PLAN

          Colonial Properties Trust, an Alabama real estate investment trust (the “Company”), sets forth herein the terms of its 2008 Omnibus Incentive Plan (the “Plan”), as follows:

1. PURPOSE

          The Plan is intended to enhance the Company’s and its Affiliates’ (as defined herein) ability to attract and retain highly qualified officers, trustees, key employees, and other persons, and to motivate such persons to serve the Company and its Affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the Plan provides for the grant of share options, share appreciation rights, restricted shares, share units (including deferred share units), and unrestricted shares. Any of these awards may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals in accordance with the terms hereof. Share options granted under the Plan may be non-qualified share options or incentive share options, as provided herein, except that share options granted to outside trustees and any consultants or advisers providing services to the Company or an Affiliate shall in all cases be non-qualified share options.

2. DEFINITIONS

          For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:

     2.1 “Affiliate” means, with respect to the Company, any company or other trade or business that controls, is controlled by or is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary. For purposes of granting share options or share appreciation rights, an entity may not be considered an Affiliate unless the Company holds a “controlling interest” in such entity, where the term “controlling interest” has the same meaning as provided in Treasury Regulation 1.414(c)-2(b)(2)(i), provided that the language “at least 50 percent” is used instead of “at least 80 percent” and, provided further, that where granting of share options or share appreciation rights is based upon a legitimate business criteria, the language “at least 20 percent” is used instead of “at least 80 percent” each place it appears in Treasury Regulation 1.414(c)-2(b)(2)(i).

     2.2 “Award” means a grant of an Option, Share Appreciation Right, Restricted Share, Unrestricted Share, Share Unit, Performance Share, or Performance Unit under the Plan.

     2.3 “Award Agreement” means the agreement between the Company and a Grantee that evidences and sets out the terms and conditions of an Award.

     2.4 “Benefit Arrangement” shall have the meaning set forth in Section 15 hereof.

     2.5 “Board” means the Board of Trustees of the Company.

     2.6 “Cause” means, as determined by the Board and unless otherwise provided in an applicable agreement with the Company or an Affiliate, (i) gross negligence or willful misconduct in connection with the performance of duties; (ii) conviction of a criminal offense (other than minor traffic offenses); or (iii) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Service Provider and the Company or an Affiliate.

     2.7 “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.

A-2

     2.8 “Committee” means a committee of, and designated from time to time by resolution of, the Board, which shall be constituted as provided in Section 3.2.

     2.9 “Company” means Colonial Properties Trust.

     2.10 “Corporate Transaction” means (i) the dissolution or liquidation of the Company or a merger, consolidation, or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of substantially all of the assets of the Company to another person or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Company is the surviving entity) which results in any person or entity owning 50% or more of the combined voting power of all classes of shares of the Company.

     2.11 “Covered Employee” means a Grantee who is a covered employee within the meaning of Section 162(m)(3) of the Code.

     2.12 “Disability” means the Grantee is unable to perform each of the essential duties of such Grantee’s position by reason of a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months; provided, however, that, with respect to rules regarding expiration of an Incentive Share Option following termination of the Grantee’s Service, Disability shall mean the Grantee is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

     2.13 “Effective Date” means March 7, 2008, the date the Plan was approved by the Board.

     2.14 “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

     2.15 “Fair Market Value” means the value of a Share, determined as follows: if on the Grant Date or other determination date the Shares are listed on an established national or regional stock exchange, or are publicly traded on an established securities market, the Fair Market Value of a Share shall be the closing price of the Shares on such exchange or in such market (if there is more than one such exchange or market the Board shall determine the appropriate exchange or market) on the Grant Date or such other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on such trading day) or, if no sale of Shares is reported for such trading day, on the next preceding day on which any sale shall have been reported. If the Shares are not listed on such an exchange or traded on such a market, Fair Market Value shall be the value of the Shares as determined by the Board by the reasonable application of a reasonable valuation method, in a manner consistent with Code Section 409A.

     2.16 “Family Member” means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of the Grantee, any person sharing the Grantee’s household (other than a tenant or employee), a trust in which any one or more of these persons have more than fifty percent of the beneficial interest, a foundation in which any one or more of these persons (or the Grantee) control the management of assets, and any other entity in which one or more of these persons (or the Grantee) own more than fifty percent of the voting interests.

     2.17 “General Partner” means Colonial Properties Trust, the general partner of Colonial Realty Limited Partnership.

     2.18 “Grant Date” means, as determined by the Board, the latest to occur of (i) the date as of which the Board approves an Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6 hereof, or (iii) such other date as may be specified by the Board.

A-3

     2.19 “Grantee” means a person who receives or holds an Award under the Plan.

     2.20 “Incentive Share Option” means an “incentive stock option” within the meaning of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.

     2.21 “Non-qualified Share Option” means an Option that is not an Incentive Share Option.

     2.22 “Operating Partnership” means Colonial Realty Limited Partnership.

     2.23 “Option” means an option to purchase one or more Shares pursuant to the Plan.

     2.24 “Option Price” means the exercise price for each Share subject to an Option.

     2.25 “Other Agreement” shall have the meaning set forth in Section 15 hereof.

     2.26 “Outside Trustee” means a member of the Board who is not an officer or employee of the Company.

     2.27 “Partnership Agreement” means the Third Amended and Restated Agreement of Limited Partnership of Colonial Realty Limited Partnership, as amended and/or restated from time to time.

     2.28 “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.

     2.27 “Performance Share” means an Award under Section 14 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.

     2.28 “Performance Unit” means an Award under Section 14 herein and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.

     2.29 “Plan” means this Colonial Properties Trust 2008 Omnibus Incentive Plan.

     2.30 “Prior Plans” means the Company’s Third Amended and Restated Employee Share Option and Restricted Share Plan, the Non-Employee Trustee Share Plan and the Trustee Share Option Plan.

     2.31 “Purchase Price” means the purchase price for each Share pursuant to a grant of Restricted Shares or Unrestricted Shares.

     2.32 “Reporting Person” means a person who is required to file reports under Section 16(a) of the Exchange Act.

     2.33 “Restricted Shares” means Shares awarded to a Grantee pursuant to Section 11 hereof.

     2.34 “SAR Exercise Price” means the per share exercise price of a SAR granted to a Grantee under Section 10 hereof.

     2.35 “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended.

     2.36 “Service” means service as a Service Provider to the Company or an Affiliate. Unless otherwise stated in the applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the

A-4

Company or an Affiliate. Subject to the preceding sentence, whether a termination of Service shall have occurred for purposes of the Plan shall be determined by the Board, which determination shall be final, binding and conclusive.

     2.37 “Service Provider” means an employee, officer or trustee of the Company or an Affiliate, or a consultant or adviser (who is a natural person) currently providing services to the Company or an Affiliate.

     2.38 “Share” means a common share of beneficial interest, par value $.01 per share, of the Company.

     2.39 “Share Appreciation Right” or “SAR” means a right granted to a Grantee under Section 10 hereof.

     2.40 “Share Unit” means a bookkeeping entry representing the equivalent of one Share awarded to a Grantee pursuant to Section 11 hereof.

     2.41 “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code.

     2.42 “Substitute Awards” means Awards granted upon assumption of, or in substitution for, outstanding awards previously granted by a company or other entity acquired by the Company or any Affiliate or with which the Company or any Affiliate combines.

     2.43 “Ten Percent Shareholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding Shares of the Company, its parent or any of its Subsidiaries. In determining share ownership, the attribution rules of Section 424(d) of the Code shall be applied.

     2.44“Unit Option” means an option to purchase one or more Units pursuant to the Plan.

     2.45 “Units” means units of partnership interest of the Operating Partnership (but does not include preferred interests in the Operating Partnership).

     2.44 “Unrestricted Shares” means an Award pursuant to Section 12 hereof.

3. ADMINISTRATION OF THE PLAN

     3.1. Board

          The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s declaration of trust and by-laws and applicable law. The Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan, any Award or any Award Agreement. All such actions and determinations shall be by the affirmative vote of a majority of the members of the Board present at a meeting or by unanimous consent of the Board executed in writing in accordance with the Company’s declaration of trust and by-laws and applicable law. The interpretation and construction by the Board of any provision of the Plan, any Award or any Award Agreement shall be final, binding and conclusive.

     3.2. Committee.

          The Board from time to time may delegate to the Committee such powers and authorities related to the administration and implementation of the Plan, as set forth in Section 3.1 above and other applicable provisions, as the Board shall determine, consistent with the declaration of trust and by-laws of the Company and applicable law.

A-5

     (i) Except as provided in Subsection (ii) and except as the Board may otherwise determine, the Committee, if any, appointed by the Board to administer the Plan shall consist of two or more Outside Trustees of the Company who: (a) qualify as “outside directors” within the meaning of Section 162(m) of the Code and who (b) meet such other requirements as may be established from time to time by the Securities and Exchange Commission for plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act and who (c) comply with the independence requirements of the stock exchange on which the Shares are listed. Discretionary Awards to Outside Trustees may only be administered by the Committee.

     (ii) The Board may also appoint one or more separate committees of the Board, each composed of one or more trustees of the Company who need not be Outside Trustees, who may administer the Plan with respect to employees or other Service Providers who are not officers or trustees of the Company, may grant Awards under the Plan to such employees or other Service Providers, and may determine all terms of such Awards.

In the event that the Plan, any Award or any Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be taken or such determination may be made by the Committee if the power and authority to do so has been delegated to the Committee by the Board as provided for in this Section. Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive. To the extent permitted by law, the Committee may delegate its authority under the Plan to a member of the Board.

     3.3. Terms of Awards.

          Subject to the other terms and conditions of the Plan, the Board shall have full and final authority to:

          (i) designate Grantees,

          (ii) determine the type or types of Awards to be made to a Grantee,

          (iii) determine the number of Shares to be subject to an Award,

          (iv) establish the terms and conditions of each Award (including, but not limited to, the exercise price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the Shares subject thereto, the treatment of an Award in the event of a change of control, and any terms or conditions that may be necessary to qualify Options as Incentive Share Options),

          (v) prescribe the form of each Award Agreement evidencing an Award, and

          (vi) amend, modify, or supplement the terms of any outstanding Award. Such authority specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to make or modify Awards to eligible individuals who are foreign nationals or are individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom. Notwithstanding the foregoing, no amendment, modification or supplement of any Award shall, without the consent of the Grantee, impair the Grantee’s rights under such Award.

          The Company may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise in competition with the Company or any Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee. In addition, the Company may annul an Award if the Grantee is an employee of the Company or an

A-6

Affiliate thereof and is terminated for Cause as defined in the applicable Award Agreement or the Plan, as applicable.

          Furthermore, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 and any Grantee who knowingly engaged in the misconduct, was grossly negligent in engaging in the misconduct, knowingly failed to prevent the misconduct or was grossly negligent in failing to prevent the misconduct, shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve-(12)month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document that contained such material noncompliance.

     3.4. No Repricing

          Notwithstanding anything in this Plan to the contrary, no amendment or modification may be made to an outstanding Option or SAR, including, without limitation, by replacement of Options or SARs with cash or other award type, that would be treated as a repricing under the rules of the stock exchange on which the Shares are listed, in each case, without the approval of the shareholders of the Company, provided, that, appropriate adjustments may be made to outstanding Options and SARs pursuant to Section 17 or Section 5.3 and may be made to make changes to achieve compliance with applicable law, including Internal Revenue Code Section 409A.

     3.5. Deferral Arrangement.

          The Board may permit or require the deferral of any award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Share equivalents. Any such deferrals shall be made in a manner that complies with Code Section 409A.

     3.6. No Liability.

          No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award or Award Agreement.

     3.7. Share Issuance/Book-Entry

          Notwithstanding any provision of this Plan to the contrary, the issuance of the Shares under the Plan may be evidenced in such a manner as the Board, in its discretion, deems appropriate, including, without limitation, book-entry registration or issuance of one or more Share certificates.

4. SHARES SUBJECT TO THE PLAN

     4.1. Number of Shares Available for Awards

          Subject to adjustment as provided in Section 17 hereof, the number of Shares available for issuance under the Plan shall be five million (5,000,000), all of which may be granted as Incentive Share Options, increased by Shares covered by awards granted under a Prior Plan that are not purchased or are forfeited or expire, or otherwise terminate without delivery of any Shares subject thereto, to the extent such Shares would again be available for issuance under such Prior Plan. Shares issued or to be issued under the Plan shall be authorized but unissued Shares; or, to the extent permitted by applicable law, issued Shares that have been reacquired by the Company.

A-7

     4.2. Adjustments in Authorized Shares

          The Board shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies. The number of Shares reserved pursuant to Section 4 shall be increased by the corresponding number of Awards assumed and, in the case of a substitution, by the net increase in the number of Shares subject to Awards before and after the substitution.

     4.3. Share Usage

          Shares covered by an Award shall be counted as used as of the Grant Date. Any Shares that are subject to Awards of Options shall be counted against the limit set forth in Section 4.1 as one (1) Share for every one (1) Share subject to an Award of Options. With respect to SARs, the number of Shares subject to an award of SARs will be counted against the aggregate number of Shares available for issuance under the Plan regardless of the number of Shares actually issued to settle the SAR upon exercise. Any Shares that are subject to Awards other than Options or Share Appreciation Rights shall be counted against the limit set forth in Section 4.1 as 3.60 Shares for every one (1) Share granted. If any Shares covered by an Award granted under the Plan or a Prior Plan are not purchased or are forfeited or expire, or if an Award otherwise terminates without delivery of any Shares subject thereto or is settled in cash in lieu of Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award shall, to the extent of any such forfeiture, termination or expiration, again be available for making Awards under the Plan in the same amount as such Shares were counted against the limit set forth in Section 4.1, provided that any Shares covered by an Award granted under a Prior Plan will again be available for making Awards under the Plan in the same amount as such Shares were counted against the limits set forth in the applicable Prior Plan. The number of Shares available for issuance under the Plan shall not be increased by (i) any Shares tendered or withheld or Award surrendered in connection with the purchase of Shares upon exercise of an Option as described in Section 13.2, or (ii) any Shares deducted or delivered from an Award payment in connection with the Company’s tax withholding obligations as described in Section 18.3.

5. EFFECTIVE DATE, DURATION AND AMENDMENTS

     5.1. Effective Date.

          The Plan shall be effective as of the Effective Date, subject to approval of the Plan by the Company’s shareholders within one year of the Effective Date. Upon approval of the Plan by the shareholders of the Company as set forth above, all Awards made under the Plan on or after the Effective Date shall be fully effective as if the shareholders of the Company had approved the Plan on the Effective Date. If the shareholders fail to approve the Plan within one year of the Effective Date, any Awards made hereunder shall be null and void and of no effect. Following the Effective Date no awards will be made under the Prior Plans.

     5.2. Term.

          The Plan shall terminate automatically ten (10) years after the Effective Date and may be terminated on any earlier date as provided in Section 5.3.

     5.3. Amendment and Termination of the Plan

          The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any Shares as to which Awards have not been made. An amendment shall be contingent on approval of the Company’s shareholders to the extent stated by the Board, required by applicable law or required by applicable stock exchange listing requirements. In addition, an amendment will be contingent on approval of the Company’s shareholders if the amendment would: (i) materially increase the benefits accruing to participants under the Plan, (ii) materially increase the aggregate number of Shares that may be issued under the Plan, or (iii) materially modify the requirements as to eligibility for participation in the

A-8

Plan. No Awards shall be made after termination of the Plan. No amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, impair rights or obligations under any Award theretofore awarded under the Plan.

6. AWARD ELIGIBILITY AND LIMITATIONS

     6.1. Service Providers and Other Persons

          Subject to this Section 6, Awards may be made under the Plan to: (i) any Service Provider to the Company or of any Affiliate, including any Service Provider who is an officer or trustee of the Company, or of any Affiliate, as the Board shall determine and designate from time to time and (ii) any other individual whose participation in the Plan is determined to be in the best interests of the Company by the Board.

     6.2. Successive Awards and Substitute Awards.

          An eligible person may receive more than one Award, subject to such restrictions as are provided herein. Notwithstanding Sections 8.1 and 10.1, the Option Price of an Option or the grant price of a SAR that is a Substitute Award (as defined in Section 2.42) may be less than 100% of the Fair Market Value of a Share on the original date of grant; provided, that, the Option Price or grant price is determined in accordance with the principles of Code Section 424 and the regulations thereunder.

7. AWARD AGREEMENT

          Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine. Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-qualified Share Options or Incentive Share Options, and in the absence of such specification such options shall be deemed Non-qualified Share Options.

8. TERMS AND CONDITIONS OF OPTIONS

     8.1. Option Price

          The Option Price of each Option shall be fixed by the Board and stated in the Award Agreement evidencing such Option. Except in the case of Substitute Awards, the Option Price of each Option shall be at least the Fair Market Value on the Grant Date of a Share; provided, however, that in the event that a Grantee is a Ten Percent Shareholder, the Option Price of an Option granted to such Grantee that is intended to be an Incentive Share Option shall be not less than 110 percent of the Fair Market Value of a Share on the Grant Date. In no case shall the Option Price of any Option be less than the par value of a Share.

     8.2. Vesting.

               Subject to Sections 8.3 and 17.3 hereof, each Option granted under the Plan shall become exercisable at such times and under such conditions as shall be determined by the Board and stated in the Award Agreement. For purposes of this Section 8.2, fractional numbers of Shares subject to an Option shall be rounded down to the next nearest whole number.

     8.3. Term.

          Each Option granted under the Plan shall terminate, and all rights to purchase Shares thereunder shall cease, upon the expiration of ten years from the date such Option is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such Option; provided, however, that in the event that the

A-9

Grantee is a Ten Percent Shareholder, an Option granted to such Grantee that is intended to be an Incentive Share Option shall not be exercisable after the expiration of five years from its Grant Date.

     8.4. Termination of Service.

          Each Award Agreement shall set forth the extent to which the Grantee shall have the right to exercise the Option following termination of the Grantee’s Service. Such provisions shall be determined in the sole discretion of the Board, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.

     8.5. Limitations on Exercise of Option.

          Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, prior to the date the Plan is approved by the shareholders of the Company as provided herein or after the occurrence of an event referred to in Section 17 hereof which results in termination of the Option.

     8.6. Method of Exercise.

          Subject to the terms of Article 13 and Section 18.3, an Option that is exercisable may be exercised by the Grantee’s delivery to the Company of notice of exercise on any business day, at the Company’s principal office, on the form specified by the Company. Such notice shall specify the number of Shares with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the Shares for which the Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to an Award.

     8.7. Rights of Holders of Options

          Unless otherwise stated in the applicable Award Agreement, an individual holding or exercising an Option shall have none of the rights of a shareholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject Shares or to direct the voting of the subject Shares) until the Shares covered thereby are fully paid and issued to him. Except as provided in Section 17 hereof, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.

     8.8. Delivery of Share Certificates.

          Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a shares certificate or certificates evidencing his or her ownership of the Shares subject to the Option.

     8.9. Transferability of Options

          Except as provided in Section 8.10, during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative) may exercise an Option. Except as provided in Section 8.10, no Option shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.

     8.10. Family Transfers.

          If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of an Option which is not an Incentive Share Option to any Family Member. For the purpose of this Section 8.10, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 8.10, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. Subsequent transfers of transferred Options are prohibited except to Family Members of the original Grantee in

A-10

accordance with this Section 8.10 or by will or the laws of descent and distribution. The events of termination of Service of Section 8.4 hereof shall continue to be applied with respect to the original Grantee, following which the Option shall be exercisable by the transferee only to the extent, and for the periods specified, in Section 8.4.

     8.11. Limitations on Incentive Share Options.

          An Option shall constitute an Incentive Share Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the Shares with respect to which all Incentive Share Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates) does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which they were granted.

     8.12. Notice of Disqualifying Disposition

          If any Grantee shall make any disposition of Shares issued pursuant to the exercise of an Incentive Share Option under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Grantee shall notify the Company of such disposition within ten (10) days thereof.

9. GRANT AND EXERCISE OF UNIT OPTIONS

     9.1 Issuance of Unit Options

          Upon the issuance of an Option, and in accordance with Section 4.2(B) of the Partnership Agreement, the General Partner shall be deemed automatically to have caused the Operating Partnership to issue to the General Partner a corresponding Unit Option on terms identical to those of such Option.

     9.2 Exercise of Unit Options

          A Unit Option shall be deemed exercised automatically, upon the exercise by an Optionee of the corresponding Option, as to the number of Units equal to the number of Shares for which such Option is exercised. The General Partner shall then cause the Operating Partnership to issue such Units to the General Partner, and the Company shall remit payment for such Units to the General Partner, which shall then remit payment to the Operating Partnership, all in accordance with Section 4.2(B) of the Partnership Agreement.

     9.2 Termination of Unit Options

          Upon the termination of an Option, the corresponding Unit Option also shall terminate.

10. TERMS AND CONDITIONS OF SHARE APPRECIATION RIGHTS

     10.1. Right to Payment and Grant Price.

          A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on the date of exercise over (B) the grant price of the SAR as determined by the Board. The Award Agreement for a SAR shall specify the grant price of the SAR, which shall be at least the Fair Market Value of a Share on the date of grant. SARs may be granted in conjunction with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in conjunction with all or part of any other Award or without regard to any Option or other Award; provided that a SAR that is granted subsequent to the Grant Date of a related Option must have a SAR Price that is no less than the Fair Market Value of one Share on the SAR Grant Date.

A-11

     10.2. Other Terms.

          The Board shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following termination of Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to Grantees, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.

     10.3. Term.

          Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon the expiration of ten years from the date such SAR is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such SAR.

     10.4. Transferability of SARS

          Except as provided in Section 10.5, during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative) may exercise a SAR. Except as provided in Section 10.5, no SAR shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.

     10.5. Family Transfers.

          If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of a SAR to any Family Member. For the purpose of this Section 10.5, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 10.5, any such SAR shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. Subsequent transfers of transferred SARs are prohibited except to Family Members of the original Grantee in accordance with this Section 10.5 or by will or the laws of descent and distribution.

11. TERMS AND CONDITIONS OF RESTRICTED SHARES AND SHARE UNITS

     11.1. Grant of Restricted Shares or Share Units.

          Awards of Restricted Shares or Share Units may be made for no consideration (other than par value of the Shares which is deemed paid by Services already rendered).

     11.2. Restrictions.

          At the time a grant of Restricted Shares or Share Units is made, the Board may, in its sole discretion, establish a period of time (a “restricted period”) applicable to such Restricted Shares or Share Units. Each Award of Restricted Shares or Share Units may be subject to a different restricted period. The Board may in its sole discretion, at the time a grant of Restricted Shares or Share Units is made, prescribe restrictions in addition to or other than the expiration of the restricted period, including the satisfaction of corporate or individual performance objectives, which may be applicable to all or any portion of the Restricted Shares

A-12

or Share Units as described in Article 14. Notwithstanding the foregoing terms of this Section 11.2, and subject to Section 11.9 below, (i) Restricted Shares and Share Units that vest solely by the passage of time shall not vest in full in less than three (3) years from the Grant Date, and (ii) Restricted Shares and Share Units that vest, or for which vesting may be accelerated, by achieving performance targets shall not vest in full in less than one (1) year from the Grant Date. The foregoing restriction shall not apply to Restricted Shares or Share Units assumed in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies. Neither Restricted Shares nor Share Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of any other restrictions prescribed by the Board with respect to such Restricted Shares or Share Units.

     11.3. Restricted Share Certificates.

          The Company shall issue, in the name of each Grantee to whom Restricted Shares have been granted, share certificates representing the total number of Restricted Shares granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the Restricted Shares are forfeited to the Company or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee, provided, however, that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and makes appropriate reference to the restrictions imposed under the Plan and the Award Agreement.

     11.4. Rights of Holders of Restricted Shares.

          Unless the Board otherwise provides in an Award Agreement, holders of Restricted Shares shall have the right to vote such Shares and the right to receive any dividends declared or paid with respect to such Shares. The Board may provide that any dividends paid on Restricted Shares must be reinvested in Shares, which may or may not be subject to the same vesting conditions and restrictions applicable to such Restricted Shares. All distributions, if any, received by a Grantee with respect to Restricted Shares as a result of any share split, share dividend, combination of shares, or other similar transaction shall be subject to the restrictions applicable to the original Grant.

     11.5. Rights of Holders of Share Units.

               11.5.1. Voting and Dividend Rights.

          Holders of Share Units shall have no rights as shareholders of the Company. The Board may provide in an Award Agreement evidencing a grant of Share Units that the holder of such Share Units shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding Shares, a cash payment for each Share Unit held equal to the per-share dividend paid on the Shares. Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Share Units at a price per unit equal to the Fair Market Value of a Share on the date that such dividend is paid.

               11.5.2. Creditor’s Rights.

          A holder of Share Units shall have no rights other than those of a general creditor of the Company. Share Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.

     11.6. Termination of Service.

               (a) Unless the Board otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee’s Service, any Restricted Shares or Share Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Restricted Shares or Share Units, the Grantee shall have no further rights with respect to such Award, including but not limited to

A-13

any right to vote Restricted Shares or any right to receive dividends with respect to Restricted Shares or Share Units.

               (b) Notwithstanding the terms of Section 11.6(a), and subject to Section 11.9 below, the Board may not (i) grant Restricted Shares or Share Units that provide for acceleration of vesting, except in the case of a Grantee’s death, disability or retirement, or upon or in connection with a Corporate Transaction, or upon the satisfaction of performance-based vesting conditions as provided in Section 11.2; or (ii) waive vesting restrictions or conditions applicable to Restricted Shares or Share Units, except in the case of a Grantee’s death, disability or retirement or upon or in connection with a Corporation Transaction. The foregoing restriction shall not apply to Restricted Shares or Share Unit Awards assumed in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies.

     11.7. Purchase of Restricted Shares and Shares Subject to Share Units.

          The Grantee shall be required, to the extent required by applicable law, to purchase the Restricted Shares or Shares subject to vested Share Units from the Company at a Purchase Price equal to the greater of (i) the aggregate par value of the Shares represented by such Restricted Shares or Share Units (ii) the Purchase Price, if any, specified in the Award Agreement relating to such Restricted Shares or Share Units. The Purchase Price shall be payable in a form described in Section 13 or, in the discretion of the Board, in consideration for past or future Services rendered to the Company or an Affiliate.

     11.8. Delivery of Shares.

          Upon the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to Restricted Shares or Share Units settled in Shares shall lapse, and, unless otherwise provided in the Award Agreement, a share certificate for such Shares shall be delivered, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be. Neither the Grantee, nor the Grantee’s beneficiary or estate, shall have any further rights with regard to a Share Unit once the Shares represented by the Share Unit has been delivered.

     11.9. Unrestricted Pool.

          Notwithstanding anything to the contrary in this Plan, Restricted Shares and Share Unit Awards may be (i) granted with vesting terms that do not comply with the requirements of Section 11.2; (ii) granted with terms providing for the acceleration of vesting that do not comply with Section 11.6(b), and/or (iii) subsequent to the date of grant, modified to provide acceleration of vesting terms that do not comply with Section 11.6(b), provided that, in no event, shall the aggregate number of shares underlying Restricted Shares and Share Unit Awards granted or modified as contemplated in this Section 11.9 exceed five percent of the shares authorized for issuance in Section 4.1 hereof.

12. TERMS AND CONDITIONS OF UNRESTRICTED SHARE AWARDS

          The Board may, in its sole discretion, grant (or sell at par value or such other higher purchase price determined by the Board) an Unrestricted Share Award to any Grantee pursuant to which such Grantee may receive Shares free of any restrictions (“Unrestricted Shares”) under the Plan; provided, however, that, in the aggregate, no more than five percent of the shares reserved for issuance under this Plan may be granted pursuant to this Section 12 and the exceptions set forth in Section 11.9. Unrestricted Share Awards may be granted or sold as described in the preceding sentence in respect of past services and other valid consideration, or in lieu of, or in addition to, any cash compensation due to such Grantee.

A-14

13. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED SHARES

     13.1. General Rule.

          Payment of the Option Price for the Shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Shares shall be made in cash or in cash equivalents acceptable to the Company.

     13.2. Surrender of Shares.

          To the extent the Award Agreement so provides, payment of the Option Price for Shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Shares may be made all or in part through the tender or attestation to the Company of Shares, which shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price has been paid thereby, at their Fair Market Value on the date of exercise or surrender.

     13.3. Cashless Exercise.

          With respect to an Option only (and not with respect to Restricted Shares), to the extent permitted by law and to the extent the Award Agreement so provides, payment of the Option Price for Shares purchased pursuant to the exercise of an Option may be made all or in part by delivery (on a form acceptable to the Board) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in Section 18.3.

     13.4. Other Forms of Payment.

          To the extent the Award Agreement so provides, payment of the Option Price for Shares purchased pursuant to exercise of an Option or the Purchase Price for Restricted Shares may be made in any other form that is consistent with applicable laws, regulations and rules, including, without limitation, Service.

14. TERMS AND CONDITIONS OF PERFORMANCE SHARES AND PERFORMANCE UNITS

     14.1. Grant of Performance Units/Performance Shares.

          Subject to the terms and provisions of this Plan, the Board, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine.

     14.2. Value of Performance Units/Performance Shares.

          Each Performance Unit shall have an initial value that is established by the Board at the time of grant. The Board shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant.

     14.3. Earning of Performance Units/Performance Shares.

          Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. The Board shall have the ability, which it may exercise in its sole discretion, to alter the

A-15

performance goals to take into account unusual or nonrecurring events or items or other factors the Board considers relevant.

     14.4. Form and Timing of Payment of Performance Units/Performance Shares.

          Payment of earned Performance Units/Performance Shares shall be as determined by the Board and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Board, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.

     14.5. Settlement of Awards; Other Terms.

          Settlement of such Awards shall be in cash, Shares, other Awards or other property, in the discretion of the Board. The Board shall specify the circumstances in which such Performance Shares or Performance Units shall be paid or forfeited in the event of termination of Service by the Grantee prior to the end of a performance period or settlement of Awards.

15. PARACHUTE LIMITATIONS

          Notwithstanding any other provision of this Plan or of any other agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or any Affiliate, except an agreement, contract, or understanding that expressly addresses Section 280G or Section 4999 of the Code (an “Other Agreement”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of Grantees or beneficiaries of which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a “Benefit Arrangement”), if the Grantee is a “disqualified individual,” as defined in Section 280G(c) of the Code, any Option, Restricted Share, Share Unit, Performance Share or Performance Unit held by that Grantee and any right to receive any payment or other benefit under this Plan shall not become exercisable or vested (i) to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the Grantee under this Plan to be considered a “parachute payment” within the meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute Payment”) and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under this Plan, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Grantee without causing any such payment or benefit to be considered a Parachute Payment. In the event that the receipt of any such right to exercise, vesting, payment, or benefit under this Plan, in conjunction with all other rights, payments, or benefits to or for the Grantee under any Other Agreement or any Benefit Arrangement would cause the Grantee to be considered to have received a Parachute Payment under this Plan that would have the effect of decreasing the after-tax amount received by the Grantee as described in clause (ii) of the preceding sentence, then the Grantee shall have the right, in the Grantee’s sole discretion, to designate those rights, payments, or benefits under this Plan, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Grantee under this Plan be deemed to be a Parachute Payment; provided, however, that in order to comply with Section 409A of the Code, the reduction or elimination will be performed in the order in which each dollar of value subject to an Award reduces the Parachute Payment to the greatest extent.

A-16

16. REQUIREMENTS OF LAW

     16.1. General.

          The Company shall not be required to sell or issue any Shares under any Award if the sale or issuance of such Shares would constitute a violation by the Grantee, any other individual exercising an Option, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of Shares, no Shares may be issued or sold to the Grantee or any other individual exercising an Option pursuant to such Award unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Award. Without limiting the generality of the foregoing, in connection with the Securities Act, upon the exercise of any Option or any SAR that may be settled in Shares or the delivery of any Shares underlying an Award, unless a registration statement under such Act is in effect with respect to the Shares covered by such Award, the Company shall not be required to sell or issue such Shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual exercising an Option may acquire such Shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Board shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or a SAR or the issuance of Shares pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that an Option (or SAR that may be settled in Shares) shall not be exercisable until the Shares covered by such Option (or SAR) are registered or are exempt from registration, the exercise of such Option (or SAR) under circumstances in which the laws of such jurisdiction apply shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

     16.2. Rule 16b-3.

          During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards pursuant to the Plan and the exercise of Options and SARs granted hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Board does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.

17. EFFECT OF CHANGES IN CAPITALIZATION

     17.1. Changes in Shares.

          If the number of outstanding Shares is increased or decreased or the Shares are changed into or exchanged for a different number or kind of shares or other securities of the Company on account of any recapitalization, reclassification, share split, reverse split, combination of shares, exchange of shares, share dividend or other distribution payable in capital shares, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares for which grants of Options and other Awards may be made under the Plan shall be adjusted proportionately and accordingly by the Company. In addition, the number and kind of shares for which Awards are outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding Options or SARs shall not change the

A-17

aggregate Option Price or SAR Exercise Price payable with respect to Shares that are subject to the unexercised portion of an outstanding Option or SAR, as applicable, but shall include a corresponding proportionate adjustment in the Option Price or SAR Exercise Price per share. The conversion of any convertible securities of the Company shall not be treated as an increase in shares effected without receipt of consideration. Notwithstanding the foregoing, in the event of any distribution to the Company’s shareholders of securities of any other entity or other assets (including an extraordinary dividend but excluding a non-extraordinary dividend of the Company) without receipt of consideration by the Company, the Company shall, in such manner as the Company deems appropriate, adjust (i) the number and kind of Shares subject to outstanding Awards and/or (ii) the exercise price of outstanding Options and Share Appreciation Rights to reflect such distribution.

17.2. Reorganization in Which the Company Is the Surviving Entity Which does not Constitute a Corporate Transaction.

          Subject to Section 17.3 hereof, if the Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more other entities which does not constitute a Corporate Transaction, any Option or SAR theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of Shares subject to such Option or SAR would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR Exercise Price of the shares remaining subject to the Option or SAR immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement evidencing an Award, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Grantee as a result of the reorganization, merger or consolidation. In the event of a transaction described in this Section 17.2, Share Units shall be adjusted so as to apply to the securities that a holder of the number of Shares subject to the Share Units would have been entitled to receive immediately following such transaction.

17.3. Corporate Transaction in which Awards are not Assumed.

               Upon the occurrence of a Corporate Transaction in which outstanding Options, SARs, Share Units and Restricted Shares are not being assumed or continued:

               (i) all outstanding Restricted Shares shall be deemed to have vested, and all Share Units shall be deemed to have vested and the Shares subject thereto shall be delivered, immediately prior to the occurrence of such Corporate Transaction, and

               (ii) either of the following two actions shall be taken:

                    (A) fifteen days prior to the scheduled consummation of a Corporate Transaction, all Options and SARs outstanding hereunder shall become immediately exercisable and shall remain exercisable for a period of fifteen days, or

                    (B) the Board may elect, in its sole discretion, to cancel any outstanding Awards of Options, Restricted Shares, Share Units, and/or SARs and pay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Board acting in good faith), in the case of Restricted Shares or Share Units, equal to the formula or fixed price per share paid to holders of Shares and, in the case of Options or SARs, equal to the product of the number of Shares subject to the Option or SAR (the “Award Shares”) multiplied by the amount, if any, by which (I) the formula or fixed price per share paid to holders of Shares pursuant to such transaction exceeds (II) the Option Price or SAR Exercise Price applicable to such Award Shares.

               With respect to the Company’s establishment of an exercise window, (i) any exercise of an Option or SAR during such fifteen-day period shall be conditioned upon the consummation of the event and shall be effective only immediately before the consummation of the event, and (ii) upon

A-18

consummation of any Corporate Transaction, the Plan and all outstanding but unexercised Options and SARs shall terminate. The Board shall send notice of an event that will result in such a termination to all individuals who hold Options and SARs not later than the time at which the Company gives notice thereof to its shareholders.

     17.4. Corporation Transaction in which Awards are Assumed.

          The Plan, Options, SARs, Share Units and Restricted Shares theretofore granted shall continue in the manner and under the terms so provided in the event of any Corporate Transaction to the extent that provision is made in writing in connection with such Corporate Transaction for the assumption or continuation of the Options, SARs, Share Units and Restricted Shares theretofore granted, or for the substitution for such Options, SARs, Share Units and Restricted Shares for new common share options and share appreciation rights and new common share units and restricted shares relating to the shares of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and option and share appreciation right exercise prices. In the event a Grantee’s Award is assumed, continued or substituted upon the consummation of any Corporate Transaction and his employment is terminated without Cause within one year following the consummation of such Corporate Transaction, the Grantee’s Award will be fully vested and may be exercised in full, to the extent applicable, beginning on the date of such termination and for the one-year period immediately following such termination or for such longer period as the Committee shall determine.

     17.5. Adjustments

          Adjustments under this Section 17 related to Shares or securities of the Company shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share. The Board shall determine the effect of a Corporate Transaction upon Awards other than Options, SARs, Share Units and Restricted Shares, and such effect shall be set forth in the appropriate Award Agreement. The Board may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, for different provisions to apply to an Award in place of those described in Sections 17.1, 17.2, 17.3 and 17.4. This Section 17 does not limit the Company’s ability to provide for alternative treatment of Awards outstanding under the Plan in the event of change of control events that are not Corporate Transactions.

     17.6. No Limitations on Company

          The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets.

18. GENERAL PROVISIONS

     18.1. Disclaimer of Rights

          No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any Affiliate, or to interfere in any way with any contractual or other right or authority of the Company either to increase or decrease the compensation or other payments to any individual at any time, or to terminate any employment or other relationship between any individual and the Company. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a trustee, officer, consultant or employee of the Company or an Affiliate. The obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed

A-19

herein. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.

     18.2. Nonexclusivity of the Plan

          Neither the adoption of the Plan nor the submission of the Plan to the shareholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable, including, without limitation, the granting of share options otherwise than under the Plan.

     18.3. Withholding Taxes

          The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by law to be withheld with respect to the vesting of or other lapse of restrictions applicable to an Award or upon the issuance of any Shares upon the exercise of an Option or pursuant to an Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company or the Affiliate, as the case may be, any amount that the Company or the Affiliate may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company or the Affiliate, which may be withheld by the Company or the Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or the Affiliate to withhold Shares otherwise issuable to the Grantee or (ii) by delivering to the Company or the Affiliate Shares already owned by the Grantee. The Shares so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the Shares used to satisfy such withholding obligation shall be determined by the Company or the Affiliate as of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 18.3 may satisfy his or her withholding obligation only with Shares that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements. The maximum number of Shares that may be withheld from any Award to satisfy any federal, state or local tax withholding requirements upon the exercise, vesting, lapse of restrictions applicable to such Award or payment of Shares pursuant to such Award, as applicable, cannot exceed such number of shares having a Fair Market Value equal to the minimum statutory amount required by the Company to be withheld and paid to any such federal, state or local taxing authority with respect to such exercise, vesting, lapse of restrictions or payment of Shares.

     18.4. Captions

          The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement.

     18.5. Other Provisions

          Each Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion.

     18.6. Number and Gender

          With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires.

     18.7. Severability

          If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be

A-20

severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.

     18.8. Governing Law

          The validity and construction of this Plan and the instruments evidencing the Awards hereunder shall be governed by the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan and the instruments evidencing the Awards granted hereunder to the substantive laws of any other jurisdiction.

     18.9. Section 409A of the Code

          The Board intends to comply with Section 409A of the Code (“Section 409A”), or an exemption to Section 409A, with regard to Awards hereunder that constitute nonqualified deferred compensation within the meaning of Section 409A. To the extent that the Board determines that a Grantee would be subject to the additional 20% tax imposed on certain nonqualified deferred compensation plans pursuant to Section 409A as a result of any provision of any Award granted under this Plan, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Board.

*      *      *

A-21

EX-10.45

Exhibit 10.45

CONSULTING AGREEMENT

     AGREEMENT made this 30th day of December, 2008 (the “Agreement”) among Colonial Properties Trust and Colonial Property Services, Inc. (collectively, “Colonial” or the “Company”) and Weston M. Andress (the “Consultant”). (Collectively referred to herein as the “Parties.”)

     WHEREAS, Colonial, on behalf of itself and its subsidiaries, desires to engage the services of the Consultant to provide certain consulting work; and

     WHEREAS, the Consultant desires to perform said services for Colonial.

     NOW, THEREFORE, in consideration of the mutual promises contained in this agreement, the Parties agree as follows:

     1. Performance of Duties. The duties and obligations described herein shall be for a period commencing on January 1, 2009 and ending on December 31, 2009.

     2. Consulting Services. Consultant agrees (i) to assist the Company in connection with the negotiation and/or closing of one or more loan facilities between the Company and The Federal National Mortgage Association and/or The Federal Home Loan Mortgage Corporation, or a combination of the two, in an aggregate amount of at least $350 million (the “Loan Facility Services”), (ii) to perform such assignments as may reasonably be assigned by the chief executive officer of the Company (the “CEO”) from time to time in writing (the “Other Specified Services”) and (iii) to provide such advice and assistance with respect to the transition of Consultant’s former duties and responsibilities as may be reasonably requested by the CEO (the “Transition Services”, and, together with the Loan Facility Services, and the Other Specified Services, the “Services”), and the Consultant shall determine the time, methods and manner by which the Services are rendered by him, provided that such methods are lawful and professional, and the timing and manner of the Services are consistent with the business needs and objectives of the Company.

     3. Business Hours. Consultant agrees to make himself reasonably available for performance of the Services and shall devote such amount of time to the Services reasonably necessary and sufficient to complete them which will not exceed 20 hours in any week. During the term of this Agreement, Consultant shall be free to undertake or engage in any consulting, employment or other work, provided it does not interfere with his ability to comply with his obligations under this Agreement or constitute a violation of

paragraph 15 of the Severance Agreement and Release between the Company and Consultant dated as of the date hereof.

     4. Compensation. In exchange for the Loan Facility Services, Colonial shall pay the Consultant aggregate compensation of $400,000, payable in twelve consecutive monthly payments of $33,333.33 beginning on January 31, 2009 (the “Loan Facility Services Compensation”). Payment of the Loan Facility Services Compensation will not be conditioned upon or impacted by the timing of the closing of the loan facility(ies), by any decision by Colonial to discontinue or abandon such efforts or by the failure of Colonial to obtain such loans for any reason. In addition, if Consultant successfully completes the Other Specified Services prior to the termination of this Agreement, Colonial shall pay the Consultant a lump sum of $100,000, with such amount payable as soon as administratively possible thereafter.

     5. Consultant. It is agreed that the Consultant is a consultant and not an employee, partner, joint venturer, or agent of Colonial. The Consultant shall be an independent contractor, and the Consultant shall have no authority to bind or commit Colonial in any manner whatsoever. Colonial shall not be responsible for the acts of the Consultant while the Consultant is performing services under this Agreement. The Consultant is solely responsible for federal and state tax withholding, social security taxes withholding, workers’ compensation benefits and fringe benefits for the Consultant. The Consultant is responsible for abiding by all Colonial policies such as: Equal Employment Opportunity Policy, Harassment Policy, Substance Abuse Policy, Code of Ethics/Conduct Policy, and Violence Policy. Any material and uncured violation of said policies will result in immediate termination of this Agreement.

     6. Indemnity. The Company shall indemnify and hold harmless Consultant for all actions undertaken by him in good faith pursuant to and during the term of this Agreement to the same extent as provided by the Company to officers and trustees pursuant to the Company’s by-laws; provided, however, that the Consultant shall assume responsibility for and shall indemnify and hold Colonial harmless and defend Colonial from all losses, expenses, attorney fees, damages, claims and judgments arising out of or resulting from non-payment and/or late payment by the Consultant of federal or state income taxes owed by Consultant with respect to the amounts received by him pursuant to Paragraph 4 hereof.

     7. Support Services. In addition to the payments provided in Paragraph 4, Colonial further shall provide the Consultant with the following, at Colonial’s expense, in connection with the performance of the Services:

(a) Access to Colonial’s email and computer systems, reports and “blackberry” technology through the term of this Agreement;

2

(b) Office space, the services of an administrative assistant and conference room space made available in Charlotte, N.C., as needed;

(c) Access to copy, fax and print services as needed to complete the Services;

(d) Reimbursement for reasonable travel expenses related to the performance of the Services for Colonial and in accordance with Colonial’s travel and reimbursement policy;

(e) A mobile telephone through the term of this Agreement; and

(f) With respect to all other expenses reasonably related to the performance of the Services, the Consultant shall be entitled to reimbursement only upon the prior approval of Colonial.

     8. Scope of Services. The parties agree that no services outside the scope of the Services described herein shall be performed by the Consultant without the prior written agreement of the Consultant.

     9. Termination. Each party has the right to terminate this Agreement prior to the expiration of the above-described term, upon 48 hours’ prior written notice to the other party; provided, however, that, in the event this Agreement is terminated by the Company other than for “cause”, promptly following such termination, the Company shall pay the balance of the Loan Facility Services Compensation in a lump sum. For purposes of this Agreement, “cause” shall mean (a) the Consultant’s failure to substantially and willfully attempt in good faith to perform the requested services after (i) notice to Consultant of the basis for the determination that he has substantially and willfully failed to attempt in good faith to perform the requested services and (ii) a two week opportunity to cure period, (b) Consultant’s gross negligence or willful misconduct in connection with the performance of his duties under this Agreement, or (c) Consultant’s conviction of a criminal offense (other than minor traffic violations) in connection with the performance of his duties hereunder. In any event, this Agreement will terminate on December 31, 2009.

     10. Governing Law. This Agreement shall be construed under and in accordance with the laws of the State of Alabama.

     11. Effect. This Agreement shall be binding on and inure to the benefit of the Parties and their respective heirs, executors, administrators, legal representatives, successors, and assigns.

     12. Validity. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the invalidity, illegality, or unenforceability shall not affect any other provision,

3

and this Agreement shall be construed as if the invalid, illegal, or unenforceable provision had never been contained in it.

     13. Entire Agreement. This Agreement constitutes the sole and only agreement of the Parties and supersedes any prior understandings or written or oral agreements between the Parties respecting its subject matter. Signatures of both Parties below indicate the Parties’ agreement of the scope of work to be provided and the terms surrounding the work.

[Signatures appear on next page.]

4

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written, Colonial acting through its duly authorized officer.

	COLONIAL PROPERTIES TRUST
/s/ Weston M. Andress	By:	/s/ John P. Rigrish
Weston M. Andress		John P Rigrish,
		Chief Administrative Officer &
		Corporate Secretary

5

COLONIAL PROPERTY SERVICES, INC.
By:	/s/ John P. Rigrish John P. Rigrish
	Chief Administrative Officer & Corporate Secretary

6

EX-10.46

Exhibit 10.46

WESTON M. ANDRESS
SEVERANCE AGREEMENT AND GENERAL RELEASE

     THIS SEVERANCE AGREEMENT AND GENERAL RELEASE (this “Agreement”), by and among COLONIAL PROPERTIES TRUST, COLONIAL PROPERTY SERVICES, INC. and WESTON M. ANDRESS (the “Employee”), an individual, is hereby entered into as of the 30th day of December, 2008.

     1. Employee hereby resigns from employment with Colonial Properties Trust (“Colonial”), and its subsidiaries and affiliates, and resigns from all the offices, directorships (including as a trustee of Colonial) and other positions (if any) Employee holds with Colonial and all of its respective directly and indirectly owned subsidiaries, affiliates and entities in which it has joint venture or other interests, effective as of December 30, 2008 (the ^"Resignation Date^"). After the Resignation Date, Employee shall not be entitled to the receipt of any further payments or benefits from Colonial other than those expressly provided for in this Agreement and the Consulting Agreement dated the same date as this Agreement. Colonial hereby accepts on behalf of Colonial and its directly and indirectly owned subsidiaries, affiliates, joint ventures and other entities such resignation.

     2. Employee shall be paid the unpaid portion of Employee’s base salary through the Resignation Date, payable no later than the next regular payroll period following the Resignation Date.

          (a) Employee’s benefits shall terminate as of the Resignation Date in accordance with the terms of Colonial’s benefits plans and its standard policies and procedures, and Employee shall not be entitled after the Resignation Date to participate in or accrue benefits under any plan of Colonial relating to stock options, stock purchases, restricted stock, performance shares, pension, thrift, profit sharing, employee stock ownership, group life insurance, medical coverage, disability insurance, education, housing allowance, car allowance, or other retirement or employee benefits, except as expressly provided in this Agreement or applicable law; provided, however, that nothing herein shall affect Employee’s right to receive his vested and accrued benefits under the Company’s 401(k) plan, his right to continued health care coverage pursuant to the COBRA and his conversion rights, if any, under the Company’s disability or life insurance plans. Employee acknowledges that he and his dependants have no rights to continued benefits under Colonial’s group health plans other than those established pursuant to COBRA. Further, Employee acknowledges that if he elects COBRA continuation coverage with respect to Colonial’s group health plans, Colonial will charge a premium for such coverage in accordance with the limitations of COBRA.

          (b) Colonial shall reimburse Employee for appropriate and reasonable expenses incurred on or before the Resignation Date, if any, in accordance with its applicable policies and procedures. Employee shall submit such requests for reimbursement within 30 days of the Resignation Date, and Colonial will reimburse Employee as promptly as practicable after the submission of such requests, but in any event, within 60 days of their submission.

          (c) In consideration of Employee’s execution of this Agreement and compliance with its terms, Colonial agrees to pay Employee One Million Two Hundred Fifty Thousand Dollars ($1,250,000), less applicable ordinary payroll deductions (the “Severance Payment”). Such amount shall be paid no later than December 31, 2008. In the event Employee subsequently exercises his revocation right pursuant to Section 6 below, Employee shall immediately repay the Severance Payment to the Company.

          (d) The Company agrees to pay to Employee any annual incentive award for his service during 2008 as awarded by the Executive Compensation Committee (the “Compensation Committee”) of the Board of Trustees of the Company under the terms of the Company’s existing 2008 annual non-equity incentive compensation program (the “2008 Program”), in cash, to the extent provided in the next sentence. Any amount payable under the immediately preceding sentence: (i) shall be paid in cash promptly following the determination of awards for executive officers under the 2008 Program by the Compensation Committee and (ii) shall equal the cash

1

value of the amount, if any, awarded to the Company’s Chief Executive Officer (i.e., the person serving as Chief Executive Officer for the majority of the 2008 calendar year) for his service during 2008 under the 2008 Program (it being understood that Employee shall not receive any annual incentive award for his service during 2008 under the 2008 Program unless the Compensation Committee awards an annual incentive award to such Chief Executive Officer for his service during 2008 under the 2008 Program). The Company shall further reimburse Employee for legal fees not to exceed Ten Thousand Dollars ($10,000).

          (e) Any payments under this Agreement that are deemed to be deferred compensation subject to the requirements of Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended, are intended to comply with the requirements of Section 409A. To the extent that there is a material risk that any payments under this Agreement may result in the imposition of an additional tax on Employee under Section 409A, Colonial will reasonably cooperate with Employee to amend this Agreement and related documents such that such documents and payments thereunder comply with Section 409A without materially changing the economic value of this Agreement or the arrangements hereunder to either party.

     3. All share option, restricted share, performance share and other equity awards held by Employee shall be forfeited and terminate as of the Resignation Date regardless of the terms in the award agreements governing such equity awards. Colonial and Employee agree that the provision of services pursuant to the Consulting Agreement will not be considered to be services for purposes of any equity award agreement held by Employee immediately prior to the Resignation Date.

     4. In consideration of the payment(s) and terms set forth in paragraph two, Employee agrees to hereby release, acquit, discharge and hold harmless Colonial, Colonial Properties Trust CRT, Inc., Colonial Properties Services, Inc., Colonial Construction Services, LLC, Colonial Realty Limited Partnership, and all of their respective parent(s), related or affiliated companies, members, subsidiaries, assigns, predecessors or transferees, and all of the present and former directors, officers, employees, servants, agents, partners and members of each of those entities (collectively “Colonial”), from any and all claims whatsoever of any kind or nature, known or unknown, including but not limited to all claims arising out of or in any way connected with the employment of Employee by Colonial, or service as a trustee of Colonial, including but not limited to any and all claims for pay, benefits, damages, or any other relief which were, might or could have been asserted by Employee in any court or before any administrative agency under any of the following federal, state or local statutes, laws, rules and/or ordinances:

          (a) the Civil Rights Act of 1991; Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1866; the Americans with Disabilities Act; the Age Discrimination in Employment Act; the Rehabilitation Act of 1973; the Family and Medical Leave Act; the Employee Retirement Income Security Act of 1974; the Equal Pay Act; the Fair Labor Standards Act; the Vietnam Era Veterans’ Readjustment Assistance Act; the Uniformed Services Employment and Reemployment Rights Act of 1994; the Worker Adjustment and Retraining Notification Act; the Fair Credit Reporting Act; the Immigration Reform and Control Act of 1986; the Occupational Safety and Health Act of 1970; the Employee Polygraph Protection Act; and any amendments to any of the foregoing;

          (b) the North Carolina Equal Employment Practices Act, N.C. Gen. Stat. § 143-422.1 et seq.; the North Carolina Communicable Disease Law, N.C. Gen. Stat. § 130A-148; the North Carolina Persons With Disabilities Protection Act, N.C. Gen. Stat. §§ 168A-1 et seq.; the North Carolina Discrimination on the Basis of Sickle Cell Trait Law, N.C. Gen. Stat. § 95-28.1; the North Carolina Genetic Testing Law, N.C. Gen. Stat. § 95-28.1A; the North Carolina Smokers’ Rights Law, N.C. Gen. Stat. § 95-28.2; the North Carolina Human Relations Commission Bias Law, N.C. Gen. Stat. § 143B-391; the North Carolina Retaliatory Employment Discrimination Law, N.C. Gen. Stat. §§ 95-240 et seq.; the North Carolina Parental Leave for School Involvement Law, N.C. Gen. Stat. § 95-28.3; N.C. Gen. Stat. § 14-357.1 (prohibition on requiring payment of medical examination as condition of employment); N.C. Gen. Stat. §§ 14-355 et seq. (prohibition of blacklisting); N.C. Gen. Stat. §§ 66-57.1 -.2 (employee’s right to inventions); N.C. Gen. Stat. §§ 95-241 et seq. (workers’ compensation retaliation); N.C. Gen. Stat. § 96-15.1(a)-(d) (adverse action for participation in proceeding under Employment Security Act); N.C. Gen. Stat. § 9-32 (adverse action because of jury service); the North Carolina Private Protective Services Act, N.C. Gen. Stat. §§ 74C-1 et seq.; the North Carolina National Guard Reemployment Rights Act, N.C. Gen. Stat. §§ 127A-201

2

et seq.; N.C. Gen. Stat. §§ 95-230 et seq. (drug testing); N.C. Gen. Stat. § 1-539.12 (job reference immunity); N.C. Gen. Stat. §§ 168-1 et seq. (discrimination against handicapped persons in public places); the North Carolina Wage and Hour Act, N.C. Gen. Stat. §§ 95-25.1 et seq.; N.C. Gen. Stat. §§ 95-78 — 94 (discrimination based on association or non-association with labor union); N.C. Gen. Stat. § 95-151 (discrimination under Occupational Safety and Health Act of North Carolina); and any amendments to any of the foregoing; and

          (c) any other federal, state, or local statute, regulation, ordinance, or common law, including without limitation the United States Constitution, the Constitution of the State of North Carolina, and any law related to contracts, torts, discrimination, terms and conditions of employment, employee benefits or termination of employment, to the full extent that such a release is allowed by law.

          (d) Provided, however, that the release set forth above shall not affect Employee’s vested benefits under the Company’s 401(k) plan, any rights or obligations of the Company pursuant to this Agreement or the Consulting Agreement, any shares of the Company held by Employee, or any obligations to indemnify Employee pursuant to the terms of the Company’s by-laws, articles of incorporation, operating agreements, governance documents or any other provisions granting Employee indemnity with respect to actions undertaken as an officer, director, trustee or employee of the Company. In addition, to the extent the Company continues to maintain directors’ and officers’ liability insurance (but in no event longer than six years from the date hereof), the Company further agrees to maintain for Employee, with respect to acts and omissions preceding said Resignation Date, directors’ and officers’ liability insurance with the same limits and the same terms and conditions as the Company’s other officers and trustees.

     5. Employee acknowledges that Employee is aware of Employee’s rights under the laws specifically and generally described in paragraph four, and Employee waives those rights to the full extent that waiver is allowed by law.

     6. The following subparagraphs (a)-(d) apply solely to Employee’s waiver of rights and claims under the Age Discrimination in Employment Act (“ADEA”), for which waiver Employee has by this Agreement received consideration to which Employee is not otherwise entitled:

          (a) Employee does not waive rights or claims that may arise under the ADEA after Employee executes this Agreement;

          (b) Employee is advised to consult with an attorney before executing this Agreement;

          (c) Employee has twenty-one (21) days, which Employee agrees is a reasonable and sufficient amount of time, to consider the waiver of rights and claims under the ADEA; and

          (d) Employee may revoke Employee’s waiver of rights and claims under the ADEA during a period of seven (7) days following his execution of this Agreement, but if Employee exercises the right to revoke, Employee must return all consideration except Twenty-five Dollars ($25.00) paid by Colonial for Employee’s execution of this Agreement. Such revocation shall be ineffective unless it is communicated in writing to Colonial within seven (7) days after the date of Employee’s execution of this Agreement.

     7. If any provision of this Agreement imposes a condition precedent, a penalty or any limitation adversely affecting Employee’s right to challenge the validity of the Agreement, or any portion thereof, such provision does not apply to any dispute about the validity of this Agreement, or any portion thereof, as it relates to the ADEA or the Older Workers Benefit Protection Act, both as amended.

     8. In consideration of the payment and terms set forth above, Employee further agrees:

          (a) to be reasonably available, assist and cooperate fully and truthfully, at Colonial’s reasonable request, with Colonial’s or its attorneys’ investigation of any matter or their participation in any

3

proceedings, negotiations, or arbitrations, judicial or otherwise, growing out of or involving Colonial and/or Employee’s employment with Colonial (Colonial shall reimburse Employee for reasonable expenses, if any, Employee incurs while complying with this obligation);

          (b) to refrain from knowingly making any false, disparaging or derogatory statements about Colonial or any of its respective officers, agents or employees. Notwithstanding the above, any disclosure made by Employee that is required by valid legal process (subpoena or court order) shall not be considered a violation of this Section 8(b); provided, however, that with respect to legal process in any nongovernmental proceeding Employee must promptly notify the Company of his receipt of such process and provide the Company with a reasonable opportunity to contest the validity of the process before Employee responds to such process;

          (c) that the payment and terms described in paragraph one shall not be considered an admission of liability or guilt in any manner whatsoever but is solely for the purpose of resolving doubtful and disputed claims, and that the payment also represents payment in full satisfaction of (i) the Employee’s accrued but unused vacation and leave and (ii) all claims for back pay, benefits, compensatory, punitive and liquidated damages, costs, expenses and attorney’s fees arising out of or pertaining to Employee’s employment with Colonial and/or under or related to the laws described specifically and generally in paragraphs two and four;

          (d) not to institute or voluntarily participate in, as a class member or otherwise, any civil action against Colonial that concerns any matter encompassed by this release;

          (e) not to seek employment or reemployment with Colonial;

          (f) that the Employee will not be entitled to any bonus or incentive payment for 2008 that might otherwise be payable to Employee for any reason, except to the extent otherwise provided herein.

     9. In consideration of the releases and other obligations of Employee set forth herein, the Company agrees that its executive officers and trustees will refrain from making any false, disparaging or derogatory about Employee. Provided, however, that nothing herein shall be construed to preclude any statement made by the Company’s executive officers or trustees under oath pursuant to duly issued process or preclude the Company from complying fully with its obligations pursuant to the Securities Exchange Act of 1934. The Company will provide Employee an advance copy of the portion of its public announcement relating to Employee’s resignation. Employee shall be provided an opportunity to comment on such language but the final determination concerning such language shall be made by the Company.

     10. The parties agree that for purposes of this Agreement the terms identified below shall be defined as follows:

          (a) “Trade Secret” means any information, without regard to form, including but not limited to, technical or non-technical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, a financial plan, a product plan, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and (i) from which the Company derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under circumstances to maintain its secrecy.

          (b) “Confidential Information” means any secret, confidential or proprietary information of the Company not otherwise included in the definition of “Trade Secret” but excluding information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right of the person or entity to which such information pertains. Confidential information includes, but is not limited to, Colonial’s agreements, customer lists, customer’s requirements, mailing lists, pricing information (including pricing strategy), business projections, financial information, product production procedures and techniques, technology, marketing plans and strategies, business plans and strategies, employee information,

4

employee communication, proprietary information, product information, consumer information, sales, leasing and pricing information, attorney-client communications or any other confidential or proprietary information relating to Colonial or its businesses.

          (c) “Nondisclosure Period” means the period beginning on the date of this Agreement and ending two (2) years thereafter.

     11. In consideration of the payment and terms described in paragraph two, Employee agrees that he shall hold in confidence and in a fiduciary capacity for the benefit of Colonial, all Trade Secrets of Colonial that came into his knowledge during his employment by Colonial and shall not directly or indirectly disclose, publish or make use of at any time after the date hereof such Trade Secrets without the prior written consent of Colonial for as long as the information remains a Trade Secret or in the normal course of services provided pursuant to the Consulting Agreement. This Agreement in no way limits or diminishes the rights Colonial may have under State common law or statute governing the protection of Trade Secrets.

     12. In consideration of the payment and terms described in paragraph two, Employee agrees that, during the Nondisclosure Period, he will hold in confidence and in a fiduciary capacity for the benefit of Colonial, all Confidential Information of Colonial that came into his knowledge during his employment by Colonial and services as a trustee of Colonial (whether or not developed or compiled by Employee and whether or not Employee has been authorized to have access to such Confidential Information) and will not directly or indirectly disclose, publish or make use of such Confidential Information, except as authorized by Colonial in connection with the performance of Employee’s duties or in the normal course of Employee’s service pursuant to the Consulting Agreement, without the prior written consent of Colonial. This Agreement in no way limits or diminishes the rights Colonial may have under State common law or statute governing the protection of Confidential Information.

     13. In consideration of the payment and terms described in paragraph two, Employee agrees to promptly deliver to Colonial all files, memoranda, notes, records, reports, manuals or other documents, including all copies of such materials and all documentation prepared or produced in connection therewith, pertaining to the performance of Employee’s services for Colonial, the business of Colonial, or containing Trade Secrets or Confidential Information regarding Colonial’s business, whether made or compiled by Employee or furnished to Employee by virtue of his employment with Colonial. This obligation shall not require Employee to return such information reasonably required by him in discharge of his obligations pursuant to the Consulting Agreement until the end of the term of such Consulting Agreement.

     14. Employee recognizes that because of the personal nature of Colonial’s business, Colonial’s employees are one of Colonial’s most valuable business assets. Furthermore, Employee recognizes that the skill, knowledge, training and experience that Colonial’s employees have acquired from their employment are fundamental to the health and prosperity of Colonial’s business. Employee also recognizes that Colonial’s investment in its employees is a protectable business interest. In consideration of the payment and terms described in paragraph two, Employee covenants and agrees that during the Nondisclosure Period, he will not, either directly or indirectly, solicit, cause or encourage any individual employed by Colonial to terminate his employment with Colonial.

     15. In consideration of the payment and terms described in paragraph two, Employee agrees that during the period in which he is providing service pursuant to the Consulting Agreement, Employee will not (i) directly or indirectly perform services for another person or entity that conflict with the services being performed by Employee under the Consulting Agreement or (ii) engage in sales, marketing or related activities on behalf of Employee or any other person or entity in competition with Colonial with respect to the matters for which Employee is providing services under the Consulting Agreement; provided, however, that Employee may request a waiver of this provision, with such waiver to be granted at the sole discretion of Colonial. Employee agrees that this restriction and all other restrictions contained in this Agreement are reasonable and do not restrict Employee any more than is reasonably necessary to protect the legitimate business interests of Colonial.

5

     16. Employee agrees that he shall comply with his obligation to pay all federal and state income taxes with respect to the payments made to him pursuant to paragraph two, and shall indemnify Colonial from any tax liability, penalty or interest that Colonial may incur as a result of his failure to comply with this obligation.

     17. A failure on the part of either party to insist on strict performance of any term of this Agreement in one or more instances shall not be construed as a waiver or relinquishment of that party’s right to insist on strict performance in the future.

     18. Employee agrees that Employee’s breach of paragraphs 10-15 of this Agreement may result in irreparable harm and injury to Colonial and may cause damage to Colonial in such a way that it would be impossible to calculate actual damages. Any such breach will entitle Colonial to injunctive relief restraining Employee from continued violations, and will entitle Colonial to any and all remedies provided by law with respect to such breach.

     19. Colonial may, without the consent of Employee, assign its rights and obligations under this Agreement to any successor entity. The Company shall ensure that all such successors and assigns perform the Company’s obligations under this Agreement and the Consulting Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place.

     20. In the event that either party commences legal action to enforce the terms of this Agreement and prevails to any extent in the action, the non-prevailing party shall be liable for and must pay the costs, expenses and reasonable attorney’s fees that the prevailing party incurs in the action.

     21. Should a court deem any provision of this agreement to be unenforceable in whole or in part, it shall not affect the legality or enforceability of the remainder of such provision or any other provision of this agreement, which shall survive and remain enforceable.

     22. This Agreement constitutes the entire agreement between the parties. Neither party shall be bound by any terms, conditions, statements or representations, oral or written, not herein contained. Both parties hereby acknowledge and agree that in executing this Agreement they have not relied upon or been induced, persuaded or motivated by any promise or representation made by the other party unless expressly set forth herein and that the other party has not made any promise or representation except those expressly set forth herein. All previous negotiations, statements and any preliminary instruments prepared by the parties or their representatives are merged in this Agreement.

     23. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Alabama.

     24. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

6

I HAVE READ THE FOREGOING SEVERANCE AGREEMENT AND GENERAL RELEASE, I FULLY UNDERSTAND ITS TERMS, I HAVE CONSULTED MY ATTORNEY ABOUT IT OR BEEN GIVEN MORE THAN AMPLE TIME TO CONSULT WITH MY ATTORNEY ABOUT IT, AND I HAVE SIGNED IT VOLUNTARILY THIS 30TH DAY OF DECEMBER, 2008. I FURTHER UNDERSTAND AND AGREE THAT IN ORDER FOR THIS AGREEMENT TO BE VALID, IT MUST BE SIGNED AND RETURNED BY ME TO JOHN RIGRISH NO LATER THAN 5:00 PM ON DECEMBER 31, 2008.

/s/ Weston M. Andress  

WESTON M. ANDRESS 

COLONIAL PROPERTIES TRUST
 

/s/ John P. Rigrish  

John P Rigrish  

Chief Administrative Officer &
Corporate Secretary 

COLONIAL PROPERTY SERVICES, INC.
 

/s/ John P. Rigrish  

John P Rigrish  

Chief Administrative Officer &
Corporate Secretary 

7

EX-10.47

Exhibit 10.47

SEVERANCE AGREEMENT AND GENERAL RELEASE

In consideration of the undersigned parties’ mutual promises and agreements described below, Charles McGehee (“Employee”) and Colonial Properties Trust (“Colonial”) agree as follows:

1. Colonial agrees to:

(a)	Pay Employee Five Hundred Ninety Thousand Two Hundred Forty Dollars ($590,240.00), less applicable ordinary deductions upon separation if Employee remains with Colonial through March 31, 2008 (or such earlier termination date determined by Colonial);
(b)	Pay any accrued, unused vacation;
(c)	to vest all shares of restricted stock held by Employee as of March 31, 2008;
(d)	to fully vest, in accordance with their originally stated vesting schedule, all unvested options;
(e)	pay pro-rated performance bonus in the amount of One Hundred Fifteen Thousand One Hundred Twenty Five Dollars ($115,125.00);
(f)	pay pro-rated stay bonus in the amount of Thirty One Thousand Three Hundred Dollars ($31,300.00).

2. Employee agrees that the employment relationship that existed between Employee and Colonial shall be deemed to have ceased as of March 31, 2008;

(a)	to give or return to Colonial all Colonial property, including without limitation keys, equipment, originals and all copies of documents and stored or downloaded information, and to not retain such property in Employee’s possession, custody or control;
(b)	to not disclose the terms of this agreement, the circumstances surrounding its execution or the fact that Colonial will provide any payment pursuant to this agreement, to any person or entity with the exception of Employee’s legal counsel, tax advisor, financial planner, and spouse, unless required by law; and to first obtain the agreement of his spouse, financial planner, tax advisor and legal counsel to comply with the same non-disclosure obligation described above before any such disclosure is made to them;
(c)	to make himself available, assist and cooperate fully and truthfully, at Colonial’s request, with Colonial’s or its attorneys’ investigation of any matter or their participation in any proceedings, judicial or otherwise, growing out of or involving Colonial during Employee’s employment with Colonial; and
(d)	to refrain from making any negative or disparaging comments regarding Colonial or its officers, agents or employees;
(e)	to permanently maintain confidentiality of any information obtained during the course of his employment with Colonial including, but not limited to, employee information, employee communication, proprietary information, product information, consumer information, sales,

1

leasing and pricing information, attorney-client communications or any other confidential or proprietary information relating to Colonial or its business; and agrees that he will not disclose or use any such information without the prior written consent of Colonial.

3.  (a)  Employee does hereby release, acquit and discharge Colonial Properties Trust, its subsidiaries or affiliated companies, and all of their directors, officers, employees, servants, agents and attorneys, from any and all claims or causes of action whatsoever of any kind or nature, whether known or unknown, including claims and causes of actions arising out of or in any way related to Employee’s employment or the termination of his employment with Colonial, or which were, might or could have been asserted in any court or before any administrative agency under the Civil Rights Act of 1991, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Americans With Disabilities Act, the Rehabilitation Act of 1973, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Family and Medical Leave Act, the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Employee Retirement Income Security Act of 1974, the Equal Pay Act, the Fair Labor Standards Act, the Vietnam Era Veteran’s Readjustment Assistance Act, the Uniform Service Employment and Reemployment Rights Act of 1994, the Fair Credit Reporting Act, the Sarbanes-Oxley Act, Alabama: [Alabama Code §§ 25-1-20 et seq. (the Alabama Age Discrimination in Employment Act); Alabama Code § 25-1-10 (the Alabama Affirmative Action Programs for Minorities law); Alabama Code § 13A-11-123 (anti-blacklisting statute); Alabama Code § 12-16-8 (employer shall pay usual compensation to employee during employee’s jury service); Alabama Code § 12-16-8.1 (employer not to discharge employee for jury service); Alabama Code § 25-5-11.1 (prohibition of discharge of employee for filing workers’ compensation claim or for safety complaints); Alabama Code §§ 25-5-330 et seq. (drug-free workplace program); Alabama Code §§ 25-7-30 et seq. (right to work laws), all as amended, or any other statute of the United States of America or the state of Alabama, the laws of the state of Alabama (including without limitation any law related to discrimination, harassment, terms and conditions of employment, or termination of employment, or tort and contract claims) or the Constitution of either the state of Alabama or the United States], to the fullest extent that such a release is allowed by law.

(b)	Employee acknowledges and agrees that he is aware of his rights under the laws specifically and generally described above and that he waives those rights to the full extent that waiver is allowed by law.
(c)	Employee also acknowledges and agrees that the payment described above shall not be considered an admission of liability or guilt in any manner whatsoever but is solely for purposes of providing severance pay to Employee and for resolving doubtful and disputed claims or any legal claims that have not been asserted and that would be doubtful and disputed if asserted, and that the payment also represents payment in full satisfaction of all claims for costs, expenses and attorneys’ fees arising under or related to the laws described specifically and generally above.
(d)	Employee further agrees to not institute or voluntarily participate as a class member in any civil action against Colonial that concerns any matter encompassed by this release.

4.	A failure on the part of either party to insist on strict performance of any term of this agreement in one or more instances shall not be construed as a waiver or relinquishment of that party’s right to insist on strict performance in the future.
5.	Employee agrees that his breach of this agreement will result in irreparable harm and injury to Colonial

2

	and would cause damage to Colonial in such a way that it would be impossible to calculate actual damages. Any such breach will entitle Colonial to injunctive relief restraining Employee from continued violations, to recover all compensation provided by Colonial as consideration for this agreement except Twenty-Five Dollars ($25.00), to additional remedies provided in the following paragraphs, and to any other remedies available to Colonial.
6.	In the event that Colonial commences legal action to enforce the terms of this severance agreement and general release and prevails to any extent in the action, Employee shall be liable for and must pay the expenses, costs and reasonable attorneys’ fees Colonial incurs in the action.
7.	Should a court deem any provision of this agreement to be unenforceable in whole or in part, it shall not affect the legality or enforceability of the remainder of such provision or any other provision of this agreement, which shall survive and remain enforceable.
8.	The following subparagraphs (a) — (d) apply solely to Employee’s waiver of rights and claims under the Age Discrimination in Employment Act, 29 U.S.C. §§ 621 et seq. (“ADEA”), for which waiver Employee has by this agreement and release received consideration to which Employee is not otherwise entitled:

(a)	Employee does not waive rights or claims that may arise under the ADEA after Employee executes this agreement and release;
(b)	Employee is advised to consult with an attorney before executing this agreement and release;
(c)	Employee has twenty-one (21) days to consider the waiver of rights and claims under the ADEA; and
(d)	Employee may revoke his waiver of rights and claims under the ADEA during a period of seven (7) days following his execution of this agreement and release, but if Employee exercises the right to revoke, he must return all consideration except Twenty-five Dollars ($25.00) paid by Colonial for his execution of this agreement and release. Such revocation shall be ineffective unless it is communicated to Colonial within seven (7) days after the date of Employee’s execution of this agreement and release.

9.	If any provision of this agreement and release imposes a condition precedent, a penalty or any limitation adversely affecting Employee’s right to challenge the validity of the agreement and release, or any portion thereof, such provision does not apply to any dispute about the validity of this agreement, or any portion thereof, as it relates to the Age Discrimination in Employment Act or the Older Workers Benefit Protection Act, all as amended.
10.	This severance agreement and general release constitutes the entire agreement between the parties. Neither party shall be bound by any terms, conditions, statements or representations, oral or written, not herein contained. Employee hereby acknowledges and agrees that in executing this agreement he has not relied upon or been induced, persuaded or motivated by any promise or representation made by Colonial unless expressly set forth herein and that Colonial has not made any promise or representation except those expressly set forth herein. All previous negotiations, statements and any preliminary instruments prepared by the parties or their representatives are merged in this agreement.
11.	This severance agreement and general release shall be governed by and interpreted in accordance with the laws of the state of Alabama.

3

Colonial Properties Trust
By:	/s/ John Rigrish
	John Rigrish
	Chief Administrative Officer

I HAVE READ THE FOREGOING SEVERANCE AGREEMENT AND GENERAL RELEASE, I FULLY UNDERSTAND ITS TERMS, I HAVE CONSULTED MY ATTORNEY ABOUT IT OR BEEN GIVEN MORE THAN AMPLE TIME TO CONSULT WITH MY ATTORNEY ABOUT IT, AND I HAVE SIGNED IT VOLUNTARILY THIS 31ST DAY OF MARCH, 2008. IN ORDER FOR THIS AGREEMENT TO BE VALID, IT MUST BE SIGNED AND RETURNED TO HUMAN RESOURCES NO LATER THAN 5:00 ON MONDAY, APRIL 21, 2008.

/s/ Charles McGehee  

Charles McGehee 

4

EX-12.1

Exhibit 12.1

COLONIAL PROPERTIES TRUST

Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Share Distributions

	For the Years Ended December 31,
(all dollar amounts in thousands)	2008			2007			2006			2005			2004
Earnings:
Pre-tax income (loss) before adjustment for minority interest in consolidated subsidiaries or income, loss from equity investees, extraoridinary gain or loss, or gains on sale of properties	$	(127,000	)	$	(72,930	)	$	(24,039	)	$	(49,795	)	$	(5,243	)
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		107,253			130,246			158,676			97,804			85,118
Total earnings	$	(27,835	)	$	46,118		$	129,344		$	46,490		$	78,147
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
Distributions to Series B preferred unitholders		7,251			7,250			7,251			7,494			8,875
Total Fixed Charges	$	107,253		$	130,246		$	158,676		$	97,804		$	85,118
Distributions to Series A, Series C and Series D preferred shareholders		8,773			13,439			20,902			14,781			15,284
Combined Fixed Charges and Preferred Share Distributions	$	116,026		$	143,685		$	179,578		$	112,585		$	100,402
Ratio of Earnings to Fixed Charges		(a	)		(a	)		(a	)		(a	)		(a	)
Ratio of Earnings to Combined Fixed Charges and Preferred Share Distributions		(b	)		(b	)		(b	)		(b	)		(b	)

a)

For the years ended December 31, 2008, 2007, 2006, 2005 and 2004, the aggregate amount of fixed charges exceeded our earnings by approximately $135.1 million, $84.1 million, $29.3 million, $51.3 million and $7.0 million, respectively, which is the amount of additional earnings that would have been required to achieve a ratio of earnings to fixed charges of 1.0x for such period. The deficiency of the ratio of earnings to fixed charges for all years presented is impacted by the classification of operations for assets held for sale and sold as discontinued operations. The deficiency of the ratio of earnings to fixed charges for the year ended December 31, 2008 is also due to the $116.9 million non-cash impairment charge related to the Company’s for-sale residential business and certain development projects. The deficiency of the ratio of earnings to fixed charges for the year ended December 31, 2007 is also due to the $43.3 million non-cash impairment charge related to the Company’s for-sale residential business. The deficiency of the ratio of earnings to fixed charges for the year ended December 31, 2005, is also impacted by amortization of intangible assets acquired in the Cornerstone merger.

b)

For the years ended December 31, 2008, 2007, 2006, 2005 and 2004, the aggregate amount of fixed charges and preferred share distributions exceeded our earnings by approximately $143.9 million, $97.6 million, $50.2 million, $66.1 million and $22.3 million, respectively, which is the amount of additional earnings that would have been required to achieve a ratio of earnings to fixed charges of 1.0x for such period. The deficiency of the ratio of earnings to fixed charges for all periods presented is impacted by the classification of operations for assets held for sale and sold as discontinued operations. The deficiency of the ratio of earnings to fixed charges for the year ended December 31, 2008 is also due to the $116.9 million non-cash impairment charge related to the Company’s for-sale residential business and certain development projects. The deficiency of the ratio of earnings to fixed charges for the year ended December 31, 2007 is also due to the $43.3 million non-cash impairment charge related to the Company’s for-sale residential business. For the year ended December 31, 2005, the deficiency is also a result of the Company recording amortization expense of approximately $42.0 million related to intangible assets acquired in the Cornerstone merger.

The ratios of earnings to fixed charges were computed by dividing earnings by fixed charges. For this purpose, earnings consist of pre-tax income from continuing operations before adjustment for minority interest in consolidated subsidiaries or income or loss from equity investees, gains on sale of properties, distributed income of equity investees, fixed charges and amortization of capitalized interest excluding interest costs capitalized. Fixed charges consist of interest expense (including interest costs capitalized) and amortization of debt issuance costs.

EX-21.1

Exhibit 21.1

List of Subsidiaries
Colonial Properties Trust

				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

List of Subsidiaries
Colonial Properties Trust

				Jurisdiction of
Name				Formation
	H.	Heathrow F, LLC		Delaware
	I.	Heathrow 3, LLC		Delaware
	J.	Heathrow G, LLC		Delaware
	K.	Heathrow 6, LLC		Delaware
	L.	Heathrow I, LLC		Delaware
	M.	Highway 150, LLC		Alabama
	N.	600 Building Partners		Alabama
	O.	Colonial/Polar BEK Management Company		Alabama
	P.	G & I III Madison, LLC		Delaware
	Q.	G & I III Meadows, LLC		Delaware
	R.	G & I III Colony Woods, LLC		Delaware
	S.	G & I IV Cunningham LP		Delaware
	T.	Parkside Drive LLC		Tennessee
	U.	CRLP VOP, LLC		Delaware
		1.	VOP Beltline Limited Partnership	Delaware
	V.	CP D’Iberville JV LLC		Alabama
		1.	Colonial/DPL JV LLC	Alabama
	W.	CMS Palma Sola Associates Limited Partnership		Florida
	X.	CMS Brentwood, LLC		Delaware
	Y.	TA-Colonial Traditions LLC		Delaware
	Z.	The Colonnade/CLP LLC		Delaware
	AA.	CRLP Durham, LP		Delaware
	BB.	CRLP Roswell, LP		Delaware
	CC.	G & I V Riverchase LLC		Delaware
	DD.	Walkers Chapel Road Two, LLC		Alabama
	EE.	ACG-CRLP Crescent Matthews LLC		Delaware
	FF.	Belterra Investors LLC		Delaware
	GG.	Bham Lending LLC		Delaware
	HH.	Colonial 100/200 Owner, LLC		Delaware
		1.	A-Colonial 100/200 Owner, LLC	Delaware
	II.	Colonial 300/500 Owner, LLC		Delaware
		1.	A- Colonial 300/500 Owner, LLC	Delaware
	JJ.	Colonial Retail Owner, LLC		Delaware
		1.	A - Colonial Retail Owner, LLC	Delaware
	KK.	Colonial Retail Development, LLC		Delaware
		1.	A-Colonial Retail Development Owner, LLC	Delaware
	LL.	Colonial North Development, LLC		Delaware
		1.	A - Colonial North Development Owner, LLC	Delaware
	MM.	Colonial East Development, LLC		Delaware
		1.	A- Colonial East Development Owner, LLC	Delaware
	NN.	CPSI St. Andrews, LLC		Delaware
		1.	Montecito St. Andrews, LLC	Delaware
	OO.	McDowell — CRLP McKinney JV, LLC		Delaware
	PP.	CP Nord du Lac JV, LLC		Delaware
	QQ.	G & I IV Harrison Grande LP		Delaware
	RR.	Parkside Drive Farragut, LLC		Tennessee

List of Subsidiaries
Colonial Properties Trust

				Jurisdiction of
Name				Formation
	SS.	Highway 11/31 LLC		Delaware
	TT.	Langley-Colonial LLC		Alabama
	UU.	CRLP Huntsville TIC Investor I LLC		Delaware
		1.	BR Cummings Research Park Portfolio I, TIC-2, LLC	Delaware
	VV.	CRLP Huntsville TIC Investor II LLC		Delaware
		1.	BR Cummings Research Park Portfolio II, TIC-2, LLC	Delaware
	WW.	CRLP Huntsville TIC Investor III LLC		Delaware
		1.	BR Cummings Research Park Portfolio III, TIC-2, LLC	Delaware
	XX.	CRLP Crescent Lane LLC		Delaware
	YY.	BR Cummings Research Place Development, LLC		Alabama
	ZZ.	CMS/Colonial Multifamily Canyon Creek JV, LP		Delaware
	AAA.	CLNL Acquisition Sub LLC		Delaware
		1.	Apple REIT II Limited Partnership	Virginia
		2.	Apple REIT III Limited Partnership	Virginia
		3.	Apple REIT IV Limited Partnership	Virginia
		4.	Apple REIT Limited Partnership	Virginia
		5.	Apple REIT V Limited Partnership	Virginia
		6.	Apple REIT VI Limited Partnership	Virginia
		7.	Apple REIT VII Limited Partnership	Virginia
		8.	Apple-CRIT Limited LLC	Delaware
		9.	Apple-CRIT General LLC	Delaware
		10.	Autumn Park Apartments, LLC	North Carolina
		11.	CAC II Limited Partnership	Virginia
		12.	CAC III Limited Partnership	Virginia
		13.	CAC III Special General LLC	Delaware
		14.	CAC III Special Limited LLC	Delaware
		15.	CAC IV Limited Partnership	Virginia
		16.	CAC Limited Partnership	Virginia
		17.	CAC V Limited Partnership	Virginia
		18.	CAC VI Limited Partnership	Virginia
		19.	CAC VI Special General LLC	Virginia
		20.	CAC VI Special Limited LLC	Delaware
		21.	CAC VII Limited Partnership	Virginia
		22.	Cornerstone Acquisition Company LLC	Delaware
		23.	Cornerstone Merger Sub, LLC	Delaware
		24.	Cornerstone NC Operating Limited Partnership	Virginia
		25.	CRIT - Dunwoody LLC	Delaware
		26.	CRIT - NC Three LLC	Delaware
		27.	CRIT - NC Two LLC	Delaware
		28.	CRIT - SC LP LLC	Delaware
		29.	CRIT General LLC	Delaware
		30.	CRIT Special II LLC	Delaware
		31.	CRIT Special III LLC	Delaware
		32.	CRIT Special IV LLC	Delaware
		33.	CRIT Special LLC	Delaware
		34.	CRIT-Cape Landing LLC	Delaware

List of Subsidiaries
Colonial Properties Trust

			Jurisdiction of
Name			Formation
	35.	CRIT-Cornerstone Limited Partnership	Virginia
	36.	CRIT-Enclave at Poplar Place, LLC	Virginia
	37.	CRIT-Glen Eagles, LLC	Virginia
	38.	CRIT-Landings, LLC	Virginia
	39.	CRIT-Legacy LLC	Delaware
	40.	CRIT-Meadows, LLC	Virginia
	41.	CRIT-Mill Creek, LLC	Virginia
	42.	CRIT-NC Four LLC	Delaware
	43.	CRIT-NC V, LLC	Delaware
	44.	CRIT-Poplar Place, LLC	Virginia
	45.	CRIT-SC GP LLC	Delaware
	46.	CRIT-SPE I LLC	Delaware
	47.	CRIT-VA II LLC	Delaware
	48.	CRIT-VA III LLC	Delaware
	49.	CRIT-VA IV LLC	Delaware
	50.	CRIT-VA LLC	Delaware
	51.	CRIT-VA V LLC	Delaware
	52.	CRIT-VA VI LLC	Delaware
	53.	Deposit Waiver LLC	Delaware
	54.	Greentree LLC	Georgia
	55.	Legacy Park Apartments, LLC	North Carolina
	56.	Marsh Cove Apartments LLC	Georgia
	57.	Merritt at Godley Station, LLC	Georgia
	58.	Merry Land Property Management, LLC	Delaware
	59.	ML Apartments I LLC	Delaware
	60.	ML Apartments II LLC	Delaware
	61.	ML Apartments III LLC	Delaware
	62.	ML Apartments IV LLC	Delaware
	63.	ML Hammocks at Long Point, L.L.C.	Georgia
	64.	ML Huntington, L.L.C.	Georgia
	65.	ML James Island Apartments, L.P.	Georgia
	66.	ML Whitemarsh LLC	Georgia
	67.	ML Windsor Place, L.L.C.	Georgia
	68.	Quarterdeck Apartments LLC	Georgia
	69.	St. Andrews Place Apartments, LLC	North Carolina
	70.	St. Andrews Place II, LLC	North Carolina
	71.	Timber Crest Apartments, LLC	North Carolina
	72.	Trinity Commons Apartments, LLC	North Carolina
	73.	Trinity Commons II, LLC	North Carolina
	74.	Waters Edge Apartments LLC	Georgia
	75.	CRIT Holdings, L.P.	Virginia
	76.	CRIT-NC, LLC	Virginia
	77.	APA II, LLC	North Carolina
	78.	Master SC Apartments L.P.	Delaware
	79.	SAP IV Arbors NF GP L.L.C.	Delaware
	80.	SAP IV SR NF GP L.C.C.	Delaware

List of Subsidiaries
Colonial Properties Trust

				Jurisdiction of
Name				Formation
		81.	Arbors at Windsor Lakes Apartments NF L.P.	Delaware
		82.	SR Apartments NF L.P.	Delaware
		83.	Merritt at Godley Station II, LLC	Georgia
		84.	Colonial Apple-CRIT LLC	Delaware
	BBB.	Colonial Retail JV LLC		Delaware
	CCC.	Colonial Office JV LLC		Delaware
		1.	CRTP OP LLC	Delaware
		2.	DRA CRT LP Germantown Center LLC	Delaware
		3.	DRA CRT GP Germantown Center LLC	Delaware
		4.	DRA CRT Germantown Center L.P.	Delaware
		5.	CR Decoverly LLC	Maryland
		6.	CR Decoverly 15200 LLLP	Maryland
		7.	DRA CRT Decoverly 15200 LLC	Delaware
		8.	DRA CRT LP Greensboro Land LLC	Delaware
		9.	DRA CRT GP Greensboro Land LLC	Delaware
		10.	DRA CRT Greensboro Land LLC	Delaware
		11.	CRT BFC GP LLC	Florida
		12.	CRT BFC Ltd.	Delaware
		13.	CRT CTA GP LLC	Delaware
		14.	CTA Partners LP	Delaware
		15.	CRT Decoverly LLC	Maryland
		16.	CR Decoverly 9501 LLLP	Maryland
		17.	CRT Post Oak Inc.	Delaware
		18.	CRT Post Oak LP	Delaware
		19.	Mez DRA CRT LP Post Oak LLC	Delaware
		20.	DRA CRT GP Post Oak LLC	Delaware
		21.	CRT BMWCX Ltd.	Florida
		22.	CRT BM GP LLC	Delaware
		23.	CRT Baymeadows Ltd.	Florida
		24.	CRT WC GP LLC	Delaware
		25.	CRT Westchase LP	Delaware
		26.	CRT McGinnis Park LLC	Florida
		27.	McGinnis Park Ltd.	Florida
		28.	CRT/McGinnis Office LLC	Florida
		29.	CRT/McGinnis Office Ltd.	Florida
		30.	CRT/McGinnis Undeveloped LLC	Florida
		31.	CRT/McGinnis Developed LLC	Florida
		32.	Mez DRA CRT LLC	Delaware
		33.	DRA CRT Lake Mary Center LLC	Delaware
		34.	DRA CRT Perimeter Center LLC	Delaware
		35.	DRA CRT Chamblee Center LLC	Delaware
		36.	DRA CRT GP Charlotte University Center LLC	Delaware
		37.	DRA CRT LP Charlotte University Center LLC	Delaware
		38.	DRA CRT Charlotte University Center LP	Delaware
		39.	CRT MK Oak Park LP	Delaware
		40.	CRT Signature Place GP LLC	Delaware

List of Subsidiaries
Colonial Properties Trust

				Jurisdiction of
Name				Formation
		41.	CRT Signature Place LP	Delaware
		42.	CRT Ravinia MZ LLC	Delaware
		43.	CRT Ravinia LLC	Delaware
		44.	DRA CRT Baymeadows Center LLC	Delaware
		45.	DRA CRT Alabama Land LLC	Delaware
		46.	DRA CRT JTB Center LLC	Delaware
		47.	DRA CRT Orlando University Center LLC	Delaware
		48.	DRA CRT Greenville Park Land LLC	Delaware
		49.	DRA ACP LLC	Delaware
		50.	DRA CRT Orlando Central Center LLC	Delaware
		51.	DRA CRT Orlando Central Land LLC	Delaware
		52.	CRT Decoverly 9509 LLC	Maryland
		53.	DRA CRT Post Oak LP	Delaware
		54.	CRT Realty Services Inc.	Florida
		55.	ACP Fitness Center LLC	Georgia
		56.	TRC Holdings LLC	Georgia
		57.	DRA CRT St. Petersburg Center LLC	Delaware
		58.	DRA CRT Landstar LLC	Delaware
		59.	DRA CRT St. Petersburg Land LLC	Delaware
		60.	DRA CRT Kogerama Land LLC	Delaware
	DDD.	Colonial Office Holdings LLC		Delaware
		1.	DRA/CLP Office LLC	Delaware
		2.	DRA/CLP 600 Townpark Office Orlando LLC	Delaware
		3.	DRA/CLP 901 Maitland Orlando LLC	Delaware
		4.	DRA/CLP Bayside Tampa LLC	Delaware
		5.	DRA/CLP Blue Lake Birmingham LLC	Delaware
		6.	DRA/CLP Colonnade Office Birmingham LLC	Delaware
		7.	DRA/CLP Colonnade Retail Birmingham LLC	Delaware
		8.	DRA/CLP Concourse Center Tampa LLC	Delaware
		9.	DRA/CLP CP Tampa LLC	Delaware
		10.	DRA/CLP Downtown Plaza Birmingham LLC	Delaware
		11.	DRA/CLP DRS Building Huntsville LLC	Delaware
		12.	DRA/CLP Esplanade Charlotte GP LLC	Delaware
		13.	DRA/CLP Esplanade LP	Delaware
		14.	DRA/CLP Heathrow Orlando LLC	Delaware
		15.	DRA/CLP Heathrow Orlando 1000 LLC	Delaware
		16.	DRA/CLP Independence Plaza Birmingham LLC	Delaware
		17.	DRA/CLP International Park Birmingham LLC	Delaware
		18.	DRA/CLP Lakeside Huntsville LLC	Delaware
		19.	DRA/CLP NG BTS Huntsville LLC	Delaware
		20.	DRA/CLP The Peachtree Atlanta LLC	Delaware
		21.	DRA/CLP Peachtree Parking LLC	Delaware
		22.	DRA/CLP Perimeter Corporate Park Huntsville LLC	Delaware
		23.	DRA/CLP Progress Center Huntsville LLC	Delaware
		24.	DRA/CLP Regions Center Huntsville LLC	Delaware
		25.	DRA/CLP Research Office Center Huntsville LLC	Delaware

List of Subsidiaries
Colonial Properties Trust

				Jurisdiction of
Name				Formation
		26.	DRA/CLP Research Park Huntsville LLC	Delaware
		27.	DRA/CLP Research Park Plaza Austin GP LLC	Delaware
		28.	DRA/CLP Research Park Plaza Austin LP	Delaware
		29.	DRA/CLP Research Place Huntsville LLC	Delaware
		30.	DRA/CLP Riverchase Center Birmingham LLC	Delaware
		31.	DRA/CLP Townpark Office Orlando LLC	Delaware
		32.	DRA/CLP Townpark Retail Orlando LLC	Delaware
	EEE.	Colonial Retail Holdings LLC		Delaware
		1.	OZ/CLP Retail LLC	Delaware
		2.	OZ/CLP Alabaster LLC	Delaware
		3.	OZ/CLP Beechwood LLC	Delaware
		4.	OZ/CLP Burnt Store LLC	Delaware
		5.	OZ/CLP Clay LLC	Delaware
		6.	OZ/CLP Hunter's Creek LLC	Delaware
		7.	OZ/CLP Kingwood Commons LP	Delaware
		8.	OZ/CLP Lakewood LLC	Delaware
		9.	OZ/CLP Northdale LLC	Delaware
		10.	OZ/CLP Portofino LP	Delaware
		11.	OZ/CLP Trussville I LLC	Delaware
		12.	OZ/CLP Trussville II LLC	Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-55078 and 333-142537) and Form S-8 (File Nos. 033-84510, 333-14155, 333-27201, 333-27203, 333-27205, 333-60333, 333-123829 and 333-150399) of Colonial Properties Trust of our report dated February 27, 2009 relating to the consolidated financial statements, financial statement schedules, and the effectiveness of internal control over financial reporting of Colonial Properties Trust, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Birmingham, Alabama
February 27, 2009

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-55078 and 333-142537) and Form S-8 (File Nos. 333-14155, 333-27201, 333-27203, 333-27205, 333-60333, 333-123829, 333-150399 and 33-84510) of Colonial Properties Trust of our report dated February 26, 2008, relating to the consolidated financial statements of DRA/CLP Office LLC and Subsidiaries appearing in this Form 10-K.

/s/ Weiser LLP

New York, New York
February 23, 2009

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

          We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-55078 and 333-142537) and Form S-8 (File Nos. 033-84510, 333-14155, 333-27201, 333-27203, 333-27205, 333-60333, 333-123829 and 333-150399) of Colonial Properties Trust of our report dated February 29, 2008, relating to the consolidated financial statements of OZ/CLP Retail and Subsidiaries, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers

Birmingham, Alabama
February 27, 2009

EX-31.1

Exhibit 31.1

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT

I, Thomas H. Lowder, certify that:

1. I have reviewed this annual report on Form 10-K of Colonial Properties Trust;

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

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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.

By:  /s/  Thomas H. Lowder

Thomas H. Lowder

Chief Executive Officer

Date: February 27, 2009

EX-31.2

Exhibit 31.2

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT

I, C. Reynolds Thompson, III, certify that:

1. I have reviewed this annual report on Form 10-K of Colonial Properties Trust;

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

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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.

By:  /s/  C. Reynolds Thompson, III

C. Reynolds Thompson, III

Chief Financial Officer

Date: February 27, 2009

EX-32.1

Exhibit 32.1

WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Executive Officer of Colonial Properties Trust (the “Company”), hereby certifies that, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to his knowledge on the date hereof:

(a) The Form 10-K of the Company 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 the Company.

By:  /s/  Thomas H. Lowder

Thomas H. Lowder

Chief Executive Officer

Date: February 27, 2009

EX-32.2

Exhibit 32.2

WRITTEN STATEMENT OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Financial Officer of Colonial Properties Trust (the “Company”), hereby certifies that, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to his knowledge on the date hereof:

(a) The Form 10-K of the Company 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 the Company.

By:  /s/  C. Reynolds Thompson, III

C. Reynolds Thompson, III

Chief Financial Officer

Date: February 27, 2009