Real Estate Partnerships

6 Months Ended

Jun. 30, 2011

Real Estate Partnerships

Real Estate Partnerships

NOTE 5—REAL ESTATE PARTNERSHIPS

Federal/Lion Venture LP

We have a joint venture arrangement (the "Partnership") with affiliates of a discretionary fund created and advised by ING Clarion Partners ("Clarion"). We own 30% of the equity in the Partnership and Clarion owns 70%. We hold a general partnership interest, however, Clarion also holds a general partnership interest and has substantive participating rights. We cannot make significant decisions without Clarion's approval. Accordingly, we account for our interest in the Partnership using the equity method. As of June 30, 2011, the Partnership owned seven retail real estate properties. We are the manager of the Partnership and its properties, earning fees for acquisitions, dispositions, management, leasing, and financing. Intercompany profit generated from fees is eliminated in consolidation. We also have the opportunity to receive performance-based earnings through our Partnership interest. Accounting policies for the Partnership are similar to accounting policies followed by the Trust. The Partnership is subject to a buy-sell provision which is customary for real estate joint venture agreements and the industry. Either partner may initiate this provision at any time, which could result in either the sale of our interest or the use of available cash or borrowings to acquire Clarion's interest.

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
OPERATING RESULTS
Revenue	$	4,676	$	4,523	$	9,644	$	9,178
Expenses
Other operating expenses		1,228		1,380		2,984		3,342
Depreciation and amortization		1,290		1,244		2,568		2,512
Interest expense		848		850		1,696		1,702
Total expenses		3,366		3,474		7,248		7,556
Net income	$	1,310	$	1,049	$	2,396	$	1,622
Our share of net income from real estate partnership	$	444	$	353	$	801	$	546

	June 30, 2011		December 31, 2010
	(In thousands)
BALANCE SHEETS
Real estate, net	$	179,481	$	181,565
Cash		3,679		3,054
Other assets		6,340		7,336
Total assets	$	189,500	$	191,955
Mortgages payable	$	57,481	$	57,584
Other liabilities		4,829		5,439
Partners' capital		127,190		128,932
Total liabilities and partners' capital	$	189,500	$	191,955
Our share of unconsolidated debt	$	17,244	$	17,275
Our investment in real estate partnership	$	34,963	$	35,504

Taurus Newbury Street JV II Limited Partnership

In May 2010, we formed Taurus Newbury Street JV II Limited Partnership ("Newbury Street Partnership"), a joint venture limited partnership with an affiliate of Taurus Investment Holdings, LLC ("Taurus"), which plans to acquire, operate and redevelop up to $200 million of properties located primarily in the Back Bay section of Boston, Massachusetts. We hold an 85% limited partnership interest in Newbury Street Partnership and Taurus holds a 15% limited partnership interest and serves as general partner. As general partner, Taurus is responsible for the operation and management of the properties, subject to our approval on major decisions. We have evaluated the entity and determined that it is not a VIE. Accordingly, given Taurus' role as general partner, we account for our interest in Newbury Street Partnership using the equity method. Accounting policies for the Newbury Street Partnership are similar to accounting policies followed by the Trust. Intercompany profit generated from interest income on loans we have provided to the partnership is eliminated in consolidation. All amounts contributed and advanced to Newbury Street Partnership are included in "Investment in real estate partnerships" in the consolidated balance sheets.

Newbury Street Partnership is subject to a buy-sell provision which is customary for real estate joint venture agreements and the industry. The buy-sell can be exercised only in certain circumstances through May 2014 and may be initiated by either party at anytime thereafter which could result in either the sale of our interest or the use of available cash or borrowings to acquire Taurus' interest.

On May 26, 2011, Newbury Street Partnership acquired the fee interest in a 6,700 square foot building located on Newbury Street for a purchase price of $6.2 million. We contributed approximately $2.8 million towards the acquisition and provided a $3.1 million interest-only loan secured by the building. This loan and the $8.8 million loan secured by the other two buildings owned by the partnership bear interest at LIBOR plus 400 basis points and mature in May 2012, subject to a one-year extension option. This purchase increases Newbury Street Partnership's portfolio to three buildings all located on Newbury Street with a total of approximately 39,000 square feet of mixed-use gross leasable area. Our investment in Newbury Street Partnership was $22.9 million and $16.1 million, respectively, at June 30, 2011 and December 31, 2010.

Due to the timing of receiving financial information from the general partner, our share of operating earnings is recorded one quarter in arrears. Consequently, the following tables provide summarized operating results for the six months ended March 31, 2011, and the financial position of the Newbury Street Partnership as of March 31, 2011 and December 31, 2010:

OPERATING RESULTS (in thousands)
Revenue	$	548
Expenses
Other operating expenses		379
Depreciation and amortization		176
Interest expense		194
Total expenses		749
Net loss	$	(201	)
Our share of net loss from real estate partnership	$	(34	)

	March 31, 2011		December 31, 2010
	(In thousands)
BALANCE SHEETS
Real estate, net	$	17,463	$	17,121
Cash		379		264
Other assets		365		358
Total assets	$	18,207	$	17,743
Mortgages payable	$	8,750	$	8,750
Other liabilities		816		393
Partners' capital		8,641		8,600
Total liabilities and partners' capital	$	18,207	$	17,743