10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005
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	59-7007599
(State or other jurisdiction of incorporation)	(IRS Employer Identification Number)
2101 Sixth Avenue North, Suite 750,	35203
Birmingham, Alabama	(Zip Code)
(Address of principal executive offices)

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
91/4% Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest, par value $.01 per share	New York Stock Exchange
Depositary shares, each representing1/10 of a share of 81/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share	New York Stock Exchange
Depositary shares, each representing1/100 of a share of 75/8% Series E 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 þ         No o

     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.    þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ         Accelerated filer o         Non-accelerated filer o

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

     The aggregate market value of the 37,528,434 Common Shares of Beneficial Interest held by non-affiliates of the Registrant was approximately $1,651,251,101 based on the closing price of $44.00 as reported on the New York Stock Exchange for such Common Shares of Beneficial Interest on June 30, 2005.

     Number of the Registrant’s Common Shares of Beneficial Interest outstanding as of March 2, 2006: 45,177,428

Contents

PART I
Item 1	Business	3
Item 1A	Risk Factors	21
Item 1B	Unresolved Staff Comments	33
Item 2	Properties	33
Item 3	Legal Proceedings	51
Item 4	Submission of Matters to a Vote of Security Holders	51
PART II
Item 5	Market for Registrant’s Common Equity and Related Shareholder Matters	52
Item 6	Selected Financial Data	53
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	74
Item 8	Financial Statements and Supplementary Data	75
Item 9	Change in and Disagreements with Accountants on Accounting and Financial Disclosure	121
Item 9A	Controls and Procedures	121
Item 9B	Other Information	121
PART III
Item 10	Trustees and Executive Officers of Registrant	122
Item 11	Executive Compensation	122
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	122
Item 13	Certain Relationships and Related Transactions	122
Item 14	Principal Accountant Fees and Services	122
PART IV
Item 15	Exhibits and Financial Statement Schedules	123
	Signatures	129
	Certification Under Section 302 of the Sarbanes-Oxley Act

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the proxy statement for the annual shareholders meeting to be held in 2006 are incorporated by reference into Part III of this report. We expect to file our proxy statement within 120 days after December 31, 2005.

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:

•  national and local economic, business and real estate conditions including, but not limited to, the effect of demand for multifamily units, office and retail rental space, the extent, strength and duration of any economic recovery, such as the effects on demand for units and rental space and the creation of new multifamily, office and retail developments, 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;

•  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;

•  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 Real Estate Investment Trust (“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 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;

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

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

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

•  other factors affecting the real estate industry generally.

      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.

2

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 self-administered equity REIT that is an owner, developer and operator of multifamily, office and retail properties in the Sunbelt region of the United States. We are a fully-integrated real estate company, which means that we are engaged in the acquisition, development, ownership, management and leasing of commercial real estate property. Our activities include ownership and operation of a diversified portfolio of 261 wholly and partially-owned properties as of December 31, 2005, consisting of multifamily, office and retail properties located in Alabama, Arizona, Florida, Georgia, Maryland, Mississippi, Nevada, New Mexico, North Carolina, South Carolina, Tennessee, Texas, and Virginia.

      As of December 31, 2005, including properties in lease-up, we owned interests in 151 multifamily apartment communities (the “multifamily properties”) containing a total of 44,337 apartment units (including 115 wholly-owned consolidated properties and 36 properties owned through unconsolidated joint-venture entities aggregating 34,272 and 10,065 units, respectively), 62 office properties (the “office properties”) containing a total of approximately 19.5 million square feet of office space (including 35 wholly-owned consolidated properties and 27 partially-owned properties owned through unconsolidated joint-venture entities aggregating approximately 7.7 million and 11.8 million square feet, respectively), 48 retail properties (the “retail properties”) containing a total of approximately 13.5 million square feet of retail space (including 38 wholly-owned consolidated properties and 10 properties owned through unconsolidated joint-venture entities aggregating approximately 8.6 million and 4.9 million square feet, respectively) and parcels of land (the “land”) adjacent to or near certain of these properties. The multifamily properties, the office properties, the retail properties and the land are referred to collectively as the “properties”. As of December 31, 2005, the multifamily properties, the office properties and the retail properties that had achieved stabilized occupancy were 95.3%, 91.3% and 92.2% leased, respectively.

      We are the direct general partner of, and hold approximately 80.55% of the interests in, Colonial Realty Limited Partnership, a Delaware limited partnership (“CRLP” or the “Operating Partnership”). We conduct all of our business through the Operating Partnership and the Operating Partnership’s subsidiaries, including Colonial Properties Services Limited Partnership (“CPSLP”), which provides management services for the properties, and Colonial Properties Services, Inc. (“CPSI”), which provides management, construction, and development services for properties owned by third parties.

      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.

Merger with Cornerstone Realty Income Trust

      On April 1, 2005, Colonial completed the merger of Cornerstone Realty Income Trust, Inc. (“Cornerstone”), a Virginia corporation, with and into CLNL Acquisition Sub, LLC (“CLNL”), a Delaware limited liability company and a wholly-owned subsidiary of Colonial, pursuant to an Agreement and Plan of Merger dated as of October 25, 2004, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated January 24, 2005 (as so amended, the “Merger Agreement”), among Cornerstone, CLNL and Colonial. As a result of the merger, CLNL succeeded by operation of law to all of the assets and liabilities of Cornerstone prior to the merger. At the time of the merger, the assets of Cornerstone consisted of 86 apartment communities with 22,981 apartment homes, a third party property management business, apartment land under development and ownership in four real estate joint ventures.

3

      Under the terms of the Merger Agreement, Cornerstone shareholders had the right to elect to receive either:

•  a number of Colonial common shares equal to the common share conversion rate, which was calculated as 0.2581; or

•  a number of Colonial 7⁵/8% Series E preferred depositary shares, $25.00 liquidation preference per depositary share, equal to the preferred depositary share conversion rate, which was calculated as 0.4194;

for each outstanding common share of Cornerstone, subject to the restriction that the Colonial Series E preferred depositary shares issued would not exceed approximately 25% of the total merger consideration. The final conversion ratios of the common and preferred depositary shares were determined based on the average market price of our common shares over a five day trading period preceding the effective time of the merger and fractional shares were paid in cash. Cornerstone shareholders who made no effective election received Colonial common shares. In connection with the merger, Colonial issued 11,277,358 Colonial common shares, 5,326,349 Colonial Series E preferred depositary shares and 578,358 CRLP common units to former shareholders of Cornerstone. The shares of Colonial issued to the Cornerstone shareholders were registered with the Securities and Exchange Commission on a Registration Statement on Form S-4 (File No. 333-121675). Immediately following the merger, Colonial contributed all of the outstanding membership interests of CLNL to CRLP in exchange for a number of CRLP’s units and Series E preferred units equal to the number of Colonial common shares and Colonial Series E preferred shares, respectively, issued in connection with the merger. As a result of such contribution, CLNL is now a wholly-owned subsidiary of CRLP.

      The aggregate consideration paid for the merger was as follows:

		(In thousands)
Issuance of 11,277,358 Colonial common shares to Cornerstone shareholders		$	462,347
Issuance of 5,326,349 Colonial Series E preferred depository shares to Cornerstone shareholders			132,747
Issuance of 578,358 CRLP common units			23,788
Fees and other expenses related to the merger			35,016
	Total purchase price		653,898
Assumption of Cornerstone’s notes and mortgages payable at book value			836,985
Adjustment to record Cornerstone’s notes and mortgages at fair value			50,880	(1)
Assumption of Cornerstone’s accounts payable and other liabilities at fair value			34,380
	Total purchase price and assumed liabilities	$	1,576,143

(1)  The fair value adjustment of $50.9 million to account for the difference between the fixed rates and market rates for the Cornerstone borrowings includes $26.8 million for prepayment penalties on debt retired during 2005.

     We allocated the purchase price between net tangible and intangible assets utilizing the assistance of a third party valuation firm. When allocating the purchase price to acquired properties, the costs were allocated to the estimated intangible value of in place leases, customer relationships and above or below market leases, and to the estimated fair value of furniture and fixtures, land and buildings on a value determined by assuming the property is vacant by applying methods similar to those used by independent appraisers of income-producing property. Depreciation and amortization is computed on a straight-line basis over the remaining useful lives of the related assets. Buildings and furniture and fixtures have an average estimated useful life of 33 years and 3 years, respectively. The value of in place leases and above or below market leases was amortized over the estimated average remaining life of leases in place at the time of the merger. In place lease terms generally range from 3 to 7 months. The value of customer relationships was amortized over 9 months. We used an estimated remaining average lease life of 5 months to amortize the value of in place leases recorded in conjunction with the merger.

4

      The following table summarizes the estimated fair value of the assets acquired and liabilities assumed on April 1, 2005:

		(In thousands)
Buildings		$	1,246,019
Furniture and fixtures			14,613
	Fair value of depreciable real estate assets		1,260,632
Land			230,768
Undeveloped land and construction in progress			3,995
In place lease value			45,658
Customer relationships			5,068
Other assets, including cash (excluding in-place lease values)			21,121
Investments in partially owned entities			8,901
	Total purchase price	$	1,576,143

      Approximately $485.6 million of the assets acquired were sold during 2005 or classified as held for sale at December 31, 2005 (see Note 4 — Property Acquisitions and Dispositions in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K). In connection with the merger, we incurred $16.1 million of termination, severance and settlement of share-based compensation costs. We had paid all of these costs as of December 31, 2005.

Acquisitions and Developments

      The following table summarizes our acquisitions and developments (excluding the Cornerstone acquisition) that were completed in 2005. 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/
	Location		Square Feet(1)		Total Cost
					(In thousands)
Acquisitions:
Multifamily Properties
Colonial Grand at Barrett Creek		Atlanta, GA		332	$	30,750
Colonial Grand at Bear Creek		Fort Worth, TX		436		36,750
Colonial Grand at Bellevue		Nashville, TN		349		35,500
Colonial Grand at Crabtree Valley		Raleigh, NC		210		17,750
Colonial Grand at Mallard Lake		Charlotte, NC		302		27,500
Colonial Grand at Shelby Farms		Memphis, TN		296		25,190
				1,925		173,440
Office Properties
Colonial Place I & II		Tampa, FL		371,000		54,903
Research Park Office Center IV		Huntsville, AL		59,900		4,970
Colonial Center at Bayside		Tampa, FL		213,800		20,660
Colonial Bank Centre		Miami, FL		235,500		44,000
Research Park Plaza III & IV		Austin, TX		357,700		90,870
Esplanade		Charlotte, NC		201,900		21,463
Colonial Center Heathrow 1001		Orlando, FL		192,200		23,290
The Peachtree		Atlanta, GA		260,900		43,801
				1,892,900		303,957

5

				Total Units/
		Location		Square Feet(1)		Total Cost
						(In thousands)
Retail Properties
Colonial Promenade at Portofino			Houston, TX		372,500		60,300
For Sale Residential
St. Andrews(2)			Jensen Beach, FL				61,750
Mizner/ Delray Beach(2)			Delray Beach, FL				55,000
							116,750
	Total Consolidated Acquisitions					$	654,447
Completed Developments/ Redevelopments:
Multifamily Properties
Colonial Grand at Mallard Creek			Charlotte, NC		252	$	20,400
Colonial Grand at Silverado			Austin, TX		238		20,343
Colonial Village at Twin Lakes			Orlando, FL		460		34,961
					950		75,704
Retail Properties
Colonial Promenade Alabaster			Birmingham, AL		607,000		29,066
Colonial Shoppes Colonnade (redevelopment)			Birmingham, AL		125,500		5,474
Colonial Mall Myrtle Beach (redevelopment)			Myrtle Beach, SC		474,200		20,889
Colonial University Village (redevelopment)			Auburn, AL		526,200		14,091
					1,732,900		69,520
Mixed-Use Properties
Colonial TownPark Lake Mary			Orlando, FL				45,300
	Multifamily				80
	Office				33,400
	Retail				199,300
	Total Developments					$	190,524
	Total Consolidated Acquisitions and Developments					$	844,971

(1) Square footage includes anchor-owned square footage.

(2)  Properties acquired as part of a 98% joint venture with Montecito Property Company. See discussion in “Joint Ventures” below.

Acquisitions

      During 2005, in addition to the Cornerstone acquisition, we acquired six multifamily properties, eight office properties and one retail property. We also acquired a partnership interest in four multifamily properties, including two condominium conversion properties, and 26 office properties (see “Joint Ventures — Equity Method Investments — DRA/ Colonial Office Joint Venture” below) during the twelve months ended December 31, 2005 (see “Merger with Cornerstone Realty Income Trust.”)

Multifamily Properties

      Cornerstone Assets — During April 2005, we completed the acquisition of Cornerstone. The assets of Cornerstone consisted of 86 apartment communities with 22,981 apartment homes, a third party property management business, apartment land under development and ownership in four real estate joint ventures.

      Colonial Grand at Barrett Creek — During August 2005, we acquired Colonial Grand at Barrett Creek (formerly Cameron at Barrett Creek), a 332-unit Class A multifamily property, located in Atlanta, Georgia. The property was acquired for a total purchase price of $30.8 million which was funded by proceeds from asset sales and borrowings under our unsecured line of credit.

6

      Colonial Grand at Bear Creek — During August 2005, we acquired Colonial Grand at Bear Creek (formerly Milano Apartments), a 436-unit Class A multifamily property, located in Fort Worth, Texas. The property was acquired for a total purchase price of $36.8 million which was funded by proceeds from asset sales and borrowings under our unsecured line of credit.

      Colonial Grand at Bellevue — During November 2005, we acquired Colonial Grand at Bellevue (formerly Devon Hills), a 349-unit Class A multifamily property, located in Nashville, Tennessee. The property was acquired for a total purchase price of $35.5 million which was funded by proceeds from asset sales.

      Colonial Grand at Crabtree Valley — During November 2005, we acquired Colonial Grand at Crabtree Valley, a 210-unit Class A multifamily property, located in Raleigh, North Carolina. The property was acquired for a total purchase price of $17.8 million which was funded by proceeds from asset sales.

      Colonial Grand at Mallard Lake — During November 2005, we acquired Colonial Grand at Mallard Lake, a 302-unit Class A multifamily property, located in Charlotte, North Carolina. The property was acquired for a total purchase price of $27.5 million which was funded by proceeds from asset sales.

      Colonial Grand at Shelby Farms — During November 2005, we acquired Colonial Grand at Shelby Farms, a 296-unit Class A multifamily property, located in Memphis, Tennessee. The property was acquired for a total purchase price of $25.2 million which was funded by proceeds from asset sales.

Office Properties

      Colonial Place I & II — During January 2005, we acquired Colonial Place I & II (formerly Westshore Place I & II), a 371,000 square foot office asset located in Tampa, Florida. The asset was acquired for a total purchase price of $54.9 million and was funded through proceeds received from asset sales.

      Research Park Office Center IV — During February 2005, we acquired an additional 60,000 square foot office asset in Research Park Office Center. This asset, located in Huntsville, Alabama, is adjacent to the three Research Park Office Center assets that were purchased during the fourth quarter of 2004. The asset was acquired for a total purchase price of $5.0 million, which was funded through borrowings under our unsecured line of credit.

      Colonial Center at Bayside — During April 2005, we acquired Colonial Center Bayside (formerly Mangrove Bay), a 214,000 square foot office asset, located in Tampa, Florida. The asset was acquired for a total purchase price of $20.7 million, which was funded through proceeds received from asset sales.

      Colonial Bank Centre — During April 2005, we acquired Colonial Bank Centre, a 236,000 square foot asset, located in Miami, Florida. The asset was acquired for a total purchase price of $44.0 million, which was funded through proceeds received from asset sales.

      Research Park Plaza III & IV — During June 2005, we acquired Research Park Plaza III & IV, a 358,000 square foot office asset, located in Austin, Texas. The asset was acquired for a total purchase price of $90.9 million, which was funded through borrowings under a bridge credit loan.

      Esplanade — During July 2005, we acquired Esplanade, a 202,000 square foot office asset, located in Charlotte, North Carolina. The asset was acquired for a total purchase price of $21.5 million, which was funded through proceeds received from asset sales.

      Colonial Center Heathrow 1001 — During July 2005, we acquired Colonial Center Heathrow 1001 (formerly Heathrow 1001), a 192,000 square foot office asset, located in Orlando, Florida. This asset was acquired under an agreement which was entered into in connection with the purchase of Heathrow Business Center in August 2002. The asset was acquired for a total purchase price of $23.3 million, which was funded by proceeds from asset sales and borrowings under our unsecured line of credit.

      The Peachtree — During August 2005, we acquired 76% of the condominium interests in The Peachtree, a 345,000 square foot office condominium complex located in the Midtown submarket of Atlanta, Georgia. Our investment of $43.8 million was funded through proceeds received from asset sales.

7

Retail Properties

      Colonial Promenade Portofino — During January 2005, we acquired Colonial Promenade Portofino, a 373,000 square foot retail asset located in Houston, Texas. The total purchase price was $60.3 million and was funded through proceeds received from asset sales.

Completed Development

Multifamily Properties

      Colonial Grand at Mallard Creek — During the third quarter of 2005, we completed the development of Colonial Grand at Mallard Creek, a 252-unit multifamily community located in Charlotte, North Carolina. The new apartments include numerous amenities including high-speed internet access, a fitness center, swimming pool and a resident business center. Project costs, including land acquisition costs, were $20.4 million and were funded through our unsecured line of credit.

      Colonial Grand at Silverado — During the second quarter of 2005, we completed the development of Colonial Grand at Silverado, a 238-unit multifamily community located in Austin, Texas. The new apartments include numerous amenities including high-speed internet access, a fitness center, swimming pool and a resident business center. Project costs, including land acquisition costs, were $20.0 million and were funded through our unsecured line of credit.

      Colonial Village at Twin Lakes — During the second quarter of 2005, we completed the development of Colonial Village at Twin Lakes, a 460-unit multifamily community located in Orlando, Florida. The new apartments include numerous amenities including high-speed internet access, a fitness center, swimming pool and a resident business center. Project costs, including land acquisition costs, were $35.0 million and were funded through our unsecured line of credit.

Retail Properties

      Colonial Promenade Alabaster — During the third quarter of 2005, we completed the development of Colonial Promenade Alabaster, a 607,000 square foot power center located in Birmingham, Alabama. The center includes a Lowes, Wal-Mart, Ross Dress for Less, Pier-1 Imports, Belk, Books-A-Million, Old Navy, Bed Bath & Beyond and an AmStar Theater. Project costs, including land acquisition costs, were $29.3 million and were funded through our unsecured line of credit.

      Colonial Shoppes Colonnade (redevelopment) — During the third quarter of 2005, we completed the redevelopment of Colonial Shoppes Colonnade, a 125,500 square foot shopping center located in Birmingham, Alabama. The redeveloped shopping center includes the addition of a 30,000 square foot Gold’s Gym and three new restaurants (Cracker Barrel, Fox & Hound and Logan Farms Deli) as well as an upgrade of the landscaping and building exteriors. Project redevelopment costs were $5.5 million and were funded through our unsecured line of credit.

      Colonial Mall Myrtle Beach (redevelopment) — During the fourth quarter of 2005, we completed the redevelopment of Colonial Mall Myrtle Beach, a 474,200 square foot regional mall located in Myrtle Beach, South Carolina. The redeveloped mall includes a new Bass Pro Shops Outdoor World, remodeling of the common area and remerchandising. Project redevelopment costs were $20.9 million and were funded through our unsecured line of credit. During the fourth quarter of 2005, this asset was transferred to the GPT/ Colonial JV, in which we retained a 10% interest. See “Joint Ventures — Equity Method Investment — GPT Transaction.”

      Colonial University Village (redevelopment) — During the fourth quarter of 2005, we completed the redevelopment of Colonial University Village, a 526,200 square foot regional mall located in Auburn, Alabama. The redeveloped is anchored by J.C. Penney, Dillard’s, Sears and Belk’s Department Store. The redevelopment also added an additional 41,000 square feet of specialty shops and restaurants to the existing mall. Project redevelopment costs were $14.1 million and were funded through our unsecured line of credit. During the fourth quarter of 2005, this asset was transferred to the GPT/ Colonial JV, in which we retained a 10% interest. See “Joint Ventures — Equity Method Investment — GPT Transaction.”

8

Mixed Use Property

      Colonial TownPark Lake Mary — During the first quarter of 2005, we continued the development of Colonial TownPark Lake Mary, a mixed use project located in Orlando, Florida. The development includes an 80-unit multifamily apartment community, a 33,400 square foot office center and a 199,300 square foot retail center. The retail center is anchored by Albertson’s and an AmStar Theater. Project development costs were $45.3 million and were funded through our unsecured line of credit.

Continuing Development Activity

      The following table summarizes our properties that are under construction, including undeveloped land, at December 31, 2005:

		Total
		Units/						Costs
		Square		Estimated		Estimated		Capitalized
		Feet(1)		Completion		Total Costs		to Date
						(In thousands)		(In thousands)
Multifamily Projects:
Colonial Grand at Silverado Reserve			238		2006	$	23,200	$	19,760
Colonial Grand at Round Rock			422		2006		34,500		20,305
Colonial Grand at Canyon Creek			336		2006		29,100		6,568
Colonial Grand at Double Creek			300		2007		27,300		3,882
Colonial Grand at Ayrsley			365		2007		33,100		178
Colonial Grand at Traditions			320		2007		30,800		2,800
Office Projects:
Northrop Grumman			110,000		2006		17,300		1,478
Colonial Center TownPark 300			150,000		2006		20,600		3,760
Retail Projects:
Colonial Pinnacle Tutwiler Farm			450,000		2006		36,000		17,473
Colonial Pinnacle Craft Farms			440,000		2007		50,800		14,264
Colonial Promenade Fultondale			257,000		2007		26,300		1,985
Colonial Promenade Alabaster II			127,000		2007		21,600		387
For Sale Projects:
Central Park			212		2006		22,300		5,133
Colonial Traditions at Gulf Shores			371		2006		20,000		15,363
Colonial Traditions at South Park			48		2007		11,500		2,014
The Renwick			85		2007		17,700		4,075
Other Projects and Undeveloped Land
Mansell Land and Infrastructure									9,306
TownPark Land and Infrastructure									14,852
Heathrow Land and Infrastructure									13,914
Canal Place Land and Infrastructure									10,952
Land									16,168
Other									17,435
	Total Consolidated Construction in Progress							$	202,052
Colonial Pinnacle Turkey Creek(2)			520,000		2006		37,900		25,949
	Total Construction in Progress							$	228,001

(1) Square footage includes anchor-owned square footage.

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

Continuing Multifamily Development Activity

      Colonial Grand at Silverado Reserve — During the first quarter of 2005, we began the development of Colonial Grand at Silverado Reserve, a 238-unit multifamily community located in Austin, Texas. Project

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development costs, including land acquisition costs, are expected to be $23.2 million and will be funded through our unsecured line of credit. The development is expected to be completed in the third quarter of 2006.

      Colonial Grand at Round Rock — During the second quarter of 2005, we began the development of Colonial Grand at Round Rock, a 422-unit multifamily community located in Austin, Texas. Project development costs, including land acquisition costs, are expected to be $34.5 million and will be funded through our unsecured line of credit. The development is expected to be completed in the fourth quarter of 2006.

      Colonial Grand at Canyon Creek — During the third quarter of 2005, we began the development of Colonial Grand at Canyon Creek, a 336-unit multifamily community located in Austin, Texas. Project development costs, including land acquisition costs, are expected to be $29.1 million and will be funded through our unsecured line of credit. The development is expected to be completed in the fourth quarter of 2006.

      Colonial Grand at Double Creek — During the fourth quarter of 2005, we began the development of Colonial Grand at Double Creek, a 300-unit multifamily community located in Austin, Texas. Project development costs, including land acquisition costs, are expected to be $27.3 million and will be funded through our unsecured line of credit. The development is expected to be completed in the third quarter of 2007.

      Colonial Grand at Ayrsley — During the fourth quarter of 2005, we began the development of Colonial Grand at Ayrsley, a 365-unit multifamily community located in Charlotte, North Carolina. Project development costs, including land acquisition costs, are expected to be $33.1 million and will be funded through our unsecured line of credit. The development is expected to be completed in the third quarter of 2007.

      Colonial Grand at Traditions — During the fourth quarter of 2005, we began the development of Colonial Grand at Traditions, a 320-unit multifamily community located in Gulf Shores, Alabama. Project development costs, including land acquisition costs, are expected to be $30.8 million and will be funded through our unsecured line of credit. The development is expected to be completed in the fourth quarter of 2007.

      All of the new multifamily communities in the above listed developments will have numerous amenities, including high-speed internet access, a fitness center, swimming pool and a resident business center.

Continuing Office Development Activity

      Northrop Grumman — During the fourth quarter of 2005, we began the build to suit development for Northrop Grumman of an 110,000 square foot office asset, located in Huntsville, Alabama. Project development costs, including land acquisition costs, are expected to be $17.3 million and will be funded through our unsecured line of credit. The development is expected to be completed in the fourth quarter of 2006.

      Colonial Center TownPark 300 — During the fourth quarter of 2005, we began the development of Colonial Center TownPark 300, a 150,000 square foot office asset, located in Orlando, Florida. Project development costs, including land acquisition costs, are expected to be $20.6 million and will be funded through our unsecured line of credit. The development, which is part of the mixed use development, Colonial TownPark Lake Mary, is expected to be completed in the third quarter of 2006.

Continuing Retail Development Activity

      Colonial Pinnacle Tutwiler Farms — During 2005, we continued the development of Colonial Pinnacle at Tutwiler Farms, a 450,000 square foot development located in northeast Birmingham, Alabama. The center anchors are expected to be Belk, Parisian, JC Penney and Best Buy. The center will also include other larger format stores, specialty fashion retailers and upscale restaurants. Project development costs are expected to total $36.0 million and will be funded through our unsecured line of credit. We expect to complete the project in the fourth quarter of 2006.

      Colonial Pinnacle Craft Farms — During 2005, we continued the development of Colonial Pinnacle at Craft Farms, a 440,000 square foot development located in Gulf Shores, Alabama. The center will include a 55,000 square foot Cobb Theatre cinema, upscale specialty stores that offer fashion apparel, home décor, a book store, a music store and upscale restaurants. Project development costs are expected to total $50.8 million and will be funded through our unsecured line of credit. We expect to complete the project in the second quarter of 2007.

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      Colonial Promenade Fultondale — During the fourth quarter of 2005, we began the development of Colonial Promenade at Fultondale, a 257,000 square foot development located in north Birmingham, Alabama. Project development costs are expected to total $26.3 million and will be funded through our unsecured line of credit. We expect to complete the project in the fourth quarter of 2007.

      Colonial Promenade Alabaster II — During the fourth quarter of 2005, we began the development of Colonial Promenade at Alabaster II, a 127,000 square foot development located in south Birmingham, Alabama. Project development costs are expected to total $21.6 million and will be funded through our unsecured line of credit. We expect to complete the project in the third quarter of 2007.

      Colonial Pinnacle Turkey Creek — During 2005, we continued the development of Colonial Pinnacle at Turkey Creek, a 50% joint venture development with Turkey Creek Land Partners. The center is expected to total approximately 520,000 square feet and is located in Knoxville, Tennessee. Anchors are expected to include Belk, Bed Bath & Beyond and Regal Theaters. The center will also include other larger format stores, specialty fashion retailers and upscale restaurants. Our portion of project development costs are expected to total $37.9 million and will be funded through our unsecured line of credit and a construction loan. We expect to complete the project in the second quarter of 2006.

Continuing For Sale Activity

      We are developing all of the for sale projects discussed below through our taxable REIT subsidiary, CPSI.

      Central Park — During the third quarter of 2005, we began the development of the Central Park, a 212-unit development located in Charleston, South Carolina. Project development costs are expected to total $22.3 million and will be funded through our unsecured line of credit. We expect to begin sales of completed units in the fourth quarter of 2006.

      Colonial Traditions at Gulf Shores — During the fourth quarter of 2005, we began the development of the Colonial Traditions at Gulf Shores, a 371 residential lot development located in Gulf Shores, Alabama. Project development costs are expected to total $20.0 million and will be funded through our unsecured line of credit. We expect to begin sales of completed lots in the third quarter of 2006.

      Colonial Traditions at South Park — During the fourth quarter of 2005, we began the development of the Colonial Traditions at South Park, a 48-unit development located in Charlotte, North Carolina. Project development costs are expected to total $11.5 million and will be funded through our unsecured line of credit. We expect to begin sales of completed units in the second quarter of 2007.

      The Renwick — During the fourth quarter of 2005, we began the development of the Renwick, an 85-unit development located in Charlotte, North Carolina. Project development costs are expected to total $17.7 million and will be funded through our unsecured line of credit. We expect to begin sales of completed units in the first quarter of 2007.

Joint Ventures

      The following summarizes the joint ventures that we entered into during 2005:

Consolidated

      Montecito Property Company — During May 2005, we entered into a partnership with Montecito Property Company to convert apartment properties into condominium communities. We are a 98% partner in this partnership and Montecito Property Company is a 2% partner. On May 24, 2005, the partnership acquired St. Andrews, a 384-unit multifamily property located in Jensen Beach, Florida, with an investment of $61.8 million which was funded through borrowings under our unsecured line of credit. In July 2005, we made an additional investment of $54.5 million into our partnership with Montecito Property Company, to fund 98% of the purchase price of Mizner/ Delray Beach, a 273-unit multifamily property located in Delray Beach, Florida. This investment was funded through borrowings under a secured bridge loan (see Note 9 — Notes and Mortgages Payable in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K). Both properties have been converted to condominium communities and condominium units at both properties are

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currently being sold (see Note 4 — Property Acquisitions and Dispositions in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

Equity Method Investments

      The Grove at Riverchase — During September 2005, we entered into a partnership agreement with Dreyfuss Real Estate Advisors LLC (“DRA”) in which we acquired a 20% interest and the management of a 345-unit multifamily property, The Grove at Riverchase, located in Birmingham, Alabama. Our investment in the partnership was $5.6 million, which consisted of $3.9 million of newly issued mortgage debt and $1.7 million of cash, which was funded from borrowings under our unsecured line of credit.

      Regents Park — During July 2005 and August 2005, we made investments of $1.0 million and $2.0 million, respectively, into a partnership with Carter and Associates, to fund 40% of the purchase price of Regents Park in Atlanta, Georgia. The joint venture will develop and sell town homes and condominiums on the property. The investment was funded through our unsecured line of credit. Additionally, we have committed to provide a construction loan to the joint venture of up to approximately $40 million at a rate of 8.25% per annum.

      Colonial Grand at Research Park — During July 2005, we entered into a 20% joint venture with the Tuckerman Group and Goodwin Procter LLP to acquire Colonial Grand at Research Park (formerly Alta Trace), a 370-unit multifamily property, located in Durham, North Carolina. Our investment in the partnership was $6.4 million, which consisted of $4.8 million of newly issued mortgage debt and $1.6 million of cash, which was funded from borrowings under our unsecured line of credit.

      DRA/ Colonial Office Joint Venture — During September 2005, we acquired a 15% partnership interest in the CRT Properties, Inc. (“CRT”) portfolio through a joint venture (the “DRA/ Colonial Office JV”) with DRA. The DRA/ Colonial Office JV owns a portfolio of 137 office buildings on 26 properties located primarily in the southeastern United States. Our 15% investment in the DRA/ Colonial Office JV required an equity contribution of $49.0 million, which is included in Investments in Partially-Owned Entities in the December 31, 2005 consolidated balance sheet. The equity contribution was funded through borrowings under our unsecured line of credit, the outstanding balance of which was reduced with the proceeds from the Company’s September 21, 2005 equity offering (see Note 12 — Equity Offerings in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

      The DRA/ Colonial Office JV’s total transaction cost of approximately $1.8 billion includes the assumption of $370.0 million of mortgage debt and the placement of an additional $1.1 billion of secured debt financing. In addition, CRLP has guaranteed approximately $50.0 million of third-party financing obtained by the DRA/ Colonial Office JV with respect to 10 of the CRT properties which the DRA/ Colonial Office JV expects to sell in the first 12 months of the venture. The DRA/ Colonial Office 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/ Colonial Office JV partners. The DRA/ Colonial Office JV’s initial purchase price allocations are preliminary and may be adjusted as the DRA/ Colonial Office JV completes its final analysis of the fair value of assets acquired and liabilities assumed. With the consummation of the acquisition of CRT, we assumed management of substantially all of the office properties included in the CRT portfolio, adding 11.7 million square feet of managed office space to our office portfolio.

      GPT Transaction — During November 2005, we entered into agreements to transfer six regional malls valued in the transaction at approximately $362.0 million to a joint venture (the “GPT Joint Venture”) with The GPT Group and Babcock & Brown, an Australian partner, in which we retained a 10% interest. We maintained the responsibility of leasing and managing the assets in the GPT Joint Venture which represent 3.75 million square feet of retail shopping space and include Colonial Mall Myrtle Beach in Myrtle Beach, South Carolina; Colonial Mall Greenville in Greenville, North Carolina; Colonial Mall Bel Air in Mobile, Alabama; Colonial Mall Valdosta in Valdosta, Georgia; Colonial Mall Glynn Place in Brunswick, Georgia; and Colonial University Village in Auburn, Alabama. The initial purchase price allocations for this transaction are preliminary and may be adjusted as the GPT Joint Venture completes its final analysis of the fair value of assets acquired and liabilities assumed.

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Dispositions

      During 2005, we disposed of 23 multifamily properties and our percentage interests in three multifamily properties representing an aggregate of 8,092 units, 328 condominium units and ten retail properties representing 6.6 million square feet. We retained a 10% interest in the GPT Joint Venture, which owns six of the retail properties that we disposed, representing 3.7 million square feet. The multifamily properties, retail properties and condominium units were sold for a total sales price of $1.1 billion, which was used to repay a portion of the borrowings under our unsecured line of credit, repay secured debt, and fund future investment activities. Additionally, throughout 2005, we sold various parcels of land located adjacent to our existing properties for an aggregate sales price of $25.1 million, which was also used to repay a portion of the borrowings under our unsecured line of credit and to support our investment activities.

For Sale Projects

      During 2005, a partnership between CPSI and the Montecito Property Company, disposed of 328 condominium units at its two condominium conversion properties. Total proceeds from the sales of these units were approximately $79.3 million. Gains on sales of property in continuing operations included gains of $13.6 million from the sales of these units. The Company recorded income taxes and minority interest on these gains of $3.7 million and $5.2 million, respectively. The total net gain on these sales after income taxes and minority interest was $4.7 million for the twelve months ended December 31, 2005.

Other Dispositions

      The following table is a summary of our operating property disposition activity in 2005:

								Gain on
				Units/Square				Sales of
Property		Location		Feet		Sales Price		Property
						(In thousands)		(In thousands)
Multifamily
	Arbors on Forest Ridge(1)		Fort Worth, TX		210	$	10,000	$	—
	Ashley Run(1)		Atlanta, GA		348		16,000		—
	Aspen Hills(1)		Dallas, TX		240		9,400		—
	Bridgetown Bay(1)		Charlotte, NC		120		5,700		—
	Carlyle Club(1)		Atlanta, GA		243		13,600		—
	Colonial Grand at Galleria Woods		Birmingham, AL		244		14,800		4,252
	Colonial Grand at Riverhills(2)		Tampa, FL		776		6,900		1,661
	Colonial Grand at Wesleyan		Macon, GA		328		20,700		5,209
	Colonial Village at Ashley Plantation		Bluffton, SC		414		27,900		6,087
	Colonial Village at Cahaba Heights(2)		Birmingham, AL		125		1,200		235
	Colonial Village at Gainesville		Gainesville, FL		560		37,400		14,308
	Colonial Village at Lake Mary		Orlando, FL		504		41,200		23,458
	Colonial Village at TownPark		Sarasota, FL		272		28,000		9,665
	Colonial Village at Walton Way		Augusta, GA		256		15,000		4,768
	Cutter’s Point(1)		Dallas, TX		196		9,800		—
	Cypress Cove at Suntree(1)(2)		Melbourne, FL		326		4,000		—
	Devonshire(1)		Dallas, TX		144		7,500		—
	Dunwoody Springs(1)		Atlanta, GA		350		23,500		—
	Eagle Crest(1)		Dallas, TX		484		20,800		—
	Mills Crossing(1)		Dallas, TX		184		6,100		—
	Sierra Ridge(1)		San Antonio, TX		230		8,800		—
	Silverbrook I & II(1)		Fort Worth, TX		642		23,500		—
	The Landing(1)		Raleigh, NC		200		12,900		—
	The Meridian(1)		Austin, TX		200		8,000		—
	Timberglen(1)		Dallas, TX		304		12,200		—
	Toscana(1)		Dallas, TX		192		5,800		—

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									Gain on
					Units/Square				Sales of
Property			Location		Feet		Sales Price		Property
							(In thousands)		(In thousands)
Retail(3)
	Colonial Mall Bel Air(4)			Mobile, AL		1,333,800		142,404		54,245
	Colonial Mall Burlington			Burlington, NC		419,200		32,500		345
	Colonial Mall Gadsden			Gadsden, AL		517,000		58,847		45,669
	Colonial Mall Glynn Place(4)			Brunswick, GA		507,900		29,499		1,155
	Colonial Mall Greenville(4)			Greenville, NC		450,300		52,621		17,320
	Colonial Mall Macon			Macon, GA		1,446,400		133,500		65,469
	Colonial Mall Myrtle Beach(4)			Myrtle Beach, SC		472,200		59,767		1,507
	Colonial Mall Temple			Temple, TX		555,600		33,500		2,907
	Colonial Mall Valdosta(4)			Valdosta, GA		399,000		46,478		8,831
	Colonial University Village(4)			Auburn, AL		526,200		31,231		10,170
		Total					$	1,011,047	$	277,261

(1)	Properties acquired as part of the Cornerstone Acquisition.
(2)	We disposed of our 15% interest in Colonial Grand at Riverhills and Colonial Village at Cahaba Heights and our 10% interest in Cypress Cove at Suntree, which is reflected above.
(3)	Retail square footage includes total square footage of asset including anchor owned square footage.
(4)	Properties were transferred to the GPT Joint Venture.

     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, the funds are utilized for payment on the unsecured line of credit or financing of other investment activities.

      In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we record individual property sales as discontinued operations, unless we maintain a continuing involvement with the properties that have been sold. During 2005, all of the operating properties sold, other than the malls sold in the GPT transaction (see “Joint Ventures — Equity Method Investment — GPT Transaction”) in which we retained a 10% interest, were classified as discontinued operations. Additionally, the sales of condominium units and parcels of land were classified within continuing operations.

Recent Developments

      Property Acquisitions — During January 2006, we acquired an additional 50,000 square feet of condominium interests in The Peachtree, a Class A office building located in the Atlanta Midtown market. We made our initial investment in the property in August 2005, when we purchased 76% of the condominium interests in The Peachtree for $43.8 million. The purchase of the additional square footage brings our ownership to more than 90% of the property. The additional investment of $8.3 million was funded through borrowings under our unsecured line of credit.

      During January 2006, we acquired a 20% partnership interest in Huntcliff Village, a 358-unit multifamily apartment community located in Atlanta, Georgia. Our 20% investment in the partnership was $8.6 million, which consisted of $5.2 million of newly issued mortgage debt and $2.8 million of cash. The cash portion of this investment was funded from borrowings under our unsecured line of credit.

      During February 2006, we acquired land and infrastructure for approximately $29.0 million, in Orange Beach, Alabama, for development and sale of residential lots and units.

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      Property Dispositions — During January 2006, we sold seven multifamily assets, all of which were acquired as a part of the Cornerstone acquisition with the exception of Colonial Village at Caledon Woods. The properties include the following:

Property Name	Location		Units		Sales Price
					(In millions)
The Timbers		Raleigh, NC		176	$	7.6
CV at Remington Place		Raleigh, NC		136		7.9
Summerwalk		Charlotte, NC		160		8.2
CV at Paces Glen		Charlotte, NC		172		6.0
CV at Stone Brook		Atlanta, GA		188		9.4
CG at Whitemarsh		Savannah, GA		352		38.7
CV at Caledon Woods		Greenville, SC		350		22.9
					$	100.7

      We used the proceeds from the sale to repay a portion of the borrowings under our unsecured line of credit.

      During March 2006, we disposed of our majority interest in Colonnade Properties LLC (see Note 7 — Investment in Partially Owned Entities and Other Arrangements in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K) for approximately $2.5 million. There was no gain or loss recognized on the disposition. We have a $6.0 million outstanding note receivable, secured by an interest in real estate, from Colonnade Properties LLC which bears interest at 9% per annum and reaches maturity in 2010.

      During March 2006, we completed the sale of a 90% interest in four shopping centers valued in the transaction at approximately $127.3 million to a joint venture partner. We maintained a 10% interest in the properties, and the responsibility of leasing and managing the assets in the joint venture which represent 0.7 million square feet of retail shopping space. The shopping centers include Colonial Promenade Boulevard Square in Pembroke Pines, Florida; Colonial Shoppes Pines Plaza in Pembroke Pines, Florida; Colonial Shoppes College Parkway in Fort Myers, Florida; and Colonial Promenade Deerfield in Deerfield Beach, Florida. As a part of the sale, our joint venture partner assumed 90% of the outstanding secured debt of $74.8 million.

      Financing activity — During February 2006, we terminated a $200.0 million forward starting interest rate swap that was outstanding at December 31, 2005 and received a payment of approximately $4.3 million dollars. As a result, we recorded a gain on this transaction of approximately $2.8 million during the first quarter of 2006. 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 and had a fair value of $1.5 million at December 31, 2005 (representing an economic hedge, as discussed in Note 10 — Derivative Instruments in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

      Distribution — During January 2006, the Board of Trustees declared a cash distribution to the shareholders and partners of CRLP in the amount of $0.68 per share and per partnership unit, totaling $38.0 million. The distribution was made to shareholders and partners of record as of February 6, 2006, and was paid on February 13, 2006.

      Preferred Share Buyback — On February 2, 2006, we announced the Board of Trustees’ authorization of the repurchase of up to $65 million of our Series E Depositary Shares, each representing 1/100 of a share of our 7⁵/8% Series E Cumulative Redeemable Preferred Shares. This repurchase program was effective immediately and extends through January 27, 2007. Under the repurchase program, we are authorized to make purchases in the open market or in privately negotiated transactions from time to time, subject to market conditions, applicable legal requirements and other factors. The repurchase program does not obligate us to repurchase any specific number of shares, and repurchases pursuant to the program may be suspended or resumed at any time or from time to time without further notice or announcement.

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Business Strategy

      Our business objective 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;

•  expanding and selectively acquiring additional multifamily, office and retail properties (primarily “lifestyle” and “power” centers) in growth markets located in the Sunbelt region of the United States, where we have first-hand knowledge of growth patterns and local economic conditions;

•  recycling capital by selectively disposing of assets that have reached their maximum investment potential and reinvesting the proceeds into opportunities-with more growth potential;

•  managing our own properties, which enables us to better control operating expenses and establish long-term relationships with our office and retail tenants;

•  developing for-sale lots and residential units;

•  converting existing and acquired multifamily apartment communities into for-sale condominium projects;

•  maintaining our third-party property management business, which increases cash flow and establishes additional relationships with investors and tenants; and

•  employing a comprehensive capital maintenance program to maintain properties in first-class condition.

      Our diversified business strategy of investing in multifamily, office and retail property types that are located in high-growth, demographically attractive cities primarily in key Sunbelt states allows us to shift assets within our portfolio in order to take advantage of market timing and economic cycles, and to maximize investment returns. Our business strategy and the implementation of that strategy are determined by our Board of Trustees and may be changed from time to time.

Financing Strategy

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

•  maintaining conservative debt service and fixed charge coverage ratios in order to sustain our investment grade status;

•  extending and sequencing the maturity dates of our debt;

•  borrowing primarily at fixed rates; and

•  generally pursuing long-term debt financings and refinancings on an unsecured basis.

      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.

      We may modify our borrowing policy and may increase or decrease our ratio of debt to total market capitalization in the future. To the extent that our Board of Trustees determines to seek additional capital, we may raise such capital through additional equity offerings, debt financings, asset dispositions 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.

      We funded our acquisition, development and redevelopment activities primarily through proceeds received from the disposition of assets, unsecured senior notes offerings and advances on our bank line of credit and equity offerings. For additional information regarding current year financing activities and year-end balances, refer to Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Property Management

      We are experienced in the management and leasing of multifamily, office and retail 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. The third-party management, leasing and brokerage businesses conducted through CPSI have provided us both with a source of cash flow that is relatively stable and with the benefits of economies of scale in conjunction with the management and leasing of our own properties. These businesses also allow us to establish additional relationships with tenants who may require additional office or retail space and help us to identify potential acquisitions.

Operational Structure

      We manage our business with three separate and distinct operating divisions: multifamily, office and retail. We have centralized functions that are common to each division, including accounting, information technology and administrative services. Decisions regarding acquisitions, developments and dispositions are also centralized. Each division has an Executive Vice President that oversees growth and operations and has a separate management team that is responsible for acquiring, developing, and leasing properties within each division. This structure allows us to utilize specialized management personnel for each operating division. Although these divisions operate independently from one another, constant communication among the Executive Vice Presidents provides us with unique synergies allowing us to take advantage of a variety of investment opportunities. Because we operate in these three divisions, we have the ability to and are currently developing mixed-use projects which incorporate each element of “Where you Live, Work and Shop”. See Note 8 — Segment Information in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K for information on our three segments and the reconciliation of total segment revenues to total revenues, total segment net operating income to income from continuing operations and minority interest, and total divisional assets to total assets for the years ended December 31, 2005, 2004 and 2003. Information regarding our segments contained in such Note 8 — 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 of the operating divisions is set forth below:

      Multifamily Division. Our multifamily division is responsible for all aspects of multifamily operations, including day-to-day management and leasing of our 151 multifamily properties, 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.

      Office Division. Our office division is responsible for all aspects of our commercial office operations, including the management and leasing services for our 62 office properties, as well as providing 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 Division. Our retail division is responsible for all aspects of our retail operations, including the management and leasing services for our 48 retail properties, as well as providing 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.

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” 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. Our diversified business strategy of investing in multifamily, office and retail property types that are located in high-growth, demographically attractive cities primarily in key Sunbelt states

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allows us to shift assets within our portfolio in order to take advantage of market timing and economic cycles, and to maximize investment returns.

Seasonality

      Our multifamily properties and office properties generally are not affected by seasonality. However, the retail shopping center industry is seasonal in nature, with shopping center tenant sales peaking during the fourth quarter due to the holiday season. As a result, a substantial portion of the percentage rent that we receive from our retail properties is not recognized until the fourth quarter. Furthermore, most new retail lease-up occurs towards the later part of the year in anticipation of the holiday season and most vacancies occur toward the beginning of the year. In addition, the majority of our retail temporary tenants take occupancy in the fourth quarter. Accordingly, retail cash flow and occupancy levels are generally lowest in the first quarter and highest in the fourth quarter.

Environmental Matters

      We believe that our properties are in 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 which 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 liabilities of which we are unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of our properties have 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” 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, 2005, we are self insured up to $1.1 million, $1.8 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.

      During the twelve months ended December 31, 2005, we had one wholly-owned office building and one partially-owned office building which sustained damage as a result of Hurricanes Wilma and Katrina. However, we are not aware of any structural damage at either of these two office buildings. We also had several multifamily and retail properties which sustained minimal damage as a result these hurricanes. The estimated damage from these hurricanes totaled $3.2 million, of which $3.0 million is recoverable under our existing insurance policies.

Employees

      As of December 31, 2005, CRLP employed approximately 1,700 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.

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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 taxable as ordinary income and long-term capital gains, and partially non-taxable as return of capital. During 2005, our distributions had the following characteristics:

Distribution		Ordinary
per Share		Income		Capital Gain
	$2.70		25.30%		74.70%

      In addition, our financial statements include the operations of a taxable REIT subsidiary, CPSI, that 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. 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 tax expense of $6.5 million in 2005 related to the taxable income of CPSI.

Available Information

      Our website address is www.colonialprop.com and provides access in the “Investor Relations” section, free of charge, to 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 Securities and Exchange Commission. Also available on our website, free of charge, are our corporate governance guidelines, charter of the governance committee, audit committee charter, executive compensation committee charter and our code of ethics. 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. 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.

Executive Officers of the Company

      The following is a biographical summary of our executive officers:

      Thomas H. Lowder, 56, has been a trustee since our formation in July 1993. He has served as our Chairman of the Board, President and Chief Executive Officer since July 1993. Mr. Lowder became President of Colonial Properties, Inc., our predecessor, in 1976, and since that time has been actively engaged in the acquisition, development, management, leasing and sale of multifamily, office and retail properties for the Company and its predecessors. Mr. Lowder is a current member of the National Association of Real Estate Investment Trusts (NAREIT), the National Association of Industrial and Office Parks (NAIOP) and the International Council of Shopping Centers. He is also a member and past president of the Alabama Chapter of the Realtors National Marketing Institute through which he successfully completed commercial real estate investment courses to receive the CCIM (Certified Commercial Investment Member) designation. He presently serves as a member of the Board of the following organizations: The Community Foundation of Greater Birmingham, Birmingham-Southern College, Crippled Children’s Foundation and United Way. Mr. Lowder is a past board member of the National Association of Real Estate Investment Trusts (NAREIT), past Chairman of the Birmingham Area Chapter of the American Red Cross, past Chairman of Children’s Hospital of Alabama and served as Chairman of the 2001 United Way Campaign for Central Alabama. He graduated with honors from Auburn University with a Bachelor of Science Degree. Mr. Lowder is the brother of James K. Lowder, one of our trustees.

      C. Reynolds Thompson, III, 43, has been our Chief Operating Officer since September 1999, and is responsible for the multifamily, office, retail and mixed-use divisions. Mr. Thompson oversees the management, acquisition, leasing and development of properties within our three operating divisions and development in the mixed-use division. Prior to his appointment as Chief Operating Officer, Mr. Thompson was Chief Investment Officer, responsible for investment strategies, market research, due diligence, mergers and acquisitions, joint venture development and cross-divisional acquisitions. Prior to his position as Chief Investment Officer, Mr. Thompson served as Executive Vice President — Office Division, with responsibility for management of all

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office properties owned and/or managed by us, from May 1997 to May 1998. Mr. Thompson joined us in February 1997 as Senior Vice President — Office Acquisitions, with responsibility for all acquisitions of office properties. Prior to joining us, Mr. Thompson worked for CarrAmerica Realty Corporation in office building acquisitions and due diligence. His eighteen-year real estate background includes acquisitions, development, leasing and management of office properties in the south. Mr. Thompson is a member of the Executive Committee of the Metropolitan Development Board, a member of the NAIOP, a member of the International Council of Shopping Centers and he serves on the Board of Visitors for The University of Alabama Culverhouse College of Commerce and Business Administration. Mr. Thompson holds a Bachelor of Science Degree from Washington and Lee University.

      Weston M. Andress, 45, has been our Chief Financial and Investment Officer since April 2004 and is responsible for financing and investment matters. Prior to joining the Company, Mr. Andress held the position of Managing Director of the Corporate and Investment Banking Department of Bank of America. Prior to his 15 year tenure with Bank of America, he was Vice President in the Real Estate Capital Markets Group of Salomon Brothers in New York. Mr. Andress serves on the vestry at Christ Episcopal Church in Charlotte, N.C., is a member of the Development Council at University of the South (Sewanee) and is on the Board of Directors for The Children’s Scholarship Fund of Charlotte. Mr. Andress holds a Masters of Business Administration from the University of North Carolina at Chapel Hill.

      John P. Rigrish, 57, has been our Chief Administrative Officer since August 1998, and is responsible for the supervision of 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 of Science degree from Samford University and did his postgraduate study at Birmingham-Southern College. He 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. He currently serves on the American Red Cross Board of Directors, Alabama Chapter and John Carroll Educational Foundation Board of Directors.

      Paul F. Earle, 48, has been our Executive Vice-President-Multifamily Division since May 1997, and is responsible for management of all multifamily properties we own and/or manage. He joined us in 1991 and has 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.

      Robert A. “Bo” Jackson, 51, has been our Executive Vice President-Office Division since December 1997, and is responsible for leading all office properties owned by the Company. Under his management, the Company’s portfolio has grown from four million to 20 million square feet and maintains one of the industry’s leading client-retention rates. He is implementing Colonial’s High-Performance Workplace, which is providing national employers with highly productive workplaces that help recruit and retain talented workforces. Prior to joining Colonial, Mr. Jackson was involved in several of the signature office properties in Atlanta including Concourse, One Ninety One Peachtree Tower and Perimeter Center. He has developed, leased or managed more than 25 million square feet of urban and suburban development in the Southeast. Under his leadership, Colonial developed office properties in the mixed-use Colonial TownPark in Orlando, Florida, which contributed to Colonial Properties Trust being named 2003 Developer of the Year by the NAIOP. Mr. Jackson is a member of the Board of Directors of CoreNet Global Atlanta Chapter, an active member in NAIOP, serves on a national NAIOP Mixed-Use panel and is involved with his church, North Point Community Church. Mr. Jackson holds a Bachelor of Science degree in Business Administration from the University of Delaware.

      Charles E. “Chip” Light, 45, has been our Executive Vice President, Retail Division since February 2004, and is responsible for leasing all retail properties owned and managed by the Company. He joined the Company in July 2003 and served as Senior Vice President — Retail Leasing until February 2004. Mr. Light has 20 years

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of retail leasing experience with such companies as Faison Associates, Jacobs Group, Homart Development and LaSalle Partners. Prior to joining us, Mr. Light was Managing Director of Retail with Faison & Associates. Mr. Light’s 20 year career includes leasing assignments with the Jacobs Company, Homart and La Salle Partners which extended from coast to coast. Mr. Light holds a Bachelor of Science degree from The University of Nebraska and a Master of Business Administration from Southern Methodist University.

      Charles A. McGehee, 60, has been our Executive Vice President — Mixed-Use Development Division since September 1999 and is responsible for our development of properties with mixed-use product types. Mr. McGehee also oversees land acquisitions and dispositions. From September 1993 to September 1999, Mr. McGehee was responsible for Land Acquisitions and Development, Brokerage and Dispositions for us. From January 1990 to September 1993 Mr. McGehee was Senior Vice President — Office Division. He joined us in 1976 as Vice President of Retail Leasing and was responsible for leasing all retail space owned and/or managed. Mr. McGehee has served as president and as a board member of the National Association of Industrial and Office Properties and is a member of the Board of Directors of the Birmingham Area Board of Realtors. Mr. McGehee is currently on the Board of Trustees for the Birmingham Chamber of Commerce and serves as a member of the Chairman’s Circle. He holds a Bachelor of Science Degree from Auburn University.

      John E. Tomlinson, 37, has been our Executive Vice President and Chief Accounting Officer since February 2005, and is responsible for Internal Control functions, compliance with generally accepted accounting principles, or GAAP, SEC reporting, regulatory agency compliance and reporting, management reporting and accounting operations. Mr. Tomlinson is a Certified Public Accountant (CPA) with over 12 years of experience in public accounting. Mr. Tomlinson holds a Bachelor of Science of Professional Accountancy and a Master of Business Administration from Mississippi State University. Prior to joining us, Mr. Tomlinson served as a Senior Manager at Deloitte & Touche LLP from May 2002 through January 2005 and as a Senior Manager/ Manager at Arthur Andersen LLP from September 1996 through May 2002. Mr. Tomlinson’s previous experience includes independent audits of public and private entity financial statements, merger and acquisition due diligence, business risk assessment and registration statement work for public debt and stock offerings.

Item 1A.     Risk Factors

      Set forth below are the risks that we believe are material to investors who purchase or own our common, preferred or debt securities. You should consider carefully the following risks, together with the other information contained in and incorporated by reference in this Annual Report on Form 10-K, and the descriptions included in our consolidated financial statements and accompanying notes.

Risks Associated with Real Estate

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, any negative trends of which may adversely affect our results of operations through decreased revenues or increased costs. These conditions include:

•  worsening of national and regional economic conditions, as well as the local economic conditions in our principal market areas;

•  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 or retail space or a reduction in demand for real estate in the markets in which our properties are located;

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•  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; 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.

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 generally are relatively illiquid and as a result cannot be sold quickly or on favorable terms in response to changes in the economy or other conditions when it 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. 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 or 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.

We are subject to significant regulation that inhibits our activities, which could adversely affect our results of operations through increased costs or 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. If we fail to comply with these requirements, governmental authorities may impose fines on us or private litigants may be awarded damages against us. In addition, we cannot predict what requirements may be enacted in the future and there can be no assurance that such enactment will not increase our costs of regulatory compliance or prohibit us from pursuing business opportunities that could be profitable to us.

Risks Associated with Our Operations

Our properties may not generate sufficient 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 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 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.

      The tenants at our office properties generally enter into leases with an initial term ranging from three to ten years, tenants at our retail properties generally enter into leases with an initial term ranging from one to ten

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years and tenants at our multifamily properties generally enter into leases with an initial term ranging from six months to one year. As leases expire at our existing properties, tenants may elect not to renew them. Even if the tenants do renew or 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 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 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, our operating results will be negatively affected.

We may not be able to control our operating costs or our expenses may remain constant, 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 revenues.

An economic downturn or natural disaster in an area in which our properties are concentrated 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 an aggregate of approximately 69.9% of our net operating income in 2005 from top quartile cities located in the Sunbelt region. 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 slowdown in the economy or a natural disaster, 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. As a result, our tenants may delay lease commencement, cease or defer making rental payments or declare bankruptcy. A bankruptcy filing by or relating to one of our tenants would bar all efforts by us to collect pre-bankruptcy debts from that tenant, or their property, unless we receive an order permitting us to do so from the bankruptcy court. A tenant bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold may be paid only to the extent that funds are available and only in the same percentage as is paid to all other

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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. Any bankruptcy or financial difficulties 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 lost to competitors;

•  contracts will not be renewed upon expiration or will not be renewed 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 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 aggregate 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 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.

      On December 29, 1998, we acquired Bel Air Mall in Mobile, Alabama. During the course of our environmental due diligence, we identified several different areas of the property in which contamination is present. One of those areas involves drycleaner solvent; the others involve petroleum contamination. The Alabama Department of Environmental Management (ADEM) is overseeing the investigation and cleanup of the drycleaner contamination. Under the terms of the purchase and sale agreement, the former owner of the property purchased a $10 million environmental insurance policy (including paying the $275,000 up front deductible) and established an escrow account totaling $1,000,000 to cover any costs associated with investigation and remediation of the contaminated areas not covered by the insurance policy. Under the agreement the seller is currently performing all required remediation of the drycleaner contamination until a “no further action” status is obtained from ADEM. In addition, an out parcel at the Bel Air Mall, previously occupied by an Amoco Gas station, currently has ongoing remediation activity on the now vacant site. Although

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we sold the Bel Air Mall to the GPT Joint Venture, in which we retained a 10% interest (see Item 1 — “Business — Joint Ventures — Equity Method of Investments — GPT Transaction”), we remain exposed to the related environmental liability (in addition to our exposure as a current 10% owner) as a previous owner.

Uninsured or underinsured losses could adversely affect our financial condition.

      As of December 31, 2005, we are self insured up to $1.1 million, $1.8 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. 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 on all of our properties. There are, however, certain types of losses, such as lease and other contract claims, acts of war or terrorism, act of God, and in some cases, 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.

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 or retail properties. These competitors include publicly traded REITs, private REITs, investment banking firms, private institutional investment funds and national, regional and local real estate investors. The current market for acquisitions continues to be extremely competitive. This competition could increase the demand for multifamily, office or retail 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 will deteriorate.

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, we intend to continue to selectively acquire multifamily, office and retail properties that meet our criteria for investment opportunities, are consistent with our business strategies and we believe will be profitable or will enhance the value of our portfolio. 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. As a result of the rapid 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.

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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 continue to acquire multifamily, office or retail properties only if they meet our criteria and we believe that 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.

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.

      To complement our acquisition strategy, we will continue to develop new properties or expand or redevelop existing properties as opportunities arise. However, there are significant risks associated with our development activities in addition to those generally associated with the ownership and operation of developed properties. These risks include the following:

•  significant expenditure of money and time on projects that may be delayed or never be completed,

•  higher than projected construction costs,

•  lack of availability of debt or equity financing on acceptable terms,

•  failure to meet anticipated occupancy or rent levels,

•  failure to obtain zoning, occupancy or other governmental approvals,

•  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

•  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. Any one or more of these risks may cause us to incur unexpected costs in connection with our development strategy, 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.

      Our investments in 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 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;

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•  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; and

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

Risks Associated with Our Indebtedness and Financing

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, 2005, the amount of our total debt was approximately $2.9 billion, consisting of $2.5 billion of consolidated debt and $0.4 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 were mortgaged to secure payment of indebtedness and we were 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 secured or unsecured debt financing, issue private or public debt, or sell some of our assets to either refinance or repay our indebtedness as it matures. We cannot assure you that these sources of financing or refinancing will be available to us at reasonable terms or at all. Our inability to obtain financing or refinancing to repay our maturing indebtedness, and our inability to refinance existing indebtedness on reasonable terms, may require us to make higher interest and principal payments, issue additional equity securities, or sell some of our assets on disadvantageous terms, all or any of which may result in foreclosure of properties, partial or complete loss on our investment and otherwise adversely affect our financial conditions and results of operation.

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

      As of December 31, 2005, our consolidated borrowings and pro rata share of unconsolidated borrowings totaled approximately $2.9 billion, which represented approximately 50.97% 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, 2005. Our organizational documents do not contain any limitation on the incurrence of debt. Our leverage and any future increases in our leverage could 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, 2005, we had approximately $424.4 million of variable rate debt outstanding, consisting of $266.8 million of our consolidated debt and $157.6 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. In

27

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 credit facility contains numerous customary restrictions, requirements and other limitations on our ability to incur debt, including restrictions related to:

•  secured debt to total asset value ratio;

•  interest coverage ratio;

•  fixed charge coverage ratio;

•  debt to total asset value ratio;

•  unencumbered interest coverage ratio;

•  unencumbered leverage ratio; and

•  adjusted total asset value.

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

•  incur secured and unsecured indebtedness;

•  sell all or substantially all or our assets; and

•  engage in mergers, consolidations and acquisitions.

      These restrictions 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.

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 development, expansion or acquisition 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, as we continue to develop or acquire new properties or expand existing properties, we will continue to rely on third-party sources of capital, including lines of credit, secured 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 new development or project expansions or our acquisition activities on terms favorable to us or at all. If we are unable to obtain sufficient level of third party financing to fund our growth, our results of operations and financial condition may be adversely affected.

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

28

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.

Risks Associated with Our Organization

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 of the Board, Chief Executive Officer and President, and James Lowder and Harold Ripps, each of whom is our 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, Thomas and James Lowder, as our trustees, may be in a position to influence us to do business with companies in which the Lowder family has a financial interest. Our policies 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 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 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 outstanding shares of Colonial;

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

29

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 shares 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 meetings 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 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.

Our board of directors has adopted a shareholder rights plan that could discourage a third party from making a proposal to acquire us.

      In 1998, our Board of Trustees adopted a shareholder rights plan, which may discourge a third party from making a proposal to acquire us. Under the plan, preferred purchase rights, which are attached to our common shares, generally will be triggered upon the acquisition of 20% or more of our outstanding common shares, unless the rights are redeemed or exchanged. If triggered, these rights would entitle our shareholders other than the acquirer to purchase 1/10,000th of a Colonial Series 1998 preferred share at a price of $92.00, subject to adjustment.

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. Although it has no present intention to do so, our Board of Trustees may amend or revise these and other policies from time to time. A change in these policies could adversely affect our financial condition or results of operations, including our ability to service debt.

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

30

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.

      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 pursuant to share option and share purchase plans, we may currently issue up to 10,872,568 common shares upon redemption of currently outstanding units. No prediction can be made about the effect that future sales of common shares will have on the market price of our common shares.

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;

•  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

31

•  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 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 $50,000 or more for each such failure.

Even if we qualify as a REIT, we will be required to pay some taxes.

      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 four years for the production of rental income prior to the sale, (ii) capitalized expenditures on the property in the four 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

32

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 and 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.

Item 1B.     Unresolved Staff Comments.

      Not applicable.

Item 2. Properties.

General

      As of December 31, 2005, our real estate portfolio included 261 properties consisting of whole or partial ownership interests, located in 13 states in the Sunbelt region of the United States. We maintain non-controlling partial interests of 10% to 50% in 73 of the 261 operating properties. The following table sets forth certain summary information about the properties as of December 31, 2005:

Summary of Properties

										Percent of
				Units/			Total 2005			Total 2005			Percentage
		Number of		NRA/			Property			Property			Occupancy at
Type of Property		Properties		GRA(1)			Revenue(2)			Revenue(2)			Dec. 31, 2005(3)
							(In thousands)
Multifamily			151		44,337	(4)	$	279,744			48.9	%		95.3	%
Office			62		19,499,515	(5)		133,368			23.3	%		91.3	%
Retail			48		13,452,603	(6)		159,460			27.8	%		92.2	%
	Total		261				$	572,572	(7)		100.0	%

(1)	Units (in this table only) refers to multifamily units, NRA refers to net rentable area of office space and GRA refers to gross retail area, which includes gross leasable area and space owned by anchor tenants.
(2)	Includes our proportionate share of revenue from those multifamily, office and retail properties accounted for under the equity method, and our share of the proceeds from properties disposed in 2005.

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(3)	Excludes the units/square feet of development or expansion phases of one multifamily property, one office property and two retail properties that had not achieved stabilized occupancy as of December 31, 2005.
(4)	Amount includes 10,065 units at 36 multifamily properties, in which we maintain a 10.0% — 35.0% ownership interest.
(5)	Amount includes 11,756,400 square feet at 27 office properties, in which we maintain a 15.0% — 33.33% ownership interest.
(6)	Amount includes 4,901,300 square feet at 10 retail properties, in which we maintain a 10.0% — 50.0% ownership interest. Square footage includes anchor-owned square footage.
(7)	Amount includes $30,332 of our proportionate share of revenue from unconsolidated properties and $61,973 of revenue from properties classified as discontinued operations during 2005. In order to arrive at consolidated property revenues of $480,266, in accordance with GAAP, these amounts must be removed from the total property revenue. Management believes including our proportionate share of revenue from unconsolidated properties and revenues from discontinued operations provides investors with a more complete description of our gross revenues.

Multifamily Properties

      The 151 multifamily properties contain a total of 44,337 garden-style apartments and range in size from 80 to 1,080 units. Twenty multifamily properties (containing a total of 7,878 apartment units) are located in Alabama, ten multifamily properties (containing a total of 2,340 units) are located in Arizona, twelve multifamily properties (containing a total of 4,135 units) are located in Florida, twenty multifamily properties (containing a total of 4,918 units) are located in Georgia, two multifamily properties (containing a total of 498 units) are located in Mississippi, three multifamily properties (containing a total of 858 units) are located in Nevada, three multifamily properties (containing a total of 1,025 units) are located in New Mexico, thirty-three multifamily properties (containing a total of 9,121 units) are located in North Carolina, ten multifamily properties (containing a total of 2,601 units) are located in South Carolina, four multifamily properties (containing a total of 1,263 units) are located in Tennessee, twenty-two multifamily properties (containing a total of 6,450 units) are located in Texas and twelve multifamily properties (containing a total of 3,290 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. All of the multifamily properties are managed by us.

      The following table sets forth certain additional information relating to the multifamily properties as of and for the year ended December 31, 2005.

Multifamily Properties

												Average					Percent of Total
							Approximate					Rental		Total Multifamily			2005 Multifamily
Multifamily			Year		Number of		Rentable Area		Percent			Rate		Property Revenue			Property
Property(1)	Location		Completed(2)		Units(3)		(Square Feet)		Occupied			per Unit		for 2005			Revenue(4)
Alabama:
CG at Edgewater		Huntsville		1990		500		541,650		96.2	%		733		4,170,604			1.5	%
CG at Galleria		Birmingham		1986/96		1,080		1,195,186		94.8	%		679		9,117,933			3.3	%
CG at Galleria Woods		Birmingham		1994											525,906	(8)		0.2	%
CG at Inverness Lakes II(7)		Mobile		1996		312		329,926		92.0	%		676		361,007			0.1	%
CG at Liberty Park		Birmingham		2000		300		338,684		96.3	%		997		3,355,474			1.2	%
CG at Madison		Huntsville		2000		336		354,592		94.3	%		800		3,072,106			1.1	%
CG at Mountain Brook(7)		Birmingham		1987/91		392		392,700		94.4	%		722		487,918			0.2	%
CG at Promenade		Montgomery		2000		384		424,372		96.4	%		844		3,965,903			1.4	%
CG at Riverchase		Birmingham		1984/91		468		745,840		95.7	%		834		4,439,115			1.6	%
Colony Woods(7)		Birmingham		1988		414		450,682		93.7	%		718		355,400			0.1	%
CV at Ashford Place		Mobile		1983		168		139,128		98.2	%		586		1,057,031			0.4	%
CV at Cahaba Heights(7)		Birmingham		1992											22,110	(8)		0.0	%
CV at Hillwood(7)(10)		Montgomery		1984		160		150,912		100.0	%		648		175,760			0.1	%
CV at Huntleigh Woods		Mobile		1978		233		199,052		99.1	%		585		1,418,235			0.5	%
CV at Inverness		Birmingham		1986/87/90		586		551,597		93.3	%		678		4,181,802			1.5	%
CV at Inverness Lakes I(7)(10)		Mobile		1983		186		176,460		100.0	%		598		186,047			0.1	%
CV at Research Park		Huntsville		1987/94		736		809,343		99.3	%		625		5,555,272			2.0	%
CV at Rocky Ridge(7)		Birmingham		1984		226		258,900		95.1	%		630		257,215			0.1	%
CV at Trussville		Birmingham		1996/97		376		410,340		93.6	%		749		3,284,392			1.2	%
Madison at Shoal Run(7)		Birmingham		1985		276		249,300		97.5	%		637		214,028			0.1	%

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													Average					Percent of Total
								Approximate					Rental		Total Multifamily			2005 Multifamily
Multifamily				Year		Number of		Rentable Area		Percent			Rate		Property Revenue			Property
Property(1)		Location		Completed(2)		Units(3)		(Square Feet)		Occupied			per Unit		for 2005			Revenue(4)
Meadows at Brook Highland(7)			Birmingham		1987		400		465,605		96.5	%		730		323,169			0.1	%
The Grove at Riverchase(7)			Birmingham		1996		345		344,625		95.7	%		777		182,716	(6)		0.1	%
Deer Creek Homes			Montgomery													27,386			0.0	%
	Subtotal — Alabama						7,878		8,528,894		95.8	%		716		46,736,529			16.8	%
Arizona
Arabian Trials(7)			Scottsdale		1986		384		347,240		97.1	%		1,054		627,495			0.2	%
Casa Lindas(7)			Tucson		1986		144		160,624		95.1	%		774		248,653			0.1	%
Colonia del Rio(7)			Tucson		1985		176		177,892		96.0	%		737		302,325			0.1	%
Fairway Crossing(7)			Phoenix		1986		310		303,170		94.2	%		759		477,766			0.2	%
Hacienda del Rio(7)			Tucson		1983		248		152,504		97.6	%		542		297,500			0.1	%
La Entrada(7)			Scottsdale		1988		130		112,810		98.5	%		830		217,262			0.1	%
Pinnancle Heights(7)			Tucson		1995		310		339,364		97.1	%		936		591,829			0.2	%
Posada del Este(7)			Phoenix		1979		148		128,894		98.0	%		802		248,000			0.1	%
Rancho Viejo(7)			Phoenix		1985		266		207,366		98.5	%		665		324,875			0.1	%
Springhill(7)			Tucson		1988		224		175,520		97.8	%		626		304,377			0.1	%
	Subtotal — Arizona						2,340		2,105,384		96.9	%		790		3,640,082			1.3	%
Florida:
CG at Bayshore(7)			Bradenton		1997		376		368,900		98.9	%		816		977,505			0.4	%
CG at Cypress Crossing			Orlando		1999		250		314,596		98.4	%		1,002		2,992,702			1.1	%
Cypress Cove at Suntree(7)			Melbourne		1991											151,038	(8)		0.1	%
CG at Gainesville			Gainesville		1989/93/94											1,135,323	(8)		0.4	%
CG at Heather Glen			Orlando		2000		448		524,074		98.7	%		929		4,893,309			1.8	%
CG at Heathrow			Orlando		1997		312		370,028		100.0	%		979		3,417,193			1.2	%
CG at Hunter’s Creek			Orlando		1997		496		624,464		96.4	%		951		5,601,577			2.0	%
CG at Lakewood Ranch			Sarasota		1999		288		301,656		99.0	%		991		3,580,415			1.3	%
CG at Metrowest			Orlando		1997		311		313,500		96.8	%		845		3,236,817			1.2	%
CG at Palma Sola(7)(10)			Bradenton		1992		340		291,796		97.4	%		796		803,206			0.3	%
CG at River Hills(7)			Tampa		1991/97											126,423	(8)		0.0	%
CG at Seven Oaks			Tampa		2004		318		301,131		94.3	%		920		3,502,650			1.3	%
CG at TownPark			Orlando		2002		456		584,664		98.0	%		1,014		5,360,554			1.9	%
CG at TownPark Reserve			Orlando		2004		80		64,900		100.0	%		1,302		1,018,853			0.4	%
CV at Lake Mary			Orlando		1991/95											1,756,296	(8)		0.6	%
CV at TownPark			Sarasota		2002											789,187	(8)		0.3	%
CV at Twin Lakes			Orlando		2004		460		138,200		97.4	%		1,178		3,673,074			1.3	%
St. Andrews			Jensen Beach		2002		N/A		N/A		N/A			N/A		1,249,943			0.5	%
Mizner/ Delray Beach			Delray Beach		2002		N/A		N/A		N/A			N/A		908,289			0.3	%
	Subtotal — Florida						4,135		4,197,909		97.8	%		960		45,174,354			16.3	%
Georgia:
CG at Barrett Creek			Atlanta		1999		332		309,456		94.3	%		728		1,046,471	(6)		0.4	%
CG at Barrington Club(7)(10)			Macon		1996		176		191,940		98.9	%		739		198,256			0.1	%
CG at Berkeley Lake			Atlanta		1998		180		243,941		96.1	%		1,016		1,979,314			0.7	%
CG at Enclave			Atlanta		1995		200		296,000		94.5	%		903		1,457,241			0.5	%
CG at Hammocks			Savannah		1997		308		323,844		97.4	%		845		2,437,184	(6)		0.9	%
CG at McGinnis Ferry			Atlanta		1997		434		510,000		96.3	%		916		4,396,179			1.6	%
CG at Mount Vernon			Atlanta		1997		213		257,180		97.2	%		1,099		2,563,756			0.9	%
CG at River Oaks			Atlanta		1992		216		276,208		94.4	%		941		2,174,123			0.8	%
CG at River Plantation			Atlanta		1994		232		311,000		93.5	%		985		2,436,215			0.9	%
CG at Sugarloaf			Atlanta		2002		250		329,600		90.4	%		908		2,530,911			0.9	%
CG at Wesleyan			Macon		1997											590,850	(8)		0.2	%
CG at Whitemarsh(10)			Savannah		2002		352		347,707		92.9	%		1,367		2,603,284	(6)		0.9	%
CV at Greentree			Savannah		1984		194		165,216		99.0	%		691		1,116,253	(6)		0.4	%
CV at Huntington			Savannah		1986		147		121,112		96.6	%		729		969,626	(6)		0.3	%
CV at Marsh Cove			Savannah		1983		188		412,041		92.0	%		770		1,210,460	(6)		0.4	%

35

													Average					Percent of Total
								Approximate					Rental		Total Multifamily			2005 Multifamily
Multifamily				Year		Number of		Rentable Area		Percent			Rate		Property Revenue			Property
Property(1)		Location		Completed(2)		Units(3)		(Square Feet)		Occupied			per Unit		for 2005			Revenue(4)
CV at Poplar Place			Atlanta		1989/95		324		269,377		92.6	%		756		1,910,745	(6)		0.7	%
CV at Spring Lake			Atlanta		1986		188		189,712		94.7	%		717		1,117,166	(6)		0.4	%
CV at Stockbridge(7)(10)			Stockbridge		1993/94		240		253,200		95.8	%		764		272,479			0.1	%
CV at Stone Brook(10)			Atlanta		1986		188		176,200		87.2	%		714		1,050,819	(6)		0.4	%
CV at Timothy Woods			Athens		1996		204		211,444		95.6	%		758		1,688,042			0.6	%
Merritt at Godley Station(7)			Savannah		2005		312		337,300		LU	(9)		698		477,491	(6)		0.2	%
Ashley Run			Atlanta		1987											596,484	(6)(8)		0.2	%
Carlyle Club Apartments			Atlanta		1974											274,925	(6)(8)		0.1	%
Dunwoody Springs			Atlanta		1981											380,850	(6)(8)		0.1	%
CV at Walton Way			Augusta		1984											496,454			0.2	%
CV at Vernon Marsh			Savannah													2,076			0.0	%
	Subtotal — Georgia						4,878		5,532,478		95.0	%		877		35,977,654			13.0	%
Mississippi:
CG at The Reservoir			Jackson		2000		170		195,605		100.0	%		886		1,761,994			0.6	%
CG at Natchez Trace			Jackson		1995/97		328		342,800		97.9	%		741		2,761,039			1.0	%
	Subtotal — Mississippi						498		538,405		98.6	%		790		4,523,033			1.6	%
Nevada
Desert Lakes(7)			Las Vegas		1991		184		188,360		94.0	%		977		403,810			0.1	%
Pinnacle Flamingo West(7)			Las Vegas		1986		324		320,364		96.9	%		831		689,691			0.2	%
Talavera(7)			Las Vegas		1995		350		353,724		96.0	%		951		800,747			0.3	%
	Subtotal — Nevada						858		862,448		95.9	%		911		1,894,248			0.7	%
New Mexico
Pinnacle Estates(7)			Albuquerque		1998		294		313,420		93.5	%		872		618,524			0.2	%
Pinnacle High Desert(7)			Albuquerque		1986		430		478,036		95.6	%		936		959,053			0.3	%
Pinnacle High Resort(7)			Albuquerque		1998		301		322,770		93.7	%		796		561,664			0.2	%
	Subtotal — New Mexico						1,025		1,114,226		94.4	%		877		2,139,241			0.8	%
North Carolina:
Autumn Park			Greensboro		2001/04		402		350,395		92.8	%		828		2,660,949	(6)		1.0	%
Beacon Hill			Charlotte		1985		349		256,075		93.7	%		652		1,677,853	(6)		0.6	%
Bridgetown Bay			Charlotte		1986											121,051	(6)(8)		0.0	%
CG at Arringdon			Raleigh/Durham		2003		320		336,000		95.0	%		892		2,703,208			1.0	%
CG at Beverly Crest			Charlotte		1996		300		278,685		97.0	%		824		2,532,283			0.9	%
CG at Crabtree Valley			Raleigh		1997		210		209,670		94.8	%		855		164,506	(6)		0.1	%
CG at Legacy Park			Charlotte		2001		288		289,080		94.1	%		796		1,874,907	(6)		0.7	%
CG at Mallard Creek			Charlotte		2004		252		105,336		98.4	%		860		859,059			0.3	%
CG at Mallard Lake			Charlotte		1998		302		300,806		93.4	%		807		226,953	(6)		0.1	%
CG at Patterson Place			Durham		1997		252		238,654		96.0	%		883		2,293,057			0.8	%
CG at Research Park(7)			Raleigh		2002		370		383,978		91.9	%		805		277,654	(6)		0.1	%
CG at Trinity Commons			Raleigh		2000/02		462		277,212		97.0	%		818		2,886,412	(6)		1.0	%
CG at Wilmington			Wilmington		1998/2002		390		351,936		95.9	%		688		2,534,318	(6)		0.9	%
Clarion Crossing			Raleigh		1972		260		175,400		95.0	%		711		1,354,585	(6)		0.5	%
CV at Charleston Place			Charlotte		1986		214		172,405		94.4	%		645		1,027,616	(6)		0.4	%
CV at Deerfield			Raleigh		1985		204		181,112		90.2	%		777		1,294,403	(6)		0.5	%
CV at Greystone			Charlotte		1998/2000		408		378,300		93.4	%		723		2,228,789	(6)		0.8	%
CV at Highland Hills			Raleigh		1987		264		264,088		94.7	%		871		1,632,841	(6)		0.6	%
CV at Meadow Creek			Charlotte		1984		250		214,920		92.0	%		653		1,242,631	(6)		0.4	%
CV at Mill Creek			Greensboro		1984		220		197,320		91.4	%		596		1,142,082	(6)		0.4	%
CV at Paces Glen(10)			Charlotte		1986		172		155,672		89.5	%		593		799,713	(6)		0.3	%
CV at Pinnacle Ridge			Asheville		1951/85		166		146,856		97.0	%		691		912,834	(6)		0.3	%
CV at Regency Place			Raleigh		1986		180		151,200		95.0	%		708		988,761	(6)		0.4	%
CV at Remington Place(10)			Raleigh		1985		136		149,386		97.1	%		795		811,740	(6)		0.3	%
CV at South Tryon			Charlotte		2002		216		230,533		98.6	%		825		1,298,567	(6)		0.5	%
CV at Stone Point			Charlotte		1986		192		162,816		93.8	%		703		1,020,446	(6)		0.4	%

36

													Average					Percent of Total
								Approximate					Rental		Total Multifamily			2005 Multifamily
Multifamily				Year		Number of		Rentable Area		Percent			Rate		Property Revenue			Property
Property(1)		Location		Completed(2)		Units(3)		(Square Feet)		Occupied			per Unit		for 2005			Revenue(4)
CV at Timber Crest			Charlotte		2000		282		277,116		94.0	%		754		1,641,980	(6)		0.6	%
Glen Eagles I & II			Greensboro		1990/2000		310		158,028		90.0	%		678		1,753,847	(6)		0.6	%
Heatherwood			Charlotte		1980		476		432,274		91.6	%		621		2,339,466	(6)		0.8	%
Parkside at Woodlake			Raleigh		1996		266		230,172		91.0	%		721		1,490,615	(6)		0.5	%
Summerwalk(10)			Charlotte		1983		160		154,000		98.1	%		661		887,288	(6)		0.3	%
The Landing			Raleigh		1984											1,128,103	(6)(8)		0.4	%
The Meadows I, II, & III(10)			Asheville		1974/2001		392		187,628		94.4	%		723		2,307,341	(6)		0.8	%
The Timbers(10)			Raleigh		1983		176		131,120		93.2	%		614		844,529	(6)		0.3	%
The Trestles			Raleigh		1987		280		217,320		95.7	%		668		1,306,738	(6)		0.5	%
	Subtotal — North Carolina						9,121		7,745,493		94.1	%		744		50,267,125			18.1	%
South Carolina:
CV at Ashley Plantation			Bluffton		1998/2000											729,142	(8)		0.3	%
Arbors at Windsor Lake(7)			Columbia		1991		228		216,240		93.4	%		729		144,854			0.1	%
Cape Landing			Myrtle Beach		1997/98		288		268,632		91.0	%		673		1,806,626	(6)		0.7	%
CG at Quarterdeck			Charleston		1987		230		218,880		95.7	%		823		1,767,538	(6)		0.6	%
CV at Caledon Wood(10)			Greenville		1995/96		350		348,305		97.7	%		720		2,622,996			0.9	%
CV at Hampton Pointe			Charleston		1986		304		314,600		93.1	%		708		2,094,662	(6)		0.8	%
CV at Waters Edge			Charleston		1985		204		187,640		92.6	%		675		1,413,832	(6)		0.5	%
CV at Westchase			Charleston		1985		352		248,391		94.9	%		626		2,103,932	(6)		0.8	%
CV at Windsor Place			Charleston		1985		224		213,440		92.9	%		640		1,378,644	(6)		0.5	%
Merritt at James Island(10)			Charleston		2002		230		257,384		92.6	%		1,075		2,301,570	(6)		0.8	%
Stone Ridge(7)			Columbia		1972		191		196,170		92.7	%		618		77,537			0.0	%
	Subtotal — South Carolina						2,601		2,469,682		93.9	%		724		16,441,333			5.9	%
Tennessee
CG at Bellevue			Nashville		1996		349		344,954		94.6	%		844		314,322	(6)		0.1	%
CG at Brentwood(7)			Nashville		1995		254		242,155		95.3	%		978		681,238			0.2	%
CG at Shelby Farms			Memphis		1998		296		318,302		94.6	%		768		235,983	(6)		0.1	%
CV at Hendersonville(7)			Nashville		1992		364		250,400		92.3	%		666		668,759			0.2	%
	Subtotal — Tennessee						1,263		1,155,811		94.1	%		802		1,900,302			0.7	%
Texas:
The Cunningham Apartments(7)			Austin		2000		280		257,338		90.0	%		765		451,062			0.2	%
Aspen Hills			Fort Worth		1979											178,930	(6)(8)		0.1	%
Brookfield(10)			Dallas		1984		232		165,648		89.2	%		563		1,072,243	(6)		0.4	%
CG at Bear Creek			Fort Worth		1998		436		394,969		95.2	%		931		1,455,724	(6)		0.5	%
CG at Round Rock			Austin		DEV		N/A		433,816		N/A			N/A		4,247			0.0	%
CG at Silverado Reserve			Austin		DEV		N/A		267,776		N/A			N/A		7,636			0.0	%
CG at Valley Ranch			Dallas		1997		396		462,123		98.2	%		1,081		3,601,741	(6)		1.3	%
Copper Crossing(10)			Fort Worth		1980/81		400		309,200		91.0	%		525		1,867,044	(6)		0.7	%
Cottonwood Crossing			Fort Worth		1985		200		150,200		92.5	%		544		914,182	(6)		0.3	%
Cutters Point			Dallas		1978											779,311	(6)(8)		0.3	%
CV at Bear Creek			Fort Worth		1984		120		90,600		98.3	%		649		676,639	(6)		0.2	%
CV at Bedford			Fort Worth		1983		238		153,986		96.6	%		584		1,176,166	(6)		0.4	%
CV at Canyon Hills			Austin		1996		229		163,056		99.6	%		748		1,338,125	(6)		0.5	%
CV at Estrada(10)			Dallas		1983		248		191,208		97.2	%		628		1,237,382	(6)		0.4	%
CV at Haverhill			San Antonio		1997		322		326,914		95.7	%		953		3,144,274			1.1	%
CV at Main Park			Dallas		1984		192		226,944		92.7	%		754		1,272,863	(6)		0.5	%
CV at North Arlington			Fort Worth		1985		240		190,560		95.8	%		654		1,342,157	(6)		0.5	%
CV at Pear Ridge			Dallas		1988		242		187,308		93.0	%		665		1,440,618	(6)		0.5	%
CV at Quarry Oaks			Austin		1996		533		459,800		93.6	%		748		4,174,753			1.5	%
CV at Sierra Vista			Austin		1999		232		204,400		94.0	%		694		1,760,923			0.6	%
CV at Silverado			Austin		2004		238		38,100		93.3	%		948		1,504,199			0.5	%
The Arbors at Forest Ridge			Fort Worth		1986											750,615	(6)(8)		0.3	%
The Meridian			Austin		1988											717,433	(6)(8)		0.3	%

37

													Average						Percent of Total
								Approximate					Rental			Total Multifamily			2005 Multifamily
Multifamily				Year		Number of		Rentable Area		Percent			Rate			Property Revenue			Property
Property(1)		Location		Completed(2)		Units(3)		(Square Feet)		Occupied			per Unit			for 2005			Revenue(4)
Devonshire			Dallas		1978												163,219	(6)(8)		0.1	%
Eagle Crest			Dallas		1983												1,829,184	(6)(8)		0.7	%
Mill Crossing			Fort Worth		1979												216,991	(6)(8)		0.1	%
Sierra Ridge			San Antonio		1981												798,610	(6)(8)		0.3	%
Silverbrook I & II			Fort Worth		1982/84												2,152,272	(6)(8)		0.8	%
Timberglen			Dallas		1984												1,065,013	(6)(8)		0.4	%
Toscana			Dallas		1986												548,538	(6)(8)		0.2	%
Grayson Square I & II			Fort Worth		1985/86		450		380,500		95.8	%		718			2,733,150	(6)		1.0	%
Paces Cove			Dallas		1982		328		219,760		100.0	%		551			1,505,874	(6)		0.5	%
Paces Point			Dallas		1985		300		228,600		95.3	%		608			1,549,458	(6)		0.6	%
Remington Hills at Las Colinas(10)			Dallas		1984		362		345,710		93.6	%		818			2,395,681	(6)		0.9	%
Summer Tree			Dallas		1980		232		133,400		94.4	%		515			1,044,489	(6)		0.4	%
	Subtotal — Texas						6,450		5,981,916		94.8	%		728			46,870,747			16.9	%
Virginia:
Arbor Trace(10)			Norfolk		1985		148		125,800		96.6	%		890			1,249,441	(6)		0.5	%
Ashley Park(10)			Richmond		1988		272		208,064		97.4	%		736			1,703,067	(6)		0.6	%
CV at Chase Gayton			Richmond		1984		328		311,196		95.7	%		807			2,341,087	(6)		0.8	%
CV at Greenbrier			Richmond		1980		258		219,460		97.7	%		853			2,205,299	(6)		0.8	%
CV at Hampton Glen			Richmond		1986		232		182,824		96.1	%		808			1,696,663	(6)		0.6	%
CV at Harbour Club			Norfolk		1988		214		173,972		97.7	%		886			1,859,116	(6)		0.7	%
CV at Tradewinds			Norfolk		1988		284		263,920		95.4	%		861			2,165,823	(6)		0.8	%
CV at Waterford			Richmond		1989		312		292,066		96.5	%		834			2,280,221	(6)		0.8	%
Mayflower Seaside(10)			Norfolk		1950		265		183,542		95.8	%		969			2,529,366	(6)		0.9	%
The Gables(10)			Richmond		1987		224		156,332		98.2	%		772			1,599,312	(6)		0.6	%
Trolley Square East & West(10)			Richmond		1964/65		328		180,372		97.9	%		732			2,075,468	(6)		0.7	%
Trophy Chase I & II			Charlottesville		1970		425		372,526		95.1	%		728			2,474,529	(6)		0.9	%
	Subtotal — Virginia						3,290		2,670,074		96.6	%		814			24,179,392			8.7	%
	TOTAL						44,337		42,902,720		95.4	%		780	(5)	$	279,744,040			100.0	%

(1)	All multifamily properties are 100% owned by us with the exception of the properties noted in (7) below. 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)	Year initially completed and, 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, 2005.
(4)	Percent of Total Multifamily 2005 Property Revenue represents each property’s proportionate share of revenue from our 151 multifamily properties, including the partially-owned properties, as well as 26 properties sold during 2005.
(5)	Represents weighted average rental rate per unit of the 151 multifamily properties at December 31, 2005.
(6)	Represents revenues from the date of our acquisition of this property in 2005 through December 31, 2005.
(7)	We hold a 10% - 35% non-controlling interest in these joint ventures.
(8)	Represents revenues from January 1, 2005 through the date the properties were sold during 2005.
(9)	These properties are currently in lease-up (LU) and are not included in the Percent Occupied and Average Rental Rate per Unit totals.

(10)  This property is classified as held for sale and is included as discontinued operations at December 31, 2005.

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

					Average Base
	Number of		Percent		Rental Rate
Year-End	Units(1)		Leased(2)		per Unit
December 31, 2005		44,337		95.3%	$	771
December 31, 2004		25,009		94.6%	$	818
December 31, 2003		15,224		92.9%	$	794
December 31, 2002		14,556		88.1%	$	785
December 31, 2001		16,256		92.8%	$	752

38

(1)	Units (in this table only) refers to multifamily units owned at year end, which for the year ended December 31, 2005, includes 10,065 units that we partially owned at December 31, 2005.
(2)	Represents weighted average occupancy of the multifamily properties that had achieved stabilized occupancy at the end of the respective period.

Office Properties

      The 62 office properties contain a total of approximately 19.5 million net rentable square feet. Eighteen of the office properties are located in Alabama (representing 16.7% of the office portfolio’s net rentable square feet), twenty-one are located in Florida (representing 40.0% of the office portfolio’s net rentable square feet), eleven are located in Atlanta, Georgia (representing 21.6% of the office portfolio’s net rentable square feet), one is located in Rockville, Maryland, three are located in Charlotte, North Carolina, one is located in Memphis, Tennessee, six are located in Texas (representing 12.6% of the office portfolio’s net rentable square feet), and one is located in Richmond, Virginia. The office properties range in size from approximately 20,900 square feet to 1,200,900 square feet. All of the office properties are managed by us, with the exception of 3 properties acquired in the Colonial/ DRA Office JV.

      The following table sets forth certain additional information relating to the office properties as of and for the year ended December 31, 2005.

Office Properties

													Average		Total Office			Percent of
						Net Rentable					Total		Base Rent		Property			Total 2005
				Year		Area Square		Percent			Annualized		per Leased		Revenue for			Office Property
Office Property(1)		Location		Completed(2)		Feet		Leased			Base Rent		Square Foot		2005(3)			Revenue(4)
Alabama:
Colonial Center Blue Lake			Birmingham		1982/95		166,554		98.3	%	$	2,912,770	$	17.79	$	3,057,460			2.3	%
Colonial Center Colonnade			Birmingham		1989/99		419,234		99.7	%		7,010,124		16.77		8,425,226			6.3	%
Riverchase Center			Birmingham		1984-88		305,204		97.8	%		2,959,153		9.91		3,737,907			2.8	%
Land Title Bldg.(7)			Birmingham		1975		29,988		100.0	%		402,855		13.43		184,603			0.1	%
International Park			Birmingham		1987/89/99		210,733		99.3	%		3,777,856		18.05		4,115,732			3.1	%
Independence Plaza			Birmingham		1979		106,216		99.7	%		1,749,898		16.52		1,782,068			1.3	%
Colonial Plaza			Birmingham		1999		170,850		96.3	%		2,884,979		17.53		3,278,057			2.5	%
Colonial Center Lakeside			Huntsville		1989/90		121,513		100.0	%		1,943,380		15.99		2,169,865			1.6	%
Colonial Center Research Park			Huntsville		1999		133,482		100.0	%		1,895,483		14.20		2,132,560			1.6	%
Colonial Center Research Park #4			Huntsville		1999		59,883		100.0	%		650,302		10.86		651,065	(5)		0.5	%
Colonial Center Research Place			Huntsville		1979/84/88		272,558		100.0	%		3,535,847		12.97		3,574,769			2.7	%
DRS building			Huntsville		1972/86/90/03		215,485		100.0	%		1,706,970		7.92		1,776,305			1.3	%
AmSouth Center			Huntsville		1990		154,521		96.9	%		2,531,963		16.91		3,043,054			2.3	%
Perimeter Corporate Park			Huntsville		1986/89		234,570		92.6	%		3,382,369		15.57		3,370,891			2.5	%
Progress Center			Huntsville		1983-91		224,369		100.0	%		2,481,037		11.06		2,599,317			1.9	%
Research Park Office Center			Huntsville		1984/00		176,570		96.2	%		1,768,663		10.41		2,180,240			1.6	%
Interstate Park			Montgomery		1982-85/89		226,961		89.8	%		3,227,955		15.84		3,379,705			2.5	%
250 Commerce St			Montgomery		1904/81		37,447		97.1	%		359,917		9.90		491,934			0.4	%
	Subtotal-Alabama						3,266,138		96.9	%		45,181,521		14.28		49,950,758			37.3	%

39

													Average		Total Office			Percent of
						Net Rentable					Total		Base Rent		Property			Total 2005
				Year		Area Square		Percent			Annualized		per Leased		Revenue for			Office Property
Office Property(1)		Location		Completed(2)		Feet		Leased			Base Rent		Square Foot		2005(3)			Revenue(4)
Florida:
Baymeadows Way(7)			Jacksonville		1993		224,281		100.0	%		2,130,669		9.50		104,219	(5)		0.1	%
Jacksonville Baymeadows(7)			Jacksonville		1999		751,295		97.1	%		9,439,219		12.94		466,950	(5)		0.4	%
Jacksonville JTB(7)			Jacksonville		2001		416,773		100.0	%		5,429,751		13.03		281,363	(5)		0.2	%
901 Maitland Center			Orlando		1985		155,730		76.5	%		2,237,235		18.78		2,298,706			1.7	%
Colonial Center 100 at TownPark			Orlando		2001		153,569		100.0	%		3,331,526		21.69		3,438,006			2.6	%
Colonial Center 200 at TownPark			Orlando		2003		155,203		100.0	%		3,061,699		19.73		3,084,030			2.3	%
Colonial Center 600 at TownPark			Orlando		2002		199,585		100.0	%		3,926,154		19.67		4,046,492			3.0	%
Colonial TownPark Office			Orlando		2004		33,423		LU	(6)		683,124		20.44		662,620	(5)		0.5	%
Colonial Center Heathrow			Orlando		1988/96/00		807,052		92.1	%		15,167,218		20.41		16,817,149			12.6	%
Heathrow 1001			Orlando		2000		192,159		95.0	%		3,419,702		18.73		1,703,718	(5)		1.3	%
Orlando Central(7)			Orlando		1980		615,601		86.0	%		8,709,238		16.45		353,929	(5)		0.3	%
Orlando Lake Mary(7)			Orlando		1999		303,540		80.4	%		4,107,562		16.83		179,211	(5)		0.1	%
Orlando University(7)			Orlando		2001		383,367		92.3	%		6,693,225		18.92		266,694	(5)		0.2	%
St. Petersburg Center(7)			St. Petersburg		2000		673,899		87.4	%		10,050,448		17.06		403,294	(5)		0.3	%
Tallahassee Center(7)			Tallahassee		1990		836,389		77.8	%		10,707,151		16.45		432,634	(5)		0.3	%
Colonial Place I & II			Tampa		1984/1986		370,994		89.9	%		7,872,624		23.60		7,135,984	(5)		5.4	%
Colonial Center at Bayside			Tampa		1988/94/97		213,768		72.3	%		1,992,733		12.89		1,720,971	(5)		1.3	%
Concourse Center			Tampa		1981/85		292,751		83.4	%		4,336,721		17.76		4,481,566			3.4	%
Broward Financial Center(7)			South Florida		1986		325,583		79.2	%		6,882,282		26.69		299,502	(5)		0.2	%
Las Olas Centre(7)			South Florida		1999		469,199		88.3	%		9,088,117		21.94		594,088	(5)		0.4	%
Colonial Bank Centre			South Florida		1982/1996		235,532		86.0	%		4,832,712		23.86		4,051,447	(5)		3.0	%
	Subtotal-Florida						7,809,693		88.3	%		124,099,111		17.99		52,822,573			39.6	%
Georgia:
Colonial Center at Mansell Overlook			Atlanta		1987/96/97/00		652,542		99.2	%		9,141,850		14.12		14,859,293			11.1	%
Colonial Center at Mansell Overlook 400			Atlanta		1987		188,478		87.1	%		1,560,088		9.50		2,134,078			1.6	%
Shoppes at Mansell			Atlanta		1996/97		20,868		100.0	%		478,195		22.92		726,119			0.5	%
Lakeside at Mansell			Atlanta		2005		14,817		LU	(6)		358,816		24.22		200,797			0.2	%
The Peachtree			Atlanta		1989		260,932		76.9	%		3,965,484		19.76		2,248,245	(5)		1.7	%
Atlantic Center Plaza(7)			Atlanta		2001		501,185		88.9	%		12,946,756		29.06		563,873	(5)		0.4	%
Atlanta Chamblee(7)			Atlanta		2000		1,129,607		91.3	%		19,022,902		18.44		784,666	(5)		0.6	%
Atlanta Gwinnett Place(7)			Atlanta		2000		262,806		81.8	%		3,633,393		16.90		153,800	(5)		0.1	%
Atlanta Perimeter(7)			Atlanta		1985		181,862		83.0	%		2,467,443		16.35		95,964	(5)		0.1	%
McGinnis Park(7)			Atlanta		2001		202,243		63.6	%		2,306,498		17.93		81,125	(5)		0.1	%
Ravinia 3(7)			Atlanta		1991		804,876		76.2	%		10,956,972		17.87		642,300	(5)		0.5	%
	Subtotal-Georgia						4,220,216		85.7	%		66,838,396		18.48		22,490,260			16.9	%
Maryland:
Decoverly(7)			Rockville		1989		154,787		98.8	%		3,756,427		24.56		261,058	(5)		0.2	%
	Subtotal-Maryland						154,787		98.8	%		3,756,427		24.56		261,058			0.2	%
North Carolina:
Esplanade			Charlotte		1981		201,902		45.8	%		1,263,492		13.66		759,259	(5)		0.6	%
Charlotte University(7)			Charlotte		1999		182,891		90.9	%		2,998,272		18.03		97,207	(5)		0.1	%
Charlotte Vanguard(7)			Charlotte		1997		527,471		66.1	%		5,184,427		14.87		201,527	(5)		0.2	%
	Subtotal-North Carolina						912,264		66.6	%		9,446,191		15.55		1,057,993			0.9	%
Tennessee:
Germantown Center(7)			Memphis		1999		531,709		85.8	%		8,041,121		17.63		330,974	(5)		0.2	%
	Subtotal-Tennessee						531,709		85.8	%		8,041,121		17.63		330,974			0.2	%

40

													Average		Total Office			Percent of
						Net Rentable					Total		Base Rent		Property			Total 2005
				Year		Area Square		Percent			Annualized		per Leased		Revenue for			Office Property
Office Property(1)		Location		Completed(2)		Feet		Leased			Base Rent		Square Foot		2005(3)			Revenue(4)
Texas:
Research Park Plaza III and IV			Austin		2001		357,689		100.0	%		7,222,735		20.19		4,843,500	(5)		3.6	%
6600 Campus Circle(7)			Dallas		1998		127,226		96.8	%		2,787,602		22.63		109,494	(5)		0.1	%
Signature Place(7)			Dallas		1986		437,319		69.6	%		5,935,948		19.50		266,048	(5)		0.2	%
Tollway Crossing(7)			Dallas		1997		152,163		100.0	%		3,374,096		22.17		148,892	(5)		0.1	%
Post Oak(7)			Houston		1982		1,200,925		94.0	%		18,626,885		16.50		847,781	(5)		0.6	%
Westchase(7)			Houston		2000		184,259		81.8	%		3,325,783		22.07		123,476	(5)		0.1	%
	Subtotal-Texas						2,459,581		90.1	%		41,273,049		18.62		6,339,191			4.7	%
Virginia:
Paragon Place 1(7)			Richmond		1986		145,127		99.7	%		2,716,127		18.77		114,926	(5)		0.1	%
	Subtotal-Virginia						145,127		99.7	%		2,716,127		18.77		114,926			0.1	%
	TOTAL						19,499,515		91.3	%	$	301,351,944	$	18.35	$	133,367,733			100	%

(1)	All office properties are 100% owned by us with the exception of those noted in (7) below.
(2)	Year initially completed and, 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 Office Property Revenue for 2005 is our share (based on our percentage ownership of the property) of the total office property revenue, unless otherwise noted.
(4)	Percent of Total Office 2005 Property Revenue represents each property’s proportionate share of revenue from our 62 office properties, including partially owned properties.
(5)	Represents revenues from the date of our acquisition or completion of development of this property in 2005 through December 31, 2005.
(6)	This property is currently in lease-up (LU) and is not included in the Percent Leased and Average Base Rent per Leased Square Foot property totals.
(7)	We hold a 15% - 33.33% non-controlling interest in these joint ventures.

     The following table sets out a schedule of the lease expirations for leases in place as of December 31, 2005, for our office properties (including all lease expirations for partially-owned properties).

			Net Rentable		Annualized		Percent of Total
	Number of		Area of Expiring		Base Rent of		Annual Base Rent
	Tenants with		Leases		Expiring		Represented by
Year of Lease Expiration	Expiring Leases		(Square Feet)(1)		Leases(1)(2)		Expiring Leases(1)
2006		484		2,378,163	$	52,803,654		14.0	%
2007		402		2,359,047		50,216,795		13.3	%
2008		394		2,309,535		51,133,437		13.5	%
2009		307		2,672,229		78,468,768		20.8	%
2010		251		1,741,382		34,023,647		9.0	%
2011		134		1,433,608		23,476,253		6.2	%
2012		69		1,455,519		34,886,446		9.2	%
2013		36		843,752		15,186,617		4.0	%
2014		38		826,994		15,699,975		4.2	%
2015		37		421,015		7,686,522		2.0	%
Thereafter		47		840,380		14,379,822		3.8	%
		2,199		17,281,624	$	377,961,936		100.0	%

(1)	Excludes approximately 2,217,891 square feet of space not leased as of December 31, 2005.
(2)	Annualized base rent is calculated using base rents as of December 31, 2005.

41

     The following 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 office properties:

					Average Base
	Rentable Area		Total Percent		Rent per Leased
Year-End	(Square Feet)(2)		Leased		Square Foot(1)
December 31, 2005		19,500,000		91.3%	$	18.35
December 31, 2004		5,870,000		92.2%	$	17.48
December 31, 2003		5,464,000		89.7%	$	18.56
December 31, 2002		5,185,000		91.0%	$	18.24
December 31, 2001		3,518,000		92.1%	$	18.02

(1)	Average base rent per leased square foot is calculated using base rents as of December 31 for each respective year.
(2)	Rentable square feet includes 11,756,400 square feet that is partially owned by us at December 31, 2005.

Retail Properties

      The 48 retail properties contain a total of approximately 13.5 million square feet (including space owned by anchor tenants). Twenty of the retail properties are located in Alabama (representing 48.7% of the retail portfolio’s gross rentable area), twelve are located in Florida (representing 16.3% of the retail portfolio’s gross rentable area), five are located in Georgia (representing 14.0% of the retail portfolio’s gross rentable area), four are located in North Carolina (representing 6.3% of the retail portfolio’s gross rentable area), one is located in South Carolina (representing 3.5% of the retail portfolio’s gross rentable area), two are located in Tennessee (representing 1.2% of the retail portfolio’s gross rentable area), three are located in Texas (representing 6.8% of the retail portfolio’s gross rentable area), and one is located in Virginia (representing 3.2% of the retail portfolio’s gross rentable area). The retail properties consist of twelve enclosed regional malls and thirty-six community shopping centers. All of the retail properties are managed by us.

42

      The following table sets forth certain information relating to the retail properties as of and for the year ended December 31, 2005.

Retail Properties

																Average
																Base
																Rent per		Total Retail			Percent of
														Total		Leased		Property			Total 2005
				Year		GRA			Number of		Percent			Annualized		Square		Revenue for			Retail Property
Retail Property(1)		Location		Completed(2)		(Square Feet)(3)			Stores		Leased(3)			Base Rent		Foot(4)		2005			Revenue(5)
Alabama:
Brookwood Village Center			Birmingham		1973/91		88,158			7		81.5	%	$	664,584	$	15.13	$	1,086,251			0.7	%
Colonial Brookwood Village			Birmingham		1973/91		372,180			70		96.3	%		6,438,138		25.59		10,211,488			6.4	%
Colonial Brookwood Village							231,953	(6)
Colonial Mall Bel Air			Mobile		1966/90/97														14,076,115	(12)		8.8	%
Bel Air Mall JV			Mobile		1966/90/97		999,799			115		97.5	%		10,840,103		21.39		179,199	(12)		0.1	%
Bel Air Mall JV							333,990	(6)
Colonial Mall Decatur			Decatur		1979/89		495,232			52		89.0	%		3,838,273		18.88		5,063,326			3.2	%
Colonial Mall Decatur							80,866	(6)
Colonial Mall Gadsden			Gadsden		1974/91														1,735,643	(8)		1.1	%
Colonial Promenade Alabaster			Birmingham		2005		218,681			31		100.0	%		3,330,766		18.67		1,452,926
Colonial Promenade Craft Farms			Gulf Shores		2005		53,170			1		LU			850,720				238,269	(10)
Colonial Promenade Hoover			Birmingham		2002		164,831			33		93.8	%		1,944,291		18.26		282,194			0.2	%
Colonial Promenade Hoover							215,766	(6)
Colonial Promenade Madison			Madison		2000		110,712			13		95.7	%		1,100,059		14.81		367,900			0.2	%
Colonial Promenade Montgomery			Montgomery		1990/97		165,114			23		80.0	%		1,276,911		12.94		1,732,075			1.1	%
Colonial Promenade Montgomery							44,000	(6)
Colonial Promenade Montgomery North			Montgomery		1990/97		108,082			9		97.9	%		1,067,404		16.45		1,219,565			0.8	%
Colonial Promenade Montgomery North							101,830	(6)
Colonial Promenade Trussville			Birmingham		2000		388,302			24		100.0	%		3,369,730		14.03		4,146,816			2.6	%
Colonial Promenade Trussville II			Birmingham		2004		58,182			18		100.0	%		894,627		16.43		1,114,725			0.7	%
Colonial Promenade Trussville II							224,509	(6)
Colonial Promenade Tutwiler Farm			Birmingham		2000		340,112			19		99.4	%		2,319,608		15.23		3,404,096			2.1	%
Colonial Promenade Tutwiler Farm							174,008	(6)
Colonial Shoppes Colonnade			Birmingham		1989		125,462			28		86.8	%		1,305,059		17.40		1,704,785			1.1	%
Colonial Shoppes Bellwood			Montgomery		1988		88,482			16		91.7	%		701,755		12.93		887,453			0.6	%
Colonial Shoppes Clay			Birmingham		1982		66,175			12		91.9	%		712,776		13.72		884,159			0.6	%
Colonial Shoppes McGehee			Montgomery		1986		98,255			15		88.0	%		478,039		7.54		613,902			0.4	%
Colonial University Village			Auburn		1973/84/89														3,410,388	(12)		2.1	%
Colonial University Village
University Village Mall JV			Auburn		1973/84/89		401,515			49		87.2	%		2,279,846		20.16		53,114	(12)		0.0	%
University Village Mall JV							124,707
Olde Town			Montgomery		1978/90		38,814			9		57.4	%		181,733		7.37		224,542			0.1	%
Parkway Place			Huntsville		1975		287,556			74		85.0	%		6,149,403		27.39		4,765,507			3.0	%
Parkway Place							348,164	(6)
	Subtotal-Alabama						6,548,607			618		93.2	%		49,743,825		20.40		58,854,437			36.9	%

43

																Average
																Base
																Rent per		Total Retail			Percent of
														Total		Leased		Property			Total 2005
				Year		GRA			Number of		Percent			Annualized		Square		Revenue for			Retail Property
Retail Property(1)		Location		Completed(2)		(Square Feet)(3)			Stores		Leased(3)			Base Rent		Foot(4)		2005			Revenue(5)
Florida:
Colonial Promenade Bear Lake			Orlando		1990		131,655			24		86.4	%		1,296,538		15.32		1,649,188			1.0	%
Colonial Promenade Boulevard Square			Pembroke Pines		2001		220,656			37		100.0	%		3,660,384		20.01		4,909,302			3.1	%
Colonial Promenade Burnt Store			Punta Gorda		1990		95,023			25		98.9	%		911,254		15.36		1,256,025			0.8	%
Colonial Promenade Deerfield			Deerfield Beach		1988/2003		378,747			60		99.3	%		4,291,653		17.04		5,824,143			3.7	%
Colonial Promenade Hunter’s Creek			Orlando		1993/95		227,536			27		52.6	%		1,616,470		19.21		2,295,202			1.4	%
Colonial Promenade Lakewood			Jacksonville		1995		195,159			51		83.0	%		1,906,496		13.75		2,595,266			1.6	%
Colonial Promenade Northdale			Tampa		1988		175,917			23		95.2	%		1,702,491		16.17		2,384,700			1.5	%
Colonial Promenade Northdale							55,000	(6)
Colonial Promenade TownPark			Orlando		2003		199,266			28		88.9	%		2,268,813		23.79		3,269,187			2.1	%
Colonial Promenade Wekiva			Orlando		1990		208,568			27		85.5	%		1,815,334		14.41		2,601,606			1.6	%
Colonial Promenade Winter Haven			Orlando		1986		161,559			19		87.2	%		1,002,817		12.68		1,399,564			0.9	%
Colonial Shoppes College Parkway			Ft. Myers		1986		78,879			15		100.0	%		1,198,860		16.26		1,807,064			1.1	%
Colonial Shoppes Pines Plaza			Pembroke Pines		2002		68,170			4		100.0	%		1,187,014		17.13		1,679,566			1.1	%
	Subtotal-Florida						2,196,135			340		88.6	%		22,858,124		17.11		31,754,885			19.9	%
Georgia:
Britt David			Columbus		1990		109,630			12		75.9	%		639,830		12.04		803,723			0.5	%
Colonial Mall Glynn Place			Brunswick		1986														3,655,699	(12)		2.3	%
Glynn Place Mall JV			Brunswick		1986		282,342			52		86.5	%		2,628,027		17.85		47,701	(12)		0.0	%
Glynn Place Mall JV							225,558	(6)
Colonial Mall Lakeshore			Gainesville		1984/97		518,290			47		93.1	%		2,780,759		19.02		4,273,466			2.7	%
Colonial Mall Macon			Macon		1975/88/97														8,995,934	(8)		5.6	%
Colonial Mall Valdosta			Valdosta		1982/85														5,227,474	(12)		3.3	%
Valdosta Mall JV			Valdosta		1982/85		325,326			53		92.8	%		3,231,998		20.78		62,592	(12)		0.0	%
Valdosta Mall JV							73,723	(6)
Colonial Promenade Beechwood			Athens		1963/92		350,795			41		99.8	%		3,624,285		15.40		3,481,934			2.2	%
	Subtotal-Georgia						1,885,664			205		92.2	%		12,904,899		17.89		26,548,522			16.6	%
North Carolina:
Colonial Mall Burlington			Burlington		1969/86/94														2,582,899	(8)		1.6	%
Colonial Mall Greenville			Greenville		1965/89/99														5,539,644	(12)		3.5	%
Greenville Mall JV			Greenville		1965/89/99		404,266			54		96.4	%		3,554,555		19.76		75,792	(12)		0.0	%
Greenville Mall JV							46,051	(6)
Colonial Mayberry Mall			Mount Airy		1968/86		149,097			18		94.5	%		704,471		12.95		1,105,016			0.7	%
Colonial Mayberry Mall							57,843	(6)
Colonial Shoppes Quaker			Greensboro		1968/88/97		102,223			27		78.0	%		861,915		13.93		1,226,366			0.8	%
Colonial Shoppes Yadkinville			Yadkinville		1971/97		90,917			16		100.0	%		694,296		8.17		850,023			0.5	%
	Subtotal-North Carolina						850,397			115		93.9	%		5,815,237		16.31		11,379,739			7.1	%
South Carolina:
Colonial Mall Myrtle Beach			Myrtle Beach		1986														7,077,189	(12)		4.4	%
Myrtle Beach Mall JV			Myrtle Beach		1986		474,218			60		91.6	%		4,129,494		21.88		88,306	(12)		0.1	%
	Subtotal-South Carolina						474,218			60		91.6	%		—		21.88		7,165,494			4.5	%
Tennessee:
Colonial Pinnacle Turkey Creek(11)			Knoxville		2004		82,733			1		LU			1,571,927				429,754	(10)		0.3	%
Rivermont Shopping Center			Chattanooga		1986/97		73,481			10		100.0	%		420,039		7.30		537,962	(9)		0.3	%
	Subtotal-Tennessee						156,214			11		100.0	%		1,991,966		7.30		967,716			0.6	%

44

															Average
															Base
															Rent per		Total Retail			Percent of
													Total		Leased		Property			Total 2005
				Year		GRA		Number of		Percent			Annualized		Square		Revenue for			Retail Property
Retail Property(1)		Location		Completed(2)		(Square Feet)(3)		Stores		Leased(3)			Base Rent		Foot(4)		2005			Revenue(5)
Texas
Colonial Mall Temple			Temple		1981/96													1,854,760	(8)		1.2	%
Colonial Pinnacle Kingwood Commons			Houston		2003		164,356		28		87.5	%		2,386,708		21.57		3,056,092			1.9	%
Colonial Promenade Portofino			Houston				372,502		37		82.9	%		4,397,597		21.52		6,152,294	(7)		3.9	%
Village on Parkway			Dallas		1980		381,166		45		94.7	%		5,203,309		18.82		8,001,508			5.0	%
	Subtotal-Texas						918,024		110		88.6	%		11,987,614		19.36		19,064,654			12.0	%
Virginia:
Colonial Mall Staunton			Staunton		1969/86/97		423,344		49		96.9	%		2,272,856		11.70		3,724,073			2.3	%
	Subtotal-Virginia						423,344		49		96.9	%		2,272,856		11.70		3,724,073			2.3	%
	Total						13,452,603		1,508		92.2	%	$	107,574,521	$	18.81	$	159,459,520			100.0	%

(1)	All retail properties are 100% owned by us, with the exception of Village on the Parkway, Parkway Place, Colonial Promenade Madison, and Colonial Promenade Hoover, which are owned 90%, 45%, 25%, and 10%, respectively, by us at December 31, 2005.
(2)	Year initially completed and, where applicable, year(s) in which the property was substantially renovated or an additional phase of the property was completed.
(3)	GRA refers to gross retail area, which includes gross leasable area and space owned by anchor tenants. Percent Leased excludes anchor owned space.
(4)	Includes specialty store space only.
(5)	Percent of Total Retail Property Revenue for 2005 represents each property’s proportionate share of revenue from our 48 retail properties, including partially owned properties.
(6)	Represents space owned by anchor tenants.
(7)	Represents revenues from the date of our acquisition or completion of development of the property in 2005 through December 31, 2005.
(8)	Represents revenues from January 1, 2005 through the date the property was sold during 2005.
(9)	This property was reclassified to “held for sale” and is included as discontinued operations at December 31, 2005.

(10)	This property is currently in lease-up and is not included in Percent Leased and Average Base Rent per Leased Square Foot property totals.
(11)	This property is a 50% joint venture and is currently under development.
(12)	These properties were transferred to the GPT Joint Venture. We retained a 10% interest in these properties through our ownership interest in the GPT Joint Venture.

     The following table sets out a schedule of the lease expirations for leases in place as of December 31, 2005, for the retail properties:

			Net Rentable		Annualized		Percent of Total
	Number of		Area of Expiring		Base Rent of		Annual Base Rent
	Tenants with		Leases		Expiring		Represented by
Year of Lease Expiration	Expiring Leases		(Square Feet)(1)		Leases(1)(2)		Expiring Leases(1)
2006		232		811,432	$	10,312,618		9.3	%
2007		229		1,077,198		11,433,154		10.3	%
2008		220		1,015,638		10,812,247		9.7	%
2009		178		1,092,931		10,594,203		9.5	%
2010		192		1,022,101		13,325,185		12.0	%
2011		116		969,934		10,495,637		9.4	%
2012		88		1,130,662		10,851,195		9.8	%
2013		74		403,273		6,210,938		5.6	%
2014		47		344,618		3,830,451		3.4	%
2015		72		590,412		8,212,794		7.4	%
Thereafter		60		1,710,784		15,118,930		13.6	%
		1,508		10,168,983	$	111,197,352		100.0	%

45

(1)	Excludes 945,700 square feet of space not leased as of December 31, 2005.
(2)	Annualized base rent is calculated using base rents as of December 31, 2005.

     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 retail properties:

	Gross Retail
	Area		Percent		Average Base Rent per
Year-End	(Square Feet)(1)		Leased		Leased Square Foot(2)
December 31, 2005		13,453,000		92.2%	$	18.81
December 31, 2004		15,294,000		91.4%	$	19.45
December 31, 2003		15,343,000		89.6%	$	19.84
December 31, 2002		15,475,000		89.2%	$	18.36
December 31, 2001		14,951,000		89.6%	$	18.03

(1)	Includes 4,901,300 square feet partially owned by us at December 31, 2005.
(2)	Average base rent per leased square foot is calculated using specialty store year-end base rent figures.

Undeveloped Land

      We own various parcels of land which are held for future developments. Land adjacent to multifamily properties typically will 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, expansion of the mall or shopping center, and outparcels which are suitable for restaurants, financial institutions, hotels, or free standing retailers.

Property Markets

      The table below sets forth certain information with respect to the geographic concentration of the properties as of December 31, 2005.

Geographic Concentration of Properties

												Total 2005
										Total 2005		Discontinued		Total 2005		Percent of
								Total 2005		Unconsolidated		Operations		Consolidated		Total 2005
		Units		NRA		GRA		Property		Property		Property		Property		Property
State		(Multifamily)(1)		(Office)(2)		(Retail)(3)		Revenue(4)		Revenue		Revenue		Revenue		Revenue
Alabama			7,878		3,266,138		6,548,607	$	155,541,724	$	8,377,314	$	2,542,156	$	144,622,254		30.1	%
Arizona			2,340		—		—		3,640,082		3,640,082		—		—		0.0	%
Florida			4,135		7,809,693		2,196,135		129,751,812		5,646,022		3,719,841		120,385,949		25.1	%
Georgia			4,878		4,220,216		1,885,664		85,016,436		3,362,148		13,880,133		67,774,155		14.1	%
Maryland			—		154,787		—		261,058		261,058		—		—		0.0	%
Mississippi			498		—		—		4,523,033		—		—		4,523,033		0.9	%
Nevada			858		—		—		1,894,248		1,894,248		—		—		0.0	%
New Mexico			1,025		—		—		2,139,241		2,139,241		—		—		0.0	%
North Carolina			9,121		912,264		850,397		62,704,857		652,180		9,361,612		52,691,065		11.0	%
South Carolina			2,601		—		474,218		23,606,827		310,697		5,653,709		17,642,421		3.7	%
Tennessee			1,263		531,709		156,214		3,198,992		2,110,725		590,894		497,374		0.1	%
Texas			6,450		2,459,581		918,024		72,274,592		1,823,278		17,068,085		53,383,229		11.1	%
Virginia			3,290		145,127		423,344		28,018,391		114,927		9,156,653		18,746,811		3.9	%
	Total		44,337		19,499,515		13,452,603	$	572,571,293	$	30,331,920	$	61,973,083	$	480,266,290		100.0	%

(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.
(4)	Includes our proportionate share of revenue from those multifamily, office and retail properties accounted for under the equity method and our share of revenue of the properties disposed in 2005.

46

     We believe that the demographic and economic trends and conditions in the markets where our properties are located indicate a potential for continued growth in property net operating income. Our properties are located in a variety of distinct submarkets within Alabama, Arizona, Florida, Georgia, Maryland, Mississippi, Nevada, New Mexico, North Carolina, South Carolina, Tennessee, Texas and Virginia. However, Birmingham, Alabama; Orlando, Tampa and Miami, Florida; Atlanta, Georgia; Charlotte and Raleigh, North Carolina; Dallas and Houston, Texas and Richmond and Norfolk, Virginia are our primary markets. We believe that our markets in these thirteen states, which are characterized by stable and increasing population and employment growth, should continue to provide a steady demand for multifamily, office and retail properties.

Mortgage Financing

      As of December 31, 2005, we had approximately $2.5 billion of secured and unsecured indebtedness outstanding with a weighted average interest rate of 6.1% and a weighted average maturity of 6.2 years. Of this amount, approximately $0.8 billion was secured mortgage financing and $1.7 billion was unsecured debt. Our mortgaged indebtedness was secured by 71 of our consolidated properties and carried a weighted average interest rate of 6.6% and a weighted average maturity of 7.2 years. The following table sets forth our secured and unsecured indebtedness in more detail.

Mortgage Debt and Notes Payable

							Anticipated Annual
					Principal Balance		Debt Service					Balance Due on
Property(1)		Interest Rate			(as of 12/31/05)		(1/1/06 - 12/31/06)		Maturity Date			Maturity
Multifamily Properties
	CG at Berkeley Lake		7.150	%	$	7,996	$	572		06/15/08		$	7,247
	CG at Edgewater		6.810	%		20,692		1,409		01/01/11			18,830
	CG at Galleria		4.450	%(6)		22,400		997		06/15/26	(2)		22,400
	CG at Galleria		5.160	%(6)		11,105		573		07/01/15			11,105
	CG at Hammocks(4)		7.990	%		19,231		1,537		09/01/11			16,195
	CG at Hunter’s Creek		7.980	%		18,999		1,516		06/30/10			18,999
	CG at Hunter’s Creek		6.590	%(5)		10,266		677		06/30/10			7,405
	CG at Madison		5.350	%(6)		16,157		864		08/01/11			13,742
	CG at Mt Vernon		7.180	%		12,542		901		02/01/08			11,624
	CG at Natchez Trace (Ph II)		8.250	%		3,920		323		02/01/37			—
	CG at Promenade		6.810	%		21,586		1,470		01/01/11			19,643
	CG at Quarterdeck(4)		7.730	%		10,115		782		07/01/09			8,871
	CG at Reservoir		5.600	%(6)		8,015		449		04/01/12			6,782
	CG at River Oaks		5.540	%		10,500		582		09/01/13			8,903
	CG at River Plantation		7.090	%		11,423		810		10/15/08			10,252
	CG at Riverchase		5.350	%(6)		19,027		1,018		07/01/11			15,934
	CG at Trinity Commons(4)		6.750	%		18,073		1,220		05/01/11			15,584
	CG at Valley Ranch(4)		6.890	%(6)		24,971		1,720		09/01/14			21,971
	CG at Wilmington(4)		6.750	%		13,279		896		05/01/11			11,435
	CV at Bear Creek(4)		7.160	%		3,508		251		07/01/11			2,983
	CV at Bedford(4)		6.990	%		8,711		609		04/01/11			7,483
	CV at Canyon Hills(4)		6.990	%		12,989		908		04/01/11			12,989
	CV at Chase Gayton(4)		7.160	%		16,381		1,173		08/01/11			13,945
	CV at Deerfield(4)		7.160	%		10,536		754		07/01/11			8,966
	CV at Estrada(4)		6.420	%		9,430		605		11/01/11			8,115
	CV at Greenbrier(4)		6.990	%		13,065		913		04/01/11			11,224
	CV at Greentree(4)		7.730	%		6,822		527		07/01/09			5,982
	CV at Hampton Glen(4)		6.680	%		12,881		860		04/01/12			10,913
	CV at Harbour Club(4)		6.990	%		8,686		607		04/01/11			7,461
	CV at Highland Hills(4)		6.990	%		15,140		1,058		04/01/11			13,007
	CV at Huntington(4)		7.970	%		5,017		400		09/01/07			4,694
	CV at Inverness		4.440	%(6)		9,900		440		06/15/26	(2)		9,900
	CV at Inverness		5.160	%(6)		1,205		62		07/01/15			1,205
	CV at Main Park(4)		7.160	%		8,728		625		07/01/11			7,427
	CV at Marsh Cove(4)		7.730	%		8,298		641		08/01/09			7,265
	CV at Meadow Creek(4)		7.160	%		9,887		708		07/01/11			8,417
	CV at North Arlington(4)		7.100	%		8,800		625		07/01/11			7,468

47

								Anticipated Annual
					Principal Balance			Debt Service					Balance Due on
Property(1)		Interest Rate			(as of 12/31/05)			(1/1/06 - 12/31/06)		Maturity Date			Maturity
	CV at Pear Ridge(4)		6.990	%		10,837			758		04/01/11			9,308
	CV at Pinnacle Ridge(4)		7.160	%		5,162			370		07/01/11			4,391
	CV at Research Park		4.520	%(6)		12,775			577		06/15/26	(2)		12,775
	CV at Research Park		5.160	%(6)		14,945			771		07/01/15			14,945
	CV at Timber Crest(4)		6.750	%		15,481			1,045		05/01/11			13,349
	CV at Timothy Woods		7.490	%		9,023			676		09/01/09			8,325
	CV at Tradewinds(4)		7.160	%		11,443			819		07/01/11			9,739
	CV at Trussville		5.600	%(6)		15,739			881		04/01/12			13,438
	CV at Waterford(4)		6.980	%		17,440			1,217		01/01/12			14,728
	CV at Waters Edge(4)		7.730	%		7,308			565		07/01/09			6,409
	CV at Windsor Place(4)		7.990	%		9,173			733		09/01/11			7,448
	Ashley Park(4)		7.000	%		9,000			630		10/04/10			9,000
	Cottonwood Crossing(4)		7.160	%		6,244			447		07/01/11			5,312
	Paces Cove(4)		7.160	%		11,510			824		07/01/11			9,796
	Summer Tree(4)		6.990	%		7,943			555		04/01/11			6,823
Office Properties
	Colonial Center 100 at Mansell Overlook		8.250	%		15,924			1,314		01/10/08			15,314
Retail Properties
	CP Montgomery		7.490	%		11,617			12,487		09/01/09			11,489
	CP Boulevard Square		7.220	%		30,787			2,223		08/01/32			5,832
	CS Pines Plaza		5.420	%		9,218			500		10/01/10			8,497
	CP Deerfield		5.900	%		32,101			1,894		02/01/13			27,658
	CS College Parkway		7.100	%		7,636			542		07/01/09			6,694
	Village on the Parkway		5.770	%		47,000			2,712		07/11/11			47,000
Other debt:
	Land Loan		3.720	%(6)		365			379		09/30/06			305
	Unsecured Credit Facility(3)		5.190	%		110,228			5,721		03/22/08			110,228
	Term Loan		5.470	%(7)		100,000			5,470		03/22/08			100,000
	Medium Term Notes		7.460	%		10,000			10,746		12/20/06			10,000
	Medium Term Notes		8.800	%		20,000			1,760		02/01/10			20,000
	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		8.050	%		65,000			70,233		07/15/06			65,000
	Senior Unsecured Notes		7.000	%		175,000			12,250		07/14/07			175,000
	Senior Unsecured Notes		6.875	%		100,000			6,875		08/15/12			100,000
	Senior Unsecured Notes		6.150	%		125,000			7,688		04/15/13			125,000
	Senior Unsecured Notes		4.800	%		100,000			4,800		04/01/11			100,000
	Senior Unsecured Notes		6.250	%		300,000			18,750		06/15/14			300,000
	Senior Unsecured Notes		4.750	%		275,000			13,063		02/01/10			275,000
	Senior Unsecured Notes		5.500	%		325,000			17,875		10/01/15			325,000
	Unamortized Discounts					(4,834	)		—					(4,834	)
TOTAL CONSOLIDATED DEBT			6.146	%	$	2,494,350		$	240,284				$	2,390,335

(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, CP as an abbreviation for Colonial Promenade, CS as an abbreviation for Colonial Shoppes and CV as an abbreviation for Colonial Village.
(2)	The maturity date noted represents the date on which credit enhancement expires for the tax-exempt municipal bonds put in place as part of the original financing for the property. The stated maturity date for the loans is August 1, 2022.
(3)	This unsecured credit facility bears interest at a variable rate, based on LIBOR plus a spread of 80 basis points. The facility also includes a competitive bid feature that allows us to convert up to $250 million under the line of credit to a fixed rate, for a fixed term not to exceed 90 days. At December 31, 2005, we had $0 outstanding under the competitive bid feature.
(4)	Represents mortgage or note payable assumed in the Cornerstone acquisition.
(5)	Represents floating rate debt that has been swapped to a fixed rate of 6.59%.
(6)	Represents variable rate debt.
(7)	Represents floating rate debt that has been swapped to a fixed rate of 5.470%.

48

     In addition, the properties in which we own partial interests (and are not consolidated in our financial statements) also are subject to existing mortgage indebtedness. Our pro-rata share of such indebtedness as of December 31, 2005 was as follows:

			Company’s Share
	Company’s		of Principal
	Percentage		Balance		Interest			Maturity
Unconsolidated Entity	Ownership		(as of 12/31/05)		Rate			Date
Multifamily Properties:
Barrington, LLC (CG)		15.0%	$	942,014		7.60	%		10/01/09
Mountain Brook, LLC (CG)		15.0%		2,334,888		7.60	%		10/01/09
Stockbridge, LLC (CV)		15.0%		1,481,357		7.60	%		10/01/09
Hillwood, LLC (CV)		15.0%		499,500		4.87	%(1)		12/15/30
Hillwood, LLC (CV)		15.0%		283,067		7.80	%		10/01/20
Inverness Lakes I, LLC (CV)		15.0%		600,000		4.83	%(1)		12/15/30
Inverness Lakes I, LLC (CV)		15.0%		311,343		7.80	%		07/01/20
Inverness Lakes II, LLC (CV)		15.0%		1,939,106		8.11	%		05/01/10
Rocky Ridge, LLC (CV)		15.0%		900,000		5.00	%(1)		12/15/30
Rocky Ridge, LLC (CV)		15.0%		260,956		7.74	%		10/01/16
Bayshore (CG)		25.0%		4,841,888		6.85	%		11/01/11
Palma Sola (CG)		25.0%		3,886,195		7.03	%		04/01/12
Cunningham		20.0%		2,800,000		5.18	%		06/15/09
Colony Woods		10.0%		1,715,000		4.18	%		11/04/08
Madison at Shoal Run		10.0%		980,000		4.18	%		11/04/08
Meadows at Brook Highland		10.0%		1,536,000		4.18	%		11/04/08
Stone Ridge		10.0%		500,000		5.50	%		01/01/09
Arbors at Windsor Lake		10.0%		892,500		5.50	%		01/01/09
Merritt at Godley Station		35.0%		6,903,543		5.50	%		06/01/25
Brentwood (CG)		25.0%		3,693,788		7.22	%		01/01/11
Hendersonville (CV)		25.0%		3,620,885		7.22	%		01/01/11
Pinnacle High Resort — Fixed		20.0%		2,966,000		4.67	%		11/01/11
Pinnacle High Resort — Floating		20.0%		741,600		5.39	%(1)		11/01/11
Pinnacle Estates — Fixed		20.0%		3,312,200		4.67	%		11/01/11
Pinnacle Estates — Floating		20.0%		828,000		5.39	%(1)		11/01/11
Hacienda Del Rio — Fixed		20.0%		972,640		4.67	%		11/01/11
Hacienda Del Rio — Floating		20.0%		243,160		5.39	%(1)		11/01/11
Pinnacle at High Desert — Fixed		20.0%		5,535,000		4.67	%		11/01/11
Pinnacle at High Desert — Floating		20.0%		1,383,800		5.39	%(1)		11/01/11
Desert Lakes — Fixed		20.0%		1,903,680		4.67	%		11/01/11
Desert Lakes — Floating		20.0%		475,920		5.39	%(1)		11/01/11
Flamingo West — Fixed		20.0%		3,151,040		4.67	%		11/01/11
Flamingo West — Floating		20.0%		787,760		5.39	%(1)		11/01/11
Talavera — Fixed		20.0%		3,780,000		4.67	%		11/01/11
Talavera — Floating		20.0%		945,000		5.39	%(1)		11/01/11
Colonial Del Rio — Fixed		20.0%		1,306,800		4.67	%		11/01/11
Colonial Del Rio — Floating		20.0%		326,800		5.39	%(1)		11/01/11
Fairway Crossings — Fixed		20.0%		2,050,560		4.67	%		11/01/11
Fairway Crossings — Floating		20.0%		514,857		5.39	%(1)		11/01/11
Posada Del Este — Fixed		20.0%		890,880		4.67	%		11/01/11
Posada Del Este — Floating		20.0%		222,720		5.39	%(1)		11/01/11
Casalindas — Fixed		20.0%		990,880		4.67	%		11/01/11
Casalindas — Floating		20.0%		247,720		5.39	%(1)		11/01/11
Pinnacle Heights — Fixed		20.0%		2,775,040		4.67	%		11/01/11
Pinnacle Heights — Floating		20.0%		693,760		5.39	%(1)		11/01/11
Spring Hill — Fixed		20.0%		1,301,000		4.67	%		11/01/11
Spring Hill — Floating		20.0%		325,200		5.69	%(1)		11/01/11
Rancho Viejo — Fixed		20.0%		1,533,800		4.67	%		11/01/11
Rancho Viejo — Floating		20.0%		383,400		5.69	%(1)		11/01/11

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				Company’s Share
		Company’s		of Principal
		Percentage		Balance		Interest			Maturity
Unconsolidated Entity		Ownership		(as of 12/31/05)		Rate			Date
La Entrada — Fixed			20.0%		889,920		4.67	%		11/01/11
La Entrada — Floating			20.0%		222,480		5.39	%(1)		11/01/11
Arabian Trails — Fixed			20.0%		3,043,680		4.67	%		11/01/11
Arabian Trails — Floating			20.0%		760,920		5.39	%(1)		11/01/11
The Grove at Riverchase			20.0%		3,850,000		5.05	%		10/01/10
CG at Research Park — Durham			20.0%		4,784,463		5.28	%		10/01/13
Office Property:
Land Title Building			33.3%		446,820		8.10	%		02/01/15
Orlando Central Center			15.0%		8,730,000		5.35	%		09/30/10
St Petersburg Center			15.0%		11,985,000		6.64	%(1)		04/09/07
Tallahassee Apal Pky Center			15.0%		14,385,000		6.64	%(1)		04/09/07
Memphis Germantown Center			15.0%		7,665,000		5.35	%		09/30/10
Atlantic Center Plaza — Fixed			15.0%		11,991,712		5.49	%		01/01/15
Atlantic Center Plaza — Floating			15.0%		1,875,000		6.44	%(1)		01/01/08
Atlanta Chamblee Center			15.0%		20,550,000		6.14	%(1)		09/30/07
Ravinia — Fixed			15.0%		12,742,913		5.26	%		01/01/08
Ravinia — Floating			15.0%		1,950,000		6.44	%(1)		01/01/08
Ravinia — Mezzanine			15.0%		2,917,500		8.14	%(1)		09/30/06
Atlanta Perimeter Center			15.0%		2,790,000		6.14	%(1)		09/30/07
Atlanta Gwinnett Center			15.0%		4,995,000		6.64	%(1)		04/09/07
Orlando University Center			15.0%		7,755,000		5.35	%		09/30/10
Orlando Lake Mary Center			15.0%		6,060,000		6.14	%(1)		09/30/07
Richmond Paragon			15.0%		3,480,000		6.64	%(1)		04/09/07
Decoverly — Fixed			15.0%		3,750,000		5.35	%		09/30/10
Decoverly — Floating			15.0%		720,000		6.64	%(1)		04/09/07
Broward Financial			15.0%		6,937,204		4.84	%		02/10/08
Las Olas			15.0%		14,720,384		5.32	%		12/11/14
Charlotte University Center			15.0%		2,790,000		5.35	%		09/30/10
Charlotte Vanguard Center			15.0%		6,810,000		6.64	%(1)		04/09/07
Jacksonville Baymeadows Center			15.0%		12,840,000		5.35	%		09/30/10
Baymeadows			15.0%		2,076,907		5.55	%		06/11/14
Westchase			15.0%		2,276,961		5.39	%		09/11/14
Jacksonville JTB Center			15.0%		4,320,000		5.35	%		09/30/10
Landstar			15.0%		3,600,000		6.64	%(1)		04/09/07
McGinnis Park — Fixed			15.0%		146,812		8.00	%		04/09/07
McGinnis Park — Floating			15.0%		2,610,000		6.64	%(1)		04/09/07
Post Oak			15.0%		17,205,000		6.14	%(1)		09/30/07
Dallas 6600 Campus Circle			15.0%		2,265,000		6.64	%(1)		04/09/07
Dallas Tollway Crossing			15.0%		3,360,000		6.64	%(1)		04/09/07
Signature Place			15.0%		4,320,000		6.39	%(1)		02/10/08
Retail Properties:
CP Hoover			10.0%		1,713,967		5.94	%		01/11/13
Glynn Place Mall JV			10.0%		2,300,000		5.25	%		12/08/10
Valdosta Mall JV			10.0%		5,160,000		5.27	%		12/08/15
Bel Air Mall JV			10.0%		12,240,000		5.30	%		12/08/15
Myrtle Beach Mall JV			10.0%		5,020,000		6.09	%(1)		12/11/07
University Village Mall JV			10.0%		3,179,000		6.04	%(1)		12/11/07
Greenville Mall JV			10.0%		4,467,500		5.29	%		12/08/15
Colonial Pinnacle Turkey Creek			50.0%		6,508,893		6.19	%		12/20/06
Parkway Place			45.0%		26,415,000		5.39	%(1)		06/28/08
	Total Unconsolidated Debt			$	373,134,283		4.85	%

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(1)  Represents variable rate debt.

Item 3. Legal Proceedings.

      Neither we nor the properties are presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us or the properties, other than routine litigation arising in the ordinary course of business, which is expected to primarily be covered by liability insurance.

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 2005.

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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, 2005, 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
2005:
	First Quarter	$	39.15	$	35.55	$	.675
	Second Quarter	$	44.24	$	37.45	$	.675
	Third Quarter	$	47.90	$	42.02	$	.675
	Fourth Quarter	$	44.63	$	40.60	$	.675
2004:
	First Quarter	$	41.70	$	37.93	$	.670
	Second Quarter	$	41.22	$	33.10	$	.670
	Third Quarter	$	42.00	$	37.23	$	.670
	Fourth Quarter	$	42.79	$	38.63	$	.670

      On March 2, 2006, the last reported sale price of the common shares on the New York Stock Exchange was $48.66. On March 2, 2006, we had approximately 3,833 shareholders of record.

      We intend to continue to declare quarterly distributions to our common shareholders. Future distributions will be declared and paid at the discretion of our board of trustees and 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. In order to maintain our qualification as a REIT, we must make annual distributions to stockholders of at least 90% of our taxable income. Under our existing credit facility and term loan, we are restricted from paying common share dividends that would exceed 95% of our funds from operations during any four-quarter period, except as necessary to protect our REIT status.

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Item 6. Selected Financial Data.

      The following table sets forth selected financial and operating information on a historical basis for the Company for each of the five years ended December 31, 2005. The following information should be read together with our consolidated financial statements and notes thereto included in Item 8 of this Form 10-K.

COLONIAL PROPERTIES TRUST

SELECTED FINANCIAL INFORMATION

			2005			2004			2003			2002			2001
			(In thousands, except per share data)
OPERATING DATA
Total revenue			$	495,443		$	317,630		$	272,296		$	262,016		$	247,945
Expenses:
	Depreciation and amortization			181,723			88,025			74,338			67,961			58,131
	Other operating			207,814			126,031			103,753			93,253			83,061
Income from operations				105,906			103,574			94,205			100,802			106,753
Interest expense				130,636			77,743			61,896			59,071			65,614
Interest income				4,460			1,064			792			1,299			1,049
Other income, net				108,707			9,701			7,218			35,820			16,637
Income from continuing operations				63,551			24,942			27,984			51,945			37,146
Income from discontinued operations				156,090			29,676			24,281			21,432			18,463
Dividends to preferred shareholders				22,391			14,781			15,284			15,565			13,407
Distributions to preferred unitholders				7,250			7,494			8,875			8,873			8,873
Net income available to common shareholders				197,250			39,837			32,530			57,812			42,202
Per share — basic:
	Income from continuing operations		$	1.08		$	0.38		$	0.33		$	1.64		$	1.14
	Income from discontinued operations			4.10			1.09			0.97			0.97			0.89
		Net income per share — basic	$	5.18		$	1.47		$	1.30		$	2.61		$	2.03
Per share — diluted:
	Income from continuing operations		$	1.07		$	0.37		$	0.33		$	1.62		$	1.14
	Income from discontinued operations			4.06			1.08			0.96			0.96			0.88
		Net income per share — diluted	$	5.13		$	1.45		$	1.29		$	2.58		$	2.02
Dividends declared per common share			$	2.70		$	2.68		$	2.66		$	2.64		$	2.52
BALANCE SHEET DATA
Land, buildings and equipment, net			$	3,888,932		$	2,426,381		$	1,970,699		$	1,947,078		$	1,756,260
Total assets				4,499,258			2,801,343			2,194,927			2,129,856			2,014,623
Total long-term liabilities				2,494,350			1,855,787			1,267,865			1,262,193			1,191,791
OTHER DATA
Funds from operations(1)*			$	177,931		$	137,610		$	123,050		$	128,110	(2)	$	120,402	(2)
Total market capitalization(3)				5,242,012			3,621,947			2,998,390			2,679,607			2,466,524
Cash flow provided by (used in)
	Operating activities			154,174			139,241			137,803			141,993			136,559
	Investing activities			(310	)		(446,035	)		(122,555	)		(99,861	)		(88,872	)
	Financing activities			(133,974	)		309,449			(13,414	)		(46,025	)		(41,835	)
Total properties (at end of year)				261			153			112			106			108

(1)  Pursuant to the definition of Funds from Operations (FFO) adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT), FFO is calculated by adjusting net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis.

The Company believes that FFO is useful to investors because it provides an additional indicator of the Company’s financial and operating performance. This is because, by excluding the effect of real estate depreciation and gains (or losses) from sales of properties

53

(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. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to net cash flows from operating activities (determined in accordance with GAAP), as a measure of our liquidity, or as an indicator of our ability to make cash distributions.

(2)	FFO has been revised for years ended 2002 and 2001 to conform to NAREIT’s FFO definition. For more information, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds from Operations.”
(3)	Total market capitalization is defined as the market value of outstanding common shares of the Company and operating partnership units of CRLP, plus preferred equity and consolidated debt of the Company. This amount was calculated assuming the conversion of 10,872,568, 10,372,650, 10,361,034, 10,788,341 and 11,159,027 units of minority interest in CRLP into the Company’s Common Shares for 2005, 2004, 2003, 2002 and 2001, respectively.
*	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 with the consolidated financial statements of the Company and notes thereto contained in Item 8 of this Form 10-K.

General

      We are a self-administered equity REIT that owns, develops and operates multifamily, office and retail properties in the Sunbelt region of the United States. We are a fully-integrated real estate company, which means that we are engaged in the acquisition, development, ownership, management and leasing of commercial real estate property. Our activities include full or partial ownership of a diversified portfolio of 261 properties as of December 31, 2005, located in Alabama, Arizona, Florida, Georgia, Maryland, Mississippi, Nevada, New Mexico, 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 a lessor, the majority of our revenue is derived from 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 tenants, and the ability of these tenants to make their rental payments. We believe that the diversified nature of the properties in which we typically invest — multifamily, office and retail — provides a more stable revenue flow in uncertain economic times, since our diversified property types generally do not have the same economic cycles and while one property type may be experiencing difficulty, the other property types may be maintaining their strength.

54

      The following table summarizes certain key operating performance measures for our properties as of and for the years ended December 31, 2005 and 2004:

				Consolidated						Unconsolidated
				Properties						Properties						Total Properties
				As of and for the						As of and for the						As of and for the
				Year Ended						Year Ended						Year Ended
				December 31,						December 31,						December 31,
				2005			2004			2005			2004			2005			2004
Multifamily Properties
	Physical Occupancy				95.3	%		94.7	%		95.6	%		92.9	%		95.3	%		94.6	%
	Same-Property Economic Occupancy(1)				84.2	%		81.8	%		n/a			n/a			84.2	%		81.8	%
	End of Month Scheduled Base
		Rent per Unit per Month		$	817		$	851		$	815		$	782		$	828		$	844
	Capital Expenditures per Unit			$	682		$	690		$	853		$	487		$	710		$	609
			Office Properties
	Physical Occupancy				92.4	%		92.2	%		86.4	%		100.0	%		91.3	%		92.2	%
	Base Rent per Square Foot			$	19.25		$	18.28		$	21.22		$	14.86		$	19.60		$	17.48
	Capital Expenditures per Square Foot			$	3.53		$	2.48		$	0.79		$	—		$	3.51		$	2.48
			Retail Properties
Regional Malls:
	Physical Occupancy				93.2	%		93.8	%		93.3	%		81.9	%		93.4	%		93.4	%
	Base Rent per Square Foot			$	20.76		$	22.25		$	24.12		$	22.86		$	22.99		$	22.86
	Tenant Gross Sales per Square Foot			$	255.64		$	271.03		$	287.69		$	272.05		$	276.43		$	271.19
Shopping Centers:
	Physical Occupancy				90.2	%		87.9	%		94.6	%		99.3	%		91.0	%		88.5	%
	Base Rent per Square Foot			$	17.20		$	16.61		$	17.41		$	17.23		$	17.21		$	16.65
	Tenant Gross Sales per Square Foot			$	227.31		$	212.70		$	274.29		$	237.48		$	229.55		$	214.16

(1)  Economic Occupancy represents scheduled base rents, less vacancy loss, all concessions adjusted for straightline (including but not limited to: renewals, move-ins, models, employee units), and bad debts divided by scheduled base rents.

     As shown in the table above, multifamily occupancy rates increased in 2005. Improvements were due primarily to the strengthening of the overall economy and acquisitions during 2005 of multifamily properties in cities such as Atlanta, GA; Austin, TX; Charlotte, NC; Raleigh-Durham, NC and Tampa, FL. On a per unit basis, base rent per month decreased as a result of the acquisition of the Cornerstone properties, which typically have fewer square feet per unit resulting in lower average rents. Although the average rent per unit decreased, average rent per square foot increased. We expect to continue to make acquisitions of attractive multifamily properties in existing markets and new markets as a result of our exposure to those new markets. As a result of the completion of the Cornerstone acquisition, we will have greater exposure to the economic trends specific to the multifamily sector, such as:

•  changes in job growth, household formation and population growth in our markets;

•  changes in interest rates;

•  supply and demand for apartment properties in our current markets; and

•  competition, which could limit our ability to secure attractive investment opportunities, lease apartment properties, or increase or maintain rents.

      As shown in the table above, physical occupancy of our office properties decreased from 92.2% in 2004 to 91.3% in 2005. The decrease is primarily due to opportunistic acquisitions made during 2005, including but not limited to the acquisition of a 15% partnership interest the in CRT Properties, Inc. portfolio which currently has an 86.4% occupancy rate. Same store occupancy increased 3% from 91.4% in 2004 to 94.9% in 2005. Average rental rates have increased in 2005 by 12.1% to $19.60 per square foot from $17.48 per square foot in 2004. The increase is due to higher rental rates on the 2005 acquisition properties. Lease transactions of 1.3 million square feet were completed in 2005, including 709,000 square feet of new leases. Additionally, average tenant

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improvements and leasing commissions have declined 7% from 2004. We remain cautiously optimistic about the office business as we continue to see positive trends in our portfolio.

      During 2005, our retail division acquired one shopping center and opened a new shopping center development which was 100% leased at December 31, 2005. We sold ten malls, six of which were to the GPT Joint Venture in which we retained a 10% interest (see Note 7 — Investment in Partially Owned Entities and other Arrangements). These mall transactions triggered the shifts in our property performance indicators above. At the end of 2004, we owned 100% of 15 malls and a partial interest in one mall. At the end of 2005, we owned 100% of five malls and a partial interest in seven malls. The 2004 year-end occupancy, base rent per square foot and tenant gross sales per square foot for the five malls which were owned 100% at the end of 2005 were 92.5%, $20.42, and $248.75, respectively, resulting in a 1.1% increase in occupancy, a 1.6% increase in base rent per square foot and a 2.8% increase in sales per square foot in 2005.

      Each of the retail property indicators in the above table continued to improve during 2005 in both the mall and shopping center portfolios. We expect these upward trends to continue during 2006. In 2005 we entered into 1,765,000 square feet of lease transactions with a total of 1,875,000 square feet of transactions commencing in 2005. We are currently developing five shopping centers totaling approximately 1.3 million square feet of retail space with more developments in the pipeline as part of our focus on expanding our portfolio in “lifestyle” and “power” centers.

      With our diversified strategy of investing in multifamily, office and retail property types, we are able to alter our asset mix to leverage market timing and maximize our investment returns. Currently, we are encouraged to see the multifamily market beginning to stabilize, and we are positioning our portfolio to benefit from that stabilization. Our diversified strategy allows us to balance risk and reward and to leverage changing market conditions in three distinct sectors, which we believe lowers our risk profile, adds stability and sets us apart from our industry peers that are invested in a single property type.

Merger with Cornerstone Realty Income Trust, Inc.

      On April 1, 2005, Colonial completed the merger of Cornerstone with and into CLNL a wholly-owned subsidiary of Colonial, pursuant to the Merger Agreement, among Cornerstone, CLNL and Colonial. For a detailed discussion of the Cornerstone acquisition see “Managements Discussion and Analysis of Financial Condition and Results of Operations — Merger with Cornerstone Realty Income Trust” and Item 1 “Business — Merger with Cornerstone Realty Income Trust”.

Recent Activity

      Fluctuations in our results of operations from period to period are affected by acquisitions, dispositions, new developments placed in service and other business transactions resulting from our efforts to develop new properties, and expand existing properties. During 2005, we repositioned our portfolio with acquisitions, dispositions and developments summarized below.

      In our multifamily division, in addition to the Cornerstone merger completed in April 2005 in which we acquired 86 multifamily apartment communities with 22,981 apartment homes and an interest in four real estate joint ventures, we made numerous other acquisitions and dispositions. During 2005, we acquired six other apartment communities with 1,925 apartment homes and a 20% partnership interest in two other apartment communities with 715 apartment homes. These properties were acquired in Birmingham, Alabama; Atlanta, Georgia; Charlotte, Durham and Raleigh, North Carolina; Nashville and Memphis, Tennessee; and Dallas, Texas. As part of a recycling program, we disposed of our 15% interest in two multifamily apartment communities with 901 apartment homes, our 10% interest in one multifamily community with 326 apartment homes and 30 wholly-owned apartment communities with 6,865 apartment homes. Of the 30 wholly owned apartment communities sold throughout 2005, 15 of the communities were assets acquired in the Cornerstone acquisition.

      In our office division, we added an additional 1.9 million square feet of rentable space in 2005 by acquiring office assets in Huntsville, Alabama; Atlanta, Georgia; Miami, Orlando and Tampa, Florida; and Austin, Texas. In addition to our wholly owned acquisitions, we acquired a 15% interest in an office joint venture with DRA

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Advisors LLC which included a portfolio of 137 office buildings on 26 properties located primarily in the southeastern United States. Our 15% interest in the Colonial/ DRA Office Joint Venture added an additional 11.7 million square feet of rentable space to our portfolio.

      In our retail division, we increased our emphasis on open-air strip centers by divesting of ten of our regional malls. Four regional malls, including assets in Gadsden, Alabama, Macon, Georgia, Burlington, North Carolina and Temple, Texas, were disposed of completely while the other six regional mall assets were transferred to the GPT Joint Venture in which we retained a 10% interest. These dispositions in total reduced our holdings in regional malls by 6.6 million square feet.

      In 2005, we capitalized on the opportunity to enter into the for-sale residential/ condominium conversion market. During the year, we became partners in two condominium conversion projects located in Jensen Beach and Delray Beach, Florida. We also announced the development plans for four additional projects, two of which we broke ground in late 2005 and two which will be begin in early 2006. These development projects are located in Charlotte, North Carolina, Charleston, South Carolina and Gulf Shores, Alabama.

      Colonial Grand at Mallard Creek, Colonial Grand at Silverado and Colonial Village at Twin Lakes are three multifamily developments that were completed during the year adding an additional 950 apartment homes to our multifamily portfolio. Completing the development of Colonial Promenade Alabaster, a retail power center located in Birmingham, Alabama, added an additional 607,000 square feet in our retail division. The Colonial Shoppes Colonnade redevelopment was completed during the third quarter of 2005 which added a 30,000 square foot gym and three new restaurants.

      We have numerous developments in our pipeline set to be completed throughout 2006 and 2007. In the multifamily division, six ground up developments for Colonial Grand apartment communities are planned, four of which are in Austin, Texas, one in Charlotte, North Carolina and one in Gulf Shores, Alabama. Upon completion, these developments will add 2,000 apartment homes in our portfolio. In the office division, we broke ground on two developments located in Huntsville, Alabama and Orlando, Florida that will add an additional 260,000 square feet of space to our portfolio. In the retail division, we continued the development of two centers located in Gulf Shores and Birmingham, Alabama, which are set to be completed in late 2006 and early 2007 and started development on two other retail centers, both of which are located in Birmingham, Alabama and are targeted to be completed in late 2007. With the completion of these developments, the retail division will have an additional 1,274,000 square feet of rentable space. We are also a 50% partner in a 520,000 square foot retail development in Knoxville, Tennessee which is set to be completed during the second quarter of 2006. See additional discussion regarding our continuing developments in Part I.

      During the year, we completed a $275 million senior notes offering, a $325 million senior notes offering and an equity offering in which we issued 4.5 million shares of common stock at a price of $43.75 per share. We used the proceeds received from these offerings to repay the outstanding balance on our bridge loans (see Note 9 — Notes and Mortgages Payable in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K), pay down the outstanding balance on our unsecured line of credit and fund investment activities.

Comparison of the year ended December 31, 2005 to the year ended December 31, 2004

      Base rent for the year ended December 31, 2005 increased $151.3 million or 58.5% as compared with the year ended December 31, 2004. Base rent increased $93.1 million as a result of the Cornerstone acquisition, $36.6 million due to net acquisition and disposition activity and $5.5 million as result of completed developments in 2005. The remaining increase is primarily a result of a decrease in move-in concessions at our multifamily properties and an increase in occupancy in all three divisions.

      Percentage rent for the year ended December 31, 2005 increased $0.8 million or 28.4% as compared with the year ended December 31, 2004. The increase was primarily due to an increase in gross sales per square foot at our retail malls and the addition of new tenants at our retail malls that have recently completed redevelopment projects. The increase was partially offset by the sale of four malls and the transfer of six malls to the GPT Joint Venture (see Note 7 — Investment in Partially Owned Entities and other Arrangements in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

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      Tenant recoveries for the year ended December 31, 2005 increased $6.6 million or 21.2% as compared with the year ended December 31, 2004. The increase was primarily the result of our 2005 and 2004 acquisitions.

      Other property related revenue for the year ended December 31, 2005 increased $11.2 million or 64.0% as compared with the year ended December 31, 2004. Of the increase, $8.4 million is attributable to the Cornerstone acquisition and $3.1 million is attributable to properties acquired and developed in 2005 and 2004 which was partially offset by $1.4 million due to 2005 dispositions. The remaining increase is a result of ancillary income from our existing properties.

      Other non-property related revenue for the year ended December 31, 2005 increased $7.9 million as compared with the year ended December 31, 2004. The increase is primarily due to an increase in property management fees of $5.3 million and leasing income of $1.8 million, as a result of an increase in third party management agreements.

      General operating expenses of our operating properties for the year ended December 31, 2005 increased $17.0 million or 72.2% as compared to the year ended December 31, 2004. Of the increase, $11.0 million is attributable to the Cornerstone acquisition and $5.1 million is related to general operating expenses of the properties acquired and developed during 2005 and 2004. The remaining increase is a result of increased operating costs at our existing properties.

      Salaries and benefits of our operating properties for the year ended December 31, 2005 increased $14.5 million or 93.5% as compared to the year ended December 31, 2004. Of the increase, $11.2 million is related to the Cornerstone acquisition and $2.5 million is related to properties acquired during 2005 and 2004 and developed in 2005. The remaining increase is a result of an increase in payroll costs as a result of general salary increases to cover cost of living increases.

      Repairs and maintenance of our operating properties for the year ended December 31, 2005 increased $13.5 million or 44.8% as compared to the year ended December 31, 2004. Of the increase, $8.1 million is related to expenses associated with properties in the Cornerstone portfolio and $1.5 million is a result of other properties acquired and developed in 2005 and 2004. The remaining increase is related to repairs that occurred on certain of our multifamily and retail assets in 2005 as compared to 2004.

      Taxes, licenses and insurance for our operating properties for the year ended December 31, 2005 increased $22.1 million or 74.5% as compared to the year ended December 31, 2004. Of the increase, $12.9 million is related to the Cornerstone assets and $8.7 million is related to the other properties acquired and developed in 2005 and 2004. The remaining increase is a result of an increase in overall property taxes on a number of our operating properties.

      General and administrative corporate expenses for the year ended December 31, 2005 increased $14.8 million or 54.1% as compared to the year ended December 31, 2004. Of the increase, $11.1 is related to an increase in salaries and other incentives associated with the growth of the Company of which $5.3 million is attributable to the addition of the Cornerstone portfolio. Additionally, $3.9 million is attributable to the acquisition of a majority interest in Colonnade Properties LLC in September 2004 (see Note 7 — Investment in Partially Owned Entities and other Arrangements in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

      Depreciation and amortization expenses for the year ended December 31, 2005 increased $93.7 million or 106.4% as compared to the year ended December 31, 2004. Of the increase, $64.3 million is related to properties acquired in the Cornerstone acquisition, including $37.1 million related to the amortization of in-place lease intangible assets. Approximately $17.0 million of the increase is related to properties acquired and developed during 2005 and 2004 which was partially offset by 2005 dispositions. Additionally, the amortization of prepaid leasing commissions and tenant improvements on our existing properties increased approximately $9.6 million as a result of an increase in leasing activity in 2005.

      Interest expense for the year ended December 31, 2005 increased $52.3 million, or 68.0%, to $130.6 million as compared to the year ended December 31, 2004. The increase reflects the issuance of $275 million of senior notes on January 31, 2005, the issuance of $325 million of senior notes on September 28, 2005 by CRLP and

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the assumption of $837.0 million of debt in connection with the Cornerstone acquisition. In addition, we had increased usage under our unsecured line of credit accompanied by rising interest rates.

      Interest Income for the year ended December 31, 2005 increased $3.4 million compared to the same period for 2004. The increase is a result of a $35.5 million increase in notes receivable in 2005 compared to 2004. We issued notes receivable in connection with the sale of eight multifamily properties and provided mezzanine financing to third parties in 2005.

      Income from partially owned entities for the year ended December 31, 2005 decreased $2.0 million compared to the same period for 2004. The decrease is primarily the result of our interest in the net loss of the DRA/ Colonial Office JV, which experienced a net loss in the fourth quarter of 2005 as a result of increased amortization and depreciation expense primarily related to in-place lease intangibles.

      Gains from sales of property included in continuing operations for the year ended December 31, 2005 increased $102.4 million to $111.2 million as compared to the year ended December 31, 2004. The increase is a result of the transfer of six regional malls to the GPT Joint Venture in which we retained a 10% interest resulting in a gain of $93.2 million and $13.6 million in gains related to condominium sales during 2005. The remaining increase is due to an increase in the number of land parcels sold.

      Income taxes for the year ended December 31, 2005 increased $5.7 million as compared to the same period in 2004. The increase is a result of $3.7 million in income taxes associated with condominium sales in 2005 and an increase in income taxes related to land sales.

      Other income (expense) for the year ended December 31, 2005 increased $4.3 million compared to the same period in 2004. The increase is primarily a result of $4.0 million received as a result of forfeited earnest money. The increase is also a result of a full year of mark to market adjustment related to a $17.0 million swap on a property acquired during 2004. The swap does not qualify for hedge accounting in accordance with SFAS No. 133. Therefore the fair value of the swap is recognized currently in earnings.

      Income from discontinued operations for the year ended December 31, 2005 increased $126.4 million compared to the year ended December 31, 2004. At December 31, 2005, we had classified eighteen multifamily apartment communities containing approximately 4,635 units and one retail asset containing approximately 73,500 square feet as held for sale. The operating property sales (with no continuing involvement) that occurred in 2005 and 2004, which resulted in a gain on disposal of $184.4 million and $17.6 million, respectively, are classified as discontinued operations (see Note 4 — Property Acquisitions and Dispositions in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

Comparison of the year ended December 31, 2004 to the year ended December 31, 2003

      Base rent for the year ended December 31, 2004 increased $39.2 million or 17.8% as compared with the year ended December 31, 2003. Base rent increased $30.6 million as a result of the 2004 and 2003 acquisitions and $1.2 million as a result of the completed developments in 2004. The remaining increase is primarily a result of a decrease in move-in concessions at our multifamily properties and an increase in occupancy at our retail properties.

      Percentage rent for the year ended December 31, 2004 increased $0.2 million or 8.4% as compared with the year ended December 31, 2003. The increase was primarily due to an increase in gross sales per square foot at our retail malls and the addition of new tenants at our retail malls that have recently completed redevelopment projects.

      Tenant recoveries for the year ended December 31, 2004 increased $1.3 million or 4.3% as compared with the year ended December 31, 2003. The increase was primarily the result of our 2004 and 2003 acquisitions.

      Other property related revenue for the year ended December 31, 2004 increased $1.2 million or 7.1% as compared with the year ended December 31, 2003. Of the increase, $1.0 million is attributable to a full year of operations for the properties acquired and developed in 2004 and 2003. The remaining increase is a result of ancillary income from our existing properties.

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      Other non-property related revenue for the year ended December 31, 2004 increased $3.5 million as compared with the year ended December 31, 2003. The increase is primarily due to an increase in property management and leasing income of $3.0 million, as a result of the new multifamily third party management agreements and the acquisition of Colonnade Properties, LLC (see Note 7 — Investment in Partially Owned Entities and other Arrangements in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K). The remaining increase is a result of an increase in development and third party construction fees.

      General operating expenses of our operating properties for the year ended December 31, 2004 increased $3.3 million or 16.2% as compared to the year ended December 31, 2003. General operating expenses of the properties acquired and developed during 2004 and 2003 increased $2.5 million in 2004 as compared to 2003. The remaining increase is a result of increased operating costs at our existing properties.

      Salaries and benefits of our operating properties for the year ended December 31, 2004 increased $2.8 million or 22.2% as compared to the year ended December 31, 2003. Of the increase, $2.2 million is related to properties acquired during 2004 and 2003 and developed in 2004. The remaining increase is a result of an increase in payroll costs as a result of general salary increases to cover cost of living increases.

      Repairs and maintenance of our operating properties for the year ended December 31, 2004 increased $3.7 million or 14.0% as compared to the year ended December 31, 2003. Of the increase, $2.6 million is a result of a full year of operations of the properties acquired and developed in 2004 and 2003. The remaining increase is related to repairs that occurred on certain of our multifamily and retail assets in 2004 as compared to 2003.

      Taxes, licenses and insurance for our operating properties for the year ended December 31, 2004 increased $4.7 million or 18.8% as compared to the year ended December 31, 2003. The properties acquired and developed in 2004 and 2003 contributed $4.6 million of the increase. The remaining increase is a result of an increase in overall property taxes on a number of our operating properties.

      General and administrative corporate expenses for the year ended December 31, 2004 increased $7.8 million or 40.1% as compared to the year ended December 31, 2003. The increase is primarily attributable to a $3.5 million increase in management compensation as a result of the Company’s continued growth, a $0.5 million increase in professional fees associated with Sarbanes-Oxley compliance and $1.6 million related to the acquisition of Colonnade Properties, LLC during 2004.

      Depreciation and amortization expenses for the year ended December 31, 2004 increased $13.7 million or 18.4% as compared to the year ended December 31, 2003. Approximately $12.9 million of the increase is related to a full year of depreciation and amortization on the properties acquired and developed during 2004 and 2003. The remaining increase is due primarily to increased amortization of prepaid leasing commissions and tenant improvements on our existing properties.

      Interest expense for the year ended December 31, 2004 increased $15.8 million, or 25.6%, to $77.7 million as compared to the year ended December 31, 2003. The increase reflects the issuance of $400 million of senior notes by CRLP during 2004 and interest on $246.2 million of debt assumed in connection with the acquisitions during 2004. Additionally, the increase is offset by a decrease in the LIBOR rate in 2003 and lower interest expense on our line of credit due to a lower average loan balance resulting from our equity offering and disposition activities in the early to mid part of 2003.

      Income from partially owned entities for the year ended December 31, 2004 increased $0.9 million compared to the same period for 2003. The increase is primarily the result of our interest in the joint venture with DRA in Arizona, New Mexico and Nevada and certain other joint ventures entered into in 2004.

      Gains from sales of property included in continuing operations for the year ended December 31, 2004 increased $1.4 million to $8.9 million as compared to the year ended December 31, 2003. The increase is a primarily the result of a gain on the sale of an operating property in which we retained a continuing interest, which was offset by a decrease in the sales of various parcels of land in 2004 as compared to the sale of certain parcels of land in 2003.

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      Income taxes for the year ended December 31, 2004 increased $0.5 million as compared to the same period in 2003. The increase is a result of an increase in income taxes related to land sales.

      Other income (expense) for the year ended December 31, 2004 increased $0.7 million as compared to the same period in 2003. The increase is due to the mark to market adjustment related to a $17.0 million swap on a property acquired during 2004. The swap does not qualify for hedge accounting in accordance with SFAS 133. Therefore the fair value of the swap is recognized currently in earnings.

Summary of Critical Accounting Policies

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

Land, Buildings, and Equipment

      Land, buildings, and equipment are stated at the lower of cost, less accumulated depreciation, or fair value. We review 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. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, as follows:

	Useful Lives
Buildings		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. When items of land, buildings, or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded. We recognize 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 collectibility of the sales price is reasonably assured and we are 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 GAAP. For properties sold to a joint venture in which we retain an ownership percentage, we limit the profit recognized from the sale to the portion sold to the outside party. Further, the profit is limited by the amount of cash received for which we have no commitment to reinvest.

Acquisition of Real Estate Assets

      We account for acquisitions of investments in real estate by allocating the purchase price to acquired tangible assets, consisting of land, building and tenant improvements, and to identifiable 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

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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. We 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 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. We also estimate 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.

      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, which are primarily expected to range from 11 to 28 years for office and retail properties and from 5 to 11 months for multifamily properties. These intangible assets have a current weighted-average composite life of 19 years for office and retail properties and 7 months for 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.

      We are actively pursuing acquisition opportunities and will not be successful in all cases. Costs incurred related to these acquisition opportunities are expensed once it is no longer probable that we will be successful in the acquisition.

Real Estate Development

      We capitalize all costs, including interest and real estate taxes that are associated with a development, construction, expansion, or leasing of real estate investments as a cost of the property. All other expenditures necessary to maintain a property in ordinary operating condition are expensed as incurred.

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

Principles of Consolidation

      The consolidated financial statements include the accounts of the Company, CRLP, CPSI and CPSLP. The minority limited partnership interests in CRLP are reflected as minority interest in our consolidated financial statements. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements. Entities in which we own, directly or indirectly, a 50% or less interest and do not control are reflected in the consolidated financial statements as investments accounted for under the equity method. Under this method the investment is carried at cost plus or minus equity in undistributed earnings or losses since the date of acquisition. For those entities in which we own less than 100% of the equity interest, we consolidate the property if we have the direct or indirect ability to make major decisions about the entities’ activities based on the terms of the respective joint venture agreements which specify the sharing of participating and protective rights such as decisions regarding major leases, encumbering the entities with debt and whether to dispose of entities. We would also consolidate certain partially-owned entities and other subsidiaries if we own less than 100% equity interest and are deemed to be the primary beneficiary as defined by FASB Interpretation 46 Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, as revised (“FIN 46(R)”).

Revenue Recognition

      We, as a lessor, have retained substantially all of the risks and benefits of ownership of our properties 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 related lease. 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 respective leases.

      Other income received from long-term contracts signed in the normal course of business is recognized in accordance with the terms of the specific contract. Property management and development fee income is recognized when earned for services provided to third parties.

      Sales and the associated gains or losses of real estate assets and for-sale condominiums are recognized in accordance with the provisions of SFAS No. 66, “Accounting for Sales of Real Estate.” For condominium conversion 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.

Notes Receivable

      Notes receivable consist primarily of promissory notes issued by third parties. We record notes receivable at cost. We evaluate the collectibility 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 value of the collateral if the note is collateral dependent. The weighted average interest rate on the notes receivable is approximately 16% per annum as of December 31, 2005. Interest income is recognized on an accrual basis.

Valuation of Receivables

      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 collectibility of outstanding receivables and record allowances as appropriate. Our policy is to record allowances for all outstanding receivables greater than 60 days past due for our office and retail properties.

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      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.

Derivative Instruments

      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 adjust our balance sheets on an ongoing quarterly basis to reflect current fair market value of our derivatives. Changes in the fair value of derivatives are recorded each period in earnings or comprehensive income, as appropriate. The ineffective portion of the hedge is immediately recognized into earnings to the extent that the change in value of a derivative does not perfectly offset the change in value of the instrument being hedged. The unrealized gains and losses held in accumulated other comprehensive income (loss) will be reclassified to earnings over time and occur when the hedged items are also recognized in earnings.

      We formally document all relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking the hedge. 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.

Recent Pronouncements of the Financial Accounting Standards Board (FASB)

      In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), Consolidation of Variable Interest Entities. FIN 46 states that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities and results of the activities of the variable interest entity should be included in the consolidated financial statements of the business enterprise. This Interpretation explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. FIN 46 also requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. Variable interest entities that effectively disperse risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. FIN 46 was to be applied immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. In December 2003, the FASB revised FIN 46 through the release of FIN 46R, which clarified certain aspects of FIN 46 and contained certain provisions that deferred the effective date of FIN 46 to periods ending after March 15, 2004 for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.

      The Company has identified certain relationships that it deems to be variable interest entities in which it holds a significant variable interest. The Company’s estimated maximum exposure to loss is related to these entities is limited to the carrying value of the Company’s investments in and notes receivable from those entities, which totaled $37.6 million as of December 31, 2005. In addition to these variable interest entities, the Company has variable interests in the form of guarantees or loans with certain other variable interest entities. The maximum exposure related to these entities is limited to the amount of the guarantees and loans which totaled $48.5 million as of December 31, 2005, which results in a total maximum exposure to the Company attributable to all variable interest entities in the aggregate amount of $86.1 million. The adoption of FIN 46 and FIN 46R did not have a material effect on the Company’s consolidated financial statements.

      In December 2004, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 123 (Revised) (“SFAS No. 123 (R)”), Share Based Payment, that will require compensation costs related to share-based payment transactions to be recognized in financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant date fair value of the equity or liability instruments

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issued. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123 (R) replaces SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123 (R) is effective for the Company as of the beginning of the first annual reporting period that begins after June 15, 2005. The Company does not expect the adoption of SFAS No. 123 (R) to have a material impact on its consolidated financial statements.

      In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue 04-5, Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights. EITF Issue 04-5 will change the application of existing accounting pronouncements that govern consolidation of variable interest entities and voting interest entities when such an entity has a sole general partner and limited partners with certain rights. EITF 04-5 is effective immediately for all limited partnerships formed or modified subsequent to June 29, 2005, and is effective for all other limited partnerships for the first fiscal year beginning after December 15, 2005. The adoption of EITF Issue 04-5 did not have a material impact on the Company’s consolidated financial statements.

      In March 2005, the FASB issued FIN No. 47 (“FIN 47”), Accounting for Conditional Asset Retirement Obligations, that requires companies to recognize a liability for the fair value of conditional asset retirement obligations, if such fair value can be reasonably estimated. FIN 47 requires the fair value of a liability for unconditional asset retirement obligations to be recognized when incurred, which is generally upon the issuance of regulation, acquisition, construction or development of the asset. FIN 47 is effective for the Company on December 31, 2005. Based on the Company’s evaluation of its exposures, the adoption of FIN 47 did not have a material impact on the Company’s consolidated financial statements.

Liquidity and Capital Resources

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 dividends and 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. We believe that cash generated from operations and borrowings under our unsecured line of credit will be sufficient to meet our short-term liquidity requirements. However, factors described below and elsewhere herein, including under Item 1A — “Risk Factors,” may have a material adverse effect on our cash flow.

      The majority of our revenue is derived from 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 tenants, and the ability of these tenants to make their rental payments. We believe that the diversified nature of the properties in which we typically invest — multifamily, office and retail — provides a more stable revenue flow in uncertain economic times, in that our diversified property types generally do not have the same economic cycles and while one property type may be experiencing difficulty, the other property types may be maintaining their strength.

      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 for 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

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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 secured and unsecured debt), sales of common and preferred shares, capital raised through the disposition of assets, and joint venture capital transactions. We believe these sources of capital will continue to be available in the future to fund our long-term capital needs. However, factors described below and elsewhere herein may have a material adverse effect on our 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. 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. We will continue to analyze which source of capital is most advantageous to us at any particular point in time, but the equity markets may not be consistently available on terms that are attractive.

      Over the last few years, we have maintained our asset recycling program, which allows us to maximize our investment returns through the sale of assets that have reached their maximum investment potential and reinvest the proceeds into opportunities with more growth potential. During 2005, we disposed of 23 multifamily properties and our percentage interest in three multifamily properties representing 8,092 units, and ten retail properties representing 6.6 million square feet, retaining a 10% interest in six of the retail properties representing 3.7 million square feet. We also sold 328 condominium units at our two condominium conversion properties during 2005. The multifamily properties, retail properties and condominium units were sold for a total sales price of $1.1 billion, which was used to repay a portion of the borrowings under our unsecured line of credit and to fund other investment activities. 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 will be limited if market conditions make such sales unattractive. Additionally, throughout 2005, we sold various parcels of land located adjacent to our existing properties for an aggregate sales price of $25.1 million, which was also used to repay a portion of the borrowings under our unsecured line of credit and to support our investment activities.

      As of December 31, 2005, we have unsecured credit facilities providing for total borrowings of up to $600.0 million and a cash management line that provides for borrowings up to $40.0 million. These credit facilities bear interest at LIBOR plus a spread calculated based on our unsecured debt ratings from time to time. Of the $600 million under the credit facilities, we have fixed $100.0 million at an interest rate of 5.47% with an interest rate swap agreement. Based on our December 31, 2005 debt ratings, the spread is 80 basis points. The credit facilities, excluding the cash management line of credit, mature and are renewable in March 2008, and provide for a one-year extension. The credit facilities include a competitive bid feature that will allow us to convert up to $250 million under the credit facilities to a fixed rate, for a fixed term not to exceed 90 days.

      The credit facilities are primarily used to finance property acquisitions and developments and had an outstanding balance at December 31, 2005 of $210.2 million, including an outstanding balance of $15.2 million on the cash management line. The interest rate of this short-term borrowing facility, including the competitive bid balance, is 5.32% and 3.14% at December 31, 2005 and 2004, respectively.

      At December 31, 2005, our total outstanding debt balance was $2.5 billion. The outstanding balance includes fixed-rate debt of $2.2 billion, or 89.3% of the total debt balance, and floating-rate debt of $266.8 million, or 10.7% of the total debt balance. Our total market capitalization as of December 31, 2005 was $5.2 billion and our ratio of debt to market capitalization was 47.6%. We have certain loan agreements that contain restrictive covenants, which among other things require maintenance of various financial ratios. At December 31, 2005, we were in compliance with these covenants.

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Investing Activities

      During 2005, in addition to the Cornerstone acquisition, we acquired six multifamily properties containing 1,925 units, eight office properties containing 1.9 million square feet, and one retail property containing 0.4 million square feet for an aggregate cost of $537.7 million. We also acquired a partnership interest in four multifamily properties containing 1,374 units, and a partnership interest in 26 office properties containing 11.7 million square feet for an aggregate cost of approximately $400 million. We completed the development of three multifamily apartment communities in Charlotte, North Carolina, Austin, Texas and Orlando, Florida for a total cost of $75.4 million and one retail power center in Birmingham, Alabama, for a total cost of $29.3 million. We also completed three retail redevelopments in Birmingham, Alabama, Myrtle Beach, South Carolina and Auburn, Alabama for a total cost of $40.5 million.

      During 2005, we provided approximately $8.0 million of subordinated financing to a third party in connection with the sale of six properties. The notes receivable for each of these properties are cross collateralized and have a maturity of 18 months. We also provided approximately $5.5 million of first mortgage financing to the same third party in connection with the sale of one property. The note receivable for this loan is cross collateralize with the subordinated notes obtained from this third party and has substantially the same terms as the subordinated notes. Additionally, during 2005, we provided subordinated financing totaling $18.8 million to three third parties for the acquisition and conversion of three multifamily properties to condominium communities. The notes receivable for each of these loans have maturities of two to three years. The weighted average interest rate on all of our notes receivable is 16% per annum as of December 31, 2005.

      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 negotiations with tenants and the willingness of tenants. We also incur expenditures for certain recurring capital expenses. During 2005, we incurred approximately $36.8 million related to tenant improvements and leasing commissions, and approximately $18.9 million of recurring capital expenditures. We expect to pay for future re-leasing and recurring capital expenditures out of cash from operations.

Dividend

      The dividend on our common stock was $0.675 per share per quarter or $2.70 per share annually in 2005. We also pay regular quarterly dividends on our preferred stock 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.

Financing Transactions

      On January 31, 2005, CRLP completed a $275 million senior notes offering of 4.750% unsecured notes due February 1, 2010. Interest on the notes is payable semi-annually on the first day of every February and August beginning August 1, 2005. The net proceeds of approximately $273.3 million were used to pay down our bridge credit facility and a portion of our unsecured line of credit.

      On March 22, 2005, CRLP, and the Company as guarantor, entered into a $500.0 million unsecured revolving credit facility and a $100.0 million unsecured term loan facility (the “Credit Facilities”) with Wachovia Bank, National Association (“Wachovia”), as Agent for the lenders, Bank of America, N.A. as Syndication Agent, Wells Fargo Bank, National Association, Citicorp North America, Inc. and AmSouth Bank, as Co-Documentation Agents, and U.S. Bank National Association and PNC Bank, National Association (“PNC Bank”), as Co-Senior Managing Agents and other lenders named therein. Base rate loans and revolving loans are available under the Credit Facilities. The Credit Facilities also include a competitive bid feature that will allow CRLP to convert up to $250.0 million under the Credit Facilities 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 from 0.00% to 0.25% based on our unsecured debt ratings from time to time. Revolving loans bear interest at LIBOR plus a margin ranging from 0.50% to 1.15% based on our unsecured debt ratings

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from time to time. Competitive bid loans bear interest at LIBOR plus a margin, as specified by the participating lenders. Term loans are available under the term loan facility and bear interest at LIBOR plus a margin ranging from 0.55% to 1.35% based on our unsecured debt ratings from time to time.

      On July 7, 2005, CRLP and the Company as guarantor, entered into a $54.5 million bridge loan which was secured by our ownership in Mizner/ Delray Beach. The bridge loan was priced at LIBOR plus 90 basis points. The balance outstanding under the bridge loan was paid off on September 21, 2005 from proceeds received from the equity offering (See Note 12 — Equity Offerings in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

      On August 2, 2005, CRLP and the Company as guarantor, entered into a $91.0 million bridge loan which was secured by our ownership in Research Park Plaza III & IV. The bridge loan was priced at LIBOR plus 90 basis points. The balance outstanding under the bridge loan was paid off on September 21, 2005 from proceeds received from the equity offering (see Note 12 — Equity Offerings in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

      On September 21, 2005, the Company issued 4,500,000 of its common shares at $43.75 per share, or an aggregate offering price of approximately $196.9 million, in a public offering in which Merrill Lynch & Co. and Wachovia Securities acted as joint book-running managers. The Company contributed the proceeds of this offering to CRLP in exchange for 4,500,000 common units of limited partnership interest. Net proceeds to the Company totaled $187.3 million after payment of underwriting fees and estimated issuance costs. The Company used approximately $145.5 million of the net proceeds to repay the outstanding balance on its bridge loans (See Note 9 — Notes and Mortgages Payable in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K), and used the remaining proceeds (which were temporarily used to pay down the outstanding balances under the Credit Facilities), together with additional borrowings under the Company’s Credit Facilities, to fund its $49.0 million equity investment in its joint venture with DRA (See Note 7 — Investment in Partially Owned Entities and Other Arrangements in our Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K).

      On September 28, 2005, CRLP completed a $325 million senior notes offering of 5.50% unsecured notes due October 1, 2015. Interest on the notes is payable semi-annually on the first day of every April and October beginning April 1, 2006. The net proceeds of $320.7 million, after discount and issuance costs, were used to reduce outstanding borrowings under our unsecured line of credit.

Credit Ratings

      Our current credit ratings are as follows:

Rating Agency	Rating(1)		Last Update
Standard & Poor’s		BBB-	December 27, 2004
Moody’s		Baa3	January 12, 2005
Fitch		BBB-	November 15, 2005

(1)  Ratings outlook is “stable”.

     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 its investment activities. In addition, our spread on our $600 million unsecured line of credit would increase as previously discussed.

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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. 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, 2005.

															Estimated
	2006		2007		2008		2009		2010		Thereafter		Total		Fair Value
	(Amounts in thousands)
Fixed Rate Debt	$	86,617	$	180,017	$	147,886	$	49,203	$	367,483	$	1,396,312	$	2,227,518	$	2,312,155
Average interest rate at December 31, 2005		7.9%		7.0%		5.7%		7.6%		5.5%		6.2%		6.0%
Variable Debt	$	365	$	—	$	110,228	$	—	$	—	$	156,239	$	266,832	$	266,832
Average interest rate at December 31, 2005		3.7%				5.2%						5.4%		5.3%

      The table incorporates only those exposures that exist as of December 31, 2005. 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.

      Our 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, 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. During 2005, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt and forecasted issuances of debt. Two of our outstanding interest rate swaps hedge the interest rate risk associated with forecasted debt issuances that are expected to occur in 2006 and 2007. Accordingly, the maximum period of time over which we are hedging its exposure to variability in future cash flows for forecasted transactions other than those related to the payment of variable interest on existing debt is approximately nineteen months. We also use interest rate swaps as part of our fair value hedging strategy. These swaps involve the receipt of fixed rate amounts in exchange for variable rate amounts over the life of the agreements without exchange of the underlying principal amount. During 2005, such swaps were used to hedge the change in fair value of fixed rate debt.

      At December 31, 2005 and 2004, derivatives with a fair value of $3.0 million and $3.7 million, respectively, were included in other assets, and derivatives with a fair value of $1.4 million were included in other liabilities at December 31, 2004. The change in net unrealized gains/losses of $1.6 million in 2005, $0.2 million in 2004 and $1.9 million in 2003 for derivatives designated as cash flow hedges is separately disclosed in the statement of changes in shareholders’ equity and comprehensive income. The change in fair value of derivatives not designated as hedges of ($0.1) million and $0.4 million is included in other income (expense) in 2005 and 2004, respectively. All derivatives were designated as hedges in 2003. No hedge ineffectiveness on fair value hedges was recognized during 2005, 2004 and 2003. Hedge ineffectiveness of $1.1 million, $3,661, and $0.4 million on cash flow hedges due to index mismatches was recognized in other income during 2005, 2004 and 2003, respectively.

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      The following table summarizes the notional values, fair values and other characteristics of our derivative financial instruments at December 31, 2005. The notional value at December 31, 2005 provides an indication of the extent of our involvement in these instruments at that time, but does not represent exposure to credit, interest rate, or market risk.

							Fair Value
			Interest				at December 31, 2005
Product Type	Notional Value		Rate		Maturity		Asset (Liability)
							(In thousands)
Interest Rate SWAP, Cash Flow	$	11.2 million		5.932%		1/1/06	$	(15	)
Interest Rate CAP, Cash Flow	$	16.4 million		4.840%		4/1/06		—
Interest Rate CAP, Cash Flow	$	25.9 million		4.840%		4/1/06		—
Interest Rate CAP, Cash Flow	$	8.4 million		4.840%		4/1/06		—
Interest Rate CAP, Cash Flow	$	30.4 million		11.200%		7/3/06		—
Interest Rate CAP, Cash Flow	$	19.7 million		6.850%		6/29/07		1
Interest Rate CAP, Cash Flow	$	16.7 million		6.850%		7/3/07		1
Interest Rate CAP, Cash Flow	$	12.8 million		6.000%		7/1/08		1
Interest Rate CAP, Cash Flow	$	22.4 million		6.000%		7/1/08		1
Interest Rate CAP, Cash Flow	$	9.9 million		6.000%		7/1/08		1
Interest Rate CAP, Cash Flow	$	10.0 million		8.373%		8/1/08		1
Interest Rate CAP, Cash Flow	$	14.9 million		7.543%		8/1/08		3
Interest Rate CAP, Cash Flow	$	7.4 million		6.983%		8/1/08		3
Interest Rate CAP, Cash Flow	$	6.2 million		8.373%		8/1/08		—
Interest Rate CAP, Cash Flow	$	13.3 million		6.786%		9/1/08		8
Interest Rate CAP, Cash Flow	$	5.5 million		7.900%		2/1/09		2
Interest Rate CAP, Cash Flow	$	17.6 million		8.100%		2/1/09		4
Interest Rate SWAP, Fair Value	$	100.0 million		4.803%		4/1/11		325
Interest Rate SWAP, Cash Flow	$	200.0 million		4.830%		2/15/16		1,532
Interest Rate SWAP, Cash Flow	$	175.0 million		4.877%		7/13/17		1,153

      We do not use derivatives for trading or speculative purposes. 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 do we anticipate any material adverse effect on our net income or financial position in the future from the use of derivatives.

      Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our hedged debt. The change in net unrealized gains/losses on cash flow hedges reflects a reclassification of $0.5 million, $1.4 million and $1.9 million of net unrealized gains/losses from accumulated other comprehensive income to interest expense during 2005, 2004 and 2003, respectively. During the next 12 months, we estimate that an additional $0.4 million will be reclassified.

      In addition to derivatives qualifying as hedges, the Company has an interest rate swap with a fair value of approximately $1.5 million at December 31, 2005 held for economic hedging purposes. 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 qualifies for hedge accounting. As a result, the Company is treating this derivative as an economic hedge. This economic hedge converts the floating rate payments on certain expected future debt obligations to a fixed rate. Interest is exchanged periodically on the notional value, with the Company receiving the LIBOR-based floating rates and paying the fixed rate. Changes in the fair value of these derivatives are recognized in earnings in other income (expense) and totaled ($0.7) million for the year ended December 31, 2005. The fair value of this derivative is included in Other Assets. Subsequent to December 31, 2005 the Company discontinued this swap.

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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, 2005:

Contractual Obligations

		Payments Due in Fiscal
		Total		2006		2007		2008		2009		2010		Thereafter
		(In thousands)
Long-Term Debt:
	Consolidated	$	2,494,351	$	86,982	$	180,017	$	258,114	$	49,203	$	367,483	$	1,552,552
	Partially Owned Entities(1)		373,134		9,426		109,161		58,471		8,951		55,939		131,186
Total Long-Term Debt		$	2,867,485	$	96,408	$	289,178	$	316,585	$	58,154	$	423,422	$	1,683,738

(1)  Represents the Company’s pro rata share of principal maturities and excludes net premiums and discounts.

Other Commercial Commitments

	Total Amounts
	Committed		2006		2007		2008		2009		2010		Thereafter
	(In thousands)
Standby Letters of Credit	$	2,801	$	2,801	$	—	$	—	$	—	$	—	$	—
Guarantees		51,000				50,000								1,000
Total Commercial Commitments	$	53,801	$	2,801	$	50,000	$	—	$	—	$	—	$	1,000

Guarantees and Other Arrangements

      During January 2000, we initiated and completed an Executive Unit Purchase Program (Unit Purchase Program), in which the Board of Trustees and certain members of our management were able to purchase 425,925 units of CRLP. The value of the units purchased under the Unit Purchase Program was approximately $10.0 million. Under the Unit Purchase Program, the Board of Trustees and the members of management obtained full-recourse personal loans from an unrelated financial institution, in order to purchase the units. As of December 31, 2004, the outstanding balance on these loans was $3.8 million as some participants had exited the program and repaid their principal balance. The units, which had a market value of approximately $6.5 million at December 31, 2004, were pledged as collateral against the loans. We provided a guarantee to the unrelated financial institution for the personal loans, which matured in January 2005. In connection with the maturity of the remaining outstanding loans in January 2005, our guarantee of such loans was terminated.

      During December 2002, we sold 90% of our interest in Colonial Promenade Hoover for a total sales price of $20.5 million to a newly formed joint venture, Highway 150 LLC, in which we maintain a 10% ownership interest and manage the property. In connection with the formation of Highway 150 LLC, we executed a guaranty, 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, 2005, the total amount of debt of the joint venture was approximately $17.1 million and matures in December 2012. At December 31, 2005, no liability was recorded on our books for the guarantee.

      In connection with the contribution of certain assets to CRLP, certain partners of CRLP have guaranteed indebtedness of the Company totaling $26.9 million at December 31, 2005. 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. Additionally, certain unitholders of CRLP and trustees of the Company have guaranteed indebtedness of the Company totaling $0.4 million at December 31, 2005. The Company has indemnified these individuals from their guarantees of this indebtedness.

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      In connection with the acquisition of CRT with DRA, CRLP guaranteed approximately $50.0 million of third-party financing obtained by the DRA/ Colonial Office JV with respect to 10 of the CRT properties which the DRA/ Colonial Office JV expects to sell in the first 12 months of the venture. The DRA/ Colonial Office 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/ Colonial Office Joint Venture partners. At December 31, 2005, no liability was recorded on our books for the guarantee.

      During July 2005, in connection with our investment into a joint venture with Carter and Associates, we committed to provide a construction loan to the joint venture of up to approximately $40 million at a rate of 8.25% per annum. As of December 31, 2005, $3.3 million had been drawn on the construction loan by the joint venture, and $36.7 million was available to be drawn.

Outlook

      Management intends to maintain our strength through continued diversification, while pursuing acquisitions and developments that meet our criteria for property quality, market strength, and investment return. Management will continue to use our unsecured line of credit to provide short-term financing for acquisition, development, and re-development activities and plans to continue to replace significant borrowings under the bank line of credit with funds generated from the sale of additional debt and equity securities and permanent financing, as market conditions permit. Management believes that these potential sources of funds, along with the possibility of issuing limited partnership units of CRLP in exchange for properties, will provide us with the means to finance additional acquisitions, developments, and expansions.

      In addition to the issuance of equity and debt, management is investigating alternate financing methods and sources to raise future capital. Private placements, joint ventures, and non-traditional equity and debt offerings are some of the alternatives we are contemplating.

      Management anticipates that our net cash provided by operations and our existing cash balances will provide the necessary funds on a short- and long-term basis to cover our operating expenses, interest expense on outstanding indebtedness, recurring capital expenditures, and dividends to shareholders in accordance with Internal Revenue Code requirements applicable to REITs.

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, 2005, our exposure to rising interest rates was mitigated by the existing debt level of 50.9% of our total market capitalization, the high percentage of fixed rate debt (89.5%) and the use of interest rate swaps to effectively fix the interest rate on approximately $111.2 million through March 2008. As it relates to the short-term, increases 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”) is useful to investors as a measure of performance for an equity REIT that provides a relevant basis for comparison among REITs. FFO, as defined by 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. Prior to January 1, 2003, we had also included marketing fees on sales transactions within FFO, in which we used internal employees to complete the asset sales. Effective January 1, 2003, we conformed our

72

FFO definition to adhere to the NAREIT white paper definition. As a result, we are no longer including marketing fees on sales transactions and we are no longer excluding straight-line rents to arrive at FFO. 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. 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 (i) does not represent cash flows from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs and liquidity, including our ability to make distributions, and (iii) should not be considered as an alternative to net income (as determined in accordance with GAAP) for purposes of evaluating our operating performance.

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      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, 2005, 2004, 2003, 2002 and 2001.

		2005			2004			2003			2002			2001
		(In thousands, except per share and unit data)
Net income available to common shareholders		$	197,250		$	39,837		$	32,530		$	57,812		$	42,202
Adjustments (consolidated):
	Minority interest in CRLP		56,578			15,202			13,644			28,656			22,764
	Minority interest in gain/(loss) on sale of undepreciated property		5,241			—			—			—			—
	Real estate depreciation		135,121			90,659			79,006			72,451			64,300
	Real estate amortization		58,029			9,482			4,367			4,957			4,451
	Consolidated gains/(losses) from sales of property, net of income tax		(288,621	)		(18,473	)		(17,418	)		(40,770	)		(15,674	)
	Gains/(losses) from sales of undepreciated property, net of income tax and minority interest		8,063			3,313			6,995			2,814			—
	Marketing fees(prior to 2003)		—			—			—			1,658			2,562
	Straight-line rents(prior to 2003)		—			—			—			(2,079	)		(1,406	)
Adjustments (unconsolidated subsidiaries):
	Real estate depreciation		7,501			4,562			3,844			2,703			2,308
	Real estate amortization		969			89			82			67			31
	(Gains)/losses from sales of property		(2,200	)		(7,061	)		—			(580	)		3
	Extraordinary loss		—			—			—			—			17
	Straight-line rents (prior to 2003)		—			—			—			(35	)		(50	)
Funds from operations		$	177,931		$	137,610		$	123,050		$	127,654		$	121,508
Prior period revisions to conform to NAREIT FFO definition
Consolidated adjustments
	Marketing fees (prior to 2003)	$	—		$	—		$	—		$	(1,658	)	$	(2,562	)
	Straight-line rents (prior to 2003)		—			—			—			2,079			1,406
Unconsolidated subsidiary adjustments
	Straight-line rents (prior to 2003)		—			—			—			35			50
Funds from operations — as revised		$	177,931		$	137,610		$	123,050		$	128,110		$	120,402
As previously reported
Funds from operations per share and unit — basic		$	3.65		$	3.67		$	3.47		$	3.85		$	3.80
Funds from operations per share and unit — diluted		$	3.62		$	3.64		$	3.45		$	3.82		$	3.78
As revised
Funds from operations per share and unit — basic		$	3.65		$	3.67		$	3.47		$	3.86		$	3.76
Funds from operations per share and unit — diluted		$	3.62		$	3.64		$	3.45		$	3.83		$	3.75
Weighted average common shares outstanding — basic			38,071			27,121			24,965			22,154			20,792
Weighted average partnership units outstanding — basic(1)			10,740			10,347			10,451			11,016			11,211
Weighted average shares and units outstanding — basic			48,811			37,468			35,416			33,170			32,003
Effect of diluted securities			391			341			267			254			111
Weighted average shares and units outstanding — diluted			49,202			37,809			35,683			33,424			32,114

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

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”.

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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, 2005 and 2004

Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003

Notes to Consolidated Financial Statements

      Report of Independent Registered Public Accounting Firm

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COLONIAL PROPERTIES TRUST

CONSOLIDATED BALANCE SHEETS

		December 31,			December 31,
		2005			2004
		(In thousands, except
		share data)
ASSETS
Land, buildings, & equipment		$	3,974,925		$	2,696,304
Undeveloped land and construction in progress			202,052			158,954
Less: Accumulated depreciation			(453,365	)		(437,635	)
Real estate assets held for sale, net			367,372			167,712
	Net real estate assets		4,090,984			2,585,335
Cash and equivalents			30,615			10,725
Restricted cash			8,142			2,333
Accounts receivable, net			28,543			20,642
Notes receivable			36,387			906
Prepaid expenses			19,549			11,238
Deferred debt and lease costs			50,436			36,750
Investment in partially owned entities			123,700			65,472
Other assets			110,902			67,942
	Total assets	$	4,499,258		$	2,801,343
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes and mortgages payable		$	2,274,620		$	1,615,817
Unsecured credit facility			210,228			239,970
Mortgages payable related to real estate held for sale			9,502			—
	Total long-term liabilities		2,494,350			1,855,787
Accounts payable			74,474			30,665
Accrued interest			29,063			17,722
Accrued expenses			17,615			10,635
Tenant deposits			7,251			4,455
Unearned rent			9,722			9,334
Other liabilities			736			1,737
	Total liabilities		2,633,211			1,930,335
Minority interest:
Preferred units			100,000			100,000
Common units			283,240			164,593
Limited partners’ interest in consolidated partnership			8,093			1,389
	Total minority interest		391,333			265,982
Preferred shares of beneficial interest, $.01 par value, 20,000,000 shares authorized:
	91/4% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25 per share, 2,000,000 shares issued and outstanding		20			20
	81/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25 per depositary share, 5,000,000 depositary shares issued and outstanding at December 31, 2005 and 2004		5			5
	75/8% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25 per depositary share, 5,326,349 depositary shares issued and outstanding at December 31, 2005		1			—
Common shares of beneficial interest, $.01 par value, 125,000,000 shares authorized; 50,637,973 and 33,222,559 shares issued at December 31, 2005 and 2004, respectively			506			332
Additional paid-in capital			1,684,853			909,269
Cumulative earnings			747,186			520,295
Cumulative distributions			(803,133	)		(670,894	)
Treasury shares, at cost; 5,623,150 shares at December 31, 2005 and 2004			(150,163	)		(150,163	)
Accumulated other comprehensive loss			(915	)		(1,966	)
Deferred compensation on restricted shares			(3,646	)		(1,872	)
	Total shareholders’ equity		1,474,714			605,026
	Total liabilities and shareholders’ equity	$	4,499,258		$	2,801,343

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

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COLONIAL PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

			For the Year Ended
			December 31,			December 31,			December 31,
			2005			2004			2003
			(In thousands, except share
			and per share data)
Revenue:
	Base rent		$	407,649		$	257,127		$	218,572
	Base rent from affiliates			2,486			1,675			1,079
	Percentage rent			3,801			2,960			2,731
	Tenant recoveries			37,579			31,016			29,725
	Other property related revenue			28,752			17,531			16,363
	Other non-property related revenue			15,176			7,321			3,826
		Total revenue		495,443			317,630			272,296
Property operating expenses:
	General operating expenses			40,495			23,519			20,247
	Salaries and benefits			29,937			15,468			12,663
	Repairs and maintenance			43,557			30,080			26,380
	Taxes, licenses, and insurance			51,785			29,677			24,982
General and administrative				42,040			27,287			19,481
Depreciation				129,954			79,344			66,982
Amortization				51,769			8,681			7,356
		Total operating expenses		389,537			214,056			178,091
		Income from operations		105,906			103,574			94,205
Other income (expense):
	Interest expense			(130,636	)		(77,743	)		(61,896	)
	Interest income			4,460			1,064			792
	Income (loss) from partially owned entities			(886	)		1,145			221
	Gains from sales of property			111,238			8,860			7,479
	Income taxes			(6,343	)		(691	)		(121	)
	Other			4,698			387			(361	)
		Total other expense		(17,469	)		(66,978	)		(53,886	)
		Income before extraordinary items, minority interest and discontinued operations		88,437			36,596			40,319
Minority interest in CRLP — common unitholders				(11,806	)		(3,879	)		(3,460	)
Minority interest in CRLP — preferred unitholders				(7,250	)		(7,494	)		(8,875	)
Minority interest of limited partners				(5,830	)		(281	)		—
		Income from continuing operations		63,551			24,942			27,984
Income from discontinued operations				16,452			23,425			23,479
Gain on disposal of discontinued operations				184,410			17,574			10,986
Minority interest in CRLP from discontinued operations				(44,772	)		(11,323	)		(10,184	)
		Income from discontinued operations		156,090			29,676			24,281
		Net income		219,641			54,618			52,265
Dividends to preferred shareholders				(22,391	)		(14,781	)		(15,284	)
Preferred share issuance costs				—			—			(4,451	)
		Net income available to common shareholders	$	197,250		$	39,837		$	32,530
Net income per common share — basic:
		Income from continuing operations	$	1.08		$	0.38		$	0.33
		Income from discontinued operations		4.10			1.09			0.97
		Net income per common share — basic	$	5.18		$	1.47		$	1.30
Net income per common share — diluted:
		Income from continuing operations	$	1.07		$	0.37		$	0.33
		Income from discontinued operations		4.06			1.08			0.96
		Net income per common share — diluted	$	5.13		$	1.45		$	1.29
Weighted average common shares outstanding — basic				38,071			27,121			24,965
Weighted average common shares outstanding — diluted				38,462			27,462			25,232
Net income			$	219,641		$	54,618		$	52,265
Other comprehensive income (loss):
	Unrealized income (loss) on cash flow hedging activities			812			(245	)		1,866
	Change in additional minimum pension liability			239			—			—
Comprehensive income			$	220,692		$	54,373		$	54,131

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

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COLONIAL PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

		For the Years Ended December 31, 2005, 2004, 2003
		Preferred Shares						Common Shares
		of Beneficial						of Beneficial															Deferred			Accumulated
		Interest						Interest				Additional											Compensation			Other			Total
												Paid-In			Cumulative		Cumulative			Treasury			on Restricted			Comprehensive			Shareholders’
		Shares			Par Value			Shares		Par Value		Capital			Earnings		Distributions			Shares			Shares			Loss			Equity
		(In thousands, except per share data)
Balance December 31, 2002			7,000		$	70			28,474	$	285	$	778,062		$	401,497	$	(486,208	)	$	(150,163	)	$	(2,153	)	$	(3,587	)	$	537,803
	Distributions on common shares ($2.66 per share)																	(65,730	)											(65,730	)
	Distributions on preferred shares																	(15,284	)											(15,284	)
	Distributions on preferred units of Colonial Realty Limited Partnership																	(8,873	)											(8,873	)
	Income before preferred unit distributions															56,687														56,687
	Issuance of Restricted Common Shares of Beneficial Interest								41		—		1,335											(1,336	)					—
	Amortization of deferred compensation																							1,330						1,330
	Public offering of common shares of beneficial interest, net of offering costs of $2,738								2,110		21		72,420																	72,441
	Public offering of preferred shares of beneficial interest, net of offering costs of $4,422		500			5							120,573																	120,578
	Redemption of Series A preferred shares of beneficial Interest		(5,000	)		(50	)						(120,499	)																(120,549	)
	Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan								842		8		27,976																	27,985
	Issuance of common shares of beneficial interest through options exercised								128		1		3,467																	3,468
	Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership								423		4		7,333																	7,337
	Unrealized Gain on derivative financial instruments																										1,866			1,866
	Adjustments to minority interest in Colonial Realty Limited Partnership at dates of capital transactions												(17,325	)																(17,325	)
Balance December 31, 2003			2,500		$	25			32,017	$	320	$	873,342		$	458,184	$	(576,095	)	$	(150,163	)	$	(2,159	)	$	(1,721	)	$	601,733
	Distributions on common shares ($2.68 per share)																	(72,524	)											(72,524	)
	Distributions on preferred shares																	(14,781	)											(14,781	)
	Distributions on preferred units of Colonial Realty Limited Partnership																	(7,493	)											(7,493	)
	Income before preferred unit distributions															62,111														62,111
	Issuance of Restricted Common Shares of Beneficial Interest								28		—		1,061											(1,061	)					—
	Amortization of deferred compensation																							1,348						1,348
	Public offering of common shares of beneficial interest, net of offering costs of $2,738
	Public offering of preferred shares of beneficial interest, net of offering costs of $4,422
	Redemption of Series A preferred shares of beneficial Interest
	Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan								789		8		29,383																	29,391
	Issuance of common shares of beneficial interest through options exercised								344		3		10,350																	10,353
	Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership								45		1		995																	997
	Unrealized Loss on derivative financial instruments																										(245	)		(245	)
	Adjustments to minority interest in Colonial Realty Limited Partnership at dates of capital transactions												(5,863	)																(5,863	)
Balance December 31, 2004			2,500		$	25			33,223	$	332	$	909,269		$	520,295	$	(670,894	)	$	(150,163	)	$	(1,872	)	$	(1,966	)	$	605,026
	Distributions on common shares ($2.70 per share)																	(102,597	)											(102,597	)
	Distributions on preferred shares																	(22,391	)											(22,391	)
	Distributions on preferred units of Colonial Realty Limited Partnership																	(7,251	)											(7,251	)
	Income before preferred unit distributions															226,891														226,891
	Issuance of Restricted Common Shares of Beneficial Interest								153		2		4,317											(4,319	)					—
	Amortization of deferred compensation																							2,545						2,545
	Public offering of common shares of beneficial interest, net of offering costs of $9,457								4,500		45		187,370																	187,415
	Issuance of common shares of beneficial interest — Cornerstone Merger, net of issuance costs of $1,491								11,277		113		462,234																	462,347
	Issuance of preferred shares of beneficial interest — Cornerstone Merger, net of issuance costs of $412		53			1							132,746																	132,747
	Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan								1,143		11		51,187																	51,198
	Issuance of common shares of beneficial interest through options exercised								264		2		4,983																	4,985
	Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership								78		1		1,987																	1,988
	Unrealized gain on derivative financial instruments																										812			812
	Change in the additional minimum pension liability																										239			239
	Adjustments to minority interest in Colonial Realty Limited Partnership at dates of capital transactions												(69,240	)																(69,240	)
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

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

				For the Years Ended
				December 31, 2005, 2004, 2003
				2005			2004			2003
				(In thousands)
Cash flows from operating activities:
	Net income			$	219,641		$	54,618		$	52,265
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			194,300			105,333			88,814
		Income (loss) from partially owned entities			1,695			(7,898	)		(608	)
		Distributions of income from unconsolidated subsidiaries			3,942			—			—
		Minority interest in CRLP			59,975			15,202			13,644
		Gains from sales of property			(295,648	)		(20,308	)		(18,463	)
		Distributions on preferred units of CRLP			7,251			7,493			8,873
		Other, net			(5,942	)		1,193			—
		Decrease (increase) in:
			Restricted cash		(5,809	)		(454	)		(398	)
			Accounts receivable		(5,485	)		(9,027	)		126
			Prepaid expenses		(4,864	)		1,940			994
			Other assets		(25,333	)		(19,563	)		(7,920	)
		Increase (decrease) in:
			Accounts payable		19,575			8,358			212
			Accrued interest		7,619			2,889			942
			Accrued expenses and other		(16,743	)		(535	)		(678	)
			Net cash provided by operating activities		154,174			139,241			137,803
Cash flows from investing activities:
	Acquisition of properties				(655,356	)		(325,748	)		(77,472	)
	Development expenditures paid to non-affiliates				(164,948	)		(89,847	)		(42,275	)
	Development expenditures paid to affiliates				(41,597	)		(23,331	)		(30,242	)
	Tenant improvements				(27,373	)		(22,991	)		(14,002	)
	Capital expenditures				(42,468	)		(17,656	)		(12,445	)
	Proceeds from (issuance of) notes receivable				(31,321	)		1,598			(1,197	)
	Proceeds from sales of property, net of selling costs				1,053,043			59,702			55,701
	Direct costs of Cornerstone Merger				(35,016	)		—			—
	Distributions from partially owned entities				6,536			35,026			3,743
	Capital contributions to partially owned entities				(61,810	)		(62,788	)		(4,366	)
			Net cash (used in) investing activities		(310	)		(446,035	)		(122,555	)
Cash flows from financing activities:
	Proceeds from common shares issuances, net of expenses paid				187,415			—			72,441
	Proceeds from Series D preferred shares, net of expenses paid				—			—			120,578
	Redemption of Series A preferred shares				—			—			(125,000	)
	Principal reductions of debt				(852,189	)		(151,151	)		(175,964	)
	Proceeds from additional borrowings				634,260			516,794			186,470
	Net change in revolving credit balances and overdrafts				(16,851	)		34,035			(2,279	)
	Dividends paid to common and preferred shareholders, and distributions to preferred unitholders				(132,239	)		(94,799	)		(89,887	)
	Distributions to common unitholders minority interest partners				(30,067	)		(27,950	)		(27,873	)
	Distributions of debt proceeds from partially owned entities				28,003			—			—
	Payment of mortgage financing cost				(8,491	)		(7,225	)		(3,353	)
	Proceeds from dividend reinvestments, including stock options exercised				56,185			39,745			31,453
			Net cash provided by (used in) financing activities		(133,974	)		309,449			(13,414	)
Increase in cash and cash equivalents					19,890			2,655			1,834
Cash and cash equivalents, beginning of period					10,725			8,070			6,236
Cash and cash equivalents, end of period				$	30,615		$	10,725		$	8,070
Supplemental disclosures of cash flow information:
	Cash paid during the year for interest, net of amounts capitalized			$	130,737		$	83,237		$	66,614
Supplemental disclosure of non cash transactions:
	Real estate assets acquired			$	1,460,380			—			—
	Assumption of notes and mortgages				836,985			—			—
	Operating assets acquired				21,121			—			—
	Operating liabilities acquired				34,380			—			—
	Fair value of adjustments on notes and mortgages				50,880			—			—
	Investments in partially owned entities acquired				8,901			—			—
	Intangible assets acquired				50,726			—			—
	Issuance of common shares of beneficial interest				462,347			—			—
	Issuance of preferred shares of beneficial interest				132,747			—			—
	Issuance of common units of operating partnership				23,788			—			—
	Cash flow hedging activities				812			(245	)		1,866

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

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COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

1. Organization and Basis of Presentation

      Organization — Colonial Properties Trust (the “Company” or “Colonial”), a real estate investment trust (“REIT”), 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 diversified portfolio of properties located primarily in the Sunbelt region of the United States, consisting of 151 multifamily apartment communities (including 115 wholly-owned consolidated properties and 36 properties partially-owned through unconsolidated joint venture entities), 62 office properties (including 35 wholly-owned consolidated properties and 27 property partially-owned through an unconsolidated joint venture entity) and 48 retail properties (including 38 consolidated properties and 10 properties partially-owned through unconsolidated joint venture entities), as of December 31, 2005.

      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 state and local taxes on its income and property. 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 2005, 2004 and 2003 the Company’s distributions had the following characteristics:

	Distribution		Ordinary		Return of		Long-Term		Unrecaptured
	per Share		Income		Capital		Capital Gain		Sec. 1250 Gains
2005	$	2.70		25.30%		0.00%		39.34%		35.36%
2004	$	2.68		53.09%		45.26%		1.51%		0.14%
2003	$	2.66		58.34%		33.85%		5.42%		2.39%

      In addition, the Company’s consolidated financial statements include the operations of a taxable REIT subsidiary, Colonial Properties Services, Inc. (“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. 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 Company recognized tax expense of $6.5 million, $0.7 million and $0.1 million for 2005, 2004 and 2003, respectively, related to the taxable income of CPSI.

      Principles Of Consolidation — The Company’s consolidated financial statements include the Company, Colonial Realty Limited Partnership (“CRLP”), the Company’s operating partnership, in which the Company held 80.55%, 72.70% and 71.81% general partner interest at December 31, 2005, 2004, and 2003, respectively, certain partially owned entities required to be consolidated and limited partner interests, CPSI and Colonial Properties Services Limited Partnership (in which CRLP holds 99% general and limited partner interests). The minority limited partner interests in CRLP are included as minority interest in the Company’s consolidated financial statements. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements.

      Investments In Partially Owned Entities — Entities in which the Company owns, directly or indirectly, a 50% or less interest and does not control are reflected in the consolidated financial statements as investments accounted for under the equity method. Under this method the investment is carried at cost plus or minus equity in undistributed earnings or losses since the date of acquisition. For those entities in which the Company owns less than 100% of the equity interest, the Company consolidates the property if the Company has the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

direct or indirect ability to make major decisions about the entities’ activities based on the terms of the respective joint venture agreements which specify the sharing of participating and protective rights such as decisions regarding major leases, encumbering the entities with debt and whether to dispose of entities. The Company also consolidates certain partially-owned entities and other subsidiaries if the Company owns less than 100% equity interest and is deemed to be the primary beneficiary as defined by FASB Interpretation 46 Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, as revised (“FIN 46(R)”).

2. Summary of Significant Accounting Policies

      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. 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. When items of land, buildings, or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded in accordance with Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived 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 collectibility 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 SFAS No. 66, Accounting for Sales of Real Estate. For properties sold to a joint venture in which the Company retains an ownership percentage, the Company limits the profit recognized from the sale to the portion sold to the outside party. 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. As of December 31, 2005, in accordance with SFAS No. 66, all sales of real estate properties have been recorded as sales transactions, as the risk and rewards of ownership have been transferred to the purchaser.

      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 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 Issue No. 98-3, Determining Whether a Non-monetary Transaction Involves Receipt of Productive Assets or of a Business.

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      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 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 have a current weighted-average composite life of 9.7 years for office properties, 14.9 years for retail properties and 7 months for 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 of December 31, 2005 and 2004, the Company had $113.2 million and $38.8 million, respectively, of gross in-place lease intangible assets. Accumulated amortization for these in-place lease intangible assets was $53.9 million and $4.4 million as of December 31, 2005 and 2004, respectively. The aggregate amortization expense for these in-place lease intangible assets was $50.5 million for 2005 and $4.4 million for 2004, and is expected to be approximately $4.7 million for each of the next five years.

      Additionally, as of December 31, 2005 and 2004, the Company had $6.9 million and ($0.8) million, respectively, of net above (below) market lease intangibles related to its office and retail property acquisitions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 $0.2 million for 2005 and $0.6 million for 2004, and is expected to be $1.4 million, $1.4 million, $1.3 million, $0.7 million and $0.7 million, for each of the next five years, respectively. These above (below) market lease intangibles have a current weighted-average composite life of 6.3 years for office properties and 8.9 years for retail properties.

      The Company is actively pursuing 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.

      Undeveloped Land and Construction in Progress — Undeveloped land and construction in progress is stated at the lower of cost or 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 placed in-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 $24.2 million and $11.3 million as of December 31, 2005 and 2004, respectively.

      Restricted Cash — Restricted cash is comprised of cash balances which are legally restricted as to use consists primarily of tenant deposits.

      Valuation of Receivables — 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 collectibility 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 $1.6 million and $1.1 million in an allowance for doubtful accounts as of December 31, 2005 and 2004, respectively.

      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.

      Notes Receivable — Notes receivable consists primarily of promissory notes issued by third parties. The Company records notes receivable at cost. The Company evaluates the collectibility 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 value of the collateral if the note is

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

collateral dependent. The weighted average interest rate on the notes receivable is approximately 16% per annum as of December 31, 2005. Interest income is recognized on an accrual basis.

      During 2005, the Company provided approximately $8.0 million of subordinated financing to a third party in connection with the sale of six multifamily properties. The notes receivable for each of these properties are cross collateralized and have a maturity of 18 months. The Company also provided approximately $5.5 million of first mortgage financing to the same third party in connection with the sale of one property. The note receivable for this loan is cross collateralized with the subordinated notes issued and has substantially the same terms as the subordinated notes. These multifamily properties were acquired in the Cornerstone acquisition and classified as held for sale as of the date of the acquisition, and as such no gain or loss was recognized on the disposition of these properties. Additionally, during 2005, the Company provided subordinated financing totaling $18.8 million to three third parties for the acquisition and conversion of three multifamily properties to condominium communities. The notes receivable for each of these loans have maturities of two to three years.

      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.

      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. 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, 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.

      Stock-Based Compensation — The Company currently sponsors stock option plans and restricted stock award plans (Refer to Note 13). Effective January 1, 2003, the Company adopted the preferable fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”. The Company selected the prospective method of adoption described in SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”. The prospective method allows the Company to apply the recognition provisions of SFAS No. 123 to all employee awards granted, modified, or settled after the beginning of the fiscal year in which the recognition provisions are first applied. In accordance with the prospective method of adoption, results for prior years have not been restated.

      Deferred Compensation on Restricted Shares — Deferred compensation on restricted shares relates to the issuance of restricted shares to employees and trustees of the Company. Deferred compensation is amortized to compensation expense based on the passage of time and certain performance criteria.

      Revenue Recognition — The Company, as lessor, has retained 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

      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.

      Net Income Per Share — Basic net income per 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 share is computed by dividing the net income available to common shareholders by 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.

      During the twelve months ended December 31, 2005, the Company had one wholly-owned office building and one partially-owned office building which sustained damage as a result of Hurricanes Wilma and Katrina. However, the Company is not aware of any structural damage at either of these two office buildings. The Company also had several multifamily and retail properties which sustained minimal damage as a result these hurricanes. The estimated damage from these hurricanes totaled $3.2 million, of which $3.0 million is recoverable under the Company’s existing insurance policies.

      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 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 is organized into, and manages its business based on the performance of three separate and distinct operating divisions: multifamily, office and retail.

      Recent Pronouncements of the Financial Accounting Standards Board (FASB) — In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), Consolidation of Variable Interest Entities. FIN 46 states that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities and results of the activities of the variable interest entity should be included in the consolidated financial statements of the business enterprise. This Interpretation explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. FIN 46 also requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. Variable interest entities that effectively disperse risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. FIN 46 was to be applied immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. In December 2003, the FASB revised FIN 46 through the release of FIN 46R, which clarified certain aspects of FIN 46 and contained certain provisions that deferred the effective date of FIN 46 to periods ending after March 15, 2004 for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The Company has identified certain relationships that it deems to be variable interest entities in which it holds a significant variable interest. The Company’s estimated maximum exposure to loss is related to these entities is limited to the carrying value of the Company’s investments in and notes receivable from those entities, which totaled $37.6 million as of December 31, 2005. In addition to these variable interest entities, the Company has variable interests in the form of guarantees or loans with certain other variable interest entities. The maximum exposure related to these entities is limited to the amount of the guarantees and loans which totaled $48.5 million as of December 31, 2005, which results in a total maximum exposure to the Company attributable to all variable interest entities in the aggregate amount of $86.1 million. The adoption of FIN 46 and FIN 46R did not have a material effect on the Company’s consolidated financial statements.

      In December 2004, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 123 (Revised) (“SFAS No. 123 (R)”), Share Based Payment, that will require compensation costs related to share-based payment transactions to be recognized in financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant date fair value of the equity or liability instruments issued. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123 (R) replaces SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123 (R) is effective for the Company as of the beginning of the first annual reporting period that begins after June 15, 2005. The Company does not expect the adoption of SFAS No. 123 (R) to have a material impact on its consolidated financial statements.

      In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue 04-5, Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights. EITF Issue 04-5 will change the application of existing accounting pronouncements that govern consolidation of variable interest entities and voting interest entities when such an entity has a sole general partner and limited partners with certain rights. EITF 04-5 is effective immediately for all limited partnerships formed or modified subsequent to June 29, 2005, and is effective for all other limited partnerships for the first fiscal year beginning after December 15, 2005. The adoption of EITF Issue 04-5 did not have a material impact on the Company’s consolidated financial statements.

      In March 2005, the FASB issued FIN No. 47 (“FIN 47”), Accounting for Conditional Asset Retirement Obligations, that requires companies to recognize a liability for the fair value of conditional asset retirement obligations, if such fair value can be reasonably estimated. FIN 47 requires the fair value of a liability for unconditional asset retirement obligations to be recognized when incurred, which is generally upon the issuance of regulation, acquisition, construction or development of the asset. FIN 47 is effective for the Company on December 31, 2005. Based on the Company’s evaluation of its exposures, the adoption of FIN 47 did not have a material impact on the Company’s consolidated financial statements.

3. Merger with Cornerstone Realty Income Trust

      On April 1, 2005, Colonial completed the merger of Cornerstone Realty Income Trust, Inc. (“Cornerstone”), a Virginia corporation, with and into CLNL Acquisition Sub, LLC (“CLNL”), a Delaware limited liability company and a wholly-owned subsidiary of Colonial, pursuant to an Agreement and Plan of Merger dated as of October 25, 2004, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated January 24, 2005 (as so amended, the “Merger Agreement”), among Cornerstone, CLNL and Colonial. As a result of the merger, CLNL succeeded by operation of law to all of the assets and liabilities of Cornerstone prior to the merger. At the time of the merger, the assets of Cornerstone consisted of 86 apartment communities with 22,981 apartment homes, a third party property management business, apartment land under development and ownership in four real estate joint ventures.

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      Under the terms of the Merger Agreement, Cornerstone shareholders had the right to elect to receive either:

•  a number of Colonial common shares equal to the common share conversion rate, which was calculated as 0.2581; or

•  a number of Colonial 7⁵/8% Series E preferred depositary shares, $25.00 liquidation preference per depositary share, equal to the preferred depositary share conversion rate, which was calculated as 0.4194;

for each outstanding common share of Cornerstone, subject to the restriction that the Colonial Series E preferred depositary shares issued would not exceed approximately 25% of the total merger consideration. The final conversion ratios of the common and preferred depositary shares were determined based on the average market price of the Company’s common shares over a five day trading period preceding the effective time of the merger and fractional shares were paid in cash. Cornerstone shareholders who made no effective election received Colonial common shares. In connection with the merger, Colonial issued 11,277,358 Colonial common shares, 5,326,349 Colonial Series E preferred depositary shares and 578,358 CRLP common units to former shareholders of Cornerstone. The shares of Colonial issued to the Cornerstone shareholders were registered with the Securities and Exchange Commission on a Registration Statement on Form S-4 (File No. 333-121675). Immediately following the merger, Colonial contributed all of the outstanding membership interests of CLNL to CRLP in exchange for a number of CRLP’s units and Series E preferred units equal to the number of Colonial common shares and Colonial Series E preferred shares, respectively, issued in connection with the merger. As a result of such contribution, CLNL is now a wholly-owned subsidiary of CRLP.

      The aggregate consideration paid for the merger was as follows:

		(In thousands)
Issuance of 11,277,358 Colonial common shares to Cornerstone shareholders		$	462,347
Issuance of 5,326,349 Colonial Series E preferred depository shares to Cornerstone shareholders			132,747
Issuance of 578,358 CRLP common units			23,788
Fees and other expenses related to the merger			35,016
	Total purchase price		653,898
Assumption of Cornerstone’s notes and mortgages payable at book value			836,985
Adjustment to record Cornerstone’s notes and mortgages at fair value			50,880	(1)
Assumption of Cornerstone’s accounts payable and other liabilities at fair value			34,380
	Total purchase price and assumed liabilities	$	1,576,143

(1)  The fair value adjustment of $50.9 million to account for the difference between the fixed rates and market rates for the Cornerstone borrowings includes $26.8 million for prepayment penalties on debt retired during 2005.

     The Company allocated the purchase price between net tangible and intangible assets utilizing the assistance of a third party valuation firm. When allocating the purchase price to acquired properties, the costs were allocated to the estimated intangible value of in place leases, customer relationships and above or below market leases, and to the estimated fair value of furniture and fixtures, land and buildings on a value determined by assuming the property is vacant by applying methods similar to those used by independent appraisers of income-producing property. Depreciation and amortization is computed on a straight-line basis over the remaining useful lives of the related assets. Buildings and furniture and fixtures have an average estimated useful life of 33 years and 3 years, respectively. The value of in place leases and above or below market leases was amortized over the estimated average remaining life of leases in place at the time of the merger. In place lease terms generally range from 3 to 7 months. The value of customer relationships was amortized over 9 months. The Company used an estimated remaining average lease life of 5 months to amortize the value of in place leases recorded in conjunction with the merger.

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COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table summarizes the estimated fair value of the assets acquired and liabilities assumed on April 1, 2005:

		(In thousands)
Buildings		$	1,246,019
Furniture and fixtures			14,613
	Fair value of depreciable real estate assets		1,260,632
Land			230,768
Undeveloped land and construction in progress			3,995
In place lease value			45,658
Customer relationships			5,068
Other assets, including cash (excluding in-place lease values)			21,121
Investments in partially owned entities			8,901
	Total purchase price	$	1,576,143

      Approximately $485.6 million of the assets acquired were sold during 2005 or classified as held for sale at December 31, 2005 (see Note 4 for 2005 dispositions and assets classified as held for sale). In connection with the merger, the Company incurred $16.1 million of termination, severance and settlement of share-based compensation costs. The Company had paid all of these costs as of December 31, 2005.

      The following unaudited pro forma financial information for the twelve months ended December 31, 2005 and 2004, give affect to the merger with Cornerstone as if it had occurred at the beginning of the periods presented. The pro forma information for the twelve months ended December 31, 2005 includes three months of pro forma results and nine months of actual results. The pro forma results are based on historical data and are not intended to be indicative of the results of future operations.

	***** Pro Forma (Unaudited) *****
	Twelve Months		Twelve Months
	Ended December 31,		Ended December 31,
	2005(1)		2004
	In thousands, except per share data
Total revenue	$	528,224	$	447,843
Net income available to common shareholders	$	240,393	$	(17,264	)
Net income per common share — dilutive	$	5.86	$	(0.45	)

(1)  One time merger costs of $9.1 million expensed by Cornerstone, have been excluded from the pro forma net income to common shareholders for the twelve months ended December 31, 2005.

4. Property Acquisitions and Dispositions

Property Acquisitions

      In addition to the Cornerstone acquisition, the Company acquired six multifamily properties, eight office properties and one retail property for an aggregate cost of $537.7 million in 2005. During 2005, the Company also acquired a partnership interest in four multifamily properties containing 1,374 units, and a partnership interest in 26 office properties containing 11.7 million square feet for an aggregate cost of approximately $400 million. During 2004, the Company acquired 11 multifamily properties, two office properties and six retail properties, including a 90% interest in one retail property that is consolidated for an aggregate cost of $508.0 million. During 2003, the Company acquired two multifamily properties and one office property for an aggregate cost of $77.5 million. The Company funded these acquisitions with cash proceeds from its dispositions of assets, public offerings of debt and equity (see Notes 9 and 12), advances on bank lines of credit, and cash from operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The consolidated operating properties acquired during 2005, 2004 and 2003 are listed below:

			Effective
	Location		Acquisition Date		Units/Square Feet
Multifamily Properties:
Colonial Grand at Barrett Creek		Atlanta, GA		August 31, 2005		332
Colonial Grand at Bear Creek		Fort Worth, TX		August 18, 2005		436
Colonial Grand at Bellevue		Nashville, TN		November 29, 2005		349
Colonial Grand at Crabtree Valley		Raleigh, NC		November 29, 2005		210
Colonial Grand at Mallard Lake		Charlotte, NC		November 29, 2005		302
Colonial Grand at Shelby Farms		Memphis, TN		November 29, 2005		296
Colonial Grand at Arringdon		Raleigh, NC		February 12, 2004		320
Colonial Grand at Berkeley Lake		Atlanta, GA		June 1, 2004		180
Colonial Grand at Mt. Vernon		Atlanta, GA		June 1, 2004		213
Colonial Grand at River Oaks		Atlanta, GA		June 1, 2004		216
Colonial Grand at River Plantation		Atlanta, GA		June 1, 2004		232
Colonial Grand at Sugarloaf		Atlanta, GA		June 1, 2004		250
Colonial Village at Sierra Vista		Austin, TX		September 10, 2004		232
Colonial Grand at Seven Oaks		Tampa, FL		September 30, 2004		318
Colonial Grand at Beverly Crest		Charlotte, NC		October 29, 2004		300
Colonial Grand at Patterson Place		Durham, NC		October 29, 2004		252
Colonial Grand at McGinnis Ferry		Atlanta, GA		December 7, 2004		434
Colonial Grand at Metrowest		Orlando, FL		December 30, 2003		311
Colonial Village at Quarry Oaks		Austin, TX		December 30, 2003		533
Office Properties:
Colonial Place I & II		Tampa, FL		January 31, 2005		371,000
Research Park Office Center IV		Huntsville, AL		February 1, 2005		59,900
Colonial Center at Bayside		Tampa, FL		April 15, 2005		213,800
Colonial Bank Centre		Miami, FL		April 27, 2005		235,500
Research Park Plaza III & IV		Austin, TX		June 30, 2005		357,700
Esplanade		Charlotte, NC		July 14, 2005		201,900
Colonial Center Heathrow 1001		Orlando, FL		July 20, 2005		192,200
The Peachtree		Atlanta, GA		August 31, 2005		260,900
DRS Building		Huntsville, AL		February 12, 2004		215,500
Research Park Office Center		Huntsville, AL		October 22, 2004		176,600
Colonial Center Research Place		Huntsville, AL		December 15, 2003		272,558
Retail Properties:
Colonial Promenade Portofino		Houston, TX		January 13, 2005		372,500
Colonial Pinnacle Kingwood Commons		Houston, TX		April 8, 2004		164,356
Village on the Parkway(1)		Dallas, TX		June 18, 2004		381,166
Colonial Shoppes College Parkway		Ft. Myers, FL		August 2, 2004		78,879
Colonial Promenade Deerfield Mall		Deerfield Beach, FL		August 2, 2004		378,745
Colonial Shoppes Pines Plaza		Pembroke Pines, FL		August 2, 2004		68,170
Colonial Promenade Boulevard Square		Pembroke Pines, FL		September 10, 2004		220,656

(1)  All acquisitions are 100% owned by the Company, with the exception of Village on the Parkway, which is 90% owned by the Company.

     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 2005 and 2004 accordance with SFAS 141. The value of the acquired tenant improvements and leasing commissions for the

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COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

office and retail assets acquired are amortized over the remaining terms of the in-place leases (see Note 2). The acquisitions during 2005, 2004 and 2003 are comprised of the following:

		2005			2004			2003
		(In thousands)
Assets purchased:
	Land, buildings, and equipment	$	625,616		$	481,890		$	74,399
	Other assets		43,054			38,818			4,080
			668,670			520,708			78,479
Notes and mortgages assumed			(5,415	)		(186,265	)		—
Other liabilities assumed or recorded			(7,899	)		(8,695	)		(1,007	)
Cash paid		$	655,356		$	325,748		$	77,472

      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 and two condominium conversion properties in a consolidated joint venture. See Note 7 — Investment in Partially Owned Entities and Other Arrangements for discussion of the Company’s joint venture activity during 2005.

      The following unaudited pro forma financial information for the twelve months ended December 31, 2005 and 2004, give affect to the above operating property acquisitions (excluding the Cornerstone acquisition, see Note 3) as if they had occurred at the beginning of the periods presented. The pro forma information for the twelve months ended December 31, 2005 includes pro forma results for the months during the year prior to the acquisition date and actual results from the date of acquisition through the end of the year. The pro forma results are not intended to be indicative of the results of future operations.

	***** Pro Forma (Unaudited) *****
	Twelve Months		Twelve Months
	Ended December 31,		Ended December 31,
	2005		2004
	In thousands, except per share data
Total revenue	$	505,353	$	359,559
Net income available to common shareholders	$	199,073	$	46,443
Net income per common share — dilutive	$	5.18	$	1.69

Property Dispositions — Continuing Operations

      During 2005, 2004 and 2003, the Company sold various parcels of land located adjacent to its existing properties for an aggregate sales price of $25.1 million, $16.7 million and $24.0 million, respectively, which were used to repay a portion of the borrowings under the Company’s unsecured line of credit and to support its investment activities. During 2005, the Company sold 90% of its interest in six retail properties representing approximately 3.7 million square feet to a joint venture formed by the Company and unrelated parties for approximately $362.0 million. The Company continues to manage the properties and accounts for its 10% interest in this joint venture as an equity investment (see Note 7).

For Sale Projects

      During 2005, the Company, through CPSI, disposed of 328 condominium units at its two acquired condominium conversion properties. Total proceeds from the sales of these units were approximately $79.3 million. Gains on sales of property in continuing operations included gains of $13.6 million from the sales of these units. The Company recorded income taxes and minority interest on these gains of $3.7 million and $5.2 million, respectively. The total net gain on these sales after income taxes and minority interest was $4.7 million for the twelve months ended December 31, 2005.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property Dispositions — Discontinued Operations

      During 2005, the Company disposed of 26 multifamily properties including 23 wholly-owned properties representing 6,865 units, its 15% interest in two properties representing 901 units and a 10% interest in a third property representing 326 units and four wholly-owned retail properties representing approximately 2.9 million square feet. The multifamily and retail properties were sold for a total sales price of $636.7 million, which was used to repay a portion of the borrowings under the Company’s unsecured line of credit and fund future investments.

      During 2004, the Company disposed of two multifamily properties including one property representing 178 units and its 15% interest in a second property representing 240 units, one office property representing 25,500 square feet, and four retail properties including three wholly-owned properties representing 290,933 square feet and its 50% interest in a fourth property representing 1.1 million square feet. The multifamily, office and retail properties were sold for a total sales price of $105.1 million, which was used to repay a portion of the borrowings under the Company’s unsecured line of credit and fund future investments.

      During 2003, the Company disposed of one multifamily property representing 176 units, one office property representing 29,000 square feet, and one retail property representing 152,667 square feet. The multifamily, office and retail properties were sold for a total sales price of $33.9 million, which was used to repay a portion of the borrowings under the Company’s unsecured line of credit and to support the Company’s investment activities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In accordance with SFAS No. 144, net income (loss) and gain (loss) on disposition of real estate for properties sold through December 31, 2005, in which the Company does not maintain continuing involvement, are reflected in its consolidated statements of income on a comparative basis as discontinued operations for the years ended December 31, 2005, 2004 and 2003. Following is a listing of the properties the Company disposed of in 2005, 2004 and 2003 that are classified as discontinued operations:

						Units/Square
Property		Location		Date		Feet
Multifamily
	Colonial Village at Cahaba Heights(1)		Birmingham, AL		February 2005		125
	Colonial Grand at Riverhills(1)		Tampa, FL		February 2005		776
	Colonial Village at Ashley Plantation		Bluffton, SC		March 2005		414
	Colonial Village at Gainesville		Gainesville, FL		March 2005		560
	Colonial Grand at Galleria Woods		Birmingham, AL		March 2005		244
	Colonial Village at TownPark		Sarasota, FL		March 2005		272
	Colonial Village at Walton Way		Augusta, GA		March 2005		256
	Colonial Grand at Wesleyan		Macon, GA		March 2005		328
	Colonial Village at Lake Mary		Orlando, FL		May 2005		504
	Bridgetown Bay		Charlotte, NC		May 2005		120
	Devonshire		Dallas, TX		May 2005		144
	Dunwoody Springs		Atlanta, GA		May 2005		350
	Caryle Club		Atlanta, GA		May 2005		243
	Aspen Hills		Dallas, TX		May 2005		240
	Ashley Run		Atlanta, GA		June 2005		348
	Mill Crossing		Dallas, TX		June 2005		184
	Arbors on Forest Ridge		Fort Worth, TX		October 2005		210
	Cutters Point		Dallas, TX		October 2005		196
	Eagle Crest		Dallas, TX		October 2005		484
	Sierra Ridge		San Antonio, TX		October 2005		230
	Timberglen		Dallas, TX		October 2005		304
	Toscana		Dallas, TX		October 2005		192
	Silverbrook		Fort Worth, TX		October 2005		642
	The Meridian		Austin, TX		October 2005		200
	The Landing		Raleigh, NC		December 2005		200
	Cypress Cove at Suntree		Melbourne, FL		December 2005		326
	Colonial Village at Vernon Marsh		Savannah, GA		October 2004		178
	Colonial Grand at Ponte Vedra(1)		Jacksonville, FL		May 2004		240
	Colonial Grand at Citrus Park		Tampa, FL		March 2003		176
Office
	Village at Roswell Summit		Atlanta, GA		July 2004		25,500
	2100 International Park		Birmingham, AL		September  2003		29,000
Retail(2)
	Colonial Mall Gadsden		Gadsden, AL		March 2005		517,000
	Colonial Mall Temple		Temple, TX		April 2005		555,600
	Colonial Mall Macon		Macon, GA		July 2005		1,446,600
	Colonial Mall Burlington		Burlington, NC		July 2005		419,200
	Colonial Promenade University Park I		Orlando, FL		March 2004		215,600
	Colonial Shoppes at Stanley		Locust, NC		July 2004		47,100
	Colonial Shoppes at Inverness		Birmingham, AL		September  2004		28,200
	Orlando Fashion Square(1)		Orlando, FL		December 2004		1,041,700
	Colonial Promenade Bardmoor		St. Petersburg, FL		March 2003		152,700

(1)	Properties were partially owned entities accounted for on the equity basis of accounting.
(2)	Square footage includes anchor-owned square footage.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Additionally, 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, 2005, the Company had classified 18 multifamily assets containing 4,635 units, two condo conversion properties and one retail asset, a strip center, containing 73,500 square feet, as held for sale. At December 31, 2004, the Company had classified seven retail assets, six malls and one strip center, containing 3.7 million square feet, as held for sale. These real estate assets are reflected in the accompanying consolidated balance sheets at $367.4 million and $167.7 million at December 31, 2005 and 2004, respectively, which represents the lower of depreciated cost or fair value less costs to sell.

      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, the funds are utilized for payment on the unsecured line of credit or financing of other investment activities.

      In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company records individual property sales as discontinued operations, unless the Company maintains a continuing involvement with the properties that have been sold. During 2005, all of the operating properties sold, other than the malls transferred to the GPT joint venture (see Note 7) in which the Company retained a 10% interest, were classified as discontinued operations. Depreciation and amortization expense not recorded for the twelve months ended December 31, 2005 related to assets classified as held for sale at December 31, 2005, was $5.0 million and $1.9 million, respectively. There was no depreciation or amortization expense suspended for the twelve months ended December 31, 2004. Additionally, the sales of condominium units and parcels of land were classified within continuing operations.

      In accordance with SFAS No. 144, the operating results of real estate assets designated as held for sale subsequent to January 1, 2002 are included in discontinued operations in the consolidated statement of operations 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. All subsequent gains and/or additional losses on the sale of these assets are also included in discontinued operations. Additionally, under SFAS No. 144, any impairment losses on assets held for continuing use are included in continuing operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Below is a summary of the operations of the properties held for sale and sold during 2005, 2004 and 2003 that are classified as discontinued operations:

		Year Ended December 31,
		2005			2004			2003
		(Amounts in thousands)
Property revenues:
	Base rent	$	52,056		$	47,068		$	47,241
	Percentage rent		506			1,035			1,053
	Tenant recoveries		4,318			10,215			10,892
	Other property revenue		5,093			4,381			5,315
Total property revenues			61,973			62,699			64,501
	Property operating and maintenance expense		25,280			21,201			21,282
	Depreciation		5,975			12,276			13,779
	Amortization		6,089			766			697
Total operating expenses			37,344			34,243			35,758
Interest expense			(7,555	)		(5,660	)		(5,659	)
Interest income			4			2			9
Income (loss) from investments			(626	)		627			386
Income from discontinued operations before net gain on disposition of discontinued operations			16,452			23,425			23,479
Net gain on disposition of discontinued operations			184,410			17,574			10,986
Minority interest in CRLP from discontinued operations			(44,772	)		(11,323	)		(10,184	)
Income from discontinued operations		$	156,090		$	29,676		$	24,281

5.     Land, Buildings, and Equipment

      Land, buildings, and equipment consist of the following at December 31, 2005 and 2004:

	Useful Lives		2005			2004
			(In thousands)
Buildings		20 to 40  years	$	3,001,370		$	2,031,570
Furniture and fixtures		5 or 7 years		78,094			73,508
Equipment		3 or 5 years		33,603			27,945
Land improvements		10 or 15  years		172,953			83,184
Tenant improvements		Life of lease		177,938			156,929
				3,463,958			2,373,136
Accumulated depreciation				(453,365	)		(437,635	)
				3,010,593			1,935,501
Real estate assets held for sale, net				367,372			167,712
Land				510,967			323,168
			$	3,888,932		$	2,426,381

6. Undeveloped Land and Construction in Progress

      During 2005, the Company completed the construction of three multifamily community developments, adding 950 apartment homes to the portfolio. These developments, located in Austin, Texas, Orlando, Florida and Charlotte, North Carolina, had a total cost of $75.7 million. Additionally, the Company completed the redevelopment of Colonial Shoppes Colonnade, adding a 30,000 square foot Gold’s Gym and three restaurants including Cracker Barrel, Fox & Hound and Logan Farms Deli, the redevelopment of Colonial Mall Myrtle Beach and the redevelopment of Colonial University Village. The Company also completed the development of Colonial Promenade Alabaster, a 607,000 square foot power center anchored by Lowes, Wal-Mart, Ross Dress

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

for Less, Pier-1 Imports, Belk, Books-A-Million, Old Navy, Beth Bath & Beyond and an AmStar Theater. The retail projects, located in Birmingham, Alabama; Myrtle Beach, South Carolina and Auburn, Alabama, had a total cost of $69.5 million.

      During 2004, the Company completed the construction of the 59,000 square foot addition to Colonial Promenade Trussville II, a community shopping center located in Birmingham, Alabama for a total cost of $8.3 million. Additionally, the Company completed the redevelopment of the 66,000 square foot retail shopping center of Colonial Shoppes Clay, located in Birmingham, Alabama for a total cost of $4.3 million.

      The Company currently has seventeen active development projects and various parcels of land available for expansion and construction. Undeveloped land and construction in progress is comprised of the following at December 31, 2005:

		Total
		Units/						Costs
		Square		Estimated		Estimated		Capitalized to
		Feet(1)		Completion		Total Costs		Date
						(In thousands)		(In thousands)
Multifamily Projects:
Colonial Grand at Silverado Reserve			238		2006	$	23,200	$	19,760
Colonial Grand at Round Rock			422		2006		34,500		20,305
Colonial Grand at Canyon Creek			336		2006		29,100		6,568
Colonial Grand at Double Creek			300		2007		27,300		3,882
Colonial Grand at Ayrsley			365		2007		33,100		178
Colonial Grand at Traditions			320		2007		30,800		2,800
Office Projects:
Northrop Grumman			110,000		2006		17,300		1,478
Colonial Center TownPark 300			150,000		2006		20,600		3,760
Retail Projects:
Colonial Pinnacle Tutwiler Farm			450,000		2006		36,000		17,473
Colonial Pinnacle Craft Farms			440,000		2007		50,800		14,264
Colonial Promenade Fultondale			257,000		2007		26,300		1,985
Colonial Promenade Alabaster II			127,000		2007		21,600		387
For Sale Projects:
Central Park			212		2006		22,300		5,133
Colonial Traditions at Gulf Shores			371		2006		20,000		15,363
Colonial Traditions at South Park			48		2007		11,500		2,014
The Renwick			85		2007		17,700		4,075
Other Projects and Undeveloped Land
Mansell Land and Infrastructure									9,306
TownPark Land and Infrastructure									14,852
Heathrow Land and Infrastructure									13,914
Canal Place Land and Infrastructure									10,952
Land									16,168
Other									17,435
	Total Consolidated Construction in Progress							$	202,052
Colonial Pinnacle Turkey Creek(2)			520,000		2006		37,900		25,949
	Total Construction in Progress							$	228,001

(1)	Square footage includes anchor-owned square footage.
(2)	Represents 50% of the costs. The Company is a 50% equity partner in this development.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Interest capitalized on construction in progress during 2005, 2004 and 2003 was $9.6 million, $6.9 million and $8.1 million, respectively.

7. Investment in Partially Owned Entities and Other Arrangements

Investments in Consolidated Partially Owned Entities

      During May 2005, the Company entered into a partnership with Montecito Property Company to convert apartment properties into condominium communities. The Company is a 98% partner in this partnership and Montecito Property Company is a 2% partner. On May 24, 2005, the partnership acquired St. Andrews, a 384-unit multifamily property located in Jensen Beach, Florida, which required an investment of $61.8 million by the Company and was funded through borrowings under the Company’s unsecured line of credit. During July 2005, the Company made an additional investment of $54.5 million into its partnership with Montecito Property Company, to fund 98% of the purchase price of Mizner/ Delray Beach, a 273-unit multifamily property located in Delray Beach, Florida. This investment was funded through borrowings under a secured bridge loan (see Note 9). Under the partnership agreement, the Company will receive a 10% preferred return on its equity investment, and 48% and 50% of any remaining available cash for St. Andrews and Mizner/ Delray Beach, respectively. The 2% third-party equity partner will receive 52% and 50% of the remaining available cash for St. Andrews and Mizner/ Delray Beach, respectively. Both properties have been converted to condominium communities, and condominium units at both properties are currently being sold (see Note 4).

      During June 2004, the Company acquired a 90% partnership interest in The Village on the Parkway, a 381,166 square foot retail lifestyle center located in Dallas, Texas. The Company’s 90% investment in the partnership was $56.4 million, which consisted of $14.1 million of equity investment and $42.3 million of newly issued mortgage debt, representing the Company’s allocated portion of mortgage debt for the property. As the Company maintains controlling financial interest of this property, the assets, liabilities and results of operations of the property are consolidated within its financial statements. The third party’s partnership interest is reflected in the financial statements as a minority interest in the consolidated partnership. Under the partnership agreement, the Company will receive a 9% preferred return on its equity investment and 65% of any remaining available cash. The 10% third-party equity partner will receive the remaining 35% of available cash after payment of the 9% return on the Company’s equity investment. The Company’s equity investment was funded through borrowings under its unsecured line of credit.

      During September 2004, the Company made a $9.0 million investment, consisting of a $2.0 million equity investment and $7.0 million in debt, in the acquisition of a majority interest in Colonnade Properties LLC, a New York based real estate investment company that focuses on the acquisition, management, redevelopment and stabilization of office assets. Colonnade Properties LLC holds a 25% interest in the Douglas HCI, a five building complex located in Coral Gables, Florida. The Company’s investment was funded through borrowings under its unsecured line of credit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Investments in Unconsolidated Partially Owned Entities

      Investments in unconsolidated partially owned entities at December 31, 2005 and 2004 consisted of the following:

	Percent
	Owned			2005			2004
				(In thousands)
Multifamily:
Arbors at Windsor Lake, Columbia, SC		10.00	%	$	716		$	—
CMS/ Colonial Joint Venture I		15.00	%		944			1,435
CMS/ Colonial Joint Venture II		15.00	%		597			670
CMS Florida		25.00	%		2,721			2,925
CMS Tennessee		25.00	%		2,377			2,727
DRA Alabama		10.00	%		2,403			2,500
DRA Cunningham, Austin, TX		20.00	%		1,111			1,266
DRA Southwest Partnership		20.00	%		18,044			19,022
DRA The Grove at Riverchase, Birmingham, AL		20.00	%		1,788			—
CG at Research Park, Durham, NC		20.00	%		1,570			—
Carter Regents Park (Development), Atlanta, GA		40.00	%		3,000			—
Merritt at Godley Station, Pooler, GA		35.00	%		3,188			—
Stone Ridge, Columbia, SC		10.00	%		497			—
					38,956			30,545
Office:
DRA/ Colonial Office JV		15.00	%		46,896			—
600 Building Partnership, Birmingham, AL		33.33	%		11			(16	)
Douglas HCI		25.00	%		5,807			6,457
					52,714			6,441
Retail:
Colonial Promenade Madison, Huntsville, AL		25.00	%		2,255			2,298
GPT/ Colonial Retail JV		10.00	%		(2,311	)(1)		—
Highway 150, LLC, Birmingham, AL		10.00	%		80			94
Parkway Place Limited Partnership, Huntsville, AL		45.00	%		12,984			12,554
Turkey Creek, Parkside Drive LLC Partnership		50.00	%		18,987			13,502
					31,995			28,448
Other:
Colonial/ Polar-BEK Management Company, Birmingham, AL		50.00	%		30			32
Other					5			6
					35			38
				$	123,700		$	65,472

(1)  Amount represents the value of the Company’s investment of approximately $8.0 million, offset by the excess basis difference on the transaction of approximately $10.3 million, which will be amortized over the life of the investment.

     During February 2005, the Company disposed of its 15% interest in Colonial Village at Cahaba Heights, a 125-unit multifamily apartment community located in Birmingham, Alabama, and its 15% interest in Colonial Grand at River Hills, a 776-unit multifamily apartment community located in Tampa, Florida, both of which were multifamily apartment communities in the CMS/ Colonial Joint Venture I. The Company’s interests in the assets were sold for $1.2 million and $6.9 million, respectively, and the proceeds were used to repay a portion of the borrowings under the Company’s unsecured line of credit.

      During April 2005, the Company completed the acquisition of Cornerstone. The assets of Cornerstone included ownership in four real estate joint ventures which consists of a 10% ownership interest in Arbors at Windsor Lake, a 10% interest in Cypress Cove at Suntree, a 35% ownership interest in Merritt at Godley Station and a 10% ownership interest in Stone Ridge (see Note 3 — Merger with Cornerstone Realty Income Trust).

      During July 2005, the Company entered into a 20% joint venture to acquire Colonial Grand at Research Park (formerly Alta Trace), a 370-unit multifamily property, located in Durham, North Carolina. The

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Company’s 20% investment in the partnership was $6.4 million, which consisted of $4.8 million of newly issued mortgage debt and $1.6 million of cash. The cash portion of this investment was funded from borrowings under the Company’s unsecured line of credit.

      During July 2005 and August 2005, the Company made investments of $1.0 million and $2.0 million, respectively, into a partnership with Carter Regents Park, to fund 40% of the purchase price of Regents Park in Atlanta, Georgia. The joint venture will develop and sell town homes and condominiums on the property. The investment was funded through the Company’s unsecured line of credit. Additionally, the Company committed to provide a construction loan to the joint venture of up to approximately $40.0 million at a rate of 8.25% per annum.

      During September 2005, the Company entered into a partnership agreement with DRA Advisors LLC in which it acquired a 20% interest and the management of a 345-unit multifamily property, The Grove at Riverchase, located in Birmingham, Alabama. The Company’s investment in the partnership was $5.6 million, which consisted of $3.9 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 line of credit.

      During September 2005, the Company acquired, through CRLP, a 15% partnership interest in the CRT Properties, Inc. (“CRT”) portfolio through a joint venture (the “DRA/ Colonial Office Joint Venture”) with DRA Advisors LLC (“DRA”). The DRA/ Colonial Office Joint Venture owns a portfolio of 137 office buildings on 26 properties located primarily in the southeastern United States. The Company’s 15% investment in the DRA/ Colonial Office Joint Venture required an equity contribution of $49.0 million, which is included in Investments in Partially-Owned Entities in the December 31, 2005 consolidated balance sheet. The equity contribution was funded through the Company’s existing credit facilities, the outstanding balances of which were reduced with the proceeds from the Company’s September 21, 2005 equity offering (see Note 12). The DRA/ Colonial Office Joint Venture’s total transaction cost of $1.8 billion includes the assumption of $370.0 million of mortgage debt and the placement of an additional $1.1 billion of secured debt financing. CRLP also guaranteed approximately $50.0 million of third-party financing obtained by the DRA/Colonial Office Joint Venture with respect to 10 of the CRT properties which the DRA/ Colonial Office Joint Venture expects to sell in the first 12 months of the venture. The DRA/ Colonial Office Joint Venture is obligated to reimburse CRLP for any payments made under the guaranty before making distributions of cash flows or capital proceeds to the DRA/ Colonial Office Joint Venture partners. The DRA/ Colonial Office Joint Venture’s initial purchase price allocations are preliminary and may be adjusted as the DRA/ Colonial Office Joint Venture completes its final analysis of the fair value of assets acquired and liabilities assumed. With the consummation of the acquisition of CRT, the Company assumed management of substantially all of the office properties included in the CRT portfolio, adding 11.7 million square feet of managed office space to the Company’s office portfolio.

      During November 2005, the Company entered into agreements to transfer six regional malls valued in the transaction at approximately $362.0 million to a joint venture with The GPT Group and Babcock & Brown, an Australian partner, in which the Company retained a 10% interest. The Company maintained the responsibility of leasing and managing the assets in the joint venture which represent 3.75 million square feet of retail shopping space and include Colonial Mall Myrtle Beach, in Myrtle Beach, South Carolina; Colonial Mall Greenville, in Greenville, North Carolina; Colonial Mall Bel Air, in Mobile, Alabama; Colonial Mall Valdosta, in Valdosta, Georgia; Colonial Mall Glynn Place, in Brunswick, Georgia; and Colonial University Village in Auburn, Alabama. The initial purchase price allocations for this transaction are preliminary and may be adjusted as the joint venture completes its final analysis of the fair value of assets acquired and liabilities assumed.

      During December 2005, the Company disposed of its 10% interest in Cypress Cove at Suntree, a 326-unit multifamily apartment community located in Melbourne, Florida. The Company’s interest in the asset was sold for $4.0 million and the proceeds were used to repay a portion of the borrowings under the Company’s unsecured line of credit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      During May 2004, the Company disposed of its 15% interest in Colonial Grand at Ponte Vedra, a 240-unit multifamily asset located in Jacksonville, Florida, which was one of the multifamily apartment communities in the CMS/ Colonial Joint Venture I. The Company’s interest was sold for $2.4 million, which was used to repay the Company’s allocated portion of outstanding mortgage debt of $1.3 million and the remaining proceeds were used to repay a portion of the borrowings under the Company’s unsecured line of credit.

      During June 2004, the Company entered into a partnership agreement with DRA, in which it maintains a 20% interest and management of The Cunningham Apartments, a 280-unit multifamily asset located in Austin, Texas. The Company’s total investment in The Cunningham Apartments was $3.9 million, which consisted of $2.8 million of newly issued mortgage debt and $1.1 million of cash, which was funded through borrowings under the Company’s unsecured line of credit.

      During June 2004, the Company acquired a 25% partnership interest in CMS Florida, including Colonial Grand at Bayshore, a 376-unit multifamily asset, and Colonial Grand at Palma Sola, a 340-unit multifamily asset, both located in Bradenton, Florida. The Company acquired the partnership interest from CMS Entrepreneurial III and IV Partners, Delaware general partnerships. The Company’s 25% investment in the partnership was $11.9 million, which consisted of $3.0 million of equity investment and $8.9 million of mortgage debt, representing its allocated portion of mortgage debt for the property. The equity investment was funded through available cash.

      During August 2004, the Company acquired a 25% partnership interest in CMS Tennessee and the management of 618 multifamily units in two communities in Nashville, Tennessee. Colonial Grand at Brentwood, which is located in the Brentwood submarket, consists of 254 units. The 364-unit Colonial Village at Hendersonville is located in the Hendersonville submarket. The assets were acquired for a total purchase price of $10.3 million, which consisted of approximately $2.8 million of cash and the assumption of approximately $7.4 million of existing mortgage debt. The cash portion of the acquisition was funded through borrowings under the Company’s unsecured line of credit.

      During the fourth quarter of 2004, the Company withdrew from its joint operations agreement with NRH Enterprises, LLC, as described in Note 17 — Related Party Transactions.

      During October 2004, the Company entered into a partnership agreement with DRA, in which the Company acquired a 20% interest and management of 16 multifamily properties located in Arizona, New Mexico and Nevada containing a combined 4,223 units. The Company’s total investment in the DRA Southwest Partnership was $64.5 million, which consisted of $45.4 million of newly issued mortgage debt and $19.1 million of cash, which was funded through borrowings under the Company’s unsecured line of credit.

      During December 2004, the Company sold its 50% interest in Orlando Fashion Square, a 1.1 million square foot retail asset located in Orlando, Florida. The total sales price was $123.2 million, $61.6 million of which is the Company’s 50% interest and portion of the proceeds. The proceeds were used to repay a secured loan of $31.4 million and Colonial’s portion of the remaining proceeds was used to support its investment activities.

      During December 2003, the Company and DRA entered into a partnership agreement, in which the Company maintains a 10% interest and manages three multifamily assets located in Birmingham, Alabama. The three assets include Colony Woods, The Meadows of Brook Highland and Madison at Shoal Run, which contain a total of 1,090 units. The Company purchased their 10% interest for a purchase price of $2.3 million, which was funded through borrowings under the Company’s unsecured line of credit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Combined financial information for the Company’s investments in unconsolidated partially owned entities for 2005 and 2004 follows:

			December 31,
			2005		2004
			(In thousands)
Balance Sheet
Assets
	Land, building, & equipment, net		$	2,631,923	$	723,370
	Construction in progress			40,762		17,728
	Other assets			364,214		78,722
		Total assets	$	3,036,899	$	819,820
Liabilities and Partners’ Equity
	Notes payable(1)		$	2,312,003	$	613,062
	Other liabilities			62,184		24,766
	Partners’ Equity			662,712		181,992
		Total liabilities and partners’ capital	$	3,036,899	$	819,820

		2005			2004			2003
Statement of Operations (For the year ended)
Revenues		$	168,108		$	72,187		$	51,571
Operating expenses			(70,155	)		(30,055	)		(21,742	)
Interest expense			(55,886	)		(20,323	)		(15,938	)
Depreciation, amortization and other			(49,711	)		(3,319	)		(12,472	)
	Net income	$	(7,644	)	$	18,490		$	1,419

(1)  The Company’s portion of indebtedness, as calculated based on ownership percentage, at December 31, 2005 and 2004 is $373.1 million and $111.6 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. Segment Information

      The Company is organized into, and manages its business based on the performance of three separate and distinct operating divisions: multifamily, office, and retail. Each division has a separate management team that is responsible for acquiring, developing, managing, and leasing properties within such division. The applicable accounting policies of the segments are the same as those described in the “Summary of Significant Accounting Policies.” The pro rata portion of the revenues, net operating income (“NOI”), and assets of the partially-owned entities and joint ventures 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 entities and joint ventures 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 segments and allocates resources to them based on divisional NOI. Divisional 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). Property operating expenses for fully owned retail properties do not include approximately $516,000, $650,000 and $685,000 of annual landlord contributions to marketing funds for 2005, 2004 and 2003, respectively. Divisional information and the reconciliation of total divisional revenues to total revenues, total divisional NOI to income from continuing operations and minority interest, and total divisional assets to total assets, for the years ended December 31, 2005, 2004 and 2003, is presented below:

				For the Year Ended
				2005			2004			2003
				(In thousands)
Revenues:
	Divisional Revenues
		Multifamily		$	279,744		$	123,396		$	98,929
		Office			133,368			98,680			93,501
		Retail			159,460			169,126			156,799
			Total Divisional Revenues:		572,572			391,202			349,229
	Partially-owned subsidiaries				(30,332	)		(18,194	)		(16,258	)
	Unallocated corporate revenues				15,176			7,321			3,826
	Discontinued operations revenues				(61,973	)		(62,699	)		(64,501	)
			Total Consolidated Revenues:	$	495,443		$	317,630		$	272,296

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

				For the Year Ended
				2005			2004			2003
				(In thousands)
NOI:
	Divisional NOI
		Multifamily		$	166,972		$	75,280		$	61,870
		Office			90,275			69,947			65,820
		Retail			112,103			118,366			109,158
			Total Divisional NOI:		369,350			263,593			236,848
	Partially-owned subsidiaries				(17,784	)		(10,611	)		(9,420	)
	Unallocated corporate revenues				15,176			7,321			3,826
	Discontinued operations NOI				(36,693	)		(41,498	)		(43,219	)
	General and administrative expenses				(42,040	)		(27,287	)		(19,481	)
	Depreciation				(129,954	)		(79,344	)		(66,982	)
	Amortization				(51,769	)		(8,681	)		(7,356	)
	Other				(380	)		81			(11	)
		Income from operations			105,906			103,574			94,205
	Total other expense				(17,469	)		(66,978	)		(53,886	)
		Income before extraordinary items, minority interest and discontinued operations		$	88,437		$	36,596		$	40,319
Assets:
	Divisional Assets
		Multifamily		$	2,374,650		$	937,935
		Office			958,131			632,010
		Retail			790,827			1,082,517
			Total Divisional Assets:		4,123,608			2,652,462
	Unallocated corporate assets(1)				375,650			148,881
				$	4,499,258		$	2,801,343

(1)  Includes the Company’s investment in joint ventures of $123,700 and $65,472 as of December 31, 2005 and 2004, respectively (see Note 7).

9. Notes and Mortgages Payable

      Notes and mortgages payable at December 31, 2005 and 2004 consist of the following:

		2005		2004
		(In thousands)
Unsecured credit facility		$	210,228	$	239,970
Bridge credit facility			—		119,000
Mortgages and other notes:
	2.00% to 6.00%		930,453		329,835
	6.01% to 7.50%		1,143,695		957,519
	7.51% to 9.00%		209,974		209,463
		$	2,494,350	$	1,855,787

      On January 31, 2005, CRLP completed a $275 million senior notes offering of 4.75% unsecured notes due February 1, 2010. Interest on the notes is payable semi-annually on the first day of every February and August beginning August 1, 2005. The net proceeds of approximately $273.3 million were used to pay down our bridge credit facility and a portion of our unsecured line of credit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      On March 22, 2005, CRLP, and Colonial Properties Trust as guarantor, entered into a $500.0 million unsecured revolving credit facility and a $100.0 million unsecured term loan facility (“the Credit Facilities”) with Wachovia Bank, National Association (“Wachovia”), as Agent for the lenders, Bank of America, N.A. as Syndication Agent, Wells Fargo Bank, National Association, Citicorp North America, Inc. and AmSouth 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. In addition to the above, the Company has a $25.0 million cash management line provided by Wachovia. On June 20, 2005, the Company increased the cash management line to $85.0 million through September 30, 2005, which was reduced to $40.0 million on October 1, 2005 and will remain outstanding until March 22, 2008.

      On July 7, 2005, CRLP and the Company as guarantor, entered into a $54.5 million bridge loan which was secured by our ownership in Mizner/ Delray Beach. The bridge loan was priced at LIBOR plus 90 basis points. The balance outstanding under the bridge loan was paid off on September 21, 2005 from proceeds received from the equity offering (see Note 12).

      On August 2, 2005, CRLP and the Company as guarantor, entered into a $91.0 million bridge loan which was secured by our ownership in Research Park Plaza. The bridge loan was priced at LIBOR plus 90 basis points. The balance outstanding under the bridge loan was paid off on September 21, 2005 from proceeds received from the equity offering (see Note 12).

      On September 28, 2005, CRLP completed a $325 million senior notes offering of 5.50% unsecured notes due October 1, 2015. Interest on the notes is payable semi-annually on the first day of every April and October beginning April 1, 2006. The net proceeds of $320.7 million, after discount and issuance costs, were used to reduce outstanding borrowings under the Company’s unsecured line of credit.

      As of December 31, 2005, the Company had unsecured Credit Facilities providing for total borrowings of up to $600.0 million and a cash management line that provides for borrowings up to $40.0 million. The Credit Facilities bear interest at LIBOR plus a spread calculated based on the Company’s unsecured debt ratings from time to time. Based on the Company’s December 31, 2005 debt ratings, the spread is 80 basis points. The Credit Facilities, excluding the cash management line of credit, mature and are renewable in March 2008, and provide for a one-year extension. The Credit Facilities include a competitive bid feature that will allow the Company to convert up to $250 million under the Credit Facilities to a fixed rate for a fixed term not to exceed 90 days. The Credit Facilities are primarily used by the Company to finance property acquisitions and developments and had an outstanding balance at December 31, 2005 of $210.2 million, including an outstanding balance of $15.2 million on the cash management line. The interest rate of the Credit Facilities, including the competitive bid balance, is 5.32% and 3.14% at December 31, 2005 and 2004, respectively.

      During 2005 and 2004, the Company, through CRLP, completed four public offerings of senior notes collectively totaling $1.0 billion. The proceeds of the offerings were used to fund acquisitions, development expenditures, repay balances outstanding on the Company’s revolving credit facility and bridge credit facilities, repay certain notes and mortgages payable, and for general corporate purposes. Details relating to these debt offerings are as follows:

	Type of						Gross
Issue Date	Note		Maturity		Rate		Proceeds
							(In thousands)
January 2005		Senior		February 2010		4.75%	$	275,000
September 2005		Senior		October 2015		5.50%		325,000
April 2004		Senior		April 2011		4.80%		100,000
June 2004		Senior		June 2014		6.25%		300,000
							$	1,000,000

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      At December 31, 2005, the Company had $1.7 billion in unsecured indebtedness including balances outstanding on its bank line of credit 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 $1.1 billion at December 31, 2005.

      The aggregate maturities of notes and mortgages payable, including the Company’s line of credit at December 31, 2005, are as follows:

	(In thousands)
2006	$	86,982
2007		180,017
2008		258,114
2009		49,203
2010		367,483
Thereafter		1,552,552
	$	2,494,350

      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, 2005 and 2004 was approximately $2.3 billion and $1.9 billion, respectively.

      Certain loan agreements of the Company contain restrictive covenants, which, among other things, require maintenance of various financial ratios. At December 31, 2005, the Company was in compliance with those covenants.

10. Derivative Instruments

      SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, 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. During 2005, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt and forecasted issuances of debt. Two of the Company’s outstanding interest rate swaps hedge the interest rate risk associated with forecasted debt issuances that are expected to occur in 2006

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and 2007. Accordingly, the maximum period of time over which the Company is hedging its exposure to variability in future cash flows for forecasted transactions other than those related to the payment of variable interest on existing debt is approximately nineteen months. The Company also uses interest rate swaps as part of its fair value hedging strategy. These swaps involve the receipt of fixed rate amounts in exchange for variable rate amounts over the life of the agreements without exchange of the underlying principal amount. During 2005, such swaps were used to hedge the change in fair value of fixed rate debt.

      At December 31, 2005 and 2004, derivatives with a fair value of $3.0 million and $3.7 million, respectively, were included in other assets, and derivatives with a fair value of $1.4 million were included in other liabilities at December 31, 2004. The change in net unrealized gains/losses of $1.6 million in 2005, $0.2 million in 2004 and $1.9 million in 2003 for derivatives designated as cash flow hedges is separately disclosed in the statement of changes in shareholders’ equity and comprehensive income. The change in fair value of derivatives not designated as hedges of ($0.1) million and $0.4 million is included in other income (expense) in 2005 and 2004, respectively. All derivatives were designated as hedges in 2003. No hedge ineffectiveness on fair value hedges was recognized during 2005, 2004 and 2003. Hedge ineffectiveness of $1.1 million, $3,661, and $0.4 million on cash flow hedges due to index mismatches was recognized in other income during 2005, 2004 and 2003, respectively.

      Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s hedged debt. The change in net unrealized gains/losses on cash flow hedges reflects a reclassification of $0.5 million, $1.4 million and $1.9 million of net unrealized gains/losses from accumulated other comprehensive income to interest expense during 2005, 2004 and 2003, respectively. During the next 12 months, the Company estimates that an additional $0.4 million will be reclassified.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table summarizes the notional values, fair values and other characteristics of the Company’s derivative financial instruments at December 31, 2005. The notional value at December 31, 2005 provides an indication of the extent of the Company’s involvement in these instruments at that time, but does not represent exposure to credit, interest rate, or market risk.

								Fair Value
	Notional		Interest					At December 31, 2005
Product Type	Value		Rate			Maturity		Asset (Liability)
								(In thousands)
Interest Rate SWAP, Cash Flow	$	11.2 million		5.932	%		1/1/06	$	(15	)
Interest Rate CAP, Cash Flow	$	16.4 million		4.840	%		4/1/06		—
Interest Rate CAP, Cash Flow	$	25.9 million		4.840	%		4/1/06		—
Interest Rate CAP, Cash Flow	$	8.4 million		4.840	%		4/1/06		—
Interest Rate CAP, Cash Flow	$	30.4 million		11.200	%		7/3/06		—
Interest Rate CAP, Cash Flow	$	19.7 million		6.850	%		6/29/07		1
Interest Rate CAP, Cash Flow	$	16.7 million		6.850	%		7/3/07		1
Interest Rate CAP, Cash Flow	$	12.8 million		6.000	%		7/1/08		1
Interest Rate CAP, Cash Flow	$	22.4 million		6.000	%		7/1/08		1
Interest Rate CAP, Cash Flow	$	9.9 million		6.000	%		7/1/08		1
Interest Rate CAP, Cash Flow	$	10.0 million		8.373	%		8/1/08		1
Interest Rate CAP, Cash Flow	$	14.9 million		7.543	%		8/1/08		3
Interest Rate CAP, Cash Flow	$	7.4 million		6.983	%		8/1/08		3
Interest Rate CAP, Cash Flow	$	6.2 million		8.373	%		8/1/08		—
Interest Rate CAP, Cash Flow	$	13.3 million		6.786	%		9/1/08		8
Interest Rate CAP, Cash Flow	$	5.5 million		7.900	%		2/1/09		2
Interest Rate CAP, Cash Flow	$	17.6 million		8.100	%		2/1/09		4
Interest Rate SWAP, Fair Value	$	100.0  million		4.803	%		4/1/11		325
Interest Rate SWAP, Cash Flow	$	200.0  million		4.830	%		2/15/16		1,532
Interest Rate SWAP, Cash Flow	$	175.0  million		4.877	%		7/13/17		1,153

      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.

      In addition to derivatives qualifying as hedges, the Company has an interest rate swap with a fair value of approximately $1.5 million at December 31, 2005 held for economic hedging purposes. 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 qualifies for hedge accounting. As a result, the Company is treating this derivative as an economic hedge. This economic hedge converts the floating rate payments on certain expected future debt obligations to a fixed rate. Interest is exchanged periodically on the notional value, with the Company receiving the LIBOR-based floating rates and paying the fixed rate. Changes in the fair value of these derivatives are recognized in earnings in other income (expense) and totaled ($0.7) million for the year ended December 31, 2005. The fair value of this derivative is included in Other Assets. Subsequent to December 31, 2005 the Company discontinued this swap.

11. Capital Structure

      Company ownership is maintained through common shares of beneficial interest (common shares), preferred shares of beneficial interest (preferred shares) and minority interest in CRLP (units). Common shareholders represent public equity owners and common unitholders represent minority interest owners. Each

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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, 2005 and 2004, 10,872,568 and 10,372,650 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 (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.

      In 1998, the Company’s Board of Trustees approved a Shareholder Rights Plan (the “Rights Plan”). Under this plan, the Board declared a dividend of one Right for each common share outstanding on the record date. The Rights become exercisable only if an individual or group acquires a 15% or more beneficial ownership in the Company. Ten days after a public announcement that an individual or group has become the beneficial owner of 15% or more of the common shares, each holder of a Right, other than the acquiring individual or group, would be entitled to purchase one common share for each Right outstanding at one-half of the Company’s current market price. Also, if the Company is acquired in a merger, or if 50% or more of the Company’s assets are sold in one or more related transactions, each Right would entitle the holder thereof to purchase common stock of the acquiring company at one-half of the then-current market price of the acquiring company’s common stock.

      On August 29, 2005, the Company and EquiServe Trust Company, N.A., as successor to BankBoston, N.A., as Rights Agent entered into a First Amendment to Rights Agreement (the “Amendment”), to amend that certain Rights Agreement, dated as of November 2, 1998 between the Company and the Rights Agent (the “Rights Agreement”). The Amendment, among other things: (i) changes the ownership threshold trigger from 15% to 20%; (ii) adds a TIDE (Three-Year Independent Director Evaluation) provision that requires the independent members of the Board of Trustees review the Rights Agreement, at least once every three years, to determine whether it should be continued or revoked; and (iii) adds a provision requiring the Board of Trustees to submit the Rights Agreement to the shareholders of the Company for ratification on or prior to December 31, 2008 if the Rights Agreement has not terminated on or prior to November 1, 2008 and providing for termination of the Agreement on December 31, 2008 if the Rights Agreement is not ratified by the shareholders on or prior to December 31, 2008.

12. Equity Offerings

      On September 21, 2005, the Company issued 4,500,000 of its common shares at $43.75 per share, or an aggregate offering price of approximately $196.9 million, in a public offering in which Merrill Lynch & Co. and Wachovia Securities acted as joint book-running managers. The Company contributed the proceeds of this offering to CRLP in exchange for 4,500,000 common units of limited partnership interest. Net proceeds to the Company totaled $187.3 million after payment of underwriting fees and estimated issuance costs. The Company used approximately $145.5 million of the net proceeds to repay the outstanding balance on its bridge loans (see Note 9), and used the remaining proceeds (which were temporarily used to pay down the outstanding balances under the Credit Facilities), together with additional borrowings under the Company’s Credit Facilities, to fund its $49.0 million equity investment in its joint venture with DRA (see Note 7).

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      On April 1, 2005, in connection with the Cornerstone acquisition (see Note 3), the Company issued 5,326,349 Series E Cumulative Redeemable Preferred Shares of Beneficial Interest. The depositary shares may be called by the Company at any time and have a liquidation preference of $25.00 per depositary share. Each Colonial Series E preferred depositary share will represent ¹/1000th of a newly created 7.62% Series E Cumulative Redeemable Preferred Share of Beneficial Interest, liquidation preference $2,500 per share, of Colonial.

      On June 2, 2003, the Company issued $75.2 million or 2,110,000 of its common shares at $35.65 per share in a public offering. The net proceeds from the offering to the Company, after deducting offering expenses, were $72.5 million. The Company used the net proceeds to repay a portion of the outstanding balance on its unsecured line of credit.

      On April 30, 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. The depositary shares may be called by the Company on or after April 30, 2008 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. The net proceeds of the offering were approximately $120.7 million and were used to redeem the Company’s $125.0 million 8.75% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest (“Series A preferred shares”) on May 7, 2003. Upon redemption of the Series A preferred shares, the Company deducted the original issuance costs of Series A preferred shares of $4.5 million from net income available to common shareholders, in accordance with the SEC’s clarification of EITF Abstracts, Topic No. D-42 “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock”.

      During 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. The net proceeds of the offering were approximately $48.1 million and were used to repay outstanding balances under the Company’s unsecured line of credit.

13. Share Option and Restricted Share Plans

      The Company has in place a Second Amended and Restated Employee Share Option and Restricted Share Plan (the “Employee Plan”) designed to attract, retain, and motivate executive officers of the Company and other key employees. The Employee Plan, as amended in April 1998, authorizes the issuance of up to approximately 5,600,000 common shares (as increased from time to time to equal 10% of the number of common shares and Operating Partnership units outstanding) pursuant to options or restricted shares granted or issued under this plan, provided that no more than 750,000 restricted shares may be issued. In connection with the grant of options under the Employee Plan, the Executive Compensation Committee of the Board of Trustees determines the option exercise period and any vesting requirements. The Company issued 130,763, 28,432 and 40,284 restricted shares under the Employee Plan during 2005, 2004 and 2003, respectively. The value of outstanding restricted shares is being charged to compensation expense based upon the earlier of satisfying the vesting period (2-5 years) or satisfying certain performance targets.

      Also, the Company had a Non-employee Trustee Share Option Plan (the “Trustee Plan”). The Trustee Plan, as amended in April 1997, authorized the issuance of up to 500,000 options to purchase common shares of beneficial interest. The Trustee Plan expired on September 28, 2003, and is succeeded by the Employee Plan. In April 1997, the Company also adopted a Non-Employee Trustee Share Plan (the “Share Plan”). The Share Plan permits non-employee trustees of the Company to elect to receive common shares in lieu of all or a portion of their annual trustee fees, board fees and committee fees. The Share Plan authorizes the issuance of 50,000 common shares under the Plan. The Company issued 7,727 and 5,692 common shares pursuant to the Share Plan during 2005 and 2004, respectively.

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      In October 1997, the Company adopted 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 a 5% discount to the market price. The Purchase Plan has no limit on the number of common shares that may be issued under the plan. The Company issued 1,354 and 938 common shares pursuant to the Purchase Plan during 2005 and 2004, respectively. In January 2004, the Purchase Plan was amended to eliminate the 5% discount available under the plan.

      For all employee stock options granted on or after January 1, 2003, in accordance with SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of SFAS No. 123, the Company has elected to adopt the accounting provisions of SFAS No. 123 under the prospective method. The prospective method allows the Company to apply the recognition provisions of SFAS No. 123 to all employee awards granted, modified, or settled after the beginning of the fiscal year in which the recognition provisions are first applied. During 2005, 2004 and 2003, the Company recognized compensation expense of $0.4 million, $0.2 million and $0.2 million, respectively, related to the stock options granted during 2005, 2004 and 2003. The following assumptions were used to derive the fair values: a 7.5-year option term; an annualized volatility rate of 21.38%, 21.29% and 16.36% for 2005, 2004 and 2003, respectively; a risk-free rate of return of 4.52%, 4.25% and 4.01% for 2005, 2004 and 2003, respectively; and a dividend yield of 6.53%, 6.86% and 7.55% for 2005, 2004 and 2003, respectively.

      Prior to January 1, 2003, the Company applied Accounting Principles Board Opinion No. 25 (APB No. 25) and related Interpretations in accounting for its plans. In accordance with APB 25, no compensation expense has been recognized for its stock option plans during the periods prior to January 1, 2003. Had compensation expense for the Company’s stock option plans been determined based on the fair value at the grant dates for awards under those plans consistent with the methods prescribed in SFAS No. 123, Accounting for Stock-Based Compensation, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

	For the Year Ending
	December 31,
	2005		2004		2003
	(In thousands, except per
	share data)
Net income available to common shareholders:
As reported	$	197,250	$	39,837	$	32,530
Pro forma	$	196,888	$	39,482	$	32,104
Net income per share — basic:
As reported	$	5.18	$	1.47	$	1.30
Pro forma	$	5.17	$	1.46	$	1.29
Net income per share — diluted:
As reported	$	5.13	$	1.45	$	1.29
Pro forma	$	5.12	$	1.44	$	1.27

      The Company uses the Black-Scholes pricing model to calculate the fair values of the options awarded, which are included in the pro forma results above.

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      Option activity under the Employee Plan, the Share Plan, and the Trustee Plan, combined is presented in the table below:

				Options Outstanding
	Shares Available
	for Future						Weighted-Average
	Option Grant			Shares			Price per Share
Balance, December 31, 2002		1,836,544			1,541,270		$	28.88
Options granted		(514,592	)		514,592		$	33.46
Options terminated		80,043			(80,043	)	$	29.65
Options exercised					(83,861	)	$	27.84
Balance, December 31, 2003		1,401,995			1,891,958		$	27.86
Options granted		(99,960	)		99,960		$	36.24
Options terminated		72,770			(72,770	)	$	32.09
Options exercised					(344,377	)	$	29.38
Balance, December 31, 2004		1,374,805			1,574,771		$	30.66
Options granted		(156,832	)		156,832		$	38.05
Options terminated		49,052			(49,052	)	$	27.14
Options exercised					(115,103	)	$	30.85
Balance, December 31, 2005		1,267,025	(1)		1,567,448		$	31.49

(1)  The balance available for future grant as of December 31, 2005 does not include an additional 2.6 million shares available to be issued based on the Company’s Employee Plan which authorizes the issuance of shares up to 10% of the number of common shares and Operating Partnership units outstanding.

     All options granted to date have a term of ten years and may be exercised in equal installments, based on a 3-5 year vesting schedule, of the total number of options issued to any individual on each of the applicable 3-5 year anniversary dates of the grant of the option. The balance of options that are exercisable total 892,387, 693,921 and 622,229 at December 31, 2005, 2004, and 2003, respectively.

14. 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.

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      The table below presents a summary of pension plan status as of December 31, 2005 and 2004, as it relates to the employees of the Company.

			2005			2004
Change in benefit obligation
		Benefit obligation at beginning of year	$	11,436,525		$	9,280,600
		Service cost		994,596			887,521
		Interest cost		683,001			590,066
		Plan amendments		—			—
		Benefits paid		(117,515	)		(77,776	)
		Actuarial (gain) loss		1,879,527			756,114
	Benefit obligation at end of year		$	14,876,134		$	11,436,525
Change in plan assets
	Fair value of plan assets at beginning of year		$	7,525,075		$	5,053,759
		Actual return on plan assets		438,994			567,982
		Employer contributions		884,888			1,981,110
		Benefits paid		(117,515	)		(77,776	)
	Fair value of plan assets at end of year		$	8,731,442		$	7,525,075
	Fair value of plan assets		$	8,731,442		$	7,525,075
	Benefit obligation			14,876,134			11,436,525
		Funded status		(6,144,692	)		(3,911,450	)
	Unrecognized net (gain) loss			4,031,516			2,028,776
	Unrecognized prior service cost			42,178			50,175
		Net amount recognized	$	(2,070,998	)	$	(1,832,499	)

      Amounts recognized in the consolidated balance sheets as of December 31, 2005 and 2004 consist of:

		2005			2004
Prepaid benefit cost		$	—		$	—
Accrued benefit cost			(2,352,313	)		(1,832,499	)
Intangible Asset			42,178			—
Accumulated other comprehensive income			239,137			—
	Net amount recognized	$	(2,070,998	)	$	(1,832,499	)

      Components of the net periodic benefit cost for 2005 and 2004 are as follows:

			2005			2004
Components of net periodic benefit cost
	Service cost		$	994,596		$	887,521
	Interest cost			683,001			590,066
	Expected return on plan assets			(642,673	)		(475,074	)
	Amortization of prior service cost			7,997			7,997
	Amortization of net (gain) loss			80,466			62,717
		Net periodic benefit cost	$	1,123,387		$	1,073,227
Additional information
	Accumulated benefit obligation		$	11,083,755		$	8,748,637

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

		2005			2004
Weighted-average assumptions used to determine benefit obligations at December 31
	Discount rate		5.50	%		6.00	%
	Rate of compensation increase		3.00	%		3.00	%
Weighted-average assumptions used to determine net cost for years ended December 31
	Discount rate		6.00	%		6.25	%
	Expected long-term rate of return on plan assets		8.00	%		8.00	%
	Rate of compensation increase		3.00	%		3.00	%

      The Company’s pension plan weighted-average asset allocations at December 31, 2005 and 2004, by asset category are as follows:

		Percentage
		of Plan
		Assets at
		December 31,
Asset Category		2005			2004
Equity Securities			57	%		51	%
Debt Securities			33	%		47	%
Real estate			5	%		0	%
Other			5	%		2	%
	Total		100	%		100	%

      The Company’s investment policy targets to achieve a long-term return on plan assets of at least 8.0%. In order to achieve these targets, the Company primarily utilizes a diversified grouping of growth and value funds with moderate risk exposure. The Company reviews the pension plan’s investment policy on a periodic basis and may adjust the investment strategy, as needed, in order to achieve the long-term objectives of the plan.

      The following table presents the cash flow activity of the pension plan during the years ending December 31, 2005 and 2004:

		Employer		Employee
Contributions
	2004	$	1,981,110	$	—
	2005	$	884,888	$	—
Benefit payments
	2004	$	77,776
	2005	$	117,515

      The following table presents the expected future benefit payments of the pension plan:

Estimated Future Benefit Payments
	2006	$	107,915
	2007		112,306
	2008		127,285
	2009		162,077
	2010		194,540
	Thereafter		2,922,646

401k Plan

      The Company maintains a 401k plan covering substantially all employees. This plan provides, with certain restrictions, that employees may contribute a portion of their earnings with the Company matching one-half of

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such contributions, solely at the Company’s discretion. Contributions by the Company were approximately $503,088, $465,786 and $469,800, for the years ended December 31, 2005, 2004 and 2003, respectively.

15. Leasing Operations

      The Company is in the business of leasing and managing 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, 2005, are as follows:

	(In thousands)
2006	$	224,942
2007		202,007
2008		174,743
2009		149,003
2010		123,400
Thereafter		340,458
	$	1,214,553

      The noncancelable leases are with tenants engaged in retail and office operations in Alabama, Georgia, Florida, North Carolina, South Carolina, Tennessee, Texas, and Virginia. 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, 2005 balance sheet. Leases with tenants 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 2005, 2004 and 2003 includes percentage rent of $3.8 million, $2.9 million and $2.7 million, respectively. This rental income was earned when certain retail tenants attained sales volumes specified in their respective lease agreements.

16.     Commitments, Contingencies, Guarantees and Other Arrangements

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.

Guarantees and Other Arrangements

      During January 2000, the Company initiated and completed an Executive Unit Purchase Program (Unit Purchase Program), in which the Board of Trustees and certain members of the Company’s management were able to purchase 425,925 units of CRLP. The value of the units purchased under the Unit Purchase Program was approximately $10.0 million. Under the Unit Purchase Program, the Board of Trustees and the members of management obtained full-recourse personal loans from an unrelated financial institution, in order to purchase the units. As of December 31, 2004, the outstanding balance on these loans was $3.8 million as some participants have exited the program and repaid their principal balance. The units, which had a market value of approximately $6.5 million at December 31, 2004, were pledged as collateral against the loans. The Company provided a guarantee to the unrelated financial institution for the personal loans, which matured in January 2005. In connection with the maturity of the remaining outstanding loans in January 2005, the Company’s guarantee for such loans was terminated.

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      During December 2002, the Company sold 90% of its interest in Colonial Promenade Hoover for a total sales price of $20.5 million to a newly formed joint venture, Highway 150 LLC, in which the Company maintains a 10% ownership interest and manages the property. In connection with the formation of Highway 150 LLC, the Company executed a guaranty, pursuant to which the Company 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. 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, 2005, the total amount of debt of the joint venture was approximately $17.1 million and matures in December 2012. At December 31, 2005, no liability was recorded on the Company’s books for the guarantee.

      In connection with the contribution of certain assets to CRLP, certain partners of CRLP have guaranteed indebtedness of the Company totaling $26.9 million at December 31, 2005. 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. Additionally, certain unitholders of CRLP and trustees of the Company have guaranteed indebtedness of the Company totaling $0.4 million at December 31, 2005. The Company has indemnified these individuals from their guarantees of this indebtedness.

      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/ Colonial Office Joint Venture with respect to 10 of the CRT properties which the DRA/ Colonial Office Joint Venture expects to sell in the first 12 months of the venture. The DRA/ Colonial Office Joint Venture is obligated to reimburse CRLP for any payments made under the guaranty before making distributions of cash flows or capital proceeds to the DRA/Colonial Office Joint Venture partners. At December 31, 2005, no liability was recorded on the Company’s books for the guarantee.

      During July 2005, in connection with the Company’s investment into a joint venture with Carter and Associates, the Company committed to provide a construction loan to the joint venture of up to approximately $40 million at a rate of 8.25% per annum. As of December 31, 2005, $3.3 million had been drawn on the construction loan by the joint venture, and $36.7 million was available to be drawn.

17. Related Party Transactions

      The Company has used an affiliated construction company to manage and oversee certain of its development, re-development and expansion projects. The affiliated construction company utilized by the 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 the affiliated construction company in compliance with the Company’s approved “Policy on Hiring Architects, Contractors, Engineers, and Consultants”. The 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, the affiliated construction company outsources all significant subcontractor work through a competitive bid process. Upon approval by the Management Committee, the Management Committee presents each project to the independent members of the Executive Committee of the Board of Trustees for final approval. In each of the following transactions, the independent members of the Executive Committee approved such transactions unanimously.

      The Company paid $41.6 million, $20.0 million and $30.2 million for property construction costs to Brasfield & Gorrie LLC, a construction company partially-owned by Mr. M. Miller Gorrie (a trustee of the Company) during the years ended December 31, 2005, 2004 and 2003, respectively. Of these amounts, $36.6 million, $17.0 million and $26.9 million was then paid to unaffiliated subcontractors for the construction of these development projects during 2005, 2004 and 2003, respectively. The Company had $8.0 and $3.3 million

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in outstanding construction invoices or retainage payable to this construction company at December 31, 2005 and 2004, respectively.

      In March 2002, CPSI acquired a 20% interest in three aircraft from NRH Enterprises, L.L.C., (“NRH”) an entity in which Mr. Harold Ripps (a trustee of the Company) indirectly has an approximate 33% interest, for approximately $1.4 million. Additionally, CPSI entered into a joint ownership agreement with the other owners of the aircraft, including NRH, under which CPSI paid NRH, as agent for all of the owners of the aircraft, a monthly fee of $10,000, plus $1,400 per hour of the Company’s flight time, to cover the operating expenses of the aircraft. Further, CPSI entered into an aircraft services agreement with MEDJET Assistance, L.L.C., (MEDJET) an entity in which Mr. Ripps indirectly has an approximate 40% interest. Under this agreement, CPSI was obligated to pay a monthly fee of $5,000 to MEDJET for managing the use, maintenance, storage, and supervision of the aircraft. NRH paid this $5,000 monthly fee to MEDJET, on behalf of CPSI, from the $10,000 monthly fee referred to above. CPSI paid approximately $279,000 during 2004 and $319,000 during 2003 to NRH for usage and service of the aircraft under the above agreements. During 2004, the Company sold its interest in the three aircraft for $0.8 million and terminated the aircraft services agreement.

      The Company leased space to certain entities in which Mr. Thomas H. Lowder, Mr. James K. Lowder, and Mr. M. Miller Gorrie have an interest and received market rent from these entities of approximately $2.5 million, $1.6 million and $1.1 million during the years ended December 31, 2005, 2004 and 2003, respectively. Additionally, the Company provided management and leasing services to certain related entities and received fees from these entities of approximately $19,000, $27,000 and $200,000 during the years ended December 31, 2005, 2004 and 2003, respectively.

      Colonial Insurance Agency, a corporation owned by The Colonial Company, has provided insurance risk management, administration and brokerage services for the Company. The aggregate amount paid by the Company to Colonial Insurance Agency for these services during the years ended December 31, 2005, 2004 and 2003 were $0.5 million, $0.4 million and $0.2 million, respectively. As a part of this service, the Company placed insurance coverage with unaffiliated insurance carriers through a competitive bidding process. The premiums paid to these unaffiliated insurance carriers totaled $8.3 million, $3.6 million and $4.2 million during 2005, 2004 and 2003, respectively.

      In connection with the closing of the Company’s acquisition of Cornerstone via merger on April 1, 2005, the Company appointed Glade Knight, who formally served as the Chairman and Chief Executive Officer of Cornerstone, as a trustee of the Company. Mr. Knight was subsequently elected to serve as a trustee of the Company at the 2005 annual meeting of Colonial shareholders. On April 1, 2005, following the Cornerstone merger, Mr. Knight elected to cash out the options under a non-statutory stock option agreement between Cornerstone and Mr. Knight, which was assumed by the Company in the Cornerstone merger, and the Company paid Mr. Knight approximately $3,100,220 (plus an applicable tax gross up payment) in connection therewith. In connection with the Cornerstone merger, the Company also assumed Cornerstone’s obligations under Mr. Knight’s change in control agreement. Shortly after the Cornerstone merger, the Company paid to Mr. Knight approximately $5,500,281 (which includes an applicable tax gross up payment) in respect of Mr. Knight’s change in control agreement assumed by Colonial and Mr. Knight’s employment agreement with Cornerstone, which terminated in connection with the closing of the Cornerstone merger.

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COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

18. Net Income Per Share

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

		2005			2004			2003
		(In thousands, except per share
		data)
Numerator:
	Net Income	$	219,641		$	54,618		$	52,265
	Less: Preferred share dividends		(22,391	)		(14,781	)		(15,284	)
	Less: Redemption of preferred share issuance costs		—			—			(4,451	)
	Net income available to common shareholders	$	197,250		$	39,837		$	32,530
Denominator:
	Denominator for basic net income per share — weighted average common shares		38,071			27,121			24,965
	Effect of dilutive securities:
	Stock options and restricted stock		391			341			267
	Denominator for diluted net income per share — adjusted weighted average common shares		38,462			27,462			25,232
	Basic net income per share, before extraordinary items	$	5.18		$	1.47		$	1.30
	Diluted net income per share, before extraordinary items	$	5.13		$	1.45		$	1.29

      There were 4,130 outstanding options to purchase common shares excluded from the computation of diluted net income per share for 2005 because the options’ exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive. The weighted average exercise price of these outstanding options for 2005 was $45.30 per share. There were no antidilutive outstanding options as of December 31, 2004. There were 43,333 outstanding options to purchase common shares excluded from the computation of diluted net income per share for 2003 because the options’ exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive. The weighted average exercise price of these outstanding options for 2003 was $35.82 per share.

19. Subsequent Events

Acquisitions

      During January 2006, the Company acquired an additional 50,000 square feet of condominium interests in The Peachtree, a Class A office building located in the Atlanta Midtown market. The Company made its initial investment in the property in August 2005 when it purchased 76% of the condominium interests in The Peachtree for $43.8 million. The purchase of the additional square footage brings Colonial’s ownership to more than 90% of the property. The additional investment of $8.3 million was funded through borrowings under the Company’s unsecured line of credit.

      During January 2006, the Company acquired a 20% partnership interest in Huntcliff Village, a 358-unit multifamily apartment community located in Atlanta, Georgia. The Company’s 20% investment in the partnership was $8.0 million, which consisted of $5.2 million of newly issued mortgage debt and $2.8 million of cash. The cash portion of this investment was funded from borrowings under the Company’s unsecured line of credit.

      During February 2006, the Company acquired land and infrastructure for approximately $29.0 million, in Orange Beach, Alabama, for development and sale of residential lots and units.

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COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property Dispositions

      During January 2006, the Company sold seven multifamily assets, all of which were acquired as a part of the Cornerstone acquisition with the exception of Colonial Village at Caledon Woods. The properties include the following:

Property Name	Location		Units		Sales Price
					(In millions)
The Timbers		Raleigh, NC		176	$	7.6
CV at Remington Place		Raleigh, NC		136		7.9
Summerwalk		Charlotte, NC		160		8.2
CV at Paces Glen		Charlotte, NC		172		6.0
CV at Stone Brook		Atlanta, GA		188		9.4
CG at Whitemarsh		Savannah, GA		352		38.7
CV at Caledon Woods		Greenville, SC		350		22.9
					$	100.7

      The Company used the proceeds from the sale to repay a portion of the borrowings under the Company’s unsecured line of credit.

      During March 2006, the Company disposed of its majority interest in Colonnade Properties, LLC (see Note 7) for approximately $2.5 million. There was no gain or loss recognized on the disposition. The Company has a $6.0 million outstanding note receivable, secured by an interest in real estate, from Colonnade Properties LLC which bears interest at 9% per annum and reaches maturity in 2010.

      During March 2006, the Company completed the sale of a 90% interest in four shopping centers valued in the transaction at approximately $127.3 million to a joint venture partner. The Company maintained a 10% interest in the properties, and the responsibility of leasing and managing the assets in the joint venture which represent 0.7 million square feet of retail shopping space. The shopping centers include Colonial Promenade Boulevard Square in Pembroke Pines, Florida; Colonial Shoppes Pines Plaza in Pembroke Pines, Florida; Colonial Shoppes College Parkway in Fort Myers, Florida; and Colonial Promenade Deerfield in Deerfield Beach, Florida. As a part of the sale, the Company’s joint venture partner assumed 90% of the outstanding secured debt of $74.8 million.

Financing activity

      During February 2006, the Company terminated a $200.0 million forward starting interest rate swap that was outstanding at December 31, 2005 and received a payment of approximately $4.3 million. As a result, the Company will record a gain on this transaction of approximately $2.8 million during the first quarter of 2006. 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 and had a fair value of $1.5 million at December 31, 2005 (representing an economic hedge, as discussed in Note 10).

Distribution

      During January 2006, the Board of Trustees declared a cash distribution to the common shareholders and holders of common units of CRLP in the amount of $0.68 per share and per partnership unit, totaling $38.0 million. The distribution was made to shareholders and partners of record as of February 6, 2006, and was paid on February 13, 2006.

Preferred Share Buyback

      On February 2, 2006, the Company announced the Board of Trustees’ authorization of the repurchase of up to $65 million of the Company’s Series E Depositary Shares, each representing ¹/100 of a share of its 7.62% Series E Cumulative Redeemable Preferred Shares. This repurchase program was effective immediately and

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COLONIAL PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

extends through January 27, 2007. Under the repurchase program, the Company is authorized to make purchases in the open market or in privately negotiated transactions from time to time, subject to market conditions, applicable legal requirements and other factors. The repurchase program does not obligate us to repurchase any specific number of shares, and repurchases pursuant to the program may be suspended or resumed at any time or from time to time without further notice or announcement.

20. Quarterly Financial Information (Unaudited)

      The following is a summary of the unaudited quarterly financial information for the years ended December 31, 2005 and 2004. The information provided herein has been reclassified in accordance with SFAS No. 144 for all periods presented.

		2005
		First			Second			Third			Fourth
		Quarter			Quarter			Quarter			Quarter
		(In thousands, except per share data)
Revenues		$	90,818		$	129,182		$	135,025		$	140,418
Income (loss) from continuing operations			2,260			(9,771	)		(7,839	)		78,901
Income from discontinuing operations			71,340			23,825			57,247			3,678
Net income			73,600			14,054			49,408			82,579
Preferred dividends			(3,695	)		(6,232	)		(6,232	)		(6,232	)
Net income available to common shareholders			69,905			7,822			43,176			76,347
Net income per share:
	Basic	$	2.51		$	0.20		$	1.07		$	1.71
	Diluted	$	2.51		$	0.20		$	1.07		$	1.69
Weighted average common shares outstanding:
	Basic		27,824			39,657			40,289			44,696
	Diluted		27,824			39,657			40,289			45,140

		2004
		First			Second			Third			Fourth
		Quarter			Quarter			Quarter			Quarter
		(In thousands, except per share data)
Revenues		$	70,576		$	74,017		$	81,751		$	91,286
Income from continuing operations			6,462			6,244			3,821			8,415
Income from discontinuing operations			10,622			3,892			4,834			10,328
Net income			17,084			10,136			8,655			18,743
Preferred dividends			(3,695	)		(3,695	)		(3,695	)		(3,696	)
Net income available to common shareholders			13,389			6,441			4,960			15,047
Net income per share:
	Basic	$	0.50		$	0.24		$	0.18		$	0.55
	Diluted	$	0.50		$	0.24		$	0.18		$	0.54
Weighted average common shares outstanding:
	Basic		26,670			27,089			27,252			27,467
	Diluted		27,045			27,382			27,615			27,839

118

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders

of Colonial Properties Trust:

      We have completed integrated audits of Colonial Properties Trust’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedules

      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, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits 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 of financial statements 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 audits provide a reasonable basis for our opinion.

Internal control over financial reporting

      Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting 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 effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides 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

119

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

March 10, 2006

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

      Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedure

      As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the 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, 2005 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. 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, 2005. 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, 2005, Colonial Properties Trust maintained effective internal control over financial reporting.

      Our management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Item 9B.     Other Information.

      On October 25, 2005, our Board of Trustees adopted a new trustee compensation policy. The new trustee compensation policy is attached hereto as Exhibit 10.59 and incorporated by reference herein. The new trustee compensation policy increases the annual retainer payment for all Board members from $20,000 to $22,500 and increases the additional annual retainer payment for the lead trustee from $7,500 to $15,000. The new trustee compensation policy also increases the grant of restricted shares received by non-employee trustees following each annual election of trustees that occurs after the trustee has completed ate least one year of services from $7,500 to $10,000.

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PART III

Item 10. Trustees and Executive Officers of the Registrant.

      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 2006 (the “Proxy Statement”) under the captions “Election of Trustees”, “Section 16(a) Beneficial Ownership Reporting Compliance” and “Audit Committee”, respectively. Information required by this item with respect to executive officers is provided in Item 1 of this report. 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 report. See “Available Information”.

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 caption “Executive Compensation.”

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, 2005, relating to our equity compensation plans pursuant to which options to purchase our common shares and our restricted common shares may be granted from time to time.

								Number of Securities Remaining
		Number of Securities to be						Available for Future Issuance
		Issued Upon Exercise of			Weighted-Average Exercise			Under Equity Compensation
		Outstanding Options,			Price of Outstanding Options,			Plans (Excluding Securities
Plan Category		Warrants and Rights(a)			Warrants and Rights(b)			Reflected in Column(a))
Equity compensation plans approved by security holders(1)			1,725,280	(2)	$	31.49	(3)		3,863,459
Equity compensation plans not approved by security holders			—			—			—
	Total		1,725,280		$	31.49			3,863,459

(1)	These plans include our second Amended and Restated Employee Share Option and Restricted Share Plan, as amended in 1998, our Non-Employee Trustee Share Plan, as amended in 1997, and our Trustee Share Option Plan, as amended in 1997.
(2)	Includes 157,832 restricted shares and performance-based restricted shares that had not vested as of December 31, 2005.
(3)	Weighted-average exercise price of outstanding options; excludes value of outstanding restricted shares.

Item 13. Certain Relationships and Related Transactions.

      The information required by this item is hereby incorporated by reference from the material appearing in the Proxy Statement under the caption “Certain Relationships and Related Transactions.”

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 caption “Summary of Audit Fees.”

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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, 2005 and 2004

Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

      15(a)(2) Financial Statement Schedules

      Schedule III                    Real Estate and Accumulated Depreciation

      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	Acquisition and Contribution Agreement and Joint Escrow Instructions dated September 16, 2005 by and among Marelda Retail Development LLC and CRLP, and amendments thereto	Incorporated by reference to Exhibit 2.1 to CRLP’s Current Report on Form 8-K filed with the SEC on November 30, 2005
	2	.5	Acquisition and Contribution Agreement and Joint Escrow Instructions dated September 16, 2005 by and among Marelda Retail Development LLC and Colonial Realty Limited Partnership, and amendments thereto	Incorporated by reference to Exhibit 2.2 to CRLP’s Current Report on Form 8-K filed with the SEC on November 30, 2005
	3	.1	Declaration of Trust of Company	Incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed with the SEC on November 5, 1997
	3	.2	Articles Supplementary of 83/4% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest of the Company	Incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed with the SEC on November 5, 1997
	3	.3	Articles Supplementary of Series 1998 Junior Participating Preferred Shares of Beneficial Interest of the Company	Incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the period ending December 31, 1998
	3	.4	Articles Supplementary of 8.875% Series B Cumulative Redeemable Perpetual Preferred Shares of the Company	Incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the period ending December 31, 1998
	3	.5	Articles Supplementary of 7.25% Series B Cumulative Redeemable Perpetual Preferred Shares of the Company	Incorporated by reference to Exhibit 3.5 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2003.

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Exhibit
No.			Exhibit	Reference
	3	.6	Articles Supplementary of 9.25% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest of the Company	Incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed with the SEC on June 19, 2001
	3	.7	Articles Supplementary of 81/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest of the Company	Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 29, 2003
	3	.8	Articles of Amendment to Declaration of Trust of the Company, dated May 11, 2004	Incorporated by reference to Exhibit 3.8 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2004
	3	.9	Articles Supplementary Reclassifying Preferred Shares	Incorporated by reference to Exhibit 3.9 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2004
	3	.10	Form of Articles Supplementary of 7.62% Series E Cumulative Preferred Shares of Beneficial Interest of the Company	Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 8-A filed with the SEC on February 7, 2005
	3	.11	Articles of Amendment to Declaration of Trust of the Company, dated April 5, 2005	Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2005
	3	.12	Bylaws of the Company	Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-3, No. 333-55078, filed with the SEC on February 6, 2001
	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
	4	.3	Rights Agreement dated as of November 2, 1998 between Colonial Properties Trust and BankBoston, N.A.	Incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the period ending December 31, 1998
	4	.4	First Amendment to Rights Agreement, dated as of August 29, 2005, between the Company and EquiServe Trust Company, N.A., as successor to BankBoston, N.A., as Rights Agent	Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 1, 2005
	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
	4	.6	Form of Deposit Agreement for Series E depository shares by and among the Company and Equiserve Trust Company, N.A. and Equiserve, Inc.	Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed with the SEC on February 7, 2005
	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 Annual Report on Form 10-K for the period ending December 31, 1999
	10	.2	Fifth Amendment to Third Amended and Restated Agreement of Limited Partnership of CRLP	Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2003
	10	.3	Sixth Amendment to Third Amended and Restated Agreement of Limited Partnership of CRLP	Incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2003
	10	.4	Seventh Amendment to Third Amended and Restated Agreement of Limited Partnership of CRLP	Incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2003
	10	.4.1	Eighth Amendment to Third Amended and Restated Agreement of Limited Partnership of CRLP.	Incorporated by reference to Exhibit 10.4.1 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2004.
	10	.4.2	Ninth Amendment to Third Amended and Restated Agreement of Limited Partnership of CRLP, dated April 1, 2005	Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2005
	10	.5	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

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Exhibit
No.			Exhibit	Reference
	10	.6	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
	10	.7	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
	10	.8	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
	10	.9	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
	10	.10	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
	10	.11	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
	10	.12	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
	10	.13	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	.14	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
	10	.15	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
	10	.16	Registration Rights and Lock-Up Agreement dated December 29, 1994, among the Company and the persons named therein	Incorporated by reference to Exhibit 10.2.12 to the Company’s Annual Report on Form 10-K for the period ending December 31, 1998
	10	.17	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
	10	.18	Second Amended and Restated Employee Share Option and Restricted Share Plan†	Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the period ending December 31, 2003
	10	.18.1	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	.18.2	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	.18.3	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	.18.4	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	.18.5	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	.18.6	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	.19	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

125

Exhibit
No.			Exhibit	Reference
	10	.20	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	.21	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	.22	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	.23	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
	10	.24	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	.25	Employment Agreement between the Company and Thomas H. Lowder†	Incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-11/ A, No. 33-65954, filed with the SEC on September 21, 1993
	10	.26	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	.27	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	.28	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
	10	.28.1	First Amendment to Partnership Agreement of CPSLP	Filed herewith
	10	.29	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
	10	.30	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	.31	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	.32	Contribution Agreement, dated April 1, 2005	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2005
	10	.33	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	.34	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	.35	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
	10	.36	Form of Reimbursement Agreement dated January 25, 2000 by Employee Unit Purchase Plan participants in favor of CRLP	Incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the period ending December 31, 1999
	10	.37	Employment Agreement dated October 1, 2001 between Cornerstone and Glade M. Knight†	Incorporated by reference to Exhibit 10.6 to Cornerstone’s Form 10-K filed April 1, 2002
	10	.38	First Amendment to Employment Agreement dated September 21, 2004 between Cornerstone and Glade M. Knight†	Incorporated by reference to Exhibit 10.3 to Cornerstone’s Annual Report on Form 10-K filed with the SEC on March 16, 2005

126

Exhibit
No.			Exhibit	Reference
	10	.39	Amendment No 2 to Employment Agreement dated February 8, 2005 between Cornerstone and Glade M. Knight†	Incorporated by reference to Exhibit 10.1 to Cornerstone’s Current Report on Form 8-K filed with the SEC on February 9, 2005
	10	.40	Stock Option Agreement dated July 23, 1999 between Cornerstone and Glade M. Knight†	Incorporated by reference to Exhibit 10.50 to Cornerstone’s Annual Report on Form 10-K filed with the SEC on March 27, 2000
	10	.41	Amendment No. 1 to Stock Option Agreement dated February 8, 2005 between Cornerstone and Glade M. Knight†	Incorporated by reference to Exhibit 10.7 to Cornerstone’s Current Report on Form 8-K filed with the SEC on February 9, 2005
	10	.42	Change in Control Agreement dated August 1, 2000 between Cornerstone and Glade M. Knight†	Incorporated by reference to Exhibit 10.48 to Cornerstone’s Annual Report on Form 10-K filed with the SEC on April 2, 2001
	10	.43	Amendment No. 1 to Change in Control Agreement dated February 8, 2005 between Cornerstone and Glade M. Knight†	Incorporated by reference to Exhibit 10.3 to Cornerstone’s Current Report on Form 8-K filed with the SEC on February 9, 2005
	10	.44	Cornerstone 1992 Incentive Plan Amended and Restated Effective July 1, 2002†	Incorporated by reference to Exhibit 10.2 to Cornerstone’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2002)
	10	.45	First Amendment to Cornerstone 1992 Incentive Plan Amended and Restated Effective July 1, 2002†	Incorporated by reference to Exhibit 10.2 to Cornerstone’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2004
	10	.46	Agreement Evidencing Waiver of Performance Bonus dated February 25, 2005 between Cornerstone and Glade M. Knight†	Incorporated by reference to Exhibit 10.64 to Cornerstone’s Annual Report on Form 10-K filed with the SEC on March 16, 2005
	10	.47	Form of Stock Option Agreement between Glade M. Knight and Cornerstone†	Incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2005
	10	.48	Cornerstone Realty Income Trust, Inc. 1992 Non-Employee Directors Stock Option Plan, as amended†	Incorporated by reference to Exhibit 99.1 in Cornerstone Realty Income Trust, Inc.’s Registration Statement on Form S-8 filed with the SEC on April 9, 1997 (File No. 333-24875)
	10	.49	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	.50	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	.51	Form of Restricted Share Agreement (331/3% 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	.52	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	.53	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	.54	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	.55	Underwriting Agreement, dated September 15, 2005, by and among the Company, CRLP, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wachovia Capital Markets, LLC, as representatives of the several underwriters named in the related Terms Agreement	Incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 21, 2005
	10	.56	Terms Agreement, dated September 15, 2005, by and among the Company, CRLP, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wachovia Capital Markets, LLC, as representatives of the several underwriters named therein	Incorporated by reference to Exhibit 1.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 21, 2005
	10	.57	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

127

Exhibit
No.			Exhibit	Reference
	10	.58	Trustee Compensation Policy for 2005†	Incorporated by reference to Exhibit 10.22.1 to the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2005
	10	.59	Trustee Compensation Policy for 2006†	Filed herewith
	12	.1	Ratio of Earnings to Fixed Charges and Ratio of Combined Fixed Charges and Preferred Share Distributions	Filed herewith
	21	.1	List of Subsidiaries	Filed herewith
	23	.1	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

      None.

128

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 March 13, 2006.

Colonial Properties Trust

By:  /s/ Thomas H. Lowder

Thomas H. Lowder

Chairman of the Board,

President 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 March 13, 2006.

Signature
/s/ Thomas H. Lowder Thomas H. Lowder	Chairman of the Board, President and Chief Executive Officer
/s/ Weston M. Andress Weston M. Andress	Chief Financial and Investment Officer (Principal Financial Officer)
/s/ John E. Tomlinson John E. Tomlinson	Executive Vice President and Chief Accounting Officer
/s/ Carl F. Bailey Carl F. Bailey	Trustee
/s/ M. Miller Gorrie M. Miller Gorrie	Trustee
/s/ William M. Johnson William M. Johnson	Trustee
/s/ Glade M. Knight Glade M. Knight	Trustee
/s/ James K. Lowder James K. Lowder	Trustee
/s/ Herbert A. Meisler Herbert A. Meisler	Trustee
/s/ Claude B. Nielsen Claude B. Nielsen	Trustee

129

Signature
/s/ Harold W. Ripps Harold W. Ripps	Trustee
/s/ Donald T. Senterfitt Donald T. Senterfitt	Trustee
/s/ John W. Spiegel John W. Spiegel	Trustee

130

SCHEDULE III

COLONIAL PROPERTIES TRUST

REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION

December 31, 2005

				Initial Cost to				Cost		Gross Amount at Which
				Company				Capitalized		Carried at Close of Period										Date
								Subsequent												Acquired/
						Buildings and		to				Buildings and				Accumulated		Date		Placed in		Depreciable
Description		Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Total		Depreciation		Completed		Service		Lives-Years
Multifamily:
	Arbor Trace	$	—	$	3,367,063	$	10,369,060	$	54,913	$	3,367,062.79	$	10,423,973.45	$	13,791,036.24	$	196,930.61		1985		2005		3-40 Years
	Ashley Park		9,000,000		3,702,098		15,332,923		124,186		3,702,098		15,457,109		19,159,207		477,707		1988		2005		3-40 Years
	Autumn Park I & II		—		4,407,166		35,387,619		84,671		4,407,166		35,472,290		39,879,457		716,734		2001/04		2005		3-40 Years
	Beacon Hill		—		2,840,084		13,927,943		412,178		2,840,084		14,340,121		17,180,205		376,074		1985		2005		3-40 Years
	Brookfield		—		1,541,108		6,022,656		469,884		1,541,108		6,492,540		8,033,648		238,405		1984		2005		3-40 Years
	Cape Landing		—		1,942,826		14,989,387		173,419		1,942,826		15,162,806		17,105,631		438,260		1997/98		2005		3-40 Years
	Colonial Grand at Arringdon		—		3,016,358		23,295,172		263,420		3,016,358		23,558,592		26,574,950		1,524,729		2003		2004		3-40 Years
	Colonial Grand at Barrett Creek		—		3,320,000		27,237,381		28,892		3,320,000		27,266,273		30,586,273		354,703		1999		2005		3-40 Years
	Colonial Grand at Bear Creek		—		4,360,000		32,029,388		364,118		4,360,000		32,393,506		36,753,506		417,149		1998		2005		3-40 Years
	Colonial Grand at Bellevue		—		3,490,000		31,544,370		—		3,490,000		31,544,370		35,034,370		102,515		1996		2005		3-40 Years
	Colonial Grand at Berkeley Lake		7,995,525		1,800,000		16,551,734		187,172		1,800,000		16,738,906		18,538,906		970,863		1998		2004		3-40 Years
	Colonial Grand at Beverly Crest		—		2,400,000		20,718,143		358,737		2,400,000		21,076,881		23,476,881		959,927		1996		2004		3-40 Years
	Colonial Grand at Crabtree Valley		—		2,100,000		15,272,196		—		2,100,000		15,272,196		17,372,196		49,634		1997		2005		3-40 Years
	Colonial Grand at Cypress Crossing		—		8,781,859		—		13,795,476		2,125,136		20,452,199		22,577,335		5,735,390		1999		1998		3-40 Years
	Colonial Grand at Edgewater		20,692,483		1,540,000		12,671,606		14,466,623		2,602,325		26,075,904		28,678,229		9,186,326		1990		1994		3-40 Years
	Colonial Grand at Enclave		—		2,283,407		14,374,986		1,305,336		2,427,705		15,536,024		17,963,729		402,286		1995		2005		3-40 Years
	Colonial Grand at Galleria		33,505,000		5,358,439		46,981,307		7,486,757		5,358,439		54,468,064		59,826,503		17,822,612		1986		1994/96		3-40 Years
	Colonial Grand at Hammocks		19,230,825		3,437,247		26,514,000		378,141		3,437,247		26,892,142		30,329,388		777,104		1997		2005		3-40 Years
	Colonial Grand at Heather Glen		—		3,800,000		—		31,827,259		4,134,235		31,493,025		35,627,259		7,687,630		2000		1998		3-40 Years
	Colonial Grand at Heathrow		—		2,560,661		17,612,990		1,036,991		2,560,661		18,649,980		21,210,642		6,304,360		1997		1994/97		3-40 Years
	Colonial Grand at Hunter’s Creek		29,264,701		33,264,022		—		1,683,894		5,308,112		29,639,804		34,947,916		10,423,281		1996		1996		3-40 Years
	Colonial Grand at Lakewood Ranch		—		2,320,442		—		21,012,337		2,148,814		21,183,964		23,332,779		5,622,250		1999		1997		3-40 Years
	Colonial Grand at Legacy Park		—		2,212,005		23,076,117		192,059		2,212,005		23,268,176		25,480,181		566,214		2001		2005		3-40 Years
	Colonial Grand at Liberty Park		—		2,296,019		—		25,490,998		2,296,019		25,490,998		27,787,017		5,966,409		2000		1998		3-40 Years
	Colonial Grand at Madison		16,156,614		1,689,400		—		21,926,452		1,831,550		21,784,301		23,615,852		5,368,006		2000		1998		3-40 Years
	Colonial Grand at Mallard Creek		—		2,911,443		1,277,575		19,161,005		2,911,443		20,438,580		23,350,023		186,262		2005		2003		3-40 Years
	Colonial Grand at Mallard Lake		—		3,020,000		24,070,350		—		3,020,000		24,070,350		27,090,350		78,228		1998		2005		3-40 Years
	Colonial Grand at McGinnis Ferry		—		5,000,114		34,600,386		400,435		5,000,114		35,000,821		40,000,935		1,371,091		1997		2004		3-40 Years
	Colonial Grand at Metrowest		—		3,421,000		22,592,957		523,678		3,421,000		23,116,635		26,537,635		1,821,822		1997		2003		3-40 Years
	Colonial Grand at Mount Vernon		12,542,407		2,130,000		24,943,402		243,802		2,130,000		25,187,204		27,317,204		1,458,111		1997		2004		3-40 Years
	Colonial Grand at Natchez Trace		3,920,167		1,312,000		16,568,050		1,085,156		1,224,499		17,740,707		18,965,206		5,228,357		1995/97		1997		3-40 Years
	Colonial Grand at Patterson Place		—		2,016,000		19,060,725		248,495		2,016,000		19,309,220		21,325,220		877,586		1997		2004		3-40 Years
	Colonial Grand at Promenade		21,586,022		1,479,352		—		26,810,617		1,668,104		26,621,865		28,289,969		6,575,931		1992		1992		3-40 Years
	Colonial Grand at Quarry Oaks		—		5,063,500		27,767,505		963,695		5,063,500		28,731,200		33,794,700		1,609,674		1996		2003		3-40 Years
	Colonial Grand at Quarterdeck		10,114,792		9,123,452		12,297,699		372,914		9,123,452		12,670,613		21,794,065		377,428		1987		2005		3-40 Years
	Colonial Grand at Reservoir		8,015,300		1,020,000		—		13,569,575		1,122,893		13,466,682		14,589,575		3,217,350		2000		1998		3-40 Years
	Colonial Grand at River Oaks		10,500,281		2,160,000		17,424,336		1,145,335		2,160,000		18,569,671		20,729,671		1,062,055		1992		2004		3-40 Years
	Colonial Grand at River Plantation		11,423,401		2,320,000		19,669,298		593,238		2,320,000		20,262,536		22,582,536		1,196,068		1994		2004		3-40 Years
	Colonial Grand at Riverchase		19,027,305		2,340,000		25,248,548		4,949,519		2,340,000		30,198,067		32,538,067		9,964,302		1984/91		2004		3-40 Years
	Colonial Grand at Seven Oaks		—		3,439,125		19,943,544		1,159,612		3,439,125		21,103,156		24,542,281		1,261,420		2004		2004		3-40 Years
	Colonial Grand at Shelby Farms		—		2,960,000		21,897,855		—		2,960,000		21,897,855		24,857,855		71,151		1998		2005		3-40 Years
	Colonial Grand at Silverado		—		2,375,425		17,744,643		268,479		2,375,425		18,013,122		20,388,547		607,065		2005		2003		3-40 Years
	Colonial Grand at Sugarloaf		—		2,500,000		21,811,418		936,717		2,500,000		22,748,135		25,248,135		1,290,320		2002		2004		3-40 Years
	Colonial Grand at TownPark		—		1,391,500		—		8,351,750		867,929		8,875,320		9,743,250		440,562		2002		2000		3-40 Years

S-1

			Initial Cost to				Cost		Gross Amount at Which
			Company				Capitalized		Carried at Close of Period										Date
							Subsequent												Acquired/
					Buildings and		to				Buildings and				Accumulated		Date		Placed in		Depreciable
Description	Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Total		Depreciation		Completed		Service		Lives-Years
Colonial Grand at TownPark — Lake Mary		—		2,647,374		—		34,859,735		2,647,374		34,859,735		37,507,109		6,797,814		2005		2005		3-40 Years
Colonial Grand at Trinity Commons		18,072,636		5,333,807		35,815,269		219,616		5,333,807		36,034,885		41,368,692		831,129		2000/02		2005		3-40 Years
Colonial Grand at Twin Lakes		—		4,966,922		29,925,363		92,502		5,624,063		29,360,724		34,984,787		1,212,906		2005		2001		3-40 Years
Colonial Grand at Valley Ranch		24,970,926		2,805,241		38,037,251		748,989		2,805,241		38,786,239		41,591,480		921,509		1997		2005		3-40 Years
Colonial Grand at Whitemarsh		—		3,797,600		34,351,276		584,152		4,513,974		34,219,054		38,733,027		N/A		2003		2005		3-40 Years
Colonial Grand at Wilmington		13,279,255		3,344,408		30,554,367		427,421		3,344,408		30,981,788		34,326,196		753,922		1998/2002		2005		3-40 Years
Clarion Crossing		—		2,727,410		12,339,859		144,528		2,727,410		12,484,387		15,211,796		457,590		1972		2005		3-40 Years
Copper Crossing		—		3,064,199		10,090,736		597,641		3,064,199		10,688,377		13,752,576		490,333		1980/81		2005		3-40 Years
Cottonwood Crossing		6,243,802		922,398		6,127,804		225,423		922,398		6,353,227		7,275,625		267,956		1985		2005		3-40 Years
Colonial Village at Bear Creek		3,507,514		1,028,887		4,357,339		294,359		1,028,887		4,651,698		5,680,585		185,209		1984		2005		3-40 Years
Colonial Village at Ashford Place		—		537,600		5,839,838		814,283		537,600		6,654,121		7,191,721		1,837,925		1983		1996		3-40 Years
Colonial Village at Bedford		8,711,441		2,403,988		8,732,353		555,058		2,403,988		9,287,412		11,691,400		282,532		1983		2005		3-40 Years
Colonial Village at Caledon Wood		—		2,100,000		19,482,210		1,155,833		2,088,949		20,649,095		22,738,043		5,951,141		1995/96		1997		3-40 Years
Colonial Village at Canyon Hills		12,988,636		2,345,191		11,274,917		549,539		2,345,191		11,824,456		14,169,647		332,247		1996		2005		3-40 Years
Colonial Village at Charleston Place		—		1,124,924		7,367,718		423,871		1,124,924		7,791,589		8,916,513		299,553		1986		2005		3-40 Years
Colonial Village at Chase Gayton		16,381,289		3,270,754		26,910,024		372,531		3,270,754		27,282,555		30,553,310		1,058,772		1984		2005		3-40 Years
Colonial Village at Deerfield		10,536,358		2,032,054		14,584,057		237,131		2,032,054		14,821,189		16,853,243		421,426		1985		2005		3-40 Years
Colonial Village at Estrada		9,429,880		1,689,249		7,401,941		267,043		1,689,249		7,668,984		9,358,233		300,988		1983		2005		3-40 Years
Colonial Village at Greenbrier		13,065,252		2,620,216		25,498,161		292,803		2,620,216		25,790,964		28,411,180		594,819		1980		2005		3-40 Years
Colonial Village at Greentree		6,822,488		1,920,436		10,288,950		486,557		1,920,436		10,775,507		12,695,943		276,353		1984		2005		3-40 Years
Colonial Village at Greystone		—		3,155,483		28,875,949		469,113		3,155,483		29,345,061		32,500,544		668,717		1998/2000		2005		3-40 Years
Colonial Village at Hampton Glen		12,881,063		3,428,098		17,966,469		370,107		3,428,098		18,336,576		21,764,674		638,404		1986		2005		3-40 Years
Colonial Village at Hampton Pointe		—		8,875,840		15,359,217		332,700		8,875,840		15,691,917		24,567,757		476,509		1986		2005		3-40 Years
Colonial Village at Harbour Club		8,685,607		3,209,585		20,094,356		660,887		3,209,585		20,755,243		23,964,828		600,669		1988		2005		3-40 Years
Colonial Village at Haverhill		—		1,771,000		17,869,452		3,194,620		1,771,000		21,064,072		22,835,072		5,296,422		1998		1998		3-40 Years
Colonial Village at Highland Hills		15,140,005		1,981,613		17,112,176		282,741		1,981,613		17,394,916		19,376,530		656,421		1987		2005		3-40 Years
Colonial Village at Huntington		5,017,102		1,315,930		7,605,360		102,327		1,315,930		7,707,687		9,023,617		201,165		1986		2005		3-40 Years
Colonial Village at Huntleigh Woods		—		745,600		4,908,990		1,383,751		730,688		6,307,653		7,038,341		2,113,382		1978		1994		3-40 Years
Colonial Village at Inverness		11,105,000		2,349,487		16,279,416		11,708,169		2,936,991		27,400,081		30,337,072		10,853,125		1986/87/90/97		1986/87/90/97		3-40 Years
Colonial Village at Main Park		8,727,503		1,208,434		10,235,978		417,323		1,208,434		10,653,300		11,861,735		324,908		1984		2005		3-40 Years
Colonial Village at Marsh Cove		8,297,775		2,023,460		11,095,073		700,849		2,023,460		11,795,922		13,819,382		385,958		1983		2005		3-40 Years
Colonial Village at Meadow Creek		9,887,077		1,548,280		11,293,190		468,526		1,548,280		11,761,717		13,309,997		394,442		1984		2005		3-40 Years
Colonial Village at Mill Creek		—		2,153,567		9,331,910		2,734,026		2,153,567		12,065,937		14,219,504		531,934		1984		2005		3-40 Years
Colonial Village at North Arlington		8,799,964		2,439,102		10,804,027		433,706		2,439,102		11,237,734		13,676,836		361,253		1985		2005		3-40 Years
Colonial Village at Paces Glen		—		908,672		5,013,745		223,822		908,672		5,237,567		6,146,239		313,739		1986		2005		3-40 Years
Colonial Village at Pear Ridge		10,837,370		3,329,377		11,311,073		242,579		3,329,377		11,553,651		14,883,028		317,016		1988		2005		3-40 Years
Colonial Village at Pinnacle Ridge		5,161,623		1,212,917		8,499,638		92,550		1,212,917		8,592,187		9,805,104		313,385		1951/85		2005		3-40 Years
Colonial Village at Poplar Place		—		2,209,209		13,932,821		643,061		2,209,209		14,575,883		16,785,092		377,292		1989/95		2005		3-40 Years
Colonial Village at Regency Place		—		1,726,498		8,748,067		379,209		1,726,498		9,127,276		10,853,774		274,377		1986		2005		3-40 Years
Colonial Village at Remington Place		—		1,009,327		5,950,650		40,262		1,009,327		5,990,913		7,000,240		244,206		1988		2005		3-40 Years
Colonial Village at Research Park		27,720,000		3,680,000.00		29,322,067.00		4,824,803		3,680,000		34,146,870		37,826,870		11,951,590		1987/94		1994		3-40 Years
Colonial Village at Sierra Vista		—		2,320,000		11,370,600		792,753		2,308,949		12,174,404		14,483,353		621,602		1999		2004		3-40 Years
Colonial Village at South Tryon		—		1,510,535		14,696,088		374,359		1,510,535		15,070,448		16,580,982		327,985		2002		2005		3-40 Years
Colonial Village at Spring Lake		—		1,409,195		9,917,923		197,133		1,409,195		10,115,055		11,524,250		408,908		1986		2005		3-40 Years
Colonial Village at Stone Brook		—		1,733,073		7,033,805		244,455		1,733,073		7,278,259		9,011,332		302,106		1987		2005		3-40 Years
Colonial Village at Stone Point		—		1,417,658		9,291,464		219,625		1,417,658		9,511,088		10,928,747		349,543		1986		2005		3-40 Years
Colonial Village at Timber Crest		15,481,367		2,284,812		19,010,168		369,560		2,284,812		19,379,728		21,664,540		462,562		2000		2005		3-40 Years
Colonial Village at Timothy Woods		9,023,098		1,020,000		11,910,546		747,423		1,024,347		12,653,622		13,677,969		3,695,728		1996		1997		3-40 Years
Colonial Village at Tradewinds		11,443,131		5,220,717		22,479,977		485,142		5,220,717		22,965,119		28,185,836		580,159		1988		2005		3-40 Years
Colonial Village at Trussville		15,739,270		1,504,000		18,800,253		1,620,070		1,510,409		20,413,914		21,924,323		6,510,897		1996/97		1997		3-40 Years
Colonial Village at Waterford		17,440,160		3,321,325		26,345,195		424,383		3,321,325		26,769,579		30,090,904		794,189		1989		2005		3-40 Years
Colonial Village at Waters Edge		7,308,468		888,386		13,215,381		495,886		888,386		13,711,267		14,599,653		573,983		1985		2005		3-40 Years
Colonial Village at Westchase		—		10,418,496		10,348,047		657,481		10,418,496		11,005,528		21,424,024		522,826		1985		2005		3-40 Years
Colonial Village at Windsor Place		9,173,431		1,274,885		15,017,745		854,273		1,274,885		15,872,017		17,146,902		494,680		1985		2005		3-40 Years

S-2

				Initial Cost to				Cost		Gross Amount at Which
				Company				Capitalized		Carried at Close of Period										Date
								Subsequent												Acquired/
						Buildings and		to				Buildings and				Accumulated		Date		Placed in		Depreciable
Description		Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Total		Depreciation		Completed		Service		Lives-Years
	Glen Eagles I & II		—		2,028,204		17,424,915		87,459		2,028,204		17,512,374		19,540,579		518,334		1990/2000		2005		3-40 Years
	Grayson Square I & II		—		6,221,164		24,463,050		483,491		6,221,164		24,946,541		31,167,705		713,314		1985/86		2005		3-40 Years
	Heatherwood		—		3,550,362		23,731,531		128,050		3,550,362		23,859,581		27,409,943		773,352		1980		2005		3-40 Years
	Merritt at James Island		—		9,175,719		17,462,810		77,926		9,175,719		17,540,736		26,716,455		—		2002		2005		3-40 Years
	Paces Cove		11,510,344		1,509,933		11,127,122		98,903		1,509,933		11,226,025		12,735,957		445,263		1982		2005		3-40 Years
	Paces Point		—		2,003,172		11,186,878		94,252		2,003,172		11,281,130		13,284,301		362,107		1985		2005		3-40 Years
	Parkside at Woodlake		—		2,781,279		17,694,376		146,699		2,781,279		17,841,075		20,622,354		474,867		1996		2005		3-40 Years
	Remington Hills at Las Colinas		—		2,520,011		22,451,151		145,022		2,520,011		22,596,173		25,116,184		189		1984		2005		3-40 Years
	Summer Tree		7,943,084		2,319,541		5,975,472		62,475		2,319,541		6,037,947		8,357,487		302,764		1980		2005		3-40 Years
	Summerwalk		—		1,040,769		6,872,638		72,906		1,040,769		6,945,544		7,986,314		322		1983		2005		3-40 Years
	The Gables		—		2,436,588		14,800,444		85,723		2,436,588		14,886,167		17,322,754		396		1987		2005		3-40 Years
	The Meadows I, II, & III		—		3,322,195		24,192,374		104,454		3,322,195		24,296,829		27,619,024		454		1974/2001		2005		3-40 Years
	The Timbers		—		1,602,524		5,877,106		781,670		1,602,524		6,658,776		8,261,300		258,622		1983		2005		3-40 Years
	The Trestles		—		2,238,067		9,392,154		578,083		2,238,067		9,970,237		12,208,304		391,748		1987		2005		3-40 Years
	Trolley Square East & West		—		4,743,279		14,416,319		172,178		4,743,279		14,588,497		19,331,776		330,782		1964/65		2005		3-40 Years
	Trophy Chase I & II		—		7,146,496		24,811,026		523,365		7,146,496		25,334,391		32,480,888		767,499		1970		2005		3-40 Years
Office:
	250 Commerce Street		—		25,000		200,200		2,770,742		25,000		2,970,942		2,995,942		2,626,598		1904/81		1980		3-40 Years
	901 Maitland Center		—		2,335,035		14,398,193		1,282,944		2,335,035		15,681,137		18,016,172		1,943,700		1985		2002		3-40 Years
	AmSouth Center		—		764,961		—		20,868,396		764,961		20,868,395		21,633,357		10,925,025		1990		1990		3-40 Years
	Colonial Bank Centre		—		6,911,461		32,714,386		161,768		6,911,461		32,876,154		39,787,615		890,802		1982		2005		3-40 Years
	Colonial Center at Bayside		—		1,507,665		15,902,388		2,450,323		1,507,665		18,352,711		19,860,376		500,261		1997		2005		3-40 Years
	Colonial Center at Blue Lake		—		1,794,672		14,615,335		4,714,884		1,779,230		19,345,661		21,124,892		3,794,784		1982/95		1999		3-40 Years
	Colonial Center at Mansell Overlook		15,924,309		4,540,000		44,012,971		92,653,106		9,673,627		131,532,450		141,206,077		27,329,735		1987/96/97/00		1997		3-40 Years
	Colonial Center at Research Office Center		—		1,745,672		12,909,263		454,321		1,745,672		13,363,584		15,109,256		1,018,395		1984/00		2004		3-40 Years
	Colonial Center at Research Place		—		2,763,900		12,790,254		2,069,783		1,202,170		16,421,767		17,623,937		1,268,246		1979/84/88		2003		3-40 Years
	Colonial Center Colonnade		—		6,299,310		40,485,721		6,599,215		6,299,310		47,084,936		53,384,246		4,580,337		1989/99		2002		3-40 Years
	Colonial Center Heathrow		—		13,548,715		97,256,123		3,670,018		13,548,715		100,926,141		114,474,856		9,000,407		1988/96-00		2002		3-40 Years
	Colonial Center Heathrow 1001		—		2,384,904		16,859,972		194,237		2,384,904		17,054,209		19,439,113		325,840		2001		2005		3-40 Years
	Colonial Center Lakeside		—		423,451		8,313,291		2,422,088		425,255		10,733,575		11,158,830		2,984,067		1989/90		1997		3-40 Years
	Colonial Center Research Park		—		1,373,238		—		12,558,996		1,003,865		12,928,369		13,932,234		3,761,453		1999		1998		3-40 Years
	Colonial Place I & II		—		4,851,165		43,534,087		2,734,819		4,851,165		46,268,906		51,120,071		1,717,742		1984/86		2005		3-40 Years
	Colonial Plaza		—		1,001,375		12,381,023		6,428,356		1,005,642		18,805,112		19,810,754		4,199,848		1982		1997		3-40 Years
	Concourse Center		—		4,875,000		25,702,552		10,190,190		4,875,000		35,892,742		40,767,742		6,469,487		1981/85		1998		3-40 Years
	DRS Building		—		610,000		12,089,992		122,007		610,000		12,211,999		12,821,999		751,052		1972/86/90/03		2004		3-40 Years
	Esplanade		—		4,211,670		16,231,315		560,902		1,512,667		19,491,220		21,003,887		340,849		1981		2005		3-40 Years
	Independence Plaza		—		1,505,000		6,018,476		4,025,635		1,505,000		10,044,111		11,549,111		2,382,818		1981/92		1998		3-40 Years
	International Park		—		1,279,355		5,668,186		17,740,102		2,740,276		21,947,367		24,687,643		5,623,952		1987/89		1997		3-40 Years
	Interstate Park		—		1,125,990		7,113,558		13,490,489		1,125,988		20,604,049		21,730,037		10,412,270		1982-85/89		1982-85/89		3-40 Years
	Perimeter Corporate Park		—		1,422,169		18,377,648		5,529,736		1,422,169		23,907,384		25,329,553		6,252,775		1986/89		1998		3-40 Years
	Progress Center		—		521,037		14,710,851		5,564,345		523,258		20,272,975		20,796,233		6,017,977		1983-91		1997		3-40 Years
	Research Park Office Center IV		—		994,058		3,644,740		49,068		550,349		4,137,517		4,687,866		140,443		1998		2005		3-40 Years
	Research Park Plaza III & IV		—		3,060,363		73,120,000		384,773		3,060,363		73,504,773		76,565,136		953,516		2001		2005		3-40 Years
	Riverchase Center		—		1,916,727		22,091,651		6,939,510		1,924,895		29,022,994		30,947,888		8,103,704		1984-88		1997		3-40 Years
	Shoppes at Mansell		—		600,000		3,089,565		120,708		600,000		3,210,273		3,810,273		634,697		1996/97		1998		3-40 Years
	The Peachtree		—		8,410,000		33,640,000		5,055,403		10,868,412		36,236,991		47,105,403		371,304		1989		2005		3-40 Years
	Town Park-Office over Retail		—		443,535		—		6,500,012		442,772		6,500,775		6,943,547		764,945		2004		2004		3-40 Years
	Lakeside at Mansell		—		1,300,000		—		839,456		1,300,000		839,456		2,139,456		—		2005		2005		3-40 Years
Retail:
	Britt David Shopping Center		—		1,755,000		4,951,852		609,921		1,755,000		5,561,773		7,316,773		1,637,689		1990		1994		3-40 Years
	Colonial Brookwood Village		—		8,136,700		24,435,002		68,067,676		8,171,373		92,468,004		100,639,378		21,611,693		1973/91/00		1997		3-40 Years
	Colonial Mall Decatur		—		3,262,800		23,636,229		5,032,598		3,262,800		28,668,827		31,931,627		9,340,998		1979/89		1993		3-40 Years
	Colonial Mall Lakeshore		—		4,646,300		30,973,239		4,518,387		4,666,100		35,471,827		40,137,926		8,974,695		1984-87		1997		3-40 Years
	Colonial Mall Staunton		—		2,895,000		15,083,542		6,818,360		2,907,337		21,889,566		24,796,902		5,502,656		1969/86/97		1997		3-40 Years

S-3

				Initial Cost to				Cost			Gross Amount at Which
				Company				Capitalized			Carried at Close of Period										Date
								Subsequent													Acquired/
						Buildings and		to					Buildings and				Accumulated		Date		Placed in		Depreciable
Description		Encumbrances		Land		Improvements		Acquisition			Land		Improvements		Total		Depreciation		Completed		Service		Lives-Years
	Colonial Mayberry Mall		—		862,500		3,778,590		1,140,377			866,175		4,915,291		5,781,467		1,299,131		1968/86		1997		3-40 Years
	Colonial Pinnacle Kingwood Commons		—		6,100,000		23,223,232		749,205			6,100,000		23,972,437		30,072,437		1,341,012		2003/04		2004		3-40 Years
	Colonial Promenade Alabaster		—		7,540,689		—		20,654,295			5,990,280		22,204,704		28,194,985		386,279		2005		2004		3-40 Years
	Colonial Promenade Beechwood		—		2,565,550		19,647,875		17,888,570			2,576,483		37,525,512		40,101,995		7,308,489		1963/92/05		1997		3-40 Years
	Colonial Promenade Boulevard Square		30,787,488		13,719,799		24,723,406		4,367,849			13,772,107		29,038,947		42,811,054		1,038,923		2001		2004		3-40 Years
	Colonial Promenade Burnt Store		—		2,707,798		5,557,430		1,611,943			2,707,798		7,169,373		9,877,171		1,843,566		1990		1994		3-40 Years
	Colonial Promenade Deerfield		32,101,028		13,000,000		26,680,451		5,258,861			13,000,000		31,939,312		44,939,312		1,535,365		1988/2003		2004		3-40 Years
	Colonial Promenade Hunter’s Creek		—		4,181,760		13,023,401		1,388,424			4,181,760		14,411,825		18,593,585		3,419,371		1993/95		1996		3-40 Years
	Colonial Promenade Lakewood		—		2,984,522		11,482,512		3,486,872			3,018,135		14,935,772		17,953,906		3,656,806		1995		1997		3-40 Years
	Colonial Promenade Montgomery		11,616,748		3,788,913		11,346,754		1,831,908			4,332,432		12,635,143		16,967,575		5,115,003		1990		1993		3-40 Years
	Colonial Promenade Montgomery North		—		2,400,000		5,664,858		630,951			2,401,182		6,294,627		8,695,809		1,298,811		1997		1995		3-40 Years
	Colonial Promenade Northdale		—		3,059,760		8,054,090		7,023,256			2,835,571		15,301,535		18,137,106		3,207,821		1988/00		1995		3-40 Years
	Colonial Promenade Portofino		—		11,148,386		44,295,771		0			11,148,386		44,295,771		55,444,157		1,515,013		2000		2005		3-40 Years
	Colonial Promenade Town Park		405,889		3,916,001		—		25,790,149			3,953,828		25,752,322		29,706,150		2,252,860		2005		2005		3-40 Years
	Colonial Promenade Trussville		—		4,201,186		—		28,244,944			3,868,278		28,577,852		32,446,130		4,113,363		2000		1998		3-40 Years
	Colonial Promenade Trussville II		—		1,476,871		—		5,400,416			802,784		6,074,502		6,877,286		282,392		2004		2003		3-40 Years
	Colonial Promenade Tutwiler Farm		—		13,202,493		—		11,699,706			7,037,894		17,864,305		24,902,199		2,437,149		2000		1999		3-40 Years
	Colonial Promenade Wekiva		—		2,817,788		15,302,375		742,378			2,817,788		16,044,753		18,862,541		3,943,147		1990		1996		3-40 Years
	Colonial Promenade Winter Haven		—		1,768,586		3,928,903		5,011,907			4,045,045		6,664,351		10,709,396		2,038,686		1986		1995		3-40 Years
	Colonial Shoppes Bear Lake		—		2,134,440		6,551,683		1,825,031			2,134,440		8,376,714		10,511,154		2,212,782		1990		1995		3-40 Years
	Colonial Shoppes Bellwood		—		330,000		—		5,440,472			330,000		5,440,472		5,770,472		2,364,496		1988		1988		3-40 Years
	Colonial Shoppes Clay		—		272,594		—		7,635,715			277,975		7,630,334		7,908,309		3,269,687		1982/2004		1982		3-40 Years
	Colonial Shoppes College Parkway		7,636,490		2,700,000		10,792,000		1,172,993			2,700,000		11,964,993		14,664,993		466,495		1970/2000		2004		3-40 Years
	Colonial Shoppes McGehee		—		197,152		—		6,424,623			197,152		6,424,623		6,621,775		2,709,456		1986		1986		3-40 Years
	Colonial Shoppes Pines Plaza		9,218,302		2,000,000		9,641,999		505,806			2,000,000		10,147,805		12,147,805		401,775		2002		2004		3-40 Years
	Colonial Shoppes Quaker Village		—		931,000		7,901,874		1,376,391			934,967		9,274,298		10,209,265		2,185,541		1968/88/97		1997		3-40 Years
	Colonial Shoppes Yadkinville		—		1,080,000		1,224,136		3,658,893			1,084,602		4,878,427		5,963,029		1,063,735		1971/97		1997		3-40 Years
	Colonial Shops Colonnade		—		2,468,092		4,034,205		5,936,247			4,827,330		7,611,214		12,438,544		529,375		1989/2005		2002		3-40 Years
	Olde Town Shopping Center		—		343,325		—		2,921,439			343,325		2,921,439		3,264,764		1,433,573		1978/90		1978/90		3-40 Years
	Rivermont Shopping Center		—		515,250		2,332,486		369,555			517,446		2,699,845		3,217,291		709,175		1986/97		1997		3-40 Years
	Village on Parkway		47,000,000		16,940,000		30,852,577		3,093,113			16,940,000		33,945,690		50,885,690		1,726,948		1980		2004		3-40 Years
Active Development Projects:
	Central Park		—		1,437,374		—		3,695,878			1,437,374		3,695,878		5,133,252		—		N/A		2005		N/A
	Colonial Grand at Canyon Creek		—		3,255,045		—		3,312,505			3,255,045		3,312,505		6,567,550		—		N/A		2005		N/A
	Colonial Grand at Double Creek		—		3,505,449		—		376,192			3,505,449		376,192		3,881,641		—		N/A		2005		N/A
	Colonial Grand at Round Rock		—		2,403,869		—		17,901,001			2,403,869		17,901,001		20,304,870		—		N/A		2005		N/A
	Colonial Grand at Silverado Reserve		—		2,297,761		—		17,462,548			2,297,761		17,462,548		19,760,309		—		N/A		2005		N/A
	Colonial Center TownPark 300		—		2,392,000		—		7,397,563			2,392,000		7,397,563		9,789,563		—		N/A		2005		N/A
	Colonial Pinnacle Craft Farms		—		7,059,359		—		9,119,303			7,059,359		9,119,303		16,178,662		—		N/A		2004		N/A
	Colonial Pinnacle Tutwiler Farm		—		2,915,467		—		14,557,669			2,915,467		14,557,669		17,473,136		—		N/A		2004		N/A
	Colonial Promenade Fultondale		—		1,984,971		—		—			1,984,971		—		1,984,971		—		N/A		2005		N/A
	Colonial Traditions at Gulf Shores		—		17,894,246		—		268,736			17,894,246		268,736		18,162,982		—		N/A		2005		N/A
	Colonial Traditions at South Park		—		1,993,941		—		19,688			1,993,941		19,688		2,013,629		—		N/A		2005		N/A
	Northrop Grumman		—		1,477,946		—		—			1,477,946		—		1,477,946		—		N/A		2005		N/A
	The Renwick		—		3,578,796		—		496,027			3,578,796		496,027		4,074,823		—		N/A		2005		N/A
Condominium Conversion Properties:
	Murano at Delray Beach		—		—		56,238,824		(20,526,387	)		—		35,712,437		35,712,437		N/A		2002		2005		N/A
	Portofino at Jensen Beach		—		—		63,094,381		(32,120,255	)		—		30,974,126		30,974,126		N/A		2002		2005		N/A

S-4

				Initial Cost to				Cost		Gross Amount at Which
				Company				Capitalized		Carried at Close of Period										Date
								Subsequent												Acquired/
						Buildings and		to				Buildings and				Accumulated		Date		Placed in		Depreciable
Description		Encumbrances		Land		Improvements		Acquisition		Land		Improvements		Total		Depreciation		Completed		Service		Lives-Years
Unimproved Land:
	Bellevue Land		—		4,922,729		—		—		4,922,729		—		4,922,729		—		N/A		2005		N/A
	Canal Place Land and Infrastructure		—		10,951,968		—		—		10,951,968		—		10,951,968		—		N/A		2005		N/A
	Corporate Assets		—		—		—		12,758,240		—		12,758,240		12,758,240		6,444,943		N/A		N/A		3-7 Years
	Heathrow Land and Infrastructure		—		12,250,568		—		1,663,187		13,913,755		—		13,913,755		—		N/A		2002		N/A
	Lakewood Ranch		—		47,990		—		1,211,704		1,184,814		74,880		1,259,694		—		N/A		1999		N/A
	Mansell Land and Infrastructure		—		2,664,265		—		724,609		3,388,874		—		3,388,874		—		N/A		1997		N/A
	TownPark Land and Infrastructure		—		8,902,943		—		1,442,923		10,345,866		—		10,345,866		—		N/A		1999		N/A
	Other Miscellaneous Projects		—		1,143,896		—		6,155,674		—		7,299,570		7,299,570		800,549		N/A		2002		N/A
		$	768,996,994.33	$	690,001,905.75	$	2,930,893,601.76	$	933,197,718	$	666,306,441.53	$	3,887,786,783.66	$	4,554,093,225.19	$	463,109,241.66

S-5

NOTES TO SCHEDULE III

COLONIAL PROPERTIES TRUST

December 31, 2005

(1) The aggregate cost for Federal Income Tax purposes was approximately $3.4 billion at December 31, 2005.

(2) See description of mortgage notes payable in Note 9 of Notes to Consolidated Financial Statements.

(3) The following is a reconciliation of real estate to balances reported at the beginning of the year:

(4) Amounts include real estate assets classified as held for sale at December 31, 2005.

			Reconciliation of Real Estate
			2005			2004			2003
Real estate investments:
	Balance at beginning of year		$	3,091,323,963		$	2,510,449,263		$	2,380,762,598
		Acquisitions of new property		2,150,264,089			478,208,477			78,742,469
		Improvements and development		254,999,732			143,497,725			87,675,381
		Dispositions of property		(942,494,559	)		(40,831,502	)		(36,731,185	)
	Balance at end of year		$	4,554,093,225		$	3,091,323,963		$	2,510,449,263

			Reconciliation of Accumulated Depreciation
			2005			2004			2003
Accumulated depreciation:
	Balance at beginning of year		$	505,988,402		$	425,487,601		$	351,163,907
		Depreciation		135,929,433			104,935,782			88,562,633
		Depreciation of disposition of property		(178,808,593	)		(24,434,981	)		(14,238,939	)
	Balance at end of year		$	463,109,242		$	505,988,402		$	425,487,601

S-6 EX-10.28.1 2 g99929exv10w28w1.htm EX-10.28.1 FIRST AMENDMENT TO PARTNERSHIP AGREEMENT

Exhibit 10.28.1

FIRST AMENDMENT
TO
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
COLONIAL PROPERTIES SERVICES LIMITED PARTNERSHIP

          THIS FIRST AMENDMENT TO FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF COLONIAL PROPERTIES SERVICES LIMITED PARTNERSHIP (this “Amendment”) dated as of March 23, 2005, is entered into by Colonial Realty Limited Partnership, as general partner (the “General Partner”) of Colonial Properties Services Limited Partnership (the “Partnership”), for itself and on behalf of the limited partner of the Partnership (the “Limited Partner”).

          WHEREAS, the General Partner is a party to the First Amended and Restated Agreement of Limited Partnership of the Partnership entered into as of September 29, 1993 (the “Partnership Agreement”);

          WHEREAS, the General Partner, pursuant to Section 12.2 of the Partnership Agreement, desires to consent to the transfer of the 1% limited partnership interest of Colonial Properties Services Inc. (“CPSI”) in the Partnership (the “LP Interest”) to Colonial Properties Services LLC (“CPS LLC”) pursuant to a Contribution Agreement, of even date herewith, between CPSI and CPS LLC; and

          WHEREAS, the General Partner, pursuant to Section 14.1(B)(2) of the Partnership Agreement, desires to amend the Partnership Agreement to reflect the transfer of the LP Interest from CPSI to CPS LLC.

          NOW, THEREFORE, in consideration of the premises and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the General Partner hereby amends the Partnership Agreement as follows:

          1. Amendment of Partnership Agreement. All references in the Partnership Agreement to CPS Inc. are hereby amended to constitute references to CPS LLC.

          2. Admission of Additional Limited Partner. Pursuant to Section 12.2 of the Partnership Agreement, the General Partner consents to the transfer of the LP Interest from CPSI to CPS LLC and to the admission of CPS LLC to the Partnership. CPS LLC is hereby admitted to the Partnership as a substitute Limited Partner.

          Capitalized terms used herein, unless otherwise defined herein, shall have the same meanings as set forth in the Partnership Agreement.

          Except as amended herein, the Partnership Agreement shall remain in full force and effect.

          IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the date first set forth above.

COLONIAL REALTY LIMITED PARTNERSHIP
By:	COLONIAL PROPERTIES TRUST, its general partner
By:	/s/ Thomas H. Lowder
Name:	Thomas H. Lowder
Title:	President and CEO

The undersigned, pursuant to Section 12.2 of the Partnership Agreement, hereby consents to the admission of CPS LLC as a substitute Limited Partner.

COLONIAL PROPERTIES SERVICES, INC.
By:	/s/ Thomas H. Lowder
Name:	Thomas H. Lowder
Title:	President and CEO

EX-10.28.1

EX-10.28.1 FIRST AMENDMENT TO PARTNERSHIP AGREEMEN

EX-10.59

Exhibit 10.59

Trustee Compensation Policy

Annual Trustee compensation for 2006 shall be as follows:

Non-Employee Trustees	2006
Annual Retainer — Board Members	$	22,500
Annual Retainer — Audit Committee Chairman	$	15,000
Annual Retainer — Executive Compensation Committee Chairman	$	7,500
Annual Retainer — Executive Committee Chairman	$	7,500
Annual Retainer — Governance Committee Chairman	$	7,500
Annual Retainer — Lead Trustee	$	15,000
Per Board Meeting Attended in Person	$	1,750	*
Per Board Meeting Attended by Telephone	$	1,000
Committee Members (other than Chairman):
Per Committee Meeting Attended in Person	$	1,250	*
Per Committee Meeting Attended by Telephone	$	1,000
Committee Chairman:
Per Committee Meeting Attended in Person or by Telephone	$	1,750	*

* Plus out of pocket expenses.

     Non-employee trustees can elect to receive common shares in lieu of all or a portion of annual board and committee fees pursuant to the Company’s Non-Employee Trustee Share Plan. Common shares received in lieu of fees under such plan shall have a fair market value equal to 125% of the amount of fees foregone.

     Non-employee trustees shall also receive an option to purchase 5,000 common shares upon election to the board, and an additional option to purchase 5,000 common shares following each annual election of trustees that occurs after the trustee has completed at least one year of service. These options will be issued under the Company’s Second Amended and Restated Employee Share Option and Restricted Share Plan. The options are to vest in one year after the date of grant, at an exercise price equal to the fair market value on the day of the grant.

     Non-employee trustees shall further receive a grant of $10,000 of restricted stock following each annual election of trustees that occurs after the trustee has completed at least one year of service. This restricted stock will be issued under the Company’s Second Amended and Restated Employee Share Option and Restricted Share Plan. The restricted stock will be valued based on the fair market value on the day of the grant and will vest one year after the date of grant.

     Employee trustees are not entitled to any additional compensation for their service as trustees.

EX-12.1

Exhibit 12.1

Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Share Distributions
(all dollar amounts in thousands)

	Year Ended December 31,
	2005			2004			2003			2002			2001
Earnings:
Pre-tax income before adjustment for minority interest in consolidated subsidiaries or income, loss from equity investees, extraordinary gain or loss, or gains on sale of properties	$	(32,652	)	$	19,507		$	23,865		$	34,134		$	33,300
Amortization of interest capitalized		2,400			1,800			1,700			1,500			1,300
Interest capitalized		(9,586	)		(6,907	)		(5,576	)		(8,064	)		(10,608	)
Distributed income of equity investees		4,494			3,588			2,148			2,073			710
Fixed charges		155,027			97,804			85,118			85,764			93,900
Total earnings	$	119,683		$	115,792		$	107,255		$	115,407		$	118,602
Fixed Charges:
Interest expense	$	132,492		$	79,136		$	67,556		$	65,265		$	71,397
Capitalized interest		9,586			6,907			5,576			8,064			10,608
Debt costs amortization		5,699			4,267			3,111			3,560			3,022
Distributions to Series B preferred unitholders		7,250			7,494			8,875			8,875			8,873
Total Fixed Charges	$	155,027		$	97,804		$	85,118		$	85,764		$	93,900
Distributions to Series A, Series C, Series D and Series E preferred shareholders	$	22,391		$	14,781		$	15,284		$	15,565		$	13,407
Combined Fixed Charges and Preferred Share Distributions	$	177,418		$	112,585		$	100,402		$	101,329		$	107,307
Ratio of Earnings to Fixed Charges		(a	)		1.2			1.3			1.3			1.3
Ratio of Earnings to Combined Fixed Charges and Preferred Share Distributions		(b	)		1.0			1.1			1.1			1.1

a)

For the twelve months ended December 31, 2005, the aggregate amount of fixed charges exceeded our earnings by approximately $35.3 million, 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 the twelve months ended December 31, 2005 is primarily due to the Company recording amortization expense of approximately $42.0 million related to in-place leases acquired in connection with our merger with Cornerstone Realty Income Trust, Inc. in April 2005.

b)

For the twelve months ended December 31, 2005, the aggregate amount of fixed charges and preferred share distributions exceeded our earnings by approximately $57.7 million, 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 the twelve months ended December 31, 2005 is primarily due to the Company recording amortization expense of approximately $42.0 million related to in-place leases acquired in connection with our merger with Cornerstone Realty Income Trust, Inc. in April 2005.

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.	Colonnade Properties LLC	Delaware
		6.	CPSI Mizner, LLC	Delaware
		7.	Montecito Mizner, LLC	Delaware
		8.	CPSI St. Andrews, LLC	Delaware
		9.	Montecito St. Andrews, LLC	Delaware
	C.	Parkway Place Limited Partnership		Alabama
	D.	CRLP Metorwest LLC		Delaware
	E.	CMS/Colonial Multifamily JV, L.P.		Alabama
		1.	Mountain Brook Manager Corporation	Alabama
		2.	Mountain Brook Manager, LLC	Alabama
		3.	Mountian Brook, LLC	Alabama
		4.	River Hills Manager Corporation	Delaware
		5.	River Hills Manager, LLC	Delaware
		6.	River Hills, LLC	Delaware
		7.	Cahaba Heights Manager, LLC	Alabama
		8.	Cahaba Heights, LLC	Alabama
		9.	Barrington Manager, LLC	Georgia
		10.	Barrington, LLC	Georgia
		11.	Stockbridge Manager, LLC	Georgia
		12.	Stockbridge, LLC	Georgia
		13.	CRLP/CMS, L.L.C.	Delaware
	F.	CMS/Colonial Multifamily JV II, L.P.		Alabama
		1.	Inverness I Manager, LLC	Alabama
		2.	Inverness I, LLC	Alabama
		3.	Inverness II Manager, LLC	Alabama
		4.	Inverness II, LLC	Alabama
		5.	Rocky Ridge Manager, LLC	Alabama
		6.	Rocky Ridge, LLC	Alabama
		7.	Hillwood Manager, LLC	Alabama
		8.	Hillwood, LLC	Alabama
		9.	CRLP/CMS II, L.L.C.	Delaware
	G.	Heathrow E, LLC		Delaware
	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

				Jurisdiction of
Name				Formation
	O.	Colonial/Polar BEK Management Company		Alabama
	P.	CRLP Quarry Oaks LLC		Delaware
	Q.	CRLP Mallard Creek LLC		Delaware
	R.	CRLP Research Place LLC		Delaware
	S.	CRLP Wynn Drive LLC		Delaware
	T.	CS Pines Plaza, LLC		Delaware
	U.	CS College Parkway, LLC		Delaware
	V.	CP Deerfield, LLC		Delaware
	W.	CP Deerfield Manager, Inc.		Delaware
	X.	CP Pembroke Pines, LLC		Delaware
	Y.	CP Pembroke Pines Manager LLC		Delaware
	Z.	CRLP Arringdon Park Drive LLC		Delaware
	AA.	CRLP Kingwood Drive LLC		Delaware
	BB.	CRLP Bradford Creek Trail LLC		Delaware
	CC.	CRLP Pleasant Hill Road LLC		Delaware
	DD.	CRLP Plantation Trace Drive LLC		Delaware
	EE.	CRLP Preson Woods Trail LLC		Delaware
	FF.	CRLP Veranda Chase Drive LLC		Delaware
	GG.	CRLP South Creek Drive LLC		Delaware
	HH.	CRLP Shannopin Drive LLC		Delaware
	II.	G & I III Madison, LLC		Delaware
	JJ.	G & I III Meadows, LLC		Delaware
	KK.	G & I III Colony Woods, LLC		Delaware
	LL.	G & I IV Cunningham LP		Delaware
	MM.	Parkside Drive LLC		Tennessee
	NN.	CRLP VOP, LLC		Delaware
		1. VOP Beltline Limited Partnership		Delaware
	OO.	G & I Rancho Viejo LLC		Delaware
	PP.	G & I La Entrada LLC		Delaware
	QQ.	G & I Arabian Trails LLC		Delaware
	RR.	G & I III Investment Residential Portfolio LLC		Delaware
		1.	G & I Residential Portfolio LLC	Delaware
		2.	G & I Casa Lindas LLC	Delaware
		3.	G & I Colonial Del Rio LLC	Delaware
		4.	G & I Desert Lakes LLC	Delaware
		5.	G & I Fairway Crossing LLC	Delaware
		6.	G & I Pinnacle High Desert LLC	Delaware
		7.	G & I Pinnacle Estates LLC	Delaware
		8.	G & I Pinnacle Flamingo West LLC	Delaware
		9.	G & I Pinnacle Heights LLC	Delaware
		10.	G & I Pinnacle High Resort LLC	Delaware
		11.	G & I Posada Del Este LLC	Delaware
		12.	G & I Springhill LLC	Delaware
		13.	G & I Talavera LLC	Delaware
		14.	G & I Hacienda del Rio, LP	Delaware
	SS.	CMS Bayshore Associates Limited Partnership		Florida

				Jurisdiction of
Name				Formation
	TT.	CMS Palma Sola Associates Limited Partnership		Florida
	UU.	CMS Brentwood, LLC		Delaware
	VV.	CMS Hendersonville, LLC		Delaware
	WW.	The Colonnade/CLP LLC		Delaware
	XX.	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 II Special General LLC	Delaware
		13.	CAC II Special Limited LLC	Delaware
		14.	CAC III Limited Partnership	Virginia
		15.	CAC III Special General LLC	Delaware
		16.	CAC III Special Limited LLC	Delaware
		17.	CAC IV Limited Partnership	Virginia
		18.	CAC IV Special General LLC	Delaware
		19.	CAC IV Special Limited LLC	Delaware
		20.	CAC Limited Partnership	Virginia
		21.	CAC Special General LLC	Delaware
		22.	CAC Special Limited LLC	Delaware
		23.	CAC V Limited Partnership	Virginia
		24.	CAC V Special General LLC	Delaware
		25.	CAC V Special Limited LLC	Delaware
		26.	CAC VI Limited Partnership	Virginia
		27.	CAC VI Special General, Inc.	Virginia
		28.	CAC VI Special Limited LLC	Delaware
		29.	CAC VII Limited Partnership	Virginia
		30.	CAC VII Special General LLC	Delaware
		31.	CAC VII Special Limited LLC	Delaware
		32.	Cornerstone Acquisition Company LLC	Delaware
		33.	Cornerstone Merger Sub, LLC	Delaware
		34.	Cornerstone NC Operating Limited Partnership	Virginia
		35.	CRIT — Dunwoody LLC	Delaware
		36.	CRIT — NC Three LLC	Delaware
		37.	CRIT — NC Two LLC	Delaware
		38.	CRIT — SC LP LLC	Delaware
		39.	CRIT General LLC	Delaware
		40.	CRIT Special II LLC	Delaware
		41.	CRIT Special III LLC	Delaware

			Jurisdiction of
Name			Formation
	42.	CRIT Special IV LLC	Delaware
	43.	CRIT Special LLC	Delaware
	44.	CRIT-Cape Landing LLC	Delaware
	45.	CRIT-Cornerstone Limited Partnership	Virginia
	46.	CRIT-Enclave at Poplar Place, LLC	Virginia
	47.	CRIT-Glen Eagles, LLC	Virginia
	48.	CRIT-Landings, LLC	Virginia
	49.	CRIT-Legacy LLC	Delaware
	50.	CRIT-Meadows, LLC	Virginia
	51.	CRIT-Mill Creek, LLC	Virginia
	52.	CRIT-NC Four LLC	Delaware
	53.	CRIT-NC V, LLC	Delaware
	54.	CRIT-Poplar Place, LLC	Virginia
	55.	CRIT-SC GP LLC	Delaware
	56.	CRIT-SPE I LLC	Delaware
	57.	CRIT-VA II LLC	Delaware
	58.	CRIT-VA III LLC	Delaware
	59.	CRIT-VA IV LLC	Delaware
	60.	CRIT-VA LLC	Delaware
	61.	CRIT-VA V LLC	Delaware
	62.	CRIT-VA VI LLC	Delaware
	63.	Deposit Waiver LLC	Delaware
	64.	Greentree LLC	Georgia
	65.	Legacy Park Apartments, LLC	North Carolina
	66.	Marsh Cove Apartments LLC	Georgia
	67.	Merritt at Godley Station, LLC	Georgia
	68.	Merry Land Property Management, LLC	Delaware
	69.	ML Apartments I LLC	Delaware
	70.	ML Apartments II LLC	Delaware
	71.	ML Apartments III LLC	Delaware
	72.	ML Apartments IV LLC	Delaware
	73.	ML Hammocks at Long Point, L.L.C.	Georgia
	74.	ML Huntington, L.L.C.	Georgia
	75.	ML James Island Apartments, L.P.	Georgia
	76.	ML Whitemarsh LLC	Georgia
	77.	ML Windsor Place, L.L.C.	Georgia
	78.	Quarterdeck Apartments LLC	Georgia
	79.	St. Andrews Place Apartments, LLC	North Carolina
	80.	St. Andrews Place II, LLC	North Carolina
	81.	Timber Crest Apartments, LLC	North Carolina
	82.	Trinity Commons Apartments, LLC	North Carolina
	83.	Trinity Commons II, LLC	North Carolina
	84.	Waters Edge Apartments LLC	Georgia
	85.	CRIT Holdings, L.P.	Virginia
	86.	CRIT-NC, LLC	Virginia
	87.	APA II, LLC	North Carolina

				Jurisdiction of
Name				Formation
		88.	Master SC Apartments L.P.	Delaware
		89.	SAP IV Arbors NF GP L.L.C.	Delaware
		90.	SAP IV SR NF GP L.C.C.	Delaware
		91.	Arbors at Windsor Lakes Apartments NF L.P.	Delaware
		92.	SR Apartments NF L.P.	Delaware
		93.	Merritt at Godley Station II, LLC	Georgia
	YY	CRLP Arrowgrass Drive LLC		Delaware
	ZZ	CRLP Brickell LLC		Delaware
	AAA	CRLP Durham, LP		Delaware
	BBB	CRLP Heathrow Park Lane LLC		Delaware
	CCC	CRLP Mangrove Bay LLC		Delaware
	DDD	CRLP McGinnis Ferry Road LLC		Delaware
	EEE	CRLP Northcreek Drive LLC		Delaware
	FFF	CRLP Old Madison Pike LLC		Delaware
	GGG	CRLP Old Madison Two LLC		Delaware
	HHH	CRLP Research Boulevard LLC		Delaware
	III	CRLP Shenandoah LLC		Delaware
	JJJ	CRLP West Cypress LLC		Delaware
	KKK	CRLP-Colonial Construction Services L.L.C.		Delaware
	LLL	CRLP-Crabtree LLC		Delaware
	MMM	Colonial Retail JV LLC		Delaware
		1.	Marelda Retail Development LLC	Delaware
		2.	Marelda Bel Air Mall LLC	Delaware
		3.	Marelda Greenville Mall LLC	Delaware
		4.	Marelda Blynn Place Mall LLC	Delaware
		5.	Marelda Valdosta Mall LLC	Delaware
		6.	Marelda University Village Mall LLC	Delaware
		7.	Marelda Myrtle Beach Mall LLC	Delaware
	NNN	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

			Jurisdiction of
Name			Formation
	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.	DRA CRT LP Vanguard Center Land LLC	Delaware
	27.	CRA CRT GP Vanguard Center Land LLC	Delaware
	28.	CRA CRT Vanguard Center Land LP	Delaware
	29.	CRT Las Olas GP LLC	Delaware
	30.	CRT Las Olas LP	Delaware
	31.	CRT ELO GP LLC	Delaware
	32.	ELO Associates II Ltd.	Florida
	33.	CRT McGinnis Park LLC	Florida
	34.	McGinnis Park Ltd.	Florida
	35.	CRT/McGinnis Office LLC	Florida
	36.	CRT/McGinnis Office Ltd.	Florida
	37.	CRT/McGinnis Undeveloped LLC	Florida
	38.	CRT/McGinnis Developed LLC	Florida
	39.	Mez DRA CRT LLC	Delaware
	40.	DRA CRT Lake Mary Center LLC	Delaware
	41.	DRA CRT Perimeter Center LLC	Delaware
	42.	DRA CRT Chamblee Center LLC	Delaware
	43.	DRA CRT GP Charlotte University Center LLC	Delaware
	44.	DRA CRT LP Charlotte University Center LLC	Delaware
	45.	DRA CRT Charlotte University Center LP	Delaware
	46.	CRT MK Oak Park LP	Delaware
	47.	CRT Signature Place GP LLC	Delaware
	48.	CRT Signature Place LP	Delaware
	49.	CRT Ravinia MZ LLC	Delaware
	50.	CRT Ravinia LLC	Delaware
	51.	DRA CRT Baymeadows Center LLC	Delaware
	52.	CRA CRT Alabama Land LLC	Delaware
	53.	DRA CRT JTB Center LLC	Delaware
	54.	DRA CRT Gwinett Land LLC	Delaware
	55.	DRA CRT Orlando University Center LLC	Delaware
	56.	DRA CRT Greenville Park Land LLC	Delaware
	57.	DRA ACP LLC	Delaware
	58.	DRA CRT Orlando Central Center LLC	Delaware
	59.	DRA CRT Orlando Central Land LLC	Delaware
	60.	DRA CRT TRS Corp.	Delaware
	61.	CRT Decoverly 9509 LLC	Maryland
	62.	CR Decoverly 9509 LLLP	Maryland
	63.	C/Dallas I Inc.	Delaware

			Jurisdiction of
Name			Formation
	64.	CRT Dallas I Limited Partnership	Delaware
	65.	C/Dallas II Inc.	Delaware
	66.	CRT Realty Services Inc.	Florida
	67.	CRT Dallas II Limited Partnership	Delaware
	68.	ACP Fitness Center LLC	Georgia
	69.	TRC Holdings LLC	Georgia
	70.	DRA CRT Paragon Place Center LLC	Delaware
	71.	DRA CRT St. Petersburg Center LLC	Delaware
	72.	DRA CRT Gwinnett Center LLC	Delaware
	73.	CRA CRT Landstar LLC	Delaware
	74.	Dra CRT Tallahassee Center LLC	Delaware
	75.	CRT Vanguard Partners L.P.	Delaware
	76.	DRA CRT St. Petersburg Land LLC	Delaware
	77.	DRA CRT Kogerama Land LLC	Delaware
	78.	CRT WPB Cityplace LLC	Florida
	79.	CRT WPB Cityplace Ltd.	Florida

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (File Nos. 333-38613, 333-55078, 333-104294, 333-105141 and 333-126125) and Form S-8 (File Nos. 033-84510, 333-14155, 333-27201, 333-27203, 333-27205, 333-60333 and 333-123829) of Colonial Properties Trust of our report dated March 10, 2006 relating to the consolidated financial statements, financial statement schedules, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Birmingham, AL
March 13, 2006

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: March 13, 2006

EX-31.2

Exhibit 31.2

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT

I, Weston M. Andress, 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/ Weston M. Andress

Weston M. Andress

Chief Financial Officer

Date: March 13, 2006

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, 2005 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: March 13, 2006

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, 2005 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/ Weston M. Andress

Weston M. Andress

Chief Financial Officer

Date: March 13, 2006