10-K 1 grt_10k-123107.htm ANNUAL REPORT grt_10k-123107.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended December 31, 2007

OR

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

Commission File Number 001-12482

GLIMCHER REALTY TRUST
(Exact name of registrant as specified in its charter)
 
Maryland
31-1390518
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
   
150 East Gay Street
43215
Columbus, Ohio
(Zip Code)
(Address of principal executive offices)
 
 
Registrant’s telephone number, including area code: (614) 621-9000

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, par value $0.01 per share
New York Stock Exchange
8 ¾% Series F Cumulative Redeemable Preferred Shares of Beneficial
New York Stock Exchange
Interest, par value $0.01 per share
 
8 % Series G Cumulative Redeemable Preferred Shares of Beneficial
New York Stock Exchange
Interest, par value $0.01 per share
 
 

 
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 [_]  No [X]

Indicated by check mark if the Registrant is not required to file reports pursuant to Section 12 or Section 15(d) of the Securities Exchange Act of 1934.  Yes [_]  No [X]

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  [X]  No [_]

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 [ ].

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. (Check One):  Large accelerated filer  [X] Accelerated filer [_]   Non-accelerated filer [_]

Indicate by check mark whether the Registrant is a shell company  (as defined in Rule 12b-2 of the Exchange Act).  Yes  [ ]  No [X]

As of February 21, 2008, there were 37,693,853 Common Shares of Beneficial Interest outstanding, par value $0.01 per share.

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of the Registrant’s Common Shares of Beneficial Interest as quoted on the New York Stock Exchange on June 30, 2007, was $902,165,275.

Documents Incorporated By Reference

Portions of the Glimcher Realty Trust Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting of Shareholders to be held on May 9, 2008 are incorporated by reference into Part III of this Report.

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TABLE OF CONTENTS
 
     
Item No.
 
Form 10-K
   
Report Page
PART I
     
1.
Business
3
1A.
Risk Factors
6
1B.
Unresolved Staff Comments
13
2.
Properties
13
3.
Legal Proceedings
19
4.
Submission of Matters to a Vote of Security Holders
19
     
PART II
     
5.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
20
6.
Selected Financial Data
20
7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22
7A.
Quantitative and Qualitative Disclosures About Market Risk
41
8.
Financial Statements and Supplementary Data
42
9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
42
9A.
Controls and Procedures
42
9B.
Other Information
44
     
PART III
     
10.
Trustees, Executive Officers and Corporate Governance
44
11.
Executive Compensation
44
12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
44
13.
Certain Relationships and Related Transactions, and Trustee Independence
44
14.
Principal Accountant Fees and Services
44
     
PART IV
     
15.
Exhibits and Financial Statement Schedules
45
     
Signatures
52
 
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PART I.

This Form 10-K, together with other statements and information publicly disseminated by Glimcher Realty Trust (“GRT,” the “Company” or the “Registrant”), 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.  Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ from the results discussed in the forward-looking statements.  Risks and other factors that might cause differences, some of which could be material, include, but are not limited to: the effect of economic and market conditions; the failure to achieve earnings and funds from operations targets or estimates; the rate of revenue increases versus expense increases; failure to increase mall store occupancy and same-mall operating income; the failure to fully recover tenant obligations for common area maintenance (“CAM”), taxes and other property expenses; the failure to complete planned redevelopments of properties; construction and lease-up delays and cost overruns; the failure of the Company to make additional investments in regional mall properties and redevelopment of properties; the consummation of asset sales at acceptable prices; the failure to sell properties as anticipated and the failure to achieve estimated sales prices and proceeds from the sale of such properties; the failure to complete proposed acquisitions; increases in and new impairment charges; the financial stability of tenants within the retail industry; tenant bankruptcies; rejection of leases by tenants in bankruptcy; the failure to attract innovative retailers; material changes in the Company’s dividend rates on its securities or ability to pay its dividend on its common stock or other securities; the failure of joint venture relationships; bankruptcies of joint venture partners; conflicts of interest with existing joint venture partners; the failure to qualify as a REIT (as hereinafter defined); the failure to consummate equity and debt financing, including the repayment of debt; the level and volatility of interest rates; the failure to realize anticipated benefits from the dividend adjustment, as well as other risks listed from time to time in this Form 10-K and in GRT’s other reports filed with the Securities and Exchange Commission (“SEC”).

Item 1.     Business

(a)           General Development of Business

GRT, Glimcher Properties Limited Partnership (the “Operating Partnership,” “OP” or “GPLP”) and entities directly or indirectly owned or controlled by GRT, on a consolidated basis, are hereinafter referred to as the “Company,” “we,” “us” or “our.”

GRT is a fully-integrated, self-administered and self-managed Maryland real estate investment trust (“REIT”) which was formed on September 1, 1993 to continue the business of The Glimcher Company (“TGC”) and its affiliates, of owning, leasing, acquiring, developing and operating a portfolio of retail properties consisting of regional and super regional malls and community shopping centers.  Enclosed regional and super regional malls in which we hold an ownership position (including joint venture interests) are referred to as “Malls” and community shopping centers in which we hold an ownership position are referred to as “Community Centers.”  The Malls and Community Centers may from time to time be individually referred to herein as a “Property” and collectively referred to herein as the “Properties.”  On January 26, 1994, GRT consummated an initial public offering (the “IPO”) of 18,198,000 of its common shares of beneficial interest (the “Common Shares”) including 2,373,750 over allotment option shares.  The net proceeds of the IPO were used by GRT primarily to acquire (at the time of the IPO) an 86.2% interest in the Operating Partnership, a Delaware limited partnership of which Glimcher Properties Corporation (“GPC”), a Delaware corporation and a wholly owned subsidiary of GRT, is sole general partner.  At December 31, 2007, GRT held a 92.1% interest in the Operating Partnership.

The Company does not engage or pay a REIT advisor.  Management, leasing, accounting, legal, design and construction supervision expertise is provided through its own personnel, or, where appropriate, through outside professionals.

(b)           Narrative Description of Business

General:  The Company is a recognized leader in the ownership, management, acquisition and development of regional and super-regional malls.  At December 31, 2007, the Properties consisted of 23 Malls (21 wholly-owned and 2 partially owned through a joint venture) containing an aggregate of 20.6 million square feet of gross leasable area (“GLA”) and 4 Community Centers containing an aggregate of 1.0 million square feet of GLA.

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For purposes of computing occupancy statistics, anchors are defined as tenants whose space is equal to or greater than 20,000 square feet of GLA. This definition is consistent with the industry’s standard definition determined by the International Council of Shopping Centers (“ICSC”).  All tenant spaces less than 20,000 square feet and all outparcels are considered to be non-anchor.  The Company computes occupancy on an economic basis, which means only those spaces where the store is open or the tenant is paying rent are considered as occupied.  The Company includes GLA in its occupancy statistics for certain anchors and outparcels that are owned by third parties.  Mall anchors, which are owned by third parties and are open and/or are obligated to pay the Company charges, are considered occupied when reporting occupancy statistics.  Community Center anchors owned by third parties are excluded from the Company’s GLA.  These differences in treatment between Malls and Community Centers are consistent with industry practice.  Outparcels at both Community Center and Mall Properties are included in GLA if the Company owns the land or building.  The outparcels where a third party owns the land and buildings, but contributes nominal ancillary charges are excluded from GLA.

As of December 31, 2007, the occupancy rate for all of the Properties was 95.2% of GLA.  The occupied GLA was leased at 83.5%, 9.3% and 7.2% to national, regional and local retailers, respectively.  The Company’s focus is to maintain high occupancy rates for the Properties by capitalizing on management’s long-standing relationships with national and regional tenants and its extensive experience in marketing to local retailers.

As of December 31, 2007, the Properties had annualized minimum rents of $222.6 million.  Approximately 77.4%, 8.0% and 14.6% of the annualized minimum rents of the Properties as of December 31, 2007 were derived from national, regional, and local retailers, respectively.  No single tenant represents more than 3.0% of the aggregate annualized minimum rents of the Properties as of December 31, 2007.

Malls:  The Malls provide a broad range of shopping alternatives to serve the needs of customers in all market segments.  Each Mall is anchored by multiple department stores such as Belk’s, The Bon-Ton, Boscov’s, Dillard’s, Elder-Beerman, JCPenney, Kohl’s, Macy’s, Nordstrom, Saks, Sears, and Von Maur.  Mall stores, most of which are national retailers, include Abercrombie & Fitch, American Eagle Outfitters, Banana Republic, Barnes & Noble, Bath & Body Works, The Disney Store, Finish Line, Foot Locker, Gap, Hallmark, Kay Jewelers, The Limited, Express, New York & Company, Old Navy, Pacific Sunwear, Radio Shack, Victoria’s Secret, Waldenbooks, and Zales Jewelers.  To provide a complete shopping, dining and entertainment experience, the Malls generally have at least one theme restaurant, a food court which offers a variety of fast food alternatives, and, in certain Malls, multiple screen movie theaters and other entertainment activities. The largest operating Mall has 1.5 million square feet of GLA and approximately 188 stores, while the smallest has 331,000 square feet of GLA and approximately 67 stores. The Malls also have additional restaurants and retail businesses, such as P.F. Chang’s, The Palm, Pier One and Red Lobster, located along the perimeter of the parking areas.

As of December 31, 2007, the Malls accounted for 95.5% of the total GLA, 96.0% of the aggregate annualized minimum rents of the Properties and had an overall occupancy rate of 95.6%.

Community Centers:  The Company’s Community Centers are designed to attract local and regional area customers and are typically anchored by a combination of discount department stores or supermarkets which attract shoppers to each center’s smaller shops.  The tenants at the Company’s Community Centers typically offer day-to-day necessities and value-oriented merchandise.  Community Center anchors include nationally recognized retailers such as Best Buy, JCPenney and Kmart, and supermarkets such as Kroger.  Many of the Community Centers have retail businesses or restaurants located along the perimeter of the parking areas.

As of December 31, 2007, Community Centers accounted for 4.5% of the total GLA, 4.0% of the aggregate annualized minimum rents of the Properties and had an overall occupancy rate of 87.7%.

Growth Strategies and Operating Policies:  Management of the Company believes per share growth in both net income and funds from operations (“FFO”) are important factors in enhancing shareholder value.  The Company believes that the presentation of FFO provides useful information to investors and a relevant basis for comparison among REITs.  Specifically, the Company believes that FFO is a supplemental measure of the Company’s operating performance as it is a recognized standard in the real estate industry, in particular, REITs.  The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) available to common shareholders (computed in accordance with Generally Accepted Accounting Principles (“GAAP”)), excluding gains or losses from sales of depreciable property, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.  FFO does include impairment losses for properties held for use and held-for-sale.  The Company’s FFO may not be directly comparable to similarly titled measures reported by other REITs.  FFO does not represent cash flow from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company’s liquidity, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions.  A reconciliation of FFO to net income available to common shareholders is provided in Item 7 of this Form 10-K.

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GRT intends to operate in a manner consistent with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to REITs and related regulations with respect to the composition of the Company’s portfolio and the derivation of income unless, because of circumstances or changes in the Code (or any related regulation), the trustees of GRT determine that it is no longer in the best interests of GRT to qualify as a REIT.

The Company’s growth strategy is to upgrade the quality of our portfolio of assets.  We focus on selective acquisitions, redevelopment of our core Mall assets and ground-up development in markets with high growth potential.  Such strategy is focused on dominant anchored retail properties within the top 100 metropolitan markets by population that have near-term upside potential or offer advantageous opportunities for the Company.

The Company acquires and develops its Properties as long-term investments.  Therefore, its focus is to provide for regular maintenance of its Properties and to conduct periodic renovations and refurbishments to preserve and increase Property values while also increasing the retail sales prospects of its tenants.  The projects usually include renovating existing facades, installing uniform signage, updating interior decor, replacement of roofs and skylights, resurfacing parking lots and increasing parking lot lighting.  To meet the needs of existing or new tenants and changing consumer demands, the Company also reconfigures and expands its Properties, including utilizing land available for expansion and development of outparcels or the addition of new anchors.  In addition, the Company works closely with its tenants to renovate their stores and enhance their merchandising capabilities.

Financing Strategies:  At December 31, 2007, the Company had a total-debt-to-total-market-capitalization ratio of 66.2% based upon the closing price of the Common Shares on the New York Stock Exchange (“NYSE”) as of December 31, 2007.  The Company is working to maintain this ratio in the mid-fifty percent range by managing outstanding debt and increasing the value of its outstanding Common Shares. Even though our outstanding debt decreased by $25 million during 2007, a sharp reduction in our Common Stock price during December 2007 resulted in a ratio higher than our targeted level. The Company expects that it may, from time to time, re-evaluate its policy with respect to its ratio of total-debt-to-total-market capitalization in light of then current economic conditions; relative costs of debt and equity capital; market values of its Properties; acquisition, development and expansion opportunities; and other factors, including meeting the taxable income distribution requirement for REITs under the Code in the event the Company has taxable income without receipt of cash sufficient to enable the Company to meet such distribution requirements.  The Company’s preference is to obtain fixed rate, long-term debt for its Properties.  At December 31, 2007, 85.2% of total Company debt was fixed rate.  Shorter term and variable rate debt typically is employed for Properties anticipated to be expanded or redeveloped.

Competition:   All of the Properties are located in areas that have shopping centers and/or malls and other retail facilities.  Generally, there are other retail properties within a five-mile radius of a Property.  The amount of rentable retail space in the vicinity of the Company’s Properties could have a material adverse effect on the amount of rent charged by the Company and on the Company’s ability to rent vacant space and/or renew leases of such Properties.  There are numerous commercial developers, real estate companies and major retailers that compete with the Company in seeking land for development, properties for acquisition and tenants for properties, some of which may have greater financial resources than the Company and more operating or development experience than that of the Company.  There are numerous shopping facilities that compete with the Company’s Properties in attracting retailers to lease space.  In addition, retailers at the Properties may face increasing competition from e-commerce, outlet malls, discount shopping clubs, catalog companies, direct mail, telemarketing and home shopping networks.

Employees:   At December 31, 2007, the Company had an aggregate of 1,042 employees, of which 487 were part-time.

Seasonality:  The shopping center industry is seasonal in nature, particularly in the fourth quarter during the holiday season when retailer occupancy and retail sales are typically at their highest levels.  In addition, shopping malls achieve a substantial portion of their specialty (temporary retailer) rents during the holiday season.

Tax Status:   GRT believes it has been organized and operated in a manner that qualifies for taxation as a REIT and intends to continue to be taxed as a REIT under Sections 856 through 860 of the Code.  As such, GRT generally will not be subject to federal income tax to the extent it distributes at least 90.0% of its REIT ordinary taxable income to its shareholders.  Additionally, the Company must satisfy certain requirements regarding its organization, ownership and certain other conditions, such as a requirement that its shares be transferable.  Moreover, the Company must meet certain tests regarding its income and assets.  At least 75.0% of the Company’s gross income must be derived from passive income closely connected with real estate activities.  In addition, 95.0% of the Company’s gross income must be derived from these same sources, plus dividends, interest and certain capital gains. To meet the asset test, at the close of each quarter of the taxable year, at least 75.0% of the value of the total assets must be represented by real estate assets, cash and cash equivalent items (including receivables), and government securities.  Additionally, to qualify as a REIT, there are several rules limiting the amount and type of securities that GRT can own, including the requirement that not more than 25.0% of the value of its total assets can be represented by securities.  If GRT fails to meet the requirements to qualify for REIT status, the Company may cease to qualify as a REIT and may be subject to certain penalty taxes.   If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates.  As a qualified REIT, the Company is subject to certain state and local taxes on its income and property and to federal income and excise taxes on its undistributed income.

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(c)          Available information

GRT files this Form 10-K and other periodic reports and statements electronically with the SEC.  The SEC maintains an Internet site that contains reports, statements and proxy and information statements, and other information provided by issuers at http://www.sec.gov. GRT’s reports, including amendments, are also available free of charge on its website, www.glimcher.com, as soon as reasonably practicable after such reports are filed with the SEC.  Information on this website is not considered part of this filing.  GRT’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers, Audit Committee Charter, Amended and Restated Executive Compensation Committee Charter, and Amended and Restated Nominating and Corporate Governance Committee Charter are available on the Company’s website and copies of each are available in print to any shareholder who requests them.

Item 1A.  Risk Factors

A number of factors affect our business and the results of our operations, many of which are beyond our control.  The following is a description of the most significant factors that might cause the actual results of operations in future periods to differ materially from those currently expected or desired.

We are subject to risks inherent in owning real estate investments.
 
Real property investments are subject to varying degrees of risk.  Our ability to make dividend distributions, as well as the amount of any distribution, may be adversely affected by the economic climate and certain local conditions including:
 
●           oversupply of space or reduced demand for rental space and newly developed properties;
 
●           the attractiveness of our properties compared to other retail space;
 
●           our ability to provide adequate maintenance to our properties; and
 
●           fluctuations in real estate taxes, insurance and other operating costs.
 
Applicable laws, including tax laws, interest rate levels and the availability of financing, may adversely affect our income and real estate values.  In addition, real estate investments are relatively illiquid and, therefore, our ability to sell our properties quickly may be limited.  We cannot be sure that we will be able to lease space as tenants move out or as to the rents we may be able to charge new tenants at such space.
 
Some of our potential losses may not be covered by insurance.
 
We maintain commercial property insurance on our consolidated real estate assets as well as those held in joint ventures in which we have an investment interest.  In addition to general liability, fire, and flood insurance, we also carry property insurance for certain windstorm risks for our properties located in Florida. Even insured losses could result in a serious disruption to our business and reduce and delay our receipt of revenue.  Additionally, hurricane and store damage in the state of Florida could exceed our windstorm coverage for our properties in that state.  Lastly, there are some types of losses, including lease and other contract claims, that generally are not insured.  If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property or properties, as well as the anticipated future revenue from the asset(s). If this happens, we may still remain obligated for any mortgage debt or other financial obligations related to the asset(s).
 
6

 
Our property insurance policies include coverage for acts of terrorism by foreign or domestic agents.  The United States government provides reinsurance coverage to insurance companies following a declared terrorism event under the Terrorism Risk Insurance Program Reauthorization Act (the “Act”) which extended the effectiveness of the Terrorism Risk Insurance Extension Act of 2005.  The Act is designed to cover losses from declared terrorism events that are equal to or exceed $100 million.  However, our premiums for terrorism insurance could continue to rise despite the coverage of the Act.  Moreover, certain criminal or terrorist-like acts that may be committed against our properties or real estate assets may not constitute terrorist acts under the Act or may cause losses that are less than the triggering amount for coverage under the Act.

We rely on major tenants.
 
At December 31, 2007, our three largest tenants were Gap, Inc., Foot Locker, Inc., and Sterling, Inc., representing 3.0%, 2.1% and 1.9% of our annualized minimum rents, respectively.  No other tenant represented more than 1.9% of the aggregate annualized minimum rents of our properties as of such date.  Our financial position and ability to make distributions may be adversely affected by the bankruptcy, insolvency, or general downturn in the business of any such tenant, or in the event any such tenant does not renew a number of its leases as they expire.
 
Bankruptcy of our tenants or downturns in our tenants’ businesses may reduce our cash flow.
 
Since we derive almost all of our income from rental payments, our cash available for distribution would be adversely affected if a significant number of our tenants were unable to meet their obligations to us, or if we were unable to lease vacant space in our properties on economically favorable terms.  A tenant may seek the protection of the bankruptcy laws, which could result in the termination of its lease causing a reduction in our cash available for distribution.  A downturn in a tenant’s business may result in a reduction in the portion of rent based on a percentage of the tenant’s sales.  Furthermore, certain of our tenants, including anchor tenants, hold the right under their lease(s) to terminate their lease(s) or reduce their rental rate if certain occupancy conditions are not met, if certain anchor tenants close, if certain sales levels or profit margins are not achieved, or if an exclusive use provision is violated.
 
We face significant competition that may decrease the occupancy and rental rates of our properties.
 
We compete with many commercial developers, real estate companies and major retailers.  Some of these entities develop or own malls, value-oriented retail properties, and community shopping centers with whom we compete for tenants.  We face competition for prime locations and for tenants.  New regional malls or other retail shopping centers with more convenient locations or better rents may attract tenants or cause them to seek more favorable lease terms at or prior to renewal.  Retailers at our properties may face increasing competition from other retailers, e-commerce, outlet malls, discount shopping clubs, catalog companies, direct mail, telemarketing and home shopping networks, all of which could affect their ability to pay rent or desire to occupy the property.
 
The failure to fully recover cost reimbursements for CAM, taxes and insurance from tenants could adversely affect our operating results.
 
The computation of cost reimbursements from tenants for CAM, insurance and real estate taxes is complex and involves numerous judgments including interpretation of terms and other tenant lease provisions. Most tenants make monthly fixed payments of CAM, real estate taxes and other cost reimbursement items. After the end of the calendar year, we compute each tenant’s final cost reimbursements and issue a bill or credit for the full amount, after considering amounts paid by the tenants during the year. The billed amounts could be disputed by the tenant(s) or become the subject of a tenant audit.  Final adjustments for the year ended December 31, 2007 have not yet been determined. At December 31, 2007, we had recorded in accounts receivables $3.3 million of costs expected to be recovered from tenants during the first six months of 2008. There can be no assurance that we will collect all or substantially all of this entire amount.


7

 
The results of operations for our properties depend on the economic conditions of the regions of the United States in which they are located.
 
Our results of operations and distributions to you will generally be subject to economic conditions in the regions in which our properties are located.  For the year ended December 31, 2007, approximately 33% of annualized minimum rents came from our properties located in Ohio.
 
We may be unable to successfully redevelop, develop or operate such properties.
 
As a result of economic and other conditions and required government approvals, development projects may not be pursued or may be completed later or with higher costs than anticipated.  Development activities involve significant risks, including:
 
·         the expenditure of funds on and devotion of time to projects which may not come to fruition;
 
·         increased construction costs, possibly making the project uneconomical;
 
·         an inability to obtain construction financing and permanent financing on favorable terms; and
 
·         occupancy rates and rents not sufficient to make a project profitable.
 
In the event of an unsuccessful development project, our loss could exceed our investment in the project.
 
We could incur significant costs related to environmental issues.
 
Under some environmental laws, 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 these substances on or under the property.  In connection with the ownership or operation of our properties, we could be liable for such costs, which could be substantial and even exceed the value of such property or the value of our aggregate assets.  We could incur such costs or be liable for such costs during a period after we dispose of or transfer a property.  The failure to remediate toxic substances may adversely affect our ability to sell or rent any of our properties or to borrow funds.  In addition, environmental laws may require us to expend substantial sums in order to use our properties or operate our business.
 
We have established a contingency reserve for one environmental matter as noted in Note 14 of our consolidated financial statements.
 
Our assets may be subject to impairment charges that may materially affect our financial results.
 
We evaluate our real estate assets and other assets for impairment indicators whenever events or changes in circumstances indicate that recoverability of our investment in the asset is not assured.  This evaluation is conducted periodically, but no less frequently than quarterly.  Our determination of whether a particular held-for-use asset is impaired is based upon the undiscounted projected cash flows used for the impairment analysis and our determination of the asset’s estimated fair value, that in turn are based upon our plans for the respective asset and our views of market and economic conditions.  With respect to assets held-for-sale, our determination of whether such an asset is impaired is based upon market and economic conditions.  If we determine that a significant impairment has occurred, then we would be required to make an adjustment to the net carrying value of the asset, which could have a material adverse effect on our results of operations and funds from operations in the accounting period in which the adjustment is made.  Furthermore, changes in estimated future cash flows due to a change in our plans or views of market and economic conditions could result in the recognition of additional impairment losses for already impaired assets, which, under the applicable accounting guidance, could be substantial.
 
We may incur significant costs of complying with the Americans with Disabilities Act and similar laws.
 
We may be required to expend significant sums of money to comply with the Americans with Disabilities Act of 1990, as amended (“ADA”), and other federal and local laws in order for our properties to meet requirements related to access and use by disabled persons.
 
8

Our failure to qualify as a REIT would have serious adverse consequences.
 
GRT believes that it has qualified as a REIT under the Code since 1994, but cannot be sure that it will remain so qualified.  Qualification as a REIT involves the application of highly technical and complex Code provisions, and the determination of various factual matters and circumstances not entirely within GRT’s control that may impact GRT’s ability to qualify as a REIT under the Code.  In addition, GRT cannot be sure that new laws, regulations and judicial decisions will not significantly change the tax laws relating to REITs, or the federal income tax consequences of REIT qualification.
 
If GRT fails to qualify as a REIT, it will be subject to federal income tax (including any applicable alternative minimum tax) on taxable income at regular corporate income tax rates.  Additionally, unless entitled to relief under certain statutory provisions, GRT will also be disqualified from electing to be treated as a REIT for the four taxable years following the year during which the qualification is lost, thereby reducing net earnings available for investment or distribution to you because of the additional tax liability imposed for the year or years involved.  Lastly, GRT would no longer be required by the Code to make any dividend distributions as a condition to REIT qualification.  To the extent that dividend distributions to you may have been made in anticipation of qualifying as a REIT, we might be required to borrow funds or to liquidate certain of our investments to pay the applicable tax.
 
Our ownership interests in certain partnerships and other ventures are subject to certain tax risks.
 
Some of our property interests and other investments are made or held through entities in which we have an interest (the “Subsidiary Partnerships”).  The tax risks of this type of ownership include possible challenge by the Internal Revenue Service of allocations of income and expense items which could affect the computation of our taxable income, a challenge to the status of any such entities as partnerships (as opposed to associations taxable as corporations) for federal income tax purposes, and the possibility of action being taken by such entities that could adversely affect GRT’s qualification as a REIT, for example, by requiring the sale of a property.  We believe that the entities in which we have an interest have been and will be treated for tax purposes as partnerships (and not treated as associations taxable as corporations).  If our ownership interest in any entity taxable as a corporation exceeded 10% (in terms of vote or value) of such entity’s outstanding securities (unless such entity were a “taxable REIT subsidiary,” or a “qualified REIT subsidiary,” as those terms are defined in the Code) or the value of interest in any such entity exceeded 5% of the value of our assets, then GRT would cease to qualify as a REIT; distributions from any of these entities would be treated as dividends, to the extent of earnings and profits, and we would not be able to deduct our share of losses, if any, generated by such entity in computing our taxable income.
 
We may not have access to other sources of funds necessary to meet our REIT distribution requirements.
 
In order to qualify to be taxed as a REIT, we must make annual distributions to our shareholders of at least 90% of our taxable income (determined by excluding any net capital gain).  The amount available for distribution will be affected by a number of factors, including the operation of our properties.  We have sold a number of non-core assets and intend in the future to sell additional selected non-core assets.  The loss of rental income associated with our properties sold will in turn affect net income and FFO.  In order to maintain REIT status, we may be required to make distributions in excess of net income and FFO.  In such a case, it may be necessary to arrange for short or long term borrowings, or to issue preferred stock or other securities, to raise funds, which may not be possible.
 
Debt financing could adversely affect our performance.
 
As of December 31, 2007, we had $1.6 billion of combined mortgage indebtedness and outstanding borrowings under our credit facility, of which $118.6 million matures during 2008.  As of December 31, 2007, we have borrowed $300.0 million from our credit facility, which matures on December 13, 2009.  A number of our outstanding loans will require lump sum or “balloon” payments for the outstanding principal balance at maturity, and we may finance future investments that may be structured in the same manner.  Our ability to repay indebtedness at maturity, or otherwise, may depend on our ability to either refinance such indebtedness or to sell our properties.  Additionally, our ability to repay any indebtedness accelerated upon any default may adversely affect our ability to obtain debt financing for such properties or to own such properties. If we are unable to repay any of our debt at or before maturity, then we may have to borrow against our properties that are not encumbered or from our credit facility, to the extent it has availability thereunder, to make such repayments.  In addition, a lender could foreclose on one or more of our properties to collect its debt.  This could cause us to lose part or all of our investment, which could reduce the value of the Common Shares and the distributions payable to you.
 
9

Certain of our financing arrangements contain limitations on the amount of debt that we may incur.

Our $470 million unsecured credit facility is the most restrictive of our financing arrangements.  Accordingly, at December 31, 2007, the additional amount that may be borrowed based upon the restrictive covenants in the credit facility is $301.4 million.  Additional amounts could be borrowed as long as we maintain a ratio of total-debt-to-total-asset value that complies with the restrictive covenants of the credit facility.  We would also be required to maintain certain coverage covenants on a prospective basis which could impact our ability to borrow these additional amounts.  The ratio of total-debt-to-total-market capitalization was 66.2% as of December 31, 2007.  As used herein, “total market capitalization” means the sum of the outstanding amount of all indebtedness, the value of our preferred shares and the total market value of the outstanding Common Shares and the units of operating partnership interest in GPLP (“OP Units”) (based on the closing price of the Common Shares on December 31, 2007).

Our financial condition and distributions could be adversely affected by financial covenants.

Our mortgage indebtedness and credit facility impose certain financial and operating restrictions on our properties, on our secured subordinated financing, and additional financings on properties.  These restrictions include restrictions on borrowings, prepayments and distributions.  Additionally, our credit facility requires certain financial tests to be met and some of our mortgage indebtedness provides for prepayment penalties, each of which could restrict our financial flexibility.

Our variable rate debt obligations may impede our operating performance and put us at a competitive disadvantage, as well as adversely affect our ability to pay distributions to you.

Required repayments of debt and related interest can adversely affect our operating performance.  As of December 31, 2007, approximately $230.0 million of our indebtedness bears interest at a variable rate.  Accordingly, an increase in interest rates on our existing indebtedness would increase interest expense, which could adversely affect our cash flow and ability to pay distributions as well as the amount of any distributions.  For example, if market rates of interest on our variable rate debt outstanding as of December 31, 2007 increased by 100 basis points, the increase in interest expense on our existing variable rate debt would decrease future earnings and cash flows by approximately $2.3 million annually.

An increase in interest rates or our total-debt-to-total-market capitalization could cause a decrease in the market price of our outstanding Common Shares.

We believe that investors generally perceive REITs as yield-driven investments and compare the annual yield from distributions by REITs with yields on various other types of financial instruments. Thus, an increase in market interest rates generally could adversely affect the market price of Common Shares.  Additionally, investors may react negatively to an increase in our total-debt-to-total-market capitalization.

The Board of Trustees has unlimited authority to increase the amount of debt that we may incur.

The Board of Trustees (the “Board”) determines financing objectives and the amount of the indebtedness that we may incur and may make revisions to these objectives at any time without a vote of our shareholders.  Although the Board has no present intention to change these objectives, revisions could result in a more highly leveraged company with an increased risk of default on indebtedness, an increase in debt service charges, and the addition of new financial covenants that restrict our business.

Our issuance of additional common or preferred Shares may affect prevailing market prices for our outstanding common share or preferred shares.

Future sales or the anticipation of such sales of additional common or preferred shares may have an adverse effect on the market price of our common shares or preferred shares.
 
The market value, or trading price, of our preferred and Common Stock could decrease based upon uncertainty in the marketplace and market perception.
 
The market value, or trading price, of our preferred stock and Common Stock may be based primarily upon the market’s perception of our operational as well as financial growth potential and current and future cash dividends or distributions, and may be secondarily based upon the real estate market value of our underlying assets. The market value, or trading price, of our preferred stock and Common Stock is also influenced by their respective dividends relative to prevailing market interest rates.  Uncertainty with respect to interest rate volatility may cause uncertainty in the market value, or trading price, of our preferred stock and Common Stock which could cause the value or price of our stock to decrease thereby affecting the value of your investment.
 
10

Our ability to operate or dispose of any partially-owned properties that we may acquire may be restricted.

Our ownership of properties through partnership or joint venture investments may involve risks not otherwise present for wholly-owned properties. These risks include the possibility that our partners or co-venturers might become bankrupt, might have economic or other business interests or goals which are inconsistent with our business interests or goals and may be in a position to take action contrary to our instructions or make requests contrary to our policies or objectives, including our policy to maintain our qualification as a REIT. We may need the consent of our partners for major decisions affecting properties that are partially-owned. Joint venture agreements may also contain provisions that could cause us to sell all or a portion of our interest in, or buy all or a portion of  our partners’ interests in, such entity or property. These provisions may be triggered at a time when it is not advantageous for us to either buy our partners’ interests or sell our interest. Additionally, if we serve as the managing member of a property-owning joint venture, we may have certain fiduciary responsibilities to the other participants in such entity. There is no limitation under our organizational documents as to the amount of funds that may be invested in partnerships or joint ventures; however, covenants of our unsecured credit facility limit the amount of capital that we may invest in joint ventures at any one time.

We are subject to certain conflicts of interest and limitations on property sales.

Pursuant to GPLP’s limited partnership agreement, GPLP may not sell all or substantially all of its assets without the consent of the holders of a majority of the OP Units, excluding GRT, if limited partners (other than GRT) at the time of the sale own in the aggregate 10% or greater of the outstanding OP Units.  At the present time, GRT owns 92.1% of the outstanding OP Units, resulting in the consent not being required.  However, should limited partners (excluding GRT) own 10% or greater of the outstanding OP Units in the future,  the majority vote requirement would effectively mean that Herbert Glimcher, the Chairman Emeritus of the GRT Board, and his sons, Michael Glimcher, the Chairman of the Board and Chief Executive Officer of GRT, and David Glimcher must approve any such transaction because, together with their spouses, they own approximately 4.8% of the OP Units (which constitutes a majority of the OP Units other than those owned by GRT) outstanding as of December 31, 2007.

As a result of Herbert Glimcher’s, Michael Glimcher’s, and David Glimcher’s status as holders of both Common Shares and OP Units, they have interests that potentially could conflict with GRT shareholders with respect to business decisions affecting GRT and GPLP.  In particular, as holders of OP Units, they may suffer different and/or more adverse tax consequences than GRT upon the sale or refinancing of some of our properties due to unrealized gains attributable to these properties.  Therefore, GRT may have objectives different from Herbert Glimcher, Michael Glimcher, and David Glimcher regarding the appropriate pricing and timing of any sale or refinancing of certain of our properties.  Although GRT (through a wholly owned subsidiary), as the sole general partner of GPLP, has the exclusive authority as to whether and on what terms to sell, refinance, or seek to purchase an interest in an individual property, Herbert Glimcher, Michael Glimcher and David Glimcher, might seek to influence decisions with respect to these actions, even though those actions might otherwise be financially advantageous or adverse to GRT.  They also may seek to influence management to refinance one or more of our properties with a higher level of debt than would be in GRT’s best interests.

Our charter and bylaws and the laws of the state of our incorporation contain provisions that may delay, defer or prevent a change in control or other transactions that could provide shareholders with the opportunity to realize a premium over the then-prevailing market price for our Common Shares.

In order to maintain GRT’s qualification as a REIT for federal income tax purposes, not more than 50% in value of the outstanding Common Shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of the taxable year.  Additionally, 100 or more persons must beneficially own the outstanding Common Shares during the last 335 days of a taxable year of 12 months or during a proportionate part of a shorter tax year.

To ensure that GRT will not fail to qualify as a REIT under this test, GRT’s organizational documents authorize the Board to take such action as may be required to preserve GRT’s qualification as a REIT and to limit any person, other than Herbert Glimcher, David Glimcher (only with respect to the limitation on the ownership of outstanding Common Shares) and any entities or persons approved by the Board, to direct or indirect ownership exceeding (i) 8.0% of the lesser of the number or value of GRT’s outstanding shares of beneficial interest (including common & preferred shares), (ii) 9.9% of the lesser of the number or value of the total 8¾% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest (“Series F Preferred Shares”) outstanding, and (iii) 9.9% of the lesser of the number or value of the total 8⅛% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest  (“Series G Preferred Shares”) outstanding.  Herbert Glimcher and David Glimcher are limited to an aggregate of 25% direct or indirect ownership of Common Shares outstanding without approval of the Board.  The Board has also granted an exemption to Cohen & Steers Capital Management, Inc., permitting them to own, directly or indirectly, of record or beneficially (i) up to 600,000 Series F Preferred Shares and (ii) up to 14.9% of the lesser of the number or value of the outstanding shares of any other class of the GRT’s equity securities.  The Board has also granted an exemption to Neuberger Berman permitting them to own 608,800 Series G Preferred Shares.  Despite these provisions, GRT cannot be sure that there will not be five or fewer individuals who will own more than 50% in value of its outstanding Common Shares, thereby causing GRT to fail to qualify as a REIT.  The ownership limits may also discourage a change in control in GRT.

11

The members of the Board are currently divided into three equal classes whose terms expire in 2008, 2009 and 2010, respectively. Each year one class of trustees is elected by GRT’s shareholders to hold office for three years.  The staggered terms for Board members may affect the ability of GRT shareholders to change control of GRT even if a change in control were in the interests of the shareholders.

GRT’s Amended and Restated Declaration of Trust, as amended (the “Declaration of Trust”) authorizes the Board to establish one or more series of preferred shares, in addition to those currently outstanding, and to determine the preferences, rights and other terms of any series.  The Board could authorize GRT to issue other series of preferred shares that could deter or impede a merger, tender offer or other transaction that some, or a majority, of GRT shareholders might believe to be in their best interest or in which GRT shareholders might receive a premium for their shares over the prevailing market price of such shares.

On March 9, 1999, GRT adopted a shareholder rights plan. Under the terms of the rights plan, the Board can in effect prevent a person or group from acquiring more than 15% of the outstanding Common Shares. Unless the Board approves of such person’s purchase, after that person acquires more than 15% of the outstanding Common Shares, all other shareholders will have the right to purchase Common Shares from GRT at a price that is half of their then fair market value. These purchases by the other shareholders would substantially reduce the value and influence of the Common Shares owned by the acquiring person. The Board, however, can prevent the rights plan from operating in this manner. This gives the Board significant discretion to approve or disapprove of a person’s efforts to acquire a large interest in GRT and, accordingly, may discourage a change in control of GRT.

The Declaration of Trust and Amended and Restated Bylaws also contain other provisions that may delay or prevent a transaction or a change in control that might involve a premium price for the Common Shares or otherwise be in the best interests of GRT’s shareholders. As a Maryland REIT, GRT is subject to the provisions of the Maryland REIT law which imposes restrictions on some business combinations and requires compliance with statutory procedures before some mergers and acquisitions can occur, thus delaying or preventing offers to acquire GRT or increasing the difficulty of completing an acquisition of GRT, even if the acquisition is in the best interests of GRT’s shareholders.

Risks associated with information systems may interfere with our operations.

We are continuing to implement new information systems and problems with the design or implementation of these new systems could interfere with our operations.

Our operations could be affected if we lose any key management personnel.

Our executive officers have substantial experience in owning, operating, managing, acquiring and developing shopping centers.  Success depends in large part upon the efforts of these executives, and we cannot guarantee that they will remain with us.  The loss of key management personnel in leasing, finance, legal, construction, development, or operations could have a negative impact on our operations.  In addition, except for isolated examples, there are generally no restrictions on the ability of these executives to compete with us after termination of their employment.



12


Inflation may influence our operations.

Inflation risks could impact our operations due to increases in construction costs as well as other costs pertinent to our business, including, but not limited to, the cost of insurance and utilities.

Item 1B.  Unresolved Staff Comments

The Company has received no written comments regarding its periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of its 2007 fiscal year and that remain unresolved.


Item 2.   Properties

The Company’s headquarters are currently located at 150 East Gay Street, Columbus, Ohio 43215, and its telephone number is (614) 621-9000.  In addition, the Company maintains management offices at each of its Malls.  On March 3, 2008, the Company is relocating its headquarters to 180 East Broad Street, Columbus, Ohio 43215.

At December 31, 2007, the Company managed and leased a total of 27 Properties of which the Company had an ownership interest (25 wholly-owned and 2 partially owned through a joint venture).  The Properties are located in 14 states as follows:  Ohio (10), West Virginia (3), California (2), Florida (2), North Carolina (1), Pennsylvania (1), Kansas (1), Kentucky (1), Minnesota (1), New Jersey (1), Oklahoma (1), Oregon (1), Tennessee (1), and Washington (1).

(a)           Malls

Twenty-three of the Properties are Malls and range in size from 331,000 square feet of GLA to 1.5 million square feet of GLA.  Seven of the Malls are located in Ohio and 16 are located throughout the country in the states of West Virginia (2), California (2), Florida (2), North Carolina (1), Pennsylvania (1), Kansas (1), Kentucky (1), Minnesota (1), New Jersey (1), Oklahoma (1), Oregon (1), Tennessee (1), and Washington (1).  The location, general character, and anchor tenant information are set forth below:

Summary of Malls at December 31, 2007
 
       
% of
% of
Store
 
Lease
 
Anchors
Stores
Total
Anchors
Stores
Sales Per
 
Expiration
Property/Location
GLA
GLA (1)
GLA
Occupied
Occupied
Square Ft.(2)
Anchors
(3)
 
Ashland Town Center
                           
Ashland, KY
153,214
 
177,796
 
331,010
 
100.0
 
94.6
 
$357
 
Belk
01/31/10
                         
Goody's
03/31/09
                         
JCPenney
10/31/09
                             
Colonial Park Mall
                           
Harrisburg, PA
504,446
 
239,222
 
743,668
 
100.0
 
97.7
 
$287
 
The Bon-Ton
01/31/15
                         
Boscov's
(4)
                         
Sears
(4)
                             
Dayton Mall, The
                           
Dayton, OH
935,130
 
482,771
 
1,417,901
 
100.0
 
92.3
 
$337
 
Borders Books & Music
12/31/21
                         
DSW Shoe Warehouse
07/31/10
                         
Elder-Beerman
(4)
                         
JCPenney
03/31/11
                         
Linens'N Things
01/31/17
                         
Macy's
(4)
                         
Old Navy
07/31/10
                         
Sears
(4)
 
13

 
       
% of
% of
Store
 
Lease
 
Anchors
Stores
Total
Anchors
Stores
Sales Per
 
Expiration
Property/Location
GLA
GLA (1)
GLA
Occupied
Occupied
Square Ft.(2)
Anchors
(3)
 
Eastland Mall
                           
("Eastland North Carolina")
                           
Charlotte, NC (10)
725,720
 
335,061
 
1,060,781
 
96.4
 
81.4
 
$232
 
Belk
(4)
                         
Burlington Coat Factory
(7)
                         
Dillard's
(4)
                         
Eastland-Fields LLC
(7)
                         
Sears
(4)
                             
Eastland Mall
                           
("Eastland Ohio")
                           
Columbus, OH
504,092
 
281,921
 
786,013
 
100.0
 
87.1
 
$280
 
JCPenney (5)
01/31/13
                         
Macy's
(4)
                         
Sears
(4)
                             
Grand Central Mall
                           
Parkersburg, WV
531,788
 
377,862
 
909,650
 
100.0
 
94.7
 
$293
 
Belk
03/31/18
                         
Elder-Beerman (5)
01/31/33
                         
JCPenney
09/30/12
                         
Regal Cinemas
01/31/17
                         
Sears
09/25/12
                         
Steve & Barry's
01/31/11
                             
Great Mall of the Great
                           
Plains, The (10)
                           
Olathe, KS
397,947
 
384,552
 
782,499
 
82.1
 
81.4
 
$172
 
Burlington Coat Factory
01/31/13
                         
Dickinson Theatres
03/31/12
                         
Famous Labels
05/31/14
                         
Foozles
01/31/09
                         
Group USA
08/13/12
                         
Steve & Barry's
01/31/13
                         
VF Factory Outlet
01/10/11
                         
Zonkers
04/30/09
                             
Indian Mound Mall
                           
Heath, OH
389,589
 
167,820
 
557,409
 
100.0
 
84.4
 
$238
 
Crown Cinema
12/31/12
                         
Elder-Beerman
01/31/09
                         
Goody's
05/31/08
                         
JCPenney
10/31/11
                         
Sears (5)
09/23/27
                         
Steve & Barry's
01/31/11
                             
Jersey Gardens
                           
Elizabeth, NJ
648,965
 
646,564
 
1,295,529
 
100.0
 
100.0
 
$506
 
Bed Bath & Beyond
01/31/10
                         
Burlington Coat Factory
01/31/10
                         
Cohoes Fashions
01/31/10
                         
Daffy's
01/31/10
                         
DSW Shoe Warehouse/ Filene's Basement
10/31/11
                         
Gap Outlet, The
01/31/10
                         
Group USA
12/31/08
                         
Jeepers!
01/31/10
                         
Last Call
11/30/09
                         
Loew's Theaters
12/31/20
                         
Marshalls
10/31/09
                         
Modell's Sporting Goods
01/31/17
                         
Nike Factory Store
11/30/11
                         
Off 5th Saks Fifth Ave Outlet
10/31/14
                         
Old Navy
05/31/10
 
14

 
       
% of
% of
Store
 
Lease
 
Anchors
Stores
Total
Anchors
Stores
Sales Per
 
Expiration
Property/Location
GLA
GLA (1)
GLA
Occupied
Occupied
Square Ft.(2)
Anchors
(3)
 
Lloyd Center
                           
Portland, OR
738,444
 
733,930
 
1,472,374
 
93.8
 
95.6
 
$417
 
Barnes & Noble
01/31/12
                         
Lloyd Ctr Ice Rink (6)
12/31/13
                         
Lloyd Mall Cinemas
01/31/12
                         
Macy's
01/31/11
                         
Marshalls
01/31/09
                         
Nordstrom
(4)
                         
Ross Dress for Less
01/31/15
                         
Sears
(4)
                             
Mall at Fairfield
                           
Commons, The
                           
Beavercreek, OH
768,284
 
369,864
 
1,138,148
 
100.0
 
95.3
 
$350
 
Dick's Sporting Good's
01/31/21
                         
Elder Beerman-For Her
01/31/14
                         
Elder-Beerman-Home Store
01/31/15
                         
JCPenney
10/31/13
                         
Macy's (5)
01/31/15
                         
Sears
10/26/13
                             
Mall at Johnson
                           
City, The
                           
Johnson City, TN
379,605
 
167,791
 
547,396
 
100.0
 
97.3
 
$442
 
Belk for Her
10/31/12
                         
Belk Home Store
06/30/11
                         
Dick's Sporting Goods
01/31/18
                         
Goody's
01/31/08
                         
JCPenney
03/31/10
                         
Sears (5)
03/09/11
                             
Merritt Square (12)
                           
Merritt Island, FL
563,512
 
309,143
 
872,655
 
100.0
 
81.5
 
$319
 
Cobb Theatres
05/31/24
                         
Dillard's
(4)
                         
JCPenney
07/31/10
                         
Macy's
(4)
                         
Sears
(4)
                         
Steve & Barry's
01/31/13
                             
Morgantown Mall
                           
Morgantown, WV
396,361
 
161,720
 
558,081
 
100.0
 
92.9
 
$325
 
Belk
03/15/11
                         
Carmike Cinemas
10/31/24
                         
Elder-Beerman
01/29/11
                         
JCPenney
09/30/10
                         
Sears
09/30/10
                         
Steve & Barry's
01/31/13
                             
New Towne Mall
                           
New Philadelphia, OH
361,501
 
152,103
 
513,604
 
100.0
 
98.4
 
$255
 
Elder-Beerman
01/31/14
                         
JCPenney
09/30/13
                         
Kohl's
01/31/27
                         
Regal Cinemas
03/31/12
                         
Sears
10/31/13
                         
Steve & Barry's
01/31/14
                         
Super Fitness Center
02/28/14
                             
Northtown Mall
                           
Blaine, MN
418,528
 
258,483
 
677,011
 
68.8
 
93.2
 
$385
 
Best Buy
01/31/10
                         
Burlington Coat Factory
09/30/10
                         
Home Depot
01/31/27
                         
Steve & Barry's
01/31/11
 
15

 
       
% of
% of
Store
 
Lease
 
Anchors
Stores
Total
Anchors
Stores
Sales Per
 
Expiration
Property/Location
GLA
GLA (1)
GLA
Occupied
Occupied
Square Ft.(2)
Anchors
(3)
 
Polaris Fashion Place
                           
Columbus, OH
888,075
 
522,085
 
1,410,160
 
100.0
 
99.5
 
$406
 
Great Indoors, The
(4)
                         
JCPenney
(4)
                         
Macy's
(4)
                         
Saks Fifth Avenue
(4)
                         
Sears
(4)
                         
Von Maur
(4)
                             
River Valley Mall
                           
Lancaster, OH
316,947
 
260,520
 
577,467
 
84.2
 
93.0
 
$289
 
Elder-Beerman
02/02/13
                         
JCPenney
09/30/12
                         
Regal Cinemas
12/31/11
                         
Sears
10/31/09
                         
Steve & Barry's
01/31/11
                             
SuperMall of the Great Northwest
                         
Auburn, WA
541,669
 
401,604
 
943,273
 
100.0
 
89.3
 
$260
 
Bed Bath & Beyond
01/31/18
                         
Burlington Coat Factory
01/31/11
                         
Gart Sports
01/31/11
                         
Marshalls
01/31/11
                         
Nordstrom
08/31/10
                         
Old Navy
01/31/11
                         
Sam's Club
05/31/19
                         
Steve & Barry's
01/31/14
                         
Vision Quest
11/30/18
                             
Weberstown Mall
                           
Stockton, CA
602,817
 
255,923
 
858,740
 
100.0
 
94.4
 
$426
 
Barnes & Noble
01/31/09
                         
Dillard's
(4)
                         
JCPenney
03/31/09
                         
Sears
(4)
                             
WestShore Plaza Mall
                           
Tampa, FL
769,878
 
291,988
 
1,061,866
 
100.0
 
97.3
 
$452
 
AMC Theatres
01/31/21
                         
JCPenney
09/30/12
                         
Macy's
(4)
                         
Old Navy
01/31/11
                         
Saks Fifth Avenue
11/30/18
                         
Sears
09/30/17
                             
Subtotal
11,536,512
 
6,978,723
 
18,515,235
 
97.2%
 
92.9
 
$357
     
                             
                             
Malls owned in a joint venture
                         
                             
Puente Hills Mall (9)
                           
City of Industry, CA
731,210
 
456,398
 
1,187,608
 
95.9
 
93.7
 
$249
 
AMC 20 Theaters
04/30/17
                         
Burlington Coat Factory
10/31/08
                         
Circuit City
01/31/19
                         
Linens `N Things
01/31/14
                         
Macy's
(4)
                         
Ross Dress for Less
01/31/10
                         
Sears
(4)
                         
Spectrum Club
01/31/14
                         
Steve & Barry's
01/31/15
 
16

 
       
% of
% of
Store
 
Lease
 
Anchors
Stores
Total
Anchors
Stores
Sales Per
 
Expiration
Property/Location
GLA
GLA (1)
GLA
Occupied
Occupied
Square Ft.(2)
Anchors
(3)
 
Tulsa Promenade (9)
                           
Tulsa, OK
690,235
 
236,071
 
926,306
 
100.0
 
84.5
 
$316
 
Dillard's
(4)
                         
Hollywood Theaters
01/31/19
                         
JCPenney
03/31/11
                         
Macy's
(4)
                         
MDS Realty II, LLC
(8) (11)
                             
Subtotal
1,421,445
 
692,469
 
2,113,914
 
97.9%
 
90.6%
 
$281
     
                             
Total
12,957,957
 
7,671,192
 
20,629,149
 
97.3%
 
92.7%
 
$351
     
 
(1)
Includes outparcels.
(2)
Average 2007 store sales per square foot for in-line stores of less than 10,000 square feet.
(3)
Lease expiration dates do not contemplate or include options to renew.
(4)
The tenant owns the land and the building and operates under an operating agreement.
(5)
This is a ground lease by the Company to the tenant.  The Company owns the land and not the building.
(6)
Managed by Ohio Entertainment Corporation, a wholly-owned subsidiary of Glimcher Development Corporation., which is a wholly-owned subsidiary of GPLP.
(7)
Building owned by third party, space partially occupied at year-end.
(8)
Tenant vacated the store, but continues to pay through the expiration date.
(9)
The Operating Partnership has an investment in this Mall of 52%.  The Company is responsible for management and leasing services and receives fees for providing these services.
(10)
Property was classified as held-for-sale as of December 31, 2007.
(11)
The tenant owns the land and the building and is subject to the Mervyn’s operating agreement.
(12)
Property acquired in the 4th quarter of 2007.


(b)
Community Centers

Four of the Properties are Community Centers ranging in size from approximately 87,000 to 443,000 square feet of GLA.  They are located in 2 states as follows: Ohio (3), and West Virginia (1).  The location, general character and anchor tenant information are set forth below.


17

 
Summary of Community Centers at December 31, 2007
 
       
% of
% of
 
Lease
 
Anchors
Stores
Total
Anchors
Stores
 
Expiration
Property/Location
GLA
GLA (1)
GLA
Occupied
Occupied
Anchors
(2)
 
Knox Village Square
                       
Mount Vernon, OH (3)
173,009
 
34,400
 
207,409
 
67.8
 
88.1
 
JCPenney
05/31/13
                     
Kmart
11/30/17
                         
Morgantown Commons
                       
Morgantown, WV
200,187
 
30,656
 
230,843
 
100.0
 
25.9
 
Gabriel Brothers
01/31/17
                     
Kmart
02/28/21
                         
Ohio River Plaza
                       
Gallipolis, OH (3)
44,242
 
43,136
 
87,378
 
37.0
 
87.9
 
Peebles
01/31/17
                         
Polaris Towne Center
                       
Columbus, OH
291,997
 
151,040
 
443,037
 
100.0
 
97.3
 
Barnes & Noble
01/31/15
                     
Best Buy
01/31/15
                     
Jo-Ann etc.
01/31/10
                     
Kroger
11/30/18
                     
Linens `N Things
01/31/15
                     
OfficeMax
09/30/14
                     
Old Navy
01/31/10
                     
T.J. Maxx
03/31/09
                         
Total
709,435
 
259,232
 
968,667
 
88.2%
 
86.1%
     
 
 
(1) 
Includes outparcels.
(2)
Lease expiration dates do not contemplate options to renew.
(3)
Property classified as held-for-sale at December 31, 2007.

 (c)           Properties Subject to Indebtedness

At December 31, 2007, 24 of the Properties, consisting of 19 Malls (17 wholly-owned and 2 partially owned through a joint venture), 3 Community Centers, and 2 properties under development (partially owned through a joint venture), were encumbered by mortgages and 4 Malls and 1 Community Center were unencumbered.  The 5 unencumbered Properties had a net book value of $206.8 million at December 31, 2007.  To facilitate the funding of working capital requirements and to finance the acquisition and development of the Properties, the Company has entered into an unsecured revolving line of credit with several financial institutions.


18

 
Various Mortgage Loans

The following table sets forth certain information regarding the mortgages which encumber various Properties.   All of the mortgages are first mortgage liens on the Properties.  The information is as of December 31, 2007 (dollars in thousands).
 
Encumbered Property
Fixed/ Variable
Interest Rate
Interest
  Rate
Loan
Balance
Annual Debt
Service
Payment at
Maturity
Maturity 
                   
Knox Village Square
Fixed
7.41%
      $     8,634
 
$     772
 
$    8,624
 02/11/2008 (1)
 
Morgantown note
Fixed
6.89%
        51,503
 
$  4,608
 
$ 50,823
09/11/2008 (2)
 
Morgantown Mall
                 
Morgantown Commons 
                 
Eastland North Carolina
Fixed
7.84%
    42,907
 
$  4,308
 
$  42,302
09/11/2008 (2)
 
Great Mall of the Great Plains, The
Fixed
6.35%
30,000
 
$  1,932
 
$  30,000
01/12/2009
 
Grand Central Mall
Fixed
7.18%
           47,001
 
$  4,268
 
$  46,065
02/01/2009
 
Mall at Johnson City, The
Fixed
8.37%
    38,323
 
$  3,740
 
$  37,026
06/01/2010
 
Polaris Towne Center
Fixed
8.20%
           39,969
 
$  3,858
 
$  38,543
06/01/2010 (2)
 
Ashland Town Center
Fixed
7.25%
           24,273
 
$  2,344
 
$  21,817
11/01/2011
 
Dayton Mall, The
Fixed
8.27%
           54,983
 
$  5,556
 
$  49,864
07/11/2012 (2)
 
WestShore Plaza
Fixed
5.09%
93,624
 
$  6,508
 
$  84,824
09/09/2012
 
Polaris Fashion Place
Fixed
5.24%
         139,692
 
$  9,928
 
$124,572
04/11/2013
 
Lloyd Center
Fixed
5.42%
  131,069
 
$  9,456
 
$116,922
06/11/2013 (2)
 
Jersey Gardens
Fixed
4.83%
         156,082
 
   $10,424
 
$135,194
06/08/2014
 
Mall at Fairfield Commons, The
Fixed
5.45%
  107,499
 
$  7,724
 
$  92,762
11/01/2014
 
SuperMall of the Great Northwest
Fixed
7.54%
           58,624
 
$  5,412
 
$  49,969
02/11/2015 (2)
 
Merritt Square Mall
Fixed
5.35%
57,000
 
$  3,092
 
$  52,914
      09/01/2015
 
River Valley Mall
Fixed
5.65%
       50,000
 
$  2,864
 
$  44,931
      01/11/2016
 
Weberstown Mall
Fixed
5.90%
60,000
 
$  3,590
 
$  60,000
      06/08/2016
 
Eastland Ohio
Fixed
5.87%
       43,000
 
$  2,557
 
$  38,057
      12/11/2016
 
                   
Total Wholly Owned Properties:
   
    $1,234,183
  (3)
       
                   
Joint Venture Properties:
                 
                   
Puente Hills Mall
Fixed
5.20%
  $     44,660
 
$  3,151
 
$  44,324
06/01/2008
 
Tulsa Promenade
Fixed
6.52%
       18,200
 
$  1,206
 
$  18,200
03/14/2009
 
Surprise Peripheral
Variable
6.98%
         1,200
 
$     172
 
$    1,200
10/01/2009
 
Scottsdale Quarter (4)
Variable
NA
                -
 
NA
 
NA
05/29/2011
 
                   
Total Joint Venture Properties:
   
$     64,060
           
 
 
(1)
This loan was paid off on February 11, 2008.
 
(2)
Optional prepayment date (without penalty) is shown. Loan matures at a later date as disclosed in Note 5 in our Consolidated Financial Statements.
 
(3)
This total differs from the amounts reported in the financial statements due to $19.0 million in tax exempt borrowings which are not secured by a mortgage and fair value adjustments to debt instruments as required by SFAS No. 141, “Business Contributions.”
 
(4)
On November 30, 2007 we closed on a $220 million construction loan for our Scottsdale Quarter project.  The loan bears interest at LIBOR plus 150 basis points.  As of December 31, 2007, we had no borrowings on the loan.


Item 3.    Legal Proceedings

The Company is involved in lawsuits, claims and proceedings, which arise in the ordinary course of business.  The Company is not presently involved in any material litigation.  In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies,” the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

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

No matter was submitted to a vote of security holders through the solicitation of proxies or otherwise during the fourth quarter of fiscal year 2007.
 
19

PART II.

Item 5.  Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

 (a)           Market Information

The Common Shares are currently listed and traded on the NYSE under the symbol “GRT.”  On February 21, 2008, the last reported sales price of the Common Shares on the NYSE was $11.76.  The following table shows the high and low sales prices for the Common Shares on the NYSE for the 2007 and 2006 quarterly periods indicated as reported by the NYSE Composite Tape and the cash distributions per Common Share paid by GRT with respect to such period.

               
Distributions
 
Quarter Ended
 
High
   
Low
   
Per Share
 
March 31, 2007
   
$29.69
     
$25.89
     
$0.4808
 
June 30, 2007
   
$28.20
     
$24.95
     
$0.4808
 
September 30, 2007
   
$25.75
     
$19.39
     
$0.4808
 
December 31, 2007
   
$24.73
     
$13.77
     
$0.4808
 
             
 
         
March 31, 2006
   
$29.10
     
$23.95
     
$0.4808
 
June 30, 2006
   
$28.36
     
$23.88
     
$0.4808
 
September 30, 2006
   
$25.63
     
$23.08
     
$0.4808
 
December 31, 2006
   
$27.72
     
$24.20
     
$0.4808
 

(b)           Holders

The number of holders of record of the Common Shares was 806 as of February 21, 2008.

(c)           Distributions

Future distributions paid by GRT on the Common Shares will be at the discretion of the trustees of GRT and will depend upon the actual cash flow of GRT, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, and such other factors as the trustees of GRT deem relevant.

GRT has implemented a Distribution Reinvestment and Share Purchase Plan under which its shareholders or Operating Partnership unit holders may elect to purchase additional Common Shares at fair value and/or automatically reinvest their distributions in Common Shares at fair value.  In order to fulfill its obligations under the plan, GRT may purchase Common Shares in the open market or issue Common Shares that have been registered and authorized specifically for the plan.  As of December 31, 2007, 2,100,000 Common Shares were authorized, of which 286,194 Common Shares have been issued.

Item 6.  Selected Financial Data

The following table sets forth Selected Financial Data for the Company.  This information should be read in conjunction with the consolidated financial statements of the Company and Management’s Discussion and Analysis of the Financial Condition and Results of Operations, each included elsewhere in this Form 10-K:
 

 
20

 
SELECTED FINANCIAL DATA
 
   
For the Years Ended December 31,
 
   
2007
   
2006
   
2005
   
2004
   
2003
 
Operating Data (in thousands, except per share amounts): (1)
                             
Total revenues
  $ 302,166     $ 292,551     $ 287,918     $ 276,697     $ 227,366  
Operating income
  $ 102,442     $ 106,151     $ 104,822     $ 99,541     $ 83,594  
Interest expense
  $ 87,940     $ 82,166     $ 71,873     $ 75,425     $ 63,998  
Gain on sales of properties, net
  $ 47,349     $ 1,717     $ 1,619     $ 19,646     $ 703  
Income from continuing operations
  $ 14,649     $ 33,615     $ 33,010     $ 21,390     $ 20,499  
(Loss) income from continuing operations per share common  (diluted)
  $ (0.03 )   $ 0.21     $ 0.40     $ 0.05     $ 0.22  
Net income (loss)
  $ 38,357     $ (77,165 )   $ 20,850     $ 51,755     $ 32,961  
Preferred stock dividends
  $ 17,437     $ 17,437     $ 17,437     $ 17,517     $ 13,688  
Net income (loss) available to common shareholders
  $ 20,920     $ (94,602 )   $ 3,413     $ 29,360     $ 19,273  
Per common share data: Earnings (loss) per share (diluted)
  $ 0.56     $ (2.55 )   $ 0.09     $ 0.82     $ 0.55  
Distributions (per common share)
  $ 1.9232     $ 1.9232     $ 1.9232     $ 1.9232     $ 1.9232  
                                         
Balance Sheet Data (in thousands):
                                       
Investment in real estate, net
  $ 1,710,003     $ 1,773,805     $ 1,877,059     $ 1,835,298     $ 1,724,226  
Total assets
  $ 1,830,947     $ 1,891,252     $ 1,995,312     $ 1,947,024     $ 1,837,423  
Total long-term debt
  $ 1,552,210     $ 1,576,886     $ 1,501,481     $ 1,402,604     $ 1,295,058  
Total shareholders’ equity
  $ 189,090     $ 225,235     $ 387,054     $ 443,822     $ 441,939  
                                         
Other Data:
                                       
Cash provided by operating activities (in thousands)
  $ 102,656     $ 96,230     $ 108,345     $ 102,305     $ 98,894  
Cash provided by (used in) investing activities (in thousands)
  $ 65,895     $ (108,911 )   $ (120,203 )   $ 38,133     $ (200,229 )
Cash (used in) provided by financing activities (in thousands)
  $ (158,155 )   $ 16,611     $ 11,233     $ (143,032 )   $ 101,066  
Funds from operations (2) (in thousands)
  $ 55,395     $ (25,502 )   $ 77,666     $ 89,629     $ 88,897  
Number of Properties (3) (4)
    27       30       36       41       70  
Total GLA (in thousands) (3) (4)
    21,598       24,740       24,615       24.291       27,061  
Occupancy rate % (3)
    95.2 %     92.8 %     91.9 %     89.3 %     89.8 %

(1)
Operating data for the years ended December 31, 2006, 2005, 2004 and 2003 are restated to reflect the reclassification of properties held-for-sale and discontinued operations.

(2)
FFO as defined by NAREIT is used by the real estate industry and investment community as a supplemental measure of the performance of real estate companies. NAREIT defines FFO as net income (loss) available to common shareholders (computed in accordance with GAAP), excluding gains or losses from sales of depreciable property, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. FFO does include impairment losses for properties held-for-use and held-for-sale.  The Company’s FFO may not be directly comparable to similarly titled measures reported by other REITs.  FFO does not represent cash flow from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of the Company’s financial performance or to cash flow from operating activities (determined in accordance with GAAP), as a measure of the Company’s liquidity, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions.  A reconciliation of FFO to net income available to common shareholders is provided in Item 7 of this Form 10-K.

(3)
Number of Properties and GLA include Properties which are both wholly-owned by the Company or by a joint venture in which the Company has a joint venture interest.  Occupancy of the Properties is defined as any space where a store is open or a tenant is paying rent at the date indicated, excluding all tenants with leases having an initial term of less than one year.

(4)
The number of Properties owned by joint ventures in which the Company has an interest and the GLA of those Properties included in the table are as follows: 2007 includes 2.1 million square feet of GLA (2 Properties); 2006 includes 2.1 million square feet of GLA (2 Properties); 2005 includes 1.2 million square feet of GLA (1 Property); none in 2004; and 2003 includes 2.0 million square feet of GLA (2 Properties).

21

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

Overview

GRT is a self-administered and self-managed Maryland real estate investment trust, or REIT, which commenced business operations in January 1994 at the time of its initial public offering.  We own, lease, manage and develop a portfolio of retail properties consisting of regional and super regional malls as well as community shopping centers.  As of December 31, 2007, we owned interests in and managed 27 Properties, consisting of 23 Malls (21 wholly-owned and 2 partially owned through a joint venture) and 4 Community Centers located in 14 states.  The Properties contain an aggregate of approximately 21.6 million square feet of GLA of which approximately 95.2% was occupied at December 31, 2007.

Our primary business objective is to achieve growth in net income and funds from operations, or FFO, by developing and acquiring retail properties; improving the operating performance and value of our existing portfolio through selective expansion and renovation of our Properties; and by maintaining high occupancy rates, increasing minimum rents per square-foot of GLA and aggressively controlling costs.

Key elements of our growth strategies and operating policies are to:

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Increase Property values by aggressively marketing available GLA and renewing existing leases;

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Negotiate and sign leases which provide for regular or fixed contractual increases to minimum rents;

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Capitalize on management’s long-standing relationships with national and regional retailers and extensive experience in marketing to local retailers, as well as exploit the leverage inherent in a larger portfolio of properties in order to lease available space;

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Establish and capitalize on strategic joint venture relationships to maximize capital resource availability;

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Utilize our team-oriented management approach to increase productivity and efficiency;

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Acquire strategically located malls;

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Hold Properties for long-term investment and emphasize regular maintenance, periodic renovation and capital improvements to preserve and maximize value;

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Selectively dispose of assets we believe have achieved long-term investment potential and redeploy the proceeds;

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Control operating costs by utilizing our employees to perform management, leasing, marketing, finance, accounting, construction supervision, legal and information technology services;

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Renovate, reconfigure or expand Properties and utilize existing land available for expansion and development of outparcels to meet the needs of existing or new tenants; and

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Utilize our development capabilities to develop quality properties at low cost.

Our strategy is to be a leading REIT focusing on anchored-retail properties located primarily in the top 100 metropolitan statistical areas by population.  We expect to continue investing in select development opportunities and in strategic acquisitions of mall properties that provide growth potential.  We expect to finance acquisition, redevelopment and development opportunities with cash on hand, borrowings under credit facilities, proceeds from strategic joint venture partners, asset dispositions, secured mortgage financings, the issuance of equity or debt securities, or a combination of two or more of the foregoing.

Critical Accounting Policies and Estimates

General

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.  Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of the Board and the Company’s independent registered public accounting firm.  Actual results may differ from these estimates under different assumptions or conditions.

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An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that are reasonably likely to occur could materially impact the financial statements.  Management believes the critical accounting policies discussed in this section reflect its more significant estimates and assumptions used in preparation of the consolidated financial statements.

Revenue Recognition

The Company’s revenue recognition policy relating to minimum rents does not require the use of significant estimates.  Minimum rents are recognized on an accrual basis over the term of the related leases on a straight-line basis.  Percentage rents, tenant reimbursements, and components of other revenue associated with the margins related to outparcel sales include estimates.

Percentage Rents

Percentage rents, which are based on tenants’ sales as reported to the Company, are recognized once the sales reported by such tenants exceed any applicable breakpoints as specified in the tenants’ leases.  The percentage rents are recognized based upon the measurement dates specified in the leases which indicate when the percentage rent is due.

Tenant Reimbursements

Estimates are used to record cost reimbursements from tenants for CAM, real estate tax, utilities and insurance. We recognize revenue based upon the amounts to be reimbursed from our tenants for these items in the same period these reimbursable expenses are incurred.  Differences between estimated cost reimbursements and final amounts billed are recognized in the subsequent year.  Leases are not uniform in dealing with such cost reimbursements and variations exist in computations between Properties and tenants.  The Company analyzes the balance of its estimated accounts receivable for real estate taxes, CAM and insurance for each of its Properties by comparing actual reimbursements versus actual expenses.  Adjustments are also made throughout the year to these receivables and the related cost reimbursement income based upon the Company’s best estimate of the final amounts to be billed and collected.  If management’s estimate of the percent of recoverable expenses that can be billed to the tenants in 2007 differs from actual amounts billed in 2007 by 1%, the amount of income recorded during 2007 would increase or decrease by $1.1 million.

Outparcel Sales

The Company sells outparcels at its various Properties.  The estimated cost used to calculate the margin from these sales involves a number of estimates.  The estimates made are based either upon assigning a proportionate value based upon historical cost paid for the total parcel to the portion of the parcel that is sold, or by incorporating the sales value method.  The proportionate share of actual cost is derived through consideration of numerous factors.  These factors include items such as ease of access to the parcel, visibility from high traffic areas and other factors that may differentiate the desirability of the particular section of the parcel that is sold.

Accounts Receivable and Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects the Company’s estimate of the amounts of the recorded accounts receivable at the balance sheet date that will not be recovered from cash receipts in subsequent periods.  The Company’s policy is to record a periodic provision for doubtful accounts based on total revenues.  The Company also periodically reviews specific tenant balances and determines whether an additional allowance is necessary.  In recording such a provision, the Company considers a tenant’s creditworthiness, ability to pay, probability of collections and consideration of the retail sector in which the tenant operates.  The allowance for doubtful accounts is reviewed periodically based upon the Company’s historical experience.

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Investment in Real Estate

Carrying Value of Assets

The Company maintains a diverse portfolio of real estate assets.  The portfolio holdings have increased as a result of both acquisitions and the development of new Properties and have been reduced by selected sales of assets.  The amounts to be capitalized as a result of acquisition and developments and the periods over which the assets are depreciated or amortized are determined based on the application of accounting standards that may require estimates as to fair value and the allocation of various costs to the individual assets.  The Company allocates the cost of the acquisition based upon the estimated fair value of the net assets acquired.  The Company also estimates the fair value of intangibles related to its acquisitions.  The valuation of the fair value of the intangibles involves estimates related to market conditions, probability of lease renewals and the current market value of in-place leases.  This market value is determined by considering factors such as the tenant’s industry, location within the Property and competition in the specific market in which the Property operates. Differences in the amount attributed to the intangible assets can be significant based upon the assumptions made in calculating these estimates.

Impairment Evaluation

Management evaluates the recoverability of its investment in real estate assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”  This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that recoverability of the asset is not assured.

The Company evaluates the recoverability of its investments in real estate assets to be held and used each quarter and records an impairment charge when there is an indicator of impairment and the undiscounted projected cash flows are less than the carrying amount for a particular Property.  The estimated cash flows used for the impairment analysis and the determination of estimated fair value are based on the Company’s plans for the respective assets and the Company’s views of market and economic conditions.  The estimates consider matters such as current and historical rental rates, occupancies for the respective Properties and comparable properties and recent sales data for comparable properties.  Changes in estimated future cash flows due to changes in the Company’s plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, could be substantial.

Investment in Real Estate – Held-for-Sale

The Company evaluates the held-for-sale classification of its owned real estate each quarter.  Assets that are classified as held-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell.  Assets are generally classified as held-for-sale once management commits to a plan to sell the Properties and has initiated an active program to market them for sale.  The results of operations of these real estate properties are reflected as discontinued operations in all periods reported.

On occasion, the Company will receive unsolicited offers from third parties to buy individual Properties.  Under these circumstances, the Company will classify the particular Property as held-for-sale when a sales contract is executed with no contingencies and the prospective buyer has funds at risk to ensure performance.

Sale of Real Estate Assets

The sale of real estate assets may also involve the application of judgments in determining whether the risks and rewards of ownership have transferred to the buyer and that a sale has been completed for purposes of recognizing a gain on the sale.  The Company recognizes property sales in accordance with SFAS No. 66, “Accounting for Sales of Real Estate.” The Company generally records the sales of operating properties and outparcels using the full accrual method at closing, when the earnings process is deemed to be complete.  Sales not qualifying for full recognition at the time of sale are accounted for under other appropriate deferral methods.

Accounting for Acquisitions

The fair value of the real estate acquired is allocated to 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 for acquired in-place leases, the value of tenant relationships, and the value of in-place leases, based in each case on their fair values.  Purchase accounting is applied to assets and liabilities related to real estate entities acquired based upon the percentage of interest acquired.