form10k_12312008.htm
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
_________________

FORM 10-K

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

(Mark One)
x           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2008
ON
¨       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________________ to ________________

Commission file number 1-9876


WEINGARTEN REALTY INVESTORS
(Exact name of registrant as specified in its charter)

TEXAS
  
74-1464203
(State or other jurisdiction of incorporation or organization)
  
(IRS Employer Identification No.)
     
2600 Citadel Plaza Drive
    
P.O. Box 924133
    
Houston, Texas
  
77292-4133
(Address of principal executive offices)
  
(Zip Code)
(713) 866-6000
(Registrant's telephone number)

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, $0.03 par value
  
New York Stock Exchange
Series D Cumulative Redeemable Preferred Shares, $0.03 par value
  
New York Stock Exchange
Series E Cumulative Redeemable Preferred Shares, $0.03 par value
  
New York Stock Exchange
Series F Cumulative Redeemable Preferred Shares, $0.03 par value
  
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YES xNO ¨.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.YES ¨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 xNO ¨.

 
 
 

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.x.

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

    Large accelerated filer x
Accelerated filer ¨
   
    Non-accelerated filer ¨.
Smaller reporting company ¨
                 (Do not check if a smaller reporting company)
  

The aggregate market value of the common shares of beneficial interest held by non-affiliates on June 30, 2008 (based upon the closing sale price on the New York Stock Exchange of $30.32) was $2,136,339,711.  As of June 30, 2008, there were 83,992,905 common shares of beneficial interest, $.03 par value, outstanding.

As of January 31, 2009, there were 87,132,356 common shares of beneficial interest outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement relating to its Annual Meeting of Shareholders to be held May 1, 2009 are incorporated by reference in Part III.

 
 


TABLE OF CONTENTS

Item No.
  
Page No.
     
   
     
1.
2
1A.
5
1B.
11
2.
12
3.
26
4.
26
     
     
   
     
5.
26
6.
29
7.
30
7A.
49
8.
50
9.
85
9A.
86
9B.
88
     
     
   
     
10.
88
11.
88
12.
89
13.
89
14.
89
     
     
   
     
15.
90
     
 
95


Forward-Looking Statements

This annual report on Form 10-K, together with other statements and information publicly disseminated by us, 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.  We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions.  Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions.  You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect actual results, performances or achievements.  Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) general economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt, or other sources of financing on favorable terms, (iv) changes in governmental laws and regulations, (v) the level and volatility of interest rates, (vi) the availability of suitable acquisition opportunities, (vii) changes in expected development activity, (viii) increases in operating costs, (ix) tax matters, including failure to qualify as a real estate investment trust, could have adverse consequences, (x) investments through real estate joint ventures and partnerships involve risks not present in investments in which we are the sole investor and (xi) changes in merchant development activity.  Accordingly, there is no assurance that our expectations will be realized.  For further discussion of the factors that could materially affect the outcome of our forward-looking statements and our future results and financial condition, see ”Item 1A. Risk Factors.”

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this annual report on Form 10-K or the date of any document incorporated herein by reference.  All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.  We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Form 10-K.

PART I

ITEM 1.        Business

General.  Weingarten Realty Investors is a real estate investment trust (“REIT”) organized under the Texas Real Estate Investment Trust Act.  We, and our predecessor entity, began the ownership and development of shopping centers and other commercial real estate in 1948.  Our primary business is leasing space to tenants in the shopping and industrial centers we own or lease.  We also manage centers for joint ventures in which we are partners or for other outside owners for which we charge fees.

At December 31, 2008, we owned or operated under long-term leases, either directly or through our interest in real estate joint ventures or partnerships, a total of 379 developed income-producing properties and 25 properties under various stages of construction and development.  The total number of centers includes 323 neighborhood and community shopping centers located in 22 states spanning the country from coast to coast.  We also owned 78 industrial projects located in California, Florida, Georgia, Tennessee, Texas and Virginia and three other operating properties located in Arizona and Texas.  The portfolio of properties is approximately 73.0 million square feet. 

We also owned interests in 31 parcels of land held for development that totaled approximately 29.8 million square feet.

At December 31, 2008, we employed 404 full-time persons and our principal executive offices are located at 2600 Citadel Plaza Drive, Houston, Texas 77008, and our phone number is (713) 866-6000.  We also have nine regional offices located in various parts of the United States.


Investment and Operating Strategy.  Our long-term investment strategy is to increase cash flow and the value of our portfolio through intensive hands-on management of our existing portfolio of assets, selective remerchandising and renovation of properties and the acquisition and development of income-producing real estate assets where the returns on such investments exceed our blended long-term cost of capital.  We have expanded our new development program to include both operating properties and a merchant developer component where we will build, lease and then sell the developed real estate.  Based on current market conditions, we anticipate acquisition volumes and investments in additional new development projects will be minimal.  Our estimated gross investment in the 25 properties under construction or in preconstruction stages and five properties that stabilized in 2008 is $560.2 million.

To improve the quality of the portfolio, we pursue the disposition of selective non-core assets as circumstances warrant.

At December 31, 2008, neighborhood and community shopping centers generated 89.2% of total revenue and industrial properties accounted for 9.4%.  We expect to continue to focus the future growth of the portfolio in neighborhood and community centers and bulk industrial properties in markets where we currently operate as well as other markets primarily throughout the United States.  While we do not anticipate significant investment in other classes of real estate such as multi-family or office assets, we remain open to alternative uses of our available capital.

We may either purchase or lease income-producing properties in the future, and may also participate with other entities in property ownership through partnerships, joint ventures or similar types of co-ownership.  Equity investments may be subject to existing mortgage financing and other indebtedness or such financing or indebtedness may be incurred in connection with acquiring such investments.

We may invest in mortgages; however, we have traditionally invested in first mortgages to real estate joint ventures or partnerships in which we own an equity interest.  We may also invest in securities of other issuers for the purpose, among others, of exercising control over such entities, subject to the gross income and asset tests necessary for REIT qualification.

Our operating strategy consists of intensive hands-on management and leasing of our properties.  In acquiring and developing properties, we attempt to accumulate enough properties in a geographic area to allow for the establishment of a regional office, which enables us to obtain in-depth knowledge of the market from a leasing perspective and to have easy access to the property and our tenants from a management viewpoint.

Diversification from both a geographic and tenancy perspective is a critical component of our operating strategy.  While approximately 35.0% of the building square footage of our properties is located in the State of Texas, we continue to expand our holdings outside the state.  With respect to tenant diversification, our two largest merchants accounted for 2.7% and 1.6%, respectively, of our total rental revenues for the year ended December 31, 2008.  No other tenant accounted for more than 1.6% of our total rental revenues.

We finance our growth and working capital needs in a conservative manner.  Our credit ratings were BBB and BBB+ from Standard & Poors and Baa2 and Baa1 from Moody's Investor Services as of December 31, 2008 and 2007, respectively.  We intend to maintain a conservative approach to managing our balance sheet, which, in turn, gives us many options to raising debt or equity capital when needed.  At December 31, 2008, our ratio of earnings to combined fixed charges and preferred dividends as defined by the Securities and Exchange Commission, not based on funds from operations, was 1.1 to 1 and our debt to total market capitalization was 57.5%.

Our policies with respect to the investment and operating strategies discussed above are reviewed by our Board of Trust Managers periodically and may be modified without a vote of our shareholders.

Location of Properties. Our properties are located in 23 states, primarily throughout the southern half of the country.  As of December 31, 2008, of our 404 properties, which were owned or operated under long-term leases either directly or through our interest in real estate joint ventures or partnerships, 90 are located in Houston and its surrounding areas, and an additional 73 properties are located in other parts of Texas.  We also have 31 parcels of land held for development, 12 of which are located in Houston and its surrounding areas and six of which are located in other parts of Texas.  Because of our investments in Houston and its surrounding areas, as well as in other parts of Texas, the Houston and Texas economies affect, to a large degree, our business and operations.


Economic Factors. As expected, the national economy continued to soften in 2008.  The residential mortgage and capital markets were under extreme stress, primarily in the form of escalating default rates on sub-prime mortgages and declining residential housing prices nationwide.  This “credit” crisis expanded to the broader commercial credit markets and has generally reduced the availability of financing and widened spreads.  These factors, coupled with a slowing economy, negatively impacted the volume of real estate transactions and capitalization rates, which, in turn, negatively impacted stock price performance of public real estate companies, including ours.  Due to our analysis of current economic considerations, including the effects of tenant bankruptcies, lack of available funding and halt of tenant expansion plans for new development projects and declines in the real estate values, plans related to our new development properties including land held for development changed, and the use of these assets was no longer certain which brought about an impairment charge.  Impairments, primarily related to our new development properties, of $52.5 million were recognized for the year ended December 31, 2008.  While the decline in the housing market has affected consumer spending, the vast majority of our properties are located in densely populated metropolitan areas and are anchored by supermarkets and discount stores, which generally provide basic necessity-type items and tend to be less affected by economic cycles.  Furthermore, our portfolio is strategically positioned in geographic markets that are forecasted to exceed the national average according to many economic measures.  Many of our operating areas throughout the United States continue to show stable employment growth and higher than average rent growth among larger metropolitan areas.  However, if weaker economic conditions persist in 2009 and beyond, our real estate portfolio may experience lower occupancy and effective rents, which would result in a corresponding decrease in net income, funds from operations and cash flows.  In addition, the value of our investment in real estate joint ventures and partnerships and notes receivable from real estate joint ventures and partnerships may also decline.

Competition.  We compete with numerous other developers and real estate companies (both public and private), financial institutions and other investors engaged in the development, acquisition and operation of shopping centers and commercial property in our trade areas.  This results in competition for the acquisition of both existing income-producing properties and prime development sites.  There is also competition for tenants to occupy the space that is developed, acquired and managed by our competitors or us.

We believe that the principal competitive factors in attracting tenants in our market areas are location, price, anchor tenants and maintenance of properties.  We also believe that our competitive advantages include the favorable locations of our properties, knowledge of markets and customer bases, our ability to provide a retailer with multiple locations with anchor tenants and the practice of continuous maintenance and renovation of our properties.

Materials Available on Our Website.  Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, as well as Reports on Forms 3, 4 and 5 regarding our officers, trust managers or 10% beneficial owners, filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934 are available free of charge through our website (www.weingarten.com) as soon as reasonably practicable after we electronically file the material with, or furnish it to, the Securities and Exchange Commission (“SEC”).  We have also made available on our website copies of our Audit Committee Charter, Management Development and Compensation Committee Charter, Governance Committee Charter, Code of Conduct and Ethics and Governance Policies.  In the event of any changes to these charters or the code or guidelines, changed copies will also be made available on our website.  You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549 or the SEC’s Internet site at www.sec.gov.  Materials on our website are not part of our Annual Report on Form 10-K.

Financial Information.  Additional financial information concerning us is included in the Consolidated Financial Statements located on pages 50 through 85 herein.


ITEM 1A.     Risk Factors

Recent disruptions in the financial markets could affect our liquidity and have other adverse effects on us and the market price of our common shares of beneficial interest.

The United States and global equity and credit markets have recently experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective debt financings to widen considerably.  These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in certain cases have resulted in the unavailability of certain types of financing.  Continued uncertainty in the equity and credit markets may negatively impact our ability to access additional financing at reasonable terms or at all, which may negatively affect our ability to complete dispositions, form joint ventures or refinance our debt.  A prolonged downturn in the equity or credit markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly.  In addition, these factors may make it more difficult for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of financing or difficulties in obtaining financing.  These events in the equity and credit markets may make it more difficult or costly for us to raise capital through the issuance of our common shares of beneficial interest or preferred shares.  These disruptions in the financial markets also may have a material adverse effect on the market value of our common shares of beneficial interest and preferred shares and other adverse effects on us or the economy generally.  There can be no assurances that government responses to the disruptions in the financial markets will restore consumer confidence, stabilize the markets or increase liquidity and the availability of equity or credit financing.

Among the market conditions that may affect the value of our common shares of beneficial interest and preferred shares are the following:

§  
The attractiveness of REIT securities as compared to other securities, including securities issued by other real estate companies, fixed income equity securities and debt securities;
§  
The degree of interest held by institutional investors;
§  
Our operating performance and financial situation; and
§  
General economic conditions.

The current volatility in the stock market has created price and volume fluctuations that have not necessarily been comparable to operating performance.
 

The economic performance and value of our shopping centers depend on many factors, each of which could have an adverse impact on our cash flows and operating results.

The economic performance and value of our properties can be affected by many factors, including the following:

§  
Changes in the national, regional and local economic climate;
§  
Local conditions such as an oversupply of space or a reduction in demand for real estate in the area;
§  
The attractiveness of the properties to tenants;
§  
Competition from other available space;
§  
Our ability to provide adequate management services and to maintain our properties;
§  
Increased operating costs, if these costs cannot be passed through to tenants;
§  
The expense of periodically renovating, repairing and releasing spaces;
§  
Consequence of any armed conflict involving, or terrorist attack against, the United States;
§  
Our ability to secure adequate insurance;
§  
Fluctuations in interest rates;
§  
Changes in real estate taxes and other expenses; and
§  
Availability of financing on acceptable terms or at all.


Our properties consist primarily of neighborhood and community shopping centers and, therefore, our performance is linked to general economic conditions in the market for retail space.  The market for retail space has been and may continue to be adversely affected by weakness in the national, regional and local economies where our properties are located, the adverse financial condition of some large retail companies, the ongoing consolidation in the retail sector, the excess amount of retail space in a number of markets and increasing consumer purchases through catalogues and the Internet.  To the extent that any of these conditions occur, they are likely to affect market rents for retail space.  In addition, we may face challenges in the management and maintenance of the properties or encounter increased operating costs, such as real estate taxes, insurance and utilities, which may make our properties unattractive to tenants.

Our acquisition activities may not produce the cash flows that we expect and may be limited by competitive pressures or other factors.

We intend to acquire existing retail properties to the extent that suitable acquisitions can be made on advantageous terms.  Acquisitions of commercial properties involve risks such as:

§  
Our estimates on expected occupancy and rental rates may differ from actual conditions;
§  
Our estimates of the costs of any redevelopment or repositioning of acquired properties may prove to be inaccurate;
§  
We may be unable to operate successfully in new markets where acquired properties are located, due to a lack of market knowledge or understanding of local economies;
§  
We may be unable to successfully integrate new properties into our existing operations; or
§  
We may have difficulty obtaining financing on acceptable terms or paying the operating expenses and debt service associated with acquired properties prior to sufficient occupancy.

In addition, we may not be in a position or have the opportunity in the future to make suitable property acquisitions on advantageous terms due to competition for such properties with others engaged in real estate investment.  Our inability to successfully acquire new properties may have an adverse effect on our results of operations.

Turmoil in capital markets could adversely impact acquisition activities and pricing of real estate assets.

Volatility in capital markets could adversely affect acquisition activities by impacting certain factors including the tightening of underwriting standards by lenders and credit rating agencies and the significant inventory of unsold Collateralized Mortgage Backed Securities in the market.  These factors directly affect a lender’s ability to provide debt financing as well as increase the cost of available debt financing.  As a result, we may not be able to obtain favorable debt financing in the future or at all.  This may result in future acquisitions generating lower overall economic returns, which may adversely affect our results of operations and distributions to shareholders.  Furthermore, any turmoil in the capital markets could adversely impact the overall amount of capital available to invest in real estate, which may result in price or value decreases of real estate assets.

Our dependence on rental income may adversely affect our profitability, our ability to meet our debt obligations and our ability to make distributions to our shareholders.

The substantial majority of our income is derived from rental income from real property.  As a result, our performance depends on our ability to collect rent from tenants.  Our income and funds for distribution would be negatively affected if a significant number of our tenants, or any of our major tenants (as discussed in more detail below):

§  
Delay lease commencements;
§  
Decline to extend or renew leases upon expiration;
§  
Fail to make rental payments when due; or
§  
Close stores or declare bankruptcy.


Any of these actions could result in the termination of the tenants’ lease and the loss of rental income attributable to the terminated leases.  In addition, lease terminations by an anchor tenant or a failure by that anchor tenant to occupy the premises could also result in lease terminations or reductions in rent by other tenants in the same shopping centers under the terms of some leases.  In these events, we cannot be sure that any tenant whose lease expires will renew that lease or that we will be able to re-lease space on economically advantageous terms.  The loss of rental revenues from a number of our tenants and our inability to replace such tenants, particularly in the case of a substantial tenant with leases in multiple locations, may adversely affect our profitability, our ability to meet debt and other financial obligations and our ability to make distributions to the shareholders.  Through the twelve months ended December 31, 2008, we had 106 tenants that either closed stores due to bankruptcy or declared bankruptcy.  Such closings and bankruptcies represent 2.9% of leasable space in our portfolio.

We may be unable to collect balances due from tenants in bankruptcy.

A tenant that files for bankruptcy protection may not continue to pay us rent.  A bankruptcy filing by or relating to one of our tenants or a lease guarantor would bar all efforts by us to collect pre-bankruptcy debts from the tenant or the lease guarantor, or their property, unless the bankruptcy court permits us to do so.  A tenant or lease guarantor bankruptcy could delay our efforts to collect past due balances under the relevant leases and could ultimately preclude collection of these sums.  If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages.  As a result, it is likely that we would recover substantially less than the full value of any unsecured claims it holds, if at all.

Our development and construction activities could adversely affect our operating results.

We intend to continue the selective development and construction of retail properties in accordance with our development and underwriting policies as opportunities arise.  Our development and construction activities include risks that:

§  
We may abandon development opportunities after expending resources to determine feasibility;
§  
Construction costs of a project may exceed our original estimates;
§  
Occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable;
§  
Rental rates per square foot could be less than projected;
§  
Financing may not be available to us on favorable terms for development of a property;
§  
We may not complete construction and lease-up on schedule, resulting in increased debt service expense and construction costs; and
§  
We may not be able to obtain, or may experience delays in obtaining necessary zoning, land use, building, occupancy and other required governmental permits and authorizations.

Additionally, the time frame required for development, construction and lease-up of these properties means that we may have to wait years for a significant cash return.  If any of the above events occur, the development of properties may hinder our growth and have an adverse effect on our results of operations.  In addition, new development activities, regardless of whether or not they are ultimately successful, typically require substantial time and attention from management.

Our merchant development program could adversely affect our operating results.
 
Through our merchant development program, we develop primarily neighborhood and community shopping centers, with the objective of selling the properties (or interests therein) to third parties, as opposed to retaining the properties in our portfolio on a long-term basis.  Due to the inherent uncertainty associated with our merchant development program, our operating results and financial indicators, such as funds from operations (“FFO”), will fluctuate from time to time.  Accordingly, fluctuations in the results of our merchant development program could cause us to be unable to meet, or to exceed, our publicly disclosed financial performance outlook, as well as FFO per share estimates of security analysts for any given period.  Our expectations with respect to sales in our merchant development program are based on currently available information, and no assurance can be given regarding the timing, terms or consummation of any sale.  Furthermore, market conditions can impact our ability to sell these properties as potential funding may not be readily available to prospective buyers.  Failure to meet our publicly disclosed financial performance outlook or security analyst estimates could have a material adverse effect on the trading price of our common shares of beneficial interest.
 


There is a lack of operating history with respect to our recent acquisitions and development of properties, and we may not succeed in the integration or management of additional properties.
 
These properties may have characteristics or deficiencies currently unknown to us that affect their value or revenue potential.  It is also possible that the operating performance of these properties may decline under our management.  As we acquire additional properties, we will be subject to risks associated with managing new properties, including lease-up and tenant retention.  In addition, our ability to manage our growth effectively will require us to successfully integrate our new acquisitions into our existing management structure.  We may not succeed with this integration or effectively manage additional properties.  Also, newly acquired properties may not perform as expected.
 
Real estate property investments are illiquid, and therefore we may not be able to dispose of properties when appropriate or on favorable terms.

Real estate property investments generally cannot be disposed of quickly.  In addition, the federal tax code imposes restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate companies.  Therefore, we may not be able to vary our portfolio in response to economic or other conditions promptly or on favorable terms, which could cause us to incur extended losses and reduce our cash flows and adversely affect distributions to shareholders.

Our cash flows and operating results could be adversely affected by required payments of debt or related interest and other risks of our debt financing.

We are generally subject to risks associated with debt financing. These risks include:

§  
Our cash flow may not satisfy required payments of principal and interest;
§  
We may not be able to refinance existing indebtedness on our properties as necessary or the terms of the refinancing may be less favorable to us than the terms of existing debt;
§  
Required debt payments are not reduced if the economic performance of any property declines;
§  
Debt service obligations could reduce funds available for distribution to our shareholders and funds available for capital investment;
§  
Any default on our indebtedness could result in acceleration of those obligations and possible loss of property to foreclosure; and
§  
The risk that necessary capital expenditures for purposes such as re−leasing space cannot be financed on favorable terms.

If a property is mortgaged to secure payment of indebtedness and we cannot make the mortgage payments, we may have to surrender the property to the lender with a consequent loss of any prospective income and equity value from such property.  Any of these risks can place strains on our cash flows, reduce our ability to grow and adversely affect our results of operations.

Property ownership through real estate partnerships and joint ventures could limit our control of those investments and reduce our expected return.

Real estate partnership or joint venture investments may involve risks not otherwise present for investments made solely by us, including the possibility that our partner or co-venturer might become bankrupt, that our partner or co-venturer might at any time have different interests or goals than us, and that our partner or co-venturer may take action contrary to our instructions, requests, policies or objectives.  Other risks of joint venture investments could include impasse on decisions, such as a sale, because neither our partner or co-venturer nor we would have full control over the partnership or joint venture.  These factors could limit the return that we receive from those investments or cause our cash flows to be lower than our estimates.



Our financial condition could be adversely affected by financial covenants.

Our credit facilities and public debt indentures under which our indebtedness is, or may be, issued contain certain financial and operating covenants, including, among other things, certain coverage ratios, as well as limitations on our ability to incur secured and unsecured indebtedness, restrictions on our ability to sell all or substantially all of our assets and engage in mergers and consolidations and certain acquisitions.  These covenants could limit our ability to obtain additional funds needed to address cash shortfalls or pursue growth opportunities or transactions that would provide substantial return to our shareholders.  In addition, a breach of these covenants could cause a default under or accelerate some or all of our indebtedness, which could have a material adverse effect on our financial condition.
 
If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax as a regular corporation and could have significant tax liability.

We intend to operate in a manner that allows us to qualify as a REIT for U.S. federal income tax purposes.  However, REIT qualification requires us to satisfy numerous requirements (some on an annual or quarterly basis) established under highly technical and complex provisions of the Internal Revenue Code, for which there are a limited number of judicial or administrative interpretations.  Our status as a REIT requires an analysis of various factual matters and circumstances that are not entirely within our control.  Accordingly, it is not certain we will be able to qualify and remain qualified as a REIT for U.S. federal income tax purposes.  Even a technical or inadvertent violation of the REIT requirements could jeopardize our REIT qualification.  Furthermore, Congress or the IRS might change the tax laws or regulations and the courts might issue new rulings, in each case potentially having retroactive effect that could make it more difficult or impossible for us to qualify as a REIT.  If we fail to qualify as a REIT in any tax year, then:

§  
We would be taxed as a regular domestic corporation, which, among other things, means that we would be unable to deduct distributions to our shareholders in computing our taxable income and would be subject to U.S. federal income tax on our taxable income at regular corporate rates;
§  
Any resulting tax liability could be substantial and would reduce the amount of cash available for distribution to shareholders, and could force us to liquidate assets or take other actions that could have a detrimental effect on our operating results; and
§  
Unless we were entitled to relief under applicable statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year during which we lost our qualification, and our cash available for distribution to our shareholders therefore would be reduced for each of the years in which we do not qualify as a REIT.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.  We may also be subject to certain U.S. federal, state and local taxes on our income and property either directly or at the level of our subsidiaries.  Any of these taxes would decrease cash available for distribution to our shareholders.

Compliance with REIT requirements may negatively affect our operating decisions.

To maintain our status as a REIT for U.S. federal income tax purposes, we must meet certain requirements, on an ongoing basis, including requirements regarding our sources of income, the nature and diversification of our assets, the amounts we distribute to our shareholders and the ownership of our shares.  We may also be required to make distributions to our shareholders when we do not have funds readily available for distribution or at times when our funds are otherwise needed to fund capital expenditures.

As a REIT, we must distribute at least 90% of our annual net taxable income (excluding net capital gains) to our shareholders.  To the extent that we satisfy this distribution requirement, but distribute less than 100% of our net taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income.  From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our net taxable income may be greater than our cash flow available for distribution to our shareholders.  If we do not have other funds available in these situations, we could be required to borrow funds, sell a portion of our securities at unfavorable prices or find other sources of funds in order to meet the REIT distribution requirements.



Dividends paid by REITs generally do not qualify for reduced tax rates.

In general, the maximum U.S. federal income tax rate for dividends paid to individual U.S. shareholders is 15% (through 2009).  Unlike dividends received from a corporation that is not a REIT, our distributions to individual shareholders generally are not eligible for the reduced rates.

Our real estate investments may contain environmental risks that could adversely affect our operating results.

The acquisition of certain assets may subject us to liabilities, including environmental liabilities.  Our operating expenses could be higher than anticipated due to the cost of complying with existing or future environmental laws and regulations.  In addition, under various federal, state and local laws, ordinances and regulations, we may be considered an owner or operator of real property or have arranged for the disposal or treatment of hazardous or toxic substances.  As a result, we may become liable for the costs of removal or remediation of certain hazardous substances released on or in our property.

We may also be liable for other potential costs that could relate to hazardous or toxic substances (including governmental fines and injuries to persons and property).  We may incur such liability whether or not we knew of, or were responsible for, the presence of such hazardous or toxic substances.  Any liability could be of substantial magnitude and divert management’s attention from other aspects of our business and, as a result, could have a material adverse effect on our operating results and financial condition, as well as our ability to make distributions to the shareholders.

An uninsured loss or a loss that exceeds the policies on our properties could subject us to lost capital or revenue on those properties.

Under the terms and conditions of the leases currently in force on our properties, tenants generally are required to indemnify and hold us harmless from liabilities resulting from injury to persons, air, water, land or property, on or off the premises, due to activities conducted on the properties, except for claims arising from our negligence or intentional misconduct or that of our agents.  Tenants are generally required, at the tenant’s expense, to obtain and keep in full force during the term of the lease, liability and property damage insurance policies.  We have obtained comprehensive liability, casualty, property, flood and rental loss insurance policies on our properties.  All of these policies may involve substantial deductibles and certain exclusions. In addition, we cannot assure the shareholders that the tenants will properly maintain their insurance policies or have the ability to pay the deductibles.  Should a loss occur that is uninsured or in an amount exceeding the combined aggregate limits for the policies noted above, or in the event of a loss that is subject to a substantial deductible under an insurance policy, we could lose all or part of our capital invested in, and anticipated revenue from, one or more of the properties, which could have a material adverse effect on our operating results and financial condition, as well as our ability to make distributions to the shareholders.

Loss of our key personnel could adversely affect the value of our common shares of beneficial interest and operations.
 
We are dependent on the efforts of our key executive personnel.  Although we believe qualified replacements could be found for these key executives, the loss of their services could adversely affect the value of our common shares of beneficial interest and operations.
 
Policies may be changed without obtaining the approval of our shareholders.

Our shareholders do not control any policies with respect to our operating and financial policies, including our policies regarding acquisitions, dispositions, indebtedness, operations, capitalization and dividends, which are determined by our Board of Trust Managers and management.


 
Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unintended expenditures that adversely affect our cash flows.

All of our properties are required to comply with the Americans with Disabilities Act (ADA).  The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to people with disabilities.  Compliance with the ADA requirements could require removal of access barriers, and noncompliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both.  While the tenants to whom we lease properties are obligated by law to comply with the ADA provisions, and typically under tenant leases are obligated to cover costs associated with compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these tenants to cover costs could be adversely affected.  As a result, we could be required to expend funds to comply with the provisions of the ADA, which could adversely affect the results of operations and financial condition and our ability to make distributions to shareholders.  In addition, we are required to operate the properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to the properties.  We may be required to make substantial capital expenditures to comply with those requirements, and these expenditures could have a material adverse effect on our ability to meet the financial obligations and make distributions to our shareholders.

ITEM 1B.     Unresolved Staff Comments

None.



ITEM 2.        Properties

At December 31, 2008, our real estate properties consisted of 404 locations in 23 states.  A complete listing of these properties, including the name, location, building area and land area, is as follows (in square feet):

 
         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
Retail
                  
                   
Arizona
                  
Arrowhead Festival S.C., 75th Ave. at W. Bell Rd., Glendale
           176,458      
157,000
  
Basha's Valley Plaza, S. McClintock at E. Southern, Tempe
          
145,104
      
570,000
  
Broadway Marketplace, Broadway at Rural, Tempe
          
82,757
      
347,000
  
Camelback Village Square, Camelback at 7th Avenue, Phoenix
          
234,494
                    543,000  
Entrada de Oro, Magee Road and Oracle Road, Tucson
          
109,091
                    572,000  
Fountain Plaza, 77th St. at McDowell, Scottsdale
          
267,271
                   445,000  
Fry's Ellsworth Plaza, Broadway Rd. at Ellsworth Rd., Mesa
          
73,608
                      58,000  
Laveen Village Market, Baseline Rd. at  51st St., Phoenix
          
111,644
                    372,274  
Madera Village, Tanque Verde Rd. and Catalina Hwy, Tucson
          
107,326
       419,000  
Mohave Crossroads, Bullhead Parkway at State Route 95, Bullhead City
     (2)                    346,227                1,363,208  
Monte Vista Village Center, Baseline Rd. at  Ellsworth Rd., Mesa
                          104,151                    353,000  
Oracle Crossings, Oracle Highway and Magee Road, Tucson
                          253,625                1,307,000  
Oracle Wetmore, Wetmore Road and Oracle Highway, Tucson
                          256,093                1,181,000  
Palmilla Center, Dysart Rd. at McDowell Rd., Avondale
                          169,142                    264,000  
Pueblo Anozira, McClintock Dr. at Guadalupe Rd., Tempe
                          157,309                    769,000  
Raintree Ranch, Ray Road at Price Road, Chandler
     (2)                    136,230                    714,813  
Rancho Encanto, 35th Avenue at Greenway Rd., Phoenix
                            66,837                    246,440  
Red Mountain Gateway, Power Rd. at McKellips Rd., Mesa
                         205,568                    353,000  
Scottsdale Horizon, Frank Lloyd Wright Blvd and Thompson Peak Parkway, Scottsdale
                            10,337                      61,000  
Shoppes at Bears Path, Tanque Verde Rd. and Bear Canyon Rd., Tucson
                            65,779                    362,000  
Squaw Peak Plaza, 16th Street at Glendale Ave., Phoenix
                            61,060                    220,000  
The Shoppes at Parkwood Ranch, Southern Avenue and Signal Butte Road, Mesa
     (2)                      72,184                   633,302  
University Plaza, Plaza Way at Milton Rd., Flagstaff
                          165,621                    919,000  
Val Vista Towne Center, Warner at Val Vista Rd., Gilbert
                         216,372                    366,000  
Arizona, Total
                      3,594,288              12,596,037  
                         
Arkansas
                        
Markham Square, W. Markham at John Barrow, Little Rock
             126,904       514,000  
Markham West, 11400 W. Markham, Little Rock
             178,210       769,000  
Westgate, Cantrell at Bryant, Little Rock
             52,626       206,000  
Arkansas, Total
             357,740       1,489,000  
                         
California
                        
580 Market Place, E. Castro Valley at Hwy. I-580, Castro Valley
             100,165       444,000  
Arcade Square, Watt Ave. at Whitney Ave., Sacramento
             76,497       234,000  
Buena Vista Marketplace, Huntington Dr. at Buena Vista St., Duarte
             90,805       322,000  
Centerwood Plaza, Lakewood Blvd. at Alondra Dr., Bellflower
             75,500       333,000  
Chino Hills Marketplace, Chino Hills Pkwy. at Pipeline Ave., Chino Hills
             309,098       1,187,000  
Creekside Center, Alamo Dr. at Nut Creek Rd., Vacaville
             116,229       400,000  
Discovery Plaza, W. El Camino Ave. at Truxel Rd., Sacramento
             93,398       417,000  
El Camino Promenade, El Camino Real at Via Molena, Encinitas
             129,753       451,000  
Freedom Centre, Freedom Blvd. At Airport Blvd., Watsonville
             150,241       543,000  
Fremont Gateway Plaza, Paseo Padre Pkwy. at Walnut Ave., Fremont
             194,601       650,000  
Greenhouse Marketplace, Lewelling Blvd. at Washington Ave., San Leandro
             238,664       578,000  
Hallmark Town Center, W. Cleveland Ave. at Stephanie Ln., Madera
             85,066       365,000  
Jess Ranch Marketplace, Bear Valley Road at Jess Ranch Parkway, Apple Valley
     (1)(2)(3)       292,038       -  
Jess Ranch Phase III, Bear Valley Road at Jess Ranch Parkway, Apple Valley
     (1)(2)(3)       149,632       794,664  
Marshalls Plaza, McHenry at Sylvan Ave., Modesto
             78,752       218,000  
Menifee Town Center, Antelope Rd. at Newport Rd., Menifee
             248,494       658,000  
Prospectors Plaza, Missouri Flat Rd. at US Hwy. 50, Placerville
             228,345       866,684  
Rancho San Marcos Village, San Marcos Blvd. at Rancho Santa Fe Rd., San Marcos
             120,829       541,000  



         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
San Marcos Plaza, San Marcos Blvd. at Rancho Santa Fe Rd., San Marcos
             81,086       116,000  
Shasta Crossroads, Churn Creek Rd. at Dana Dr., Redding
             252,802       520,000  
Silver Creek Plaza, E. Capital Expressway at Silver Creek Blvd., San Jose
             199,179       573,000  
Southampton Center, IH-780 at Southampton Rd., Benecia
             162,390       596,000  
Stony Point Plaza, Stony Point Rd. at Hwy. 12, Santa Rosa
             198,528       619,000  
Summerhill Plaza, Antelope Rd. at Lichen Dr., Sacramento
             133,614       704,000  
Sunset Center, Sunset Ave. at State Hwy. 12, Suisun City
             85,238       359,000  
Tully Corners Shopping Center, Tully Rd at Quimby Rd, San Jose
     (1)(3)       115,992       430,891  
Valley, Franklin Boulevard and Mack Road, Sacramento
             103,605       580,000  
Westminster Center, Westminster Blvd. at Golden West St., Westminster
             417,870       1,739,000  
California, Total
             4,528,411       15,239,239  
                         
Colorado
                        
Academy Place, Academy Blvd. at Union Blvd., Colorado Springs
             261,419       404,000  
Aurora City Place, E. Alameda at I225, Aurora
     (1)(3)       547,283       2,260,000  
CityCenter Englewood, S. Santa Fe at Hampden Ave., Englewood
     (1)(3)       360,543       452,941  
Crossing at Stonegate, Jordon Rd. at Lincoln Ave., Parker
     (1)(3)       109,058       870,588  
Glenwood Meadows, Midland Ave. at W. Meadows, Glenwood Springs
     (1)(3)       395,760       1,287,805  
Green Valley Ranch Towne Center, Tower Rd. at 48th Ave., Denver
     (1)(3)       113,006       276,000  
Lowry Town Center, 2nd Ave. at Lowry Ave., Denver
     (1)(3)       129,439       246,000  
River Point at Sheridan, Highway 77 and Highway 88, Sheridan
     (1)(2)(3)       414,844       4,270,000  
The Gardens on Havana, Mississippi at Havana, Aurora
     (1)(2)(3)       515,830       -  
Thorncreek Crossing, Washington St. at 120th St., Thornton
     (1)(3)       386,130       1,156,863  
Uintah Gardens, NEC 19th St. at West Uintah, Colorado Springs
             212,638       677,000  
Westminster Plaza, North Federal Blvd. at 72nd Ave., Westminster
     (1)       153,169       636,000  
Colorado, Total
             3,599,119       12,537,197  
                         
Florida
                        
Alafaya Square, Alafaya Trail, Oviedo
     (1)(3)       176,486       915,000  
Argyle Village, Blanding at Argyle Forest Blvd., Jacksonville
             312,447       1,329,000  
Boca Lyons, Glades Rd. at Lyons Rd., Boca Raton
             113,689       545,000  
Clermont Landing, U.S. 27 & Steve's Road
     (1)(2)(3)       223,962       2,119,194  
Colonial Landing, East Colonial Dr. at Maguire Boulevard, Orlando
     (1)(2)       263,267       980,000  
Colonial Plaza, E. Colonial Dr. at Primrose Dr., Orlando
             496,751       2,009,000  
Countryside Centre, US Highway 19 at Countryside Boulevard
             242,123       906,440  
East Lake Woodlands, East Lake Road and Tampa Road, Palm Harbor
     (1)(3)       140,103       730,000  
Embassy Lakes, Sheraton St. at Hiatus Rd., Cooper City
             176,114       618,000  
Epic Village - St. Augustine, SR 207 at Rolling Hills Dr
     (1)(2)       53,625       1,001,880  
Flamingo Pines, Pines Blvd. at Flamingo Rd., Pembroke Pines
             368,111       1,447,000  
Hollywood Hills Plaza, Hollywood Blvd. at North Park Rd., Hollywood
             364,714       1,429,000  
Indian Harbour Place, East Eau Gallie Boulevard, Indian Harbour Beach
     (1)(3)       163,521       636,000  
International Drive Value Center, International Drive and Touchstone Drive, Orlando
     (1)(3)       185,664       985,000  
Kendall Corners, Kendall Drive and SW 127th Avenue, Miami
     (1)(3)       96,515       365,000  
Lake Washington Crossing, Wickham Rd. at Lake Washington Rd., Melbourne
     (1)(3)       118,828       580,000  
Lake Washington Square, Wickham Rd. at Lake Washington Rd., Melbourne
             111,811       688,000  
Largo Mall, Ulmerton Rd. at Seminole Ave., Largo
             571,638       1,888,000  
Market at Southside, Michigan Ave. at Delaney Ave., Orlando
             156,955       349,000  
Marketplace at Seminole Towne Center, Central Florida Greenway and Rinehart Road, Sanford
             493,751       1,743,000  
Northridge, E. Commercial Blvd. at Dixie Hwy., Oakland Park
             236,170       901,000  
Palm Coast Center, State Road 100 & Belle Terre Parkway, Palm Coast
     (1)(2)3)       331,671       1,319,873  
Palm Lakes Plaza, Atlantic Boulevard and Rock Island Road, Maragate
     (1)(3)       113,752       550,000  
Paradise Key at Kelly Plantation, US Highway 98 and Mid Bay Bridge Rd, Destin
     (1)(3)       271,777       1,247,123  
Pembroke Commons, University at Pines Blvd., Pembroke Pines
             314,401       1,394,000  
Phillips Crossing, Interstate 4 and Sand Lake Road, Orlando
     (2)       126,808       697,000  
Phillips Landing, Turkey Lake Rd., Orlando
     (2)       266,725       311,000  
Pineapple Commons, Us Highway 1 and Britt Rd., Stuart
     (1)(3)       249,014       762,736  
Publix at Laguna Isles, Sheridan St. at SW 196th Ave., Pembroke Pines
             69,475       400,000  
Quesada Commons, Quesada Avenue and Toledo Blade Boulevard, Port Charlotte
     (1)(3)       58,890       312,000  
Shoppes at Paradise Isle, 34940 Emerald Coast Pkwy, Destin
     (1)(3)       171,837       764,000  




         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
Shoppes at Parkland, Hillsboro Boulevard at State Road #7, Parkland
             152,052       905,000  
Shoppes of Port Charlotte, Toledo Blade Boulevard and Tamiami Trail, Port Charlotte
     (1)(3)       3,912       176,720  
Shoppes of Port Charlotte, Toledo Blade Boulevard and Tamiami Trail, Port Charlotte
     (1)(3)       41,011       276,000  
South Dade, South Dixie Highway and Eureka Drive, Miami
     (1)(3)       219,412       1,230,000  
Sunrise West Shopping Center, West Commercial Drive and NW 91st Avenue, Sunrise
     (1)(3)       76,321       540,000  
Sunset 19, US Hwy. 19 at Sunset Pointe Rd., Clearwater
             275,910       1,078,000  
Tamiami Trail Shops, S.W. 8th St. at S.W. 137th Ave., Miami
             110,867       515,000  
The Marketplace at Dr. Phillips, Dr. Phillips Boulevard and Sand Lake Road, Orlando
     (1)(3)       326,250       1,495,000  
The Shoppes at South Semoran, Semoran Blvd. at Pershing Ave.
             101,535       451,282  
TJ Maxx Plaza, 117th Avenue at Sunset Blvd., Kendall
             161,572       540,000  
University Palms, Alafaya Trail at McCullough Rd., Oviedo
     (1)       99,172       522,000  
Venice Pines, Center Rd. at Jacaranda Blvd., Venice
             97,303       525,000  
Vizcaya Square, Nob Hill Rd. at Cleary Blvd., Plantation
             112,410       521,000  
Westland Terrace Plaza, SR 50 at Apopka Vineland Rd., Orlando
             260,521       361,000  
Winter Park Corners, Aloma Ave. at Lakemont Ave., Winter Park
             102,397       400,000  
Florida, Total
             9,181,240       39,458,248  
                         
Georgia
                        
Brookwood Marketplace, Peachtree Parkway at Mathis Airport Rd., Suwannee
             370,134       1,459,000  
Brookwood Square, East-West Connector at Austell Rd., Austell
             253,448       971,000  
Brownsville Commons, Brownsville Road and Hiram-Lithia Springs Road, Powder Springs
             81,886       205,000  
Camp Creek Marketplace II, Camp Creek Parkway and Carmla Drive, Atlanta
             196,283       724,000  
Cherokee Plaza, Peachtree Road and Colonial Drive, Atlanta
     (1)       98,553       336,000  
Dallas Commons, US Highway 278 and Nathan Dean Boulevard, Dallas
             95,262       244,000  
Grayson Commons, Grayson Hwy at Rosebud Rd., Grayson
             76,611       507,383  
Lakeside Marketplace, Cobb Parkway (US Hwy 41), Acworth
             321,688       736,000  
Mansell Crossing, North Point Parkway at Mansell Rd
     (1)(3)       102,931       582,833  
Perimeter Village, Ashford-Dunwoody Rd
             387,755       1,803,820  
Publix at Princeton Lakes, Carmia Drive and Camp Creek Drive, Atlanta
             68,407       336,000  
Reynolds Crossing, Steve Reynolds and Old North Cross Rd., Duluth
             115,983       407,000  
Roswell Corners, Woodstock Rd. at Hardscrabble Rd., Roswell
             318,499       784,000  
Sandy Plains Exchange, Sandy Plains at Scufflegrit, Marietta
             72,784       452,000  
Thompson Bridge Commons, Thompson Bridge Rd. at Mt. Vernon Rd., Gainesville
             92,587       540,000  
Georgia, Total
             2,652,811       10,088,036  
                         
Illinois
                        
Burbank Station, S. Cicero Ave. at W. 78th St.
             303,566       1,013,380  
Illinois, Total
             303,566       1,013,380  
                         
Kansas
                        
Kohl's, Wanamaker Rd. at S.W. 17th St., Topeka
             115,716       444,000  
Shawnee Village, Shawnee Mission Pkwy. at Quivera Rd., Shawnee
             135,139       10,000  
Kansas, Total
             250,855       454,000  
                         
Kentucky
                        
Festival at Jefferson Court, Outer Loop at Jefferson Blvd., Louisville
             218,396       1,153,000  
Millpond Center, Boston at Man O’War, Lexington
             151,567       773,000  
Regency Shopping Centre, Nicholasville Rd.& West Lowry Lane, Lexington
             170,530       590,000  
Tates Creek, Tates Creek at Man O’ War, Lexington
             179,450       660,000  
Kentucky, Total
             719,943       3,176,000  
                         
Louisiana
                        
14/Park Plaza, Hwy. 14 at General Doolittle, Lake Charles
             172,068       535,000  
Ambassador Plaza, Ambassador Caffery at W. Congress, Lafayette
             101,950       34,915  
Danville Plaza, Louisville at 19th, Monroe
             141,380       539,000  
K-Mart Plaza, Ryan St., Lake Charles
     (1)(3)       215,948       126,000  
Manhattan Place, Manhattan Blvd. at Gretna Blvd., Harvey
             281,615       894,000  
Orleans Station, Paris, Robert E. Lee at Chatham, New Orleans
             -       31,000  
Prien Lake Plaza, Prien Lake Rd. at Nelson Rd., Lake Charles
             213,118       64,950  
River Marketplace, Ambassador Caffery at Kaliste Saloom, Lafayette
     (1)(3)       334,942       1,029,415  
Southgate, Ryan at Eddy, Lake Charles
             170,588       511,000  




         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
Town & Country Plaza, U.S. Hwy. 190 West, Hammond
             226,102       645,000  
University Place, 70th St. at Youree Dr., Shreveport
     (1)(3)       401,154       1,078,431  
Westwood Village, W. Congress at Bertrand, Lafayette
             141,346       942,000  
Louisiana, Total
             2,400,211       6,430,711  
                         
Maine
                        
The Promenade, Essex at Summit, Lewiston
     (1)       197,845       962,667  
Maine, Total
             197,845       962,667  
                         
Missouri
                        
Ballwin Plaza, Manchester Rd. at Vlasis Dr., Ballwin
             200,915       653,000  
Western Plaza, Hwy 141 at Hwy 30, Fenton
     (1)(3)       56,634       654,000  
Missouri, Total
             257,549       1,307,000  
                         
Nevada
                        
Best in the West, Rainbow at Lake Mead Rd., Las Vegas
             436,814       1,516,000  
Charleston Commons, Charleston and Nellis, Las Vegas
             338,378       1,314,791  
College Park S.C., E. Lake Mead Blvd. at Civic Ctr. Dr., North Las Vegas
             167,654       721,000  
Eastern Horizon, Eastern Ave. at  Horizon Ridge Pkwy., Henderson
             210,287       478,000  
Francisco Centre, E. Desert Inn Rd. at S. Eastern Ave., Las Vegas
             148,815       639,000  
Mission Center, Flamingo Rd. at Maryland Pkwy, Las Vegas
             208,220       570,000  
Paradise Marketplace, Flamingo Rd. at Sandhill, Las Vegas
             148,713       537,000  
Rainbow Plaza, Phase I, Rainbow Blvd. at Charleston Blvd., Las Vegas
             136,369       514,518  
Rainbow Plaza, Rainbow Blvd. at Charleston Blvd., Las Vegas
             278,416       1,033,482  
Rancho Towne & Country, Rainbow Blvd. at Charleston Blvd., Las Vegas
             87,367       350,000  
Tropicana Beltway, Tropicana Beltway at Fort Apache Rd., Las Vegas
             640,749       1,466,000  
Tropicana Marketplace, Tropicana at Jones Blvd., Las Vegas
             142,728       519,000  
Westland Fair North, Charleston Blvd. At Decatur Blvd., Las Vegas
             576,202       2,342,061  
Nevada, Total
             3,520,712       12,000,852  
                         
New Mexico
                        
De Vargas, N. Guadalupe at Paseo de Peralta, Santa Fe
             312,421       795,000  
Eastdale, Candelaria Rd. at Eubank Blvd., Albuquerque
             117,623       601,000  
North Towne Plaza, Academy Rd. at Wyoming Blvd., Albuquerque
             104,034       607,000  
Pavillions at San Mateo, I-40 at San Mateo, Albuquerque
             195,944       791,000  
Plaza at Cottonwood, Coors Bypass Blvd. at Seven Bar Loop Rd., Albuquerque
             418,322       386,000  
Wyoming Mall, Academy Rd. at Northeastern, Albuquerque
             267,886       1,309,000  
New Mexico, Total
             1,416,230       4,489,000  
                         
North Carolina
                        
Avent Ferry, Avent Ferry Rd. at Gorman St., Raleigh
             111,650       669,000  
Bull City Market, Broad St. at West Main St., Durham
             42,517       112,000  
Capital Square, Capital Blvd. at Huntleigh Dr., Cary
             143,063       607,000  
Chatham Crossing, US 15/501 at Plaza Dr., Chapel Hill
     (1)(3)       96,155       424,000  
Cole Park Plaza, US 15/501 and Plaza Dr., Chapel Hill
     (1)(3)       82,258       380,000  
Durham Festival, Hillsborough Rd. at LaSalle St., Durham
             134,295       487,000  
Falls Pointe, Neuce Rd. at Durant Rd., Raleigh
             193,331       659,000  
Galleria, Galleria Boulevard and Sardis Road, Charlotte
             328,144       799,000  
Harrison Pointe, Harrison Ave. at Maynard Rd., Cary
             130,934       1,297,306  
Heritage Station, Forestville Rd. at Rogers Rd., Wake Forest
             68,778       392,000  
High House Crossing, NC Hwy 55 at Green Level W. Rd., Cary
             89,997       606,000  
Johnston Road Plaza, Johnston Rd. at McMullen Creek Pkwy., Charlotte
             79,508       466,000  
Leesville Town Centre, Leesville Rd. at Leesville Church Rd., Raleigh
             112,576       904,000  
Little Brier Creek, Little Brier Creek Lane and Brier Leaf Lane, Raleigh
             63,011       90,000  
Lynnwood Collection, Creedmoor Rd at Lynn Road, Raleigh
             86,362       429,000  
Mineral Springs Village, Mineral Springs Rd. at Wake Forest Rd., Durham
             59,859       572,000  
Northwoods Market, Maynard Rd. at Harrison Ave., Cary
             77,802       431,000  
Parkway Pointe, Cory Parkway at S. R. 1011, Cary
             80,061       461,000  
Pinecrest Plaza, Hwy. 15-501 at Morganton Rd., Pinehurst
             250,140       1,438,000  
Ravenstone Commons, Hwy 98 at Sherron Rd., Durham
             60,424       374,000  
Six Forks Station, Six Forks Rd. at Strickland Rd., Raleigh
             467,270       1,843,000  




         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
Steele Creek Crossing, York Rd. at Steele Creek Rd., Charlotte
             77,301       491,000  
Stonehenge Market, Creedmoor Rd. at Bridgeport Dr., Raleigh
             188,521       669,000  
Surf City Crossing, Highway 17 and Highway 210, Surf City
     (1)(2)       48,756       1,714,109  
Waterford Village, US Hwy 17 & US Hwy 74/76, Leland
     (1)(2)       69,701       830,447  
Whitehall Commons, NWC of Hwy. 49 at I-485, Charlotte
             444,496       360,000  
North Carolina, Total
             3,586,910       17,504,862  
                         
Oklahoma
                        
Market Boulevard , E. Reno Ave. at N. Douglas Ave., Midwest City
             35,765       142,000  
Town and Country, Reno Ave at North Air Depot, Midwest City
             135,892       540,000  
Oklahoma, Total
             171,657       682,000  
                         
Oregon
                        
Clackamas Square, SE 82nd Avenue and SE Causey Avenue, Portland
     (1)(3)       136,739       215,000  
Oak Grove Market Center, SE Mcloughlin Blvd & Oak Grove Ave
             97,207       292,288  
Raleigh Hills Plaza, SW Beaverton-Hillsdale Hwy and SW Scholls Ferry Road, Portland
     (1)(3)       39,520       165,000  
Oregon, Total
             273,466       672,288  
                         
South Carolina
                        
Fresh Market Shoppes, 890 William Hilton Head Pkwy, Hilton Head
     (1)(3)       86,120       436,000  
South Carolina, Total
             86,120       436,000  
                         
Tennessee
                        
Bartlett Towne Center, Bartlett Blvd. at Stage Rd., Bartlett
             179,364       774,000  
Commons at Dexter Lake Phase II, Dexter at N. Germantown, Memphis
     (1)       61,538       272,792  
Commons at Dexter Lake, Dexter at N. Germantown, Memphis
     (1)       166,958       740,208  
Highland Square, Summer at Highland, Memphis
             14,490       84,000  
Mendenhall Commons, South Mendenahall Rd. and Sanderlin Avenue, Memphis
     (1)       79,871       250,000  
Ridgeway Trace, Memphis
     (2)       209,327       275,915  
Summer Center, Summer Ave. at Waring Rd., Memphis
             148,581       560,000  
Tennessee, Total
             860,129       2,956,915  
                         
Texas
                        
10/Federal, I-10 at Federal
     (1)       132,472       474,000  
Alabama-Shepherd, S. Shepherd at W. Alabama
             56,110       176,000  
Angelina Village, Hwy. 59 at Loop 287, Lufkin
             248,199       1,835,000  
Bayshore Plaza, Spencer Hwy. at Burke Rd.
             121,966       196,000  
Bell Plaza, 45th Ave. at Bell St., Amarillo
     (1)       130,529       682,000  
Bellaire Boulevard, Bellaire at S. Rice
     (1)       35,081       137,000  
Boswell Towne Center, Highway 287 at Bailey Boswell Rd., Saginaw
             87,835       137,000  
Braeswood Square, N. Braeswood at Chimney Rock
             103,336       422,000  
Broadway , Broadway at 59th St., Galveston
     (1)       74,477       220,000  
Broadway, S. Broadway at W. 9th St., Tyler
             60,400       259,000  
Calder, Calder at 24th St., Beaumont
             34,641       95,000  
Cedar Bayou, Bayou Rd., La Marque
             45,561       51,000  
Central Plaza, Loop 289 at Slide Rd., Lubbock
             151,196       529,000  
Centre at Post Oak, Westheimer at Post Oak Blvd.
             182,070       505,000  
Champions Village,  F.M. 1960 at Champions Forest Dr.
     (1)       383,779       1,391,000  
Coronado, 34th St. at Wimberly Dr., Amarillo
             46,829       201,000  
Crossroads, I-10 at N. Main, Vidor
             115,692       484,000  
Cullen Place, Cullen at Reed
             7,316       30,000  
Cullen Plaza, Cullen at Wilmington
     (1)       84,517       318,000  
Custer Park, SWC Custer Road at Parker Road, Plano
             180,568       376,000  
Cypress Pointe, F.M. 1960 at Cypress Station
             287,364       737,000  
Eastpark, Mesa Rd. at Tidwell
             1,576       85,262  
Edgebrook, Edgebrook at Gulf Fwy.
     (1)       78,324       360,000  
Fiesta Trails, I-10 at DeZavala Rd., San Antonio
             488,370       1,589,000  
Fiesta Village, Quitman at Fulton
     (1)       30,249       80,000  
Fondren/West Airport, Fondren at W. Airport
             56,593       223,000  
Food King Place, 25th St. at Avenue P, Galveston
             28,062       78,000  
Galveston Place, Central City Blvd. at 61st St., Galveston
             210,187       828,000  




         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
Gateway Station, I-35W and McAlister Rd., Burleson
     (1)(2)       31,960       344,286  
Gillham Circle, Gillham Circle at Thomas, Port Arthur
             33,134       94,000  
Glenbrook Square, Telephone Road
     (1)       76,483       320,000  
Griggs Road, Griggs at Cullen
     (1)       80,114       382,000  
Harrisburg Plaza, Harrisburg at Wayside
     (1)       93,438       334,000  
Heights Plaza, 20th St. at Yale
             71,777       228,000  
Horne Street Market, I-30 & Horne Street, Fort Worth
     (2)       42,267       223,463  
Humblewood Shopping Plaza, Eastex Fwy. at F.M. 1960
             277,837       784,000  
I-45/Telephone Rd. Center, I-45 at Maxwell Street
     (1)       172,609       819,000  
Independence Plaza, Town East Blvd., Mesquite
             179,182       787,000  
Island Market Place, 6th St. at 9th Ave., Texas City
             27,277       90,000  
Jacinto City, Market at Baca
     (1)       49,138       134,000  
Killeen Marketplace, 3200 E. Central Texas Expressway, Killeen
             251,137       512,000  
Kirby Strip Center, Kirby Dr, Houston
             10,000       37,897  
Lake Pointe Market Center, Dalrock Rd. at Lakeview Pkwy., Rowlett
             124,036       218,158  
Las Tiendas Plaza, Expressway 83 at McColl Rd., McAllen
     (1)(3)       530,067       910,000  
Lawndale, Lawndale at 75th St.
     (1)       52,127       177,000  
League City Plaza, I-45 at F.M. 518, League City
     (1)       126,990       680,000  
Little York Plaza, Little York at E. Hardy
     (1)       117,353       483,000  
Lone Star Pavilions, Texas at Lincoln Ave., College Station
             106,907       439,000  
Lyons Avenue, Lyons at Shotwell
     (1)       67,629       178,000  
Market at Nolana, Nolana Ave and 29th St., McAllen
     (1)(2)(3)       230,261       508,000  
Market at Sharyland Place, U.S. Expressway 83 and Shary Road, Mission
     (1)(2)(3)       415,912       543,000  
Market at Town Center, Town Center Blvd., Sugar Land
             375,820       1,733,000  
Market at Westchase, Westheimer at Wilcrest
             84,084       318,000  
Montgomery Plaza, Loop 336 West at I-45, Conroe
             296,837       1,179,000  
Moore Plaza, S. Padre Island Dr. at Staples, Corpus Christi
             533,577       1,491,000  
New Boston Road, New Boston at Summerhill, Texarkana
             97,000       335,000  
North Creek Plaza, Del Mar Blvd. at Hwy. I-35, Laredo
             448,756       1,251,000  
North Main Square, Pecore at N. Main
             18,515       64,000  
North Oaks, F.M. 1960 at Veterans Memorial
     (1)       404,733       1,646,000  
North Park Plaza, Eastex Fwy. at Dowlen, Beaumont
     (1)(3)       281,401       636,000  
North Towne Plaza, U.S. 77 and 83 at SHFM 802, Brownsville
     (1)(2)       117,000       1,258,551  
North Triangle , I-45 at F.M. 1960
             16,060       113,000  
Northbrook Center, Northwest Fwy. at W. 34th
             172,479       655,000  
Northcross, N. 10th St. at Nolana Loop, McAllen
     (1)(3)       76,391       218,000  
Northwest Crossing, N.W. Fwy. at Hollister
     (1)(3)       304,064       884,000  
Oak Forest, W. 43rd at Oak Forest
             147,674       541,000  
Oak Park Village, Nacogdoches at New Braunfels, San Antonio
     (1)       64,287       221,000  
Old Navy Building, 1815 10th Street, McAllen
     (1)(3)       15,000       62,000  
Orchard Green, Gulfton at Renwick
             74,983       273,000  
Overton Park Plaza, SW Loop 820/Interstate 20 at South Hulen St., Ft. Worth
             463,302       1,636,000  
Palmer Plaza, F.M. 1764 at 34th St., Texas City
             196,506       367,000  
Parliament Square II, W. Ave. at Blanco, San Antonio
             54,541       220,919  
Parliament Square, W. Ave. at Blanco, San Antonio
             64,950       263,081  
Phelan West, Phelan at 23rd St., Beaumont
     (1)(3)       82,221       88,509  
Phelan, Phelan at 23rd St, Beaumont
             12,000       63,000  
Pitman Corners, Custer Road at West 15th, Plano
             192,283       699,000  
Plantation Centre, Del Mar Blvd. at McPherson Rd., Laredo
             134,919       596,000  
Portairs, Ayers St. at Horne Rd., Corpus Christi
             118,233       416,000  
Preston Shepard Place, Preston Rd. at Park Blvd.
     (1)(3)       363,337       1,359,072  
Randall's /Cypress Station, F.M. 1960 at I-45
             138,974       618,000  
Randall's /Kings Crossing, Kingwood Dr. at Lake Houston Pkwy.
     (1)       126,397       624,000  
Randall's /Norchester, Grant at Jones
             107,200       475,000  
Richmond Square, Richmond Ave. at W. Loop 610
             93,870       135,000  
River Oaks East, W. Gray at Woodhead
             71,265       206,000  
River Oaks West, W. Gray at S. Shepherd
             255,978       609,000  
Rockwall, I-30 at Market Center Street, Rockwall
             209,051       933,000  
Rose-Rich, U.S. Hwy. 90A at Lane Dr., Rosenberg
             103,385       386,000  




         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
Sharyland Towne Crossing, Shary Rd. at Hwy. 83, Mission
     (1)(2)(3)       476,376       2,008,000  
Sheldon Forest North , North, I-10 at Sheldon
             22,040       131,000  
Sheldon Forest South , North, I-10 at Sheldon
     (1)       75,340       328,000  
Shops at Three Corners, S. Main at Old Spanish Trail
     (1)       247,129       1,007,143  
South 10th St. HEB, S. 10th St. at Houston St., McAllen
     (1)(3)       103,702       368,000  
Southgate, Calder Ave. at 6th St., Beaumont
             33,555       118,000  
Southgate, W. Fuqua at Hiram Clark
     (1)       124,634       533,000  
Spring Plaza, Hammerly at Campbell
     (1)       59,266       202,000  
Starr Plaza, U.S. Hwy. 83 at Bridge St., Rio Grande City
     (1)(3)       176,812       742,000  
Steeplechase, Jones Rd. at F.M. 1960
             294,501       849,000  
Stella Link , Stella Link at S. Braeswood
             96,396       423,588  
Studemont, Studewood at E. 14th St
             28,466       91,000  
Ten Blalock Square, I-10 at Blalock
             97,217       321,000  
The Shoppes at Wilderness Oaks, US Hwy 281 at Wilderness Oaks
     (2)       -       1,269,730  
Thousand Oaks, Thousand Oaks Dr. at Jones Maltsberger Rd., San Antonio
     (1)       162,882       730,000  
Tomball Marketplace, FM 2920 and Future 249, Tomball
     (2)       122,189       2,067,056  
Town and Country, 4th St. at University, Lubbock
             30,743       339,000  
Valley View, West Ave. at Blanco Rd., San Antonio
             89,859       341,000  
Village Arcade, University at Kirby
             57,219       276,503  
Village Arcade-Phase II, University at Kirby
             28,371       60,099  
Village Arcade-Phase III, University at Kirby
             106,879       231,156  
Westchase Center, Westheimer at Wilcrest
             332,544       754,000  
Westhill Village, Westheimer at Hillcroft
             130,562       479,000  
Westmont, Dowlen at Phelan, Beaumont
             98,071       507,000  
Westover Square, 151 and Ingram, San Antonio
     (1)(2)       -       369,741  
Westwood Center, Culebra Road and Westwood Loop, San Antonio
     (2)       5,500       782,151  
Wolflin Village, Wolflin Ave. at Georgia St., Amarillo
             153,084       421,000  
Texas, Total
             16,101,344       60,046,365  
                         
Utah
                        
300 West Retail Center, Paxton Ave and 400 West St
     (1)(2)(3)       -       456,568  
Alpine Valley Center, Main St. at State St., American Fork
     (1)(3)       224,654       447,045  
Taylorsville Town Center, West 4700 South at Redwood Rd., Taylorsville
             134,214       399,000  
West Jordan Town Center, West 7000 South at S. Redwood Rd., West Jordan
             304,899       814,000  
Utah, Total
             663,767       2,116,613  
                         
Washington
                        
Meridian Town Center, Meridian Avenue East and 132nd Street East, Puyallup
     (1)(3)       143,012       535,000  
Mukilteo Speedway Center, Mukilteo Speedway, Lincoln Way, and Highway 99, Lynnwood
     (1)(3)       90,273       355,000  
Rainer Square Plaza, Rainer Avenue South and South Charleston Street, Seattle
     (1)(3)       107,423       345,000  
South Hill Center, 43rd Avenue Southwest and Meridian Street South, Puyallup
     (1)(3)       134,020       515,000  
Village at Liberty Lake, E. Country Vista Dr. at N. Liberty Rd., Liberty Lake
     (1)(2)(3)       132,874       56,044  
Washington, Total
             607,602       1,806,044  
                         
Industrial
                        
                         
California
                        
Siempre Viva Business Park, Siempre Viva Rd. at Kerns St., San Diego
     (1)(3)       726,766       1,760,000  
California, Total
             726,766       1,760,000  
                         
Florida
                        
1801 Massaro, 1801 Massaro Blvd., Tampa
             159,000       337,000  
Hopewell Industrial Center, Old Hopewell Boulevard and U.S. Highway 301, Tampa
             224,483       486,000  
Lakeland Industrial Center, I-4 at County Rd., Lakeland
             600,000       1,535,000  
Lakeland Interestate Industrial Park I, Interstate Drive and Kathleen Rd., Lakeland
             168,400       425,000  
Tampa East Industrial Portfolio, 1841 Massaro Blvd., Tampa
             512,923       1,342,000  
Florida, Total
             1,664,806       4,125,000  





         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
Georgia
                        
6485 Crescent Drive, I-85 at Jimmy Carter Blvd., Norcross
     (1)(3)       360,460       965,000  
Atlanta Industrial Park, Atlanta Industrial Pkwy. at Atlanta Industrial Dr., Atlanta
             120,200       381,918  
Atlanta Industrial Park II & VI, Atlanta Industrial Pkwy. at Atlanta Industrial Dr., Atlanta
             382,100       1,214,068  
Atlanta Industrial Parkway, Atlanta Industrial Pkwy. at Atlanta Industrial Dr., Atlanta
             50,000       159,014  
Kennesaw 75, 3850-3900 Kennesaw Prkwy, Kennesaw
             178,467       491,000  
Riverview Distribution Center, Fulton Industrial Blvd. at Camp Creek Parkway
             265,200       1,301,791  
Sears Logistics, 3700 Southside Industrial Way, Atlanta
     (1)(3)       402,554       890,000  
SouthPark 3075, Anvil Block Rd and SouthPark Blvd, Atlanta
             234,525       1,022,292  
Southside Industrial Parkway, Southside Industrial Pkwy at Jonesboro Rd., Atlanta
             72,000       242,000  
Westlake 125, Camp Creek Parkway and Westlake Parkway, Atlanta
             154,464       422,048  
Georgia, Total
             2,219,970       7,089,131  
                         
Tennessee
                        
Crowfarn Drive Warehouse, Crowfarn Dr. at Getwell Rd., Memphis
     (1)(3)       158,849       315,000  
Outland Business Center, Outland Center Dr., Memphis
     (1)(3)       410,138       1,215,000  
Southpoint I & II, Pleasant Hill Rd. at Shelby Dr., Memphis
             570,940       1,127,000  
Tennessee, Total
             1,139,927       2,657,000  
                         
Texas
                        
1625 Diplomat Drive, SWC Diplomat Dr. at McDaniel Dr., Carrollton
             106,140       199,000  
610 and 11th St. Warehouse, Loop 610 at 11th St.
     (1)(3)       243,642       540,000  
610 and 11th St. Warehouse, Loop 610 at 11th St.
             104,975       202,000  
610/288 Business Park , Cannon Street
     (1)(3)       295,426       480,000  
Beltway 8 Business Park, Beltway 8 at Petersham Dr.
             157,498       499,000  
Blankenship Building, Kempwood Drive
             59,729       175,000  
Braker 2 Business Center, Kramer Ln. at Metric Blvd., Austin
             27,359       93,000  
Brookhollow Business Center, Dacoma at Directors Row
             133,553       405,000  
Central Park Northwest VI, Central Pkwy. at Dacoma
             175,348       518,000  
Central Park Northwest VII, Central Pkwy. at Dacoma
             103,602       283,000  
Central Plano Business Park, Klein Rd. at Plano Pkwy., Plano
             137,785       415,000  
Claywood Industrial Park, Clay at Hollister
     (2)       390,891       1,761,000  
Corporate Center Park I and II, Putnam Dr. at Research Blvd., Austin
             119,452       326,000  
Crestview, Bissonnet at Wilcrest
             8,970       35,000  
Crosspoint Warehouse, Crosspoint
             72,505       179,000  
Freeport Business Center, 13215 N. Promenade Blvd., Stafford
             251,385       635,000  
Freeport Commerce Center, Sterling Street and Statesman Drive, Irving
             50,590       196,000  
Houston Cold Storage Warehouse, 7080 Express Lane
             128,752       345,189  
Interwest Business Park, Alamo Downs Parkway, San Antonio
             219,244       742,000  
Isom Business Park, 919-981 Isom Road, San Antonio
             175,200       462,000  
Jester Plaza Office Service Center, West T.C. Jester
             100,605       244,000  
Jupiter Service Center, Jupiter near Plano Pkwy., Plano
             78,480       234,000  
Kempwood Industrial, Kempwood Dr. at Blankenship Dr.
     (1)(3)       219,489       530,000  
Kempwood Industrial, Kempwood Dr. at Blankenship Dr.
             113,218       327,000  
Lathrop Warehouse, Lathrop St. at Larimer St.
     (1)(3)       251,890       435,000  
Manana Office Center, I-35 at Manana, Dallas
             223,128       470,000  
McGraw Hill Distribution Center, 420 E. Danieldale Rd, DeSoto
             417,938       888,000  
Midpoint I-20 Distribution Center, New York Avenue and Arbrook Boulevard, Arlington
             253,165       593,000  
Midway Business Center, Midway at Boyington, Carrollton
             141,246       309,000  
Navigation Business Park, Navigation at N. York
     (1)(3)       238,321       555,000  
Newkirk Service Center, Newkirk near N.W. Hwy., Dallas
             105,892       223,000  
Northeast Crossing Office/Service Center, East N.W. Hwy. at Shiloh, Dallas
             78,700       199,000  
Northway Park II, Loop 610 East at Homestead
     (1)(3)       303,483       745,000  
Northwest Crossing Office/Service Center, N.W. Hwy. at Walton Walker, Dallas
             126,984       290,000  
Oak Hills Industrial Park, Industrial Oaks Blvd., Austin
             89,858       340,000  
O'Connor Road Business Park, O’Connor Road, San Antonio
             150,091       459,000  
Railwood F, Market at U.S. 90
     (1)(3)       300,000       560,000  
Railwood G, Mesa at U.S. 90
     (1)(2)(3)       210,850       562,665  
Railwood Industrial Park, Mesa at U.S. 90
     (1)(3)       497,656       1,060,000  
Railwood Industrial Park, Mesa at U.S. 90
             402,680       1,141,764  
Randol Mill Place, Randol Mill Road, Arlington
             54,639       178,000  





         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
Redbird Distribution Center, Joseph Hardin Drive, Dallas
             110,839       233,000  
Regal Distribution Center, Leston Avenue, Dallas
             202,559       318,000  
Rutland 10 Business Center, Metric Blvd. At Centimeter Circle, Austin
             54,000       139,000  
Sherman Plaza Business Park, Sherman at Phillips, Richardson
             101,137       312,000  
South Loop Business Park, S. Loop at Long Dr.
     (1)(3)       92,450       206,000  
Southpark A,B,C, East St. Elmo Rd. at Woodward St., Austin
             78,276       238,000  
Southpoint Service Center, Burleson at Promontory Point Dr., Austin
             57,667       234,000  
Southport Business Park 5, South Loop 610
             160,653       358,000  
Southwest Park II Service Center, Rockley Road
             67,700       216,000  
Space Center Industrial Park, Pulaski St. at Irving Blvd., Dallas
             264,582       426,000  
Stonecrest Business Center, Wilcrest at Fallstone
             110,641       308,000  
Town & Country Commerce Center, I-10 at Beltway 8
             206,000       -  
West 10 Business Center II, Wirt Rd. at I-10
             82,658       147,000  
West Loop Commerce Center, W. Loop N. at I-10
             34,256       91,000  
West-10 Business Center, Wirt Rd. at I-10
             102,087       331,000  
Westgate Service Center, Park Row Drive at Whiteback Dr.
             119,786       499,000  
Texas, Total
             9,165,650       22,889,618  
                         
Virginia
                        
Enterchange at Meadowville, 2101 Bermuda Hundred Dr, Chester
     (1)(3)       226,809       845,717  
Enterchange at Northlake A, 11900-11998 North Lakeridge Parkway, Ashland
             215,077       697,831  
Enterchange at Northlake C, North Lakeridge Parkway & Northlake Park Dr, Ashland
     (1)(3)       293,115       677,794  
Enterchange at Walthall A & B, 1900-1998 Ruffin Mill Rd, Colonial Heights
     (1)(3)       606,780       1,467,536  
Enterchange at Walthall C, 1936-1962 Ruffin Mill Rd, Colonial Heights
     (1)(3)       261,922       864,840  
Enterchange at Walthall D, 1700-1798 Ruffin Mill Rd, Colonial Heights
             243,782       752,020  
Interport Business Center A, 4800-4890 Eubank Road, Richmond
     (1)(3)       447,412       1,037,556  
Interport Business Center B, 4700-4790 Eubank Road, Richmond
     (1)(3)       118,000       277,477  
Interport Business Center C, 5300-5390 Laburnum Ave, Richmond
     (1)(3)       54,885       154,202  
Virginia, Total
             2,467,782       6,774,973  
                         
Other
                        
                         
Arizona
                        
Arcadia Biltmore Plaza, Campbell Ave. at North 36th St., Phoenix
             21,122       74,000  
Arizona, Total
             21,122       74,000  
                         
Texas
                        
1919 North Loop West, Hacket Drive at West Loop 610 North
             139,449       157,000  
Citadel Plaza, Citadel Plaza Dr.
             121,000       170,931  
Texas, Total
             260,449       327,931  
                         
Land Held for Development
                        
                         
Arizona
                        
Lon Adams Rd at Tangerine Farms Rd, Marana
                     464,785  
Arizona, Total
                     464,785  
                         
California
                        
Bear Valley Road at Jess Ranch Parkway Phase II, Apple Valley
     (1)(3)               139,392  
Bear Valley Road at Jess Ranch Parkway Phase III, Apple Valley
     (1)(3)               448,668  
California, Total
                     588,060  
                         
Colorado
                        
Mississippi at Havana, Aurora
     (1)(3)               418,717  
Colorado, Total
                     418,717  
                         
Florida
                        
Young Pines and Curry Ford Rd, Orange County
                     132,422  
Florida, Total
                     132,422  





         
Building
    
Land
  
Center and Location
        
Area
    
Area
  
                   
Georgia
                        
NWC South Fulton Parkway @ Hwy 92, Union City
     (1)               3,554,000  
Georgia, Total
                     3,554,000  
                         
Louisiana
                        
70th St. at Mansfield Rd., Shreveport
                     41,704  
Louisiana, Total
                     41,704  
                         
Nevada
                        
SWC Highway 215 at Decatur, Las Vegas
                     1,103,810  
Nevada, Total
                     1,103,810  
                         
North Carolina
                        
Creedmoor (Highway 50) and Crabtree Valley Avenue, Raleigh
                     576,000  
Highway 17 and Highway 210, Surf City
     (1)               1,590,811  
U.S. 15-501 and Bruce Wood Rd, Southern Pines
                     1,047,000  
U.S. Highway 1 at Caveness Farms Rd., Wake Forest
                     3,479,317  
U.S. Hwy 17 and U.S. Hwy 74/76, Leland
     (1)               362,419  
North Carolina, Total
                     7,055,547  
                         
Texas
                        
9th Ave. at 25th St., Port Arthur
                     243,000  
Bissonnet at Wilcrest, Houston
                     84,629  
Citadel Plaza at 610 North Loop, Houston
                     137,000  
Culebra Road and Westwood Loop, San Antonio
                     403,366  
East Orem
                     122,000  
FM 1957 (Potranco Road) and FM 211, San Antonio
     (1)               8,656,243  
FM 2920 and Highway 249, Tomball
                     363,944  
Highway 3 at Highway 1765, Texas City
                     201,000  
Kirkwood at Dashwood Drive, Houston
                     322,000  
Leslie Rd. at Bandera Rd., Helotes
                     75,000  
Mesa Road at Tidwell, Houston
                     35,898  
Northwest Freeway at Gessner, Houston
                     213,292  
River Pointe Drive at Interstate 45, Conroe
                     118,483  
Rock Prairie Rd. at Hwy. 6, College Station
                     3,570,178  
Shary Rd. at North Hwy. 83, Mission
     (1)(3)               1,607,364  
Shaver at Southmore, Pasadena
                     17,000  
West Little York at Interstate 45, Houston
                     161,000  
West Loop North at Interstate 10, Houston
                     145,000  
Texas, Total
                     16,476,397  



Property Listing
as of December 31, 2008
                   
   
Number of
    
Building Total
    
Land Total
  
ALL PROPERTIES BY STATE
  
Properties
    
Square Feet
    
Square Feet
  
                   
Arizona
     25       3,615,410       13,134,822  
Arkansas
     3       357,740       1,489,000  
California
     29       5,255,177       17,587,299  
Colorado
     12       3,599,119       12,955,914  
Florida
     50       10,846,046       43,715,670  
Georgia
     23       4,872,781       20,731,167  
Illinois
     1       303,566       1,013,380  
Kansas
     2       250,855       454,000  
Kentucky
     4       719,943       3,176,000  
Louisiana
     12       2,400,211       6,472,415  
Maine
     1       197,845       962,667  
Missouri
     2       257,549       1,307,000  
Nevada
     12       3,520,712       13,104,662  
New Mexico
     6       1,416,230       4,489,000  
North Carolina
     26       3,586,910       24,560,409  
Oklahoma
     2       171,657       682,000  
Oregon
     3       273,466       672,288  
South Carolina
     1       86,120       436,000  
Tennessee
     9       2,000,056       5,613,915  
Texas
     163       25,527,443       99,740,311  
Utah
     4       663,767       2,116,613  
Virginia
     9       2,467,782       6,774,973  
Washington
     5       607,602       1,806,044  
                         
Grand Total
     404       72,997,987       282,995,549  
                         
Total Retail
     323       55,331,515       207,462,454  
                         
Total Industrial
     78       17,384,901       45,295,722  
                         
Total Land Held for Development
                     29,835,442  
                         
Total Other
     3       281,571       401,931  
 
_________________
 
Total square footage includes 464,561 square feet of building area and 12,267,045 square feet of land leased from others.
 
Footnotes for detail property listing:
(1)
Denotes partial ownership.  The square feet figures represent our proportionate ownership of the property held by the joint venture or partnership.
 
(2)
Denotes property currently under development.
 
(3)
Denotes properties that are not consolidated under generally accepted accounting principles.
 
 
NOTE:
Square feet are reflective of area available to be leased.  Certain listed properties may have additional square feet that are not owned by us.



General.  In 2008, no single property accounted for more than 1.7% of our total assets or 1.5% of gross revenues.  The five largest properties, in the aggregate, represented approximately 6.7% of our gross revenues for the year ended December 31, 2008; otherwise, none of the remaining properties accounted for more than 1.2% of our gross revenues during the same period.  The weighted average occupancy rate for all of our improved properties as of December 31, 2008 was 92.6% compared to 94.4% as of December 31, 2007.  The average effective annual rental per square foot was approximately $13.16 in 2008, $12.57 in 2007, $12.12 in 2006, $11.38 in 2005 and $11.01 in 2004 for retail properties and $4.98 in 2008, $4.86 in 2007, $4.91 in 2006, $4.89 in 2005 and $4.70 in 2004 for industrial properties.

The majority of our properties are owned directly by us (subject in some cases to mortgages), although our interests in some properties are held indirectly through interests in real estate joint ventures or under long-term leases.  In our opinion, our properties are well maintained and in good repair, suitable for their intended uses, and adequately covered by insurance.

We participate in 69 real estate joint ventures or partnerships that hold 140 of our properties.  Our ownership interest ranges from 7.8% to 99%; we are normally the managing or operating partner and receive a fee for acting in this capacity.

We may use a DownREIT operating partnership structure in the acquisition of some real estate properties.  In these transactions, a fair value purchase price is agreed upon between us, as general partner of the DownREIT, and the seller where the seller receives operating partnership units in exchange for some or all of its ownership interest in the property.  Each operating partnership unit is the equivalent of one of our common shares of beneficial interest.  These units generally allow our partners the right to put their limited partnership units’ interest to us on or after the first anniversary of the entity’s formation.  We may acquire these limited partnership units for either cash or a fixed number of our common shares of beneficial interest at our discretion.

Shopping Centers.  At December 31, 2008, we owned or operated under long-term leases, either directly or through our interest in real estate joint ventures or partnerships, a total of 299 developed income-producing properties and 24 properties under various stages of construction and development, which are located in 22 states spanning the USA from coast to coast.

Our shopping centers are primarily neighborhood and community shopping centers that typically range in size from 100,000 to 600,000 square feet of building area, as distinguished from large regional enclosed malls and small strip centers, which generally contain 5,000 to 25,000 square feet. Almost none of the centers have climatized common areas, but are designed to allow retail customers to park their automobiles in close proximity to any retailer in the center.  Our centers are customarily constructed of masonry, steel and glass, and all have lighted, paved parking areas, which are typically landscaped with berms, trees and shrubs.  They are generally located at major intersections in close proximity to neighborhoods that have existing populations sufficient to support retail activities of the types conducted in our centers.

We have approximately 7,200 separate leases with 5,300 different tenants.  Included among our top revenue-producing tenants are:  The Kroger Co., T.J.X. Companies, Safeway, Ross Stores, Publix, Home Depot, Office Depot, Blockbuster Video, Petsmart and Gap. The diversity of our tenant base is also evidenced by the fact that our largest tenant accounted for only 2.7% of rental revenues during 2008.



Lease expirations as of December 31, 2008 for the next ten years, assuming tenants do not exercise renewal options:
 

                 
Annual Net Rent
of Expiring Leases
  
Year
  
Number of Expiring Leases
  
Square Feet of Expiring Leases
(000's)
  
Percentage of Leaseable Square Feet
    
Total
(000’s)
    
Per Square
Foot
  
2009
   925   4,746   10.48 %   $ 49,223     $ 10.37  
2010
   1,144   5,955   13.16 %     70,667       11.87  
2011
   1,099   5,998   13.25 %     73,830       12.31  
2012
   742   5,153   11.38 %     61,072       11.85  
2013
   748   5,583   12.33 %     62,148       11.13  
2014
   271   3,532   7.80 %     32,720       9.26  
2015
   128   1,339   2.96 %     15,168       11.33  
2016
   105   1,303   2.88 %     15,596       11.97  
2017
   111   1,513   3.34 %     20,505       13.55  
2018
   116   1,637   3.62 %     18,904       11.55  
 
In the ordinary course of business, we have tenants who cease making payments under their leases or who file for bankruptcy protection.  We are unable to predict or forecast the timing of store closings or unexpected vacancies.  While we believe the effect of this will not have a material impact on our financial position, results of operations, or liquidity due to the significant diversification of our tenant base, the uncertainty in the economy and commercial credit markets could result in a negative impact.

Our shopping center leases have lease terms generally ranging from three to five years for tenant space under 5,000 square feet and from 10 to 25 years for tenant space over 10,000 square feet.  Leases with primary lease terms in excess of 10 years, generally for anchor and out-parcels, frequently contain renewal options which allow the tenant to extend the term of the lease for one or more additional periods, with each of these periods generally being of a shorter duration than the primary lease term.  The rental rates paid during a renewal period are generally based upon the rental rate for the primary term; sometimes adjusted for inflation, market conditions or an amount of the tenant's sales during the primary term.

Most of our leases provide for the monthly payment in advance of fixed minimum rentals, the tenants' pro rata share of ad valorem taxes, insurance (including fire and extended coverage, rent insurance and liability insurance) and common area maintenance for the center (based on estimates of the costs for these items).  They also provide for the payment of additional rentals based on a percentage of the tenants' sales.  Utilities are generally paid directly by tenants except where common metering exists with respect to a center.  In this case we make payments for the utilities, and the tenants on a monthly basis reimburse us.  Generally, our leases prohibit the tenant from assigning or subletting its space.  They also require the tenant to use its space for the purpose designated in its lease agreement and to operate its business on a continuous basis.  Some of the lease agreements with major tenants contain modifications of these basic provisions in view of the financial condition, stability or desirability of those tenants.  Where a tenant is granted the right to assign its space, the lease agreement generally provides that the original lessee will remain liable for the payment of the lease obligations under that lease agreement.

In January 2008, we acquired a 4,000 square foot pad building located in Florida through a 25%-owned unconsolidated joint venture.

In March 2008, we contributed 18 neighborhood/community shopping centers located in Texas with an aggregate value of approximately $227.5 million, and aggregating more than 2.1 million square feet, to a joint venture.  We sold an 85% interest in this joint venture to AEW Capital Management on behalf of one of its institutional clients and received proceeds approximating $216.1 million.  We maintain a 15% ownership interest in this venture, which is consolidated in our financial statements.


In May 2008, we acquired Kirby Strip Center, a 10,000 square foot building located in Texas.

In August 2008, we executed a real estate limited partnership with a foreign institutional investor to purchase up to $250 million of retail properties in various states. Our ownership in this unconsolidated real estate limited partnership is 20.1%.  As of December 31, 2008, no properties have been purchased.

In November 2008, we contributed eight neighborhood/community shopping centers with an aggregate value of approximately $205.1 million, and aggregating approximately 1.1 million square feet, to a joint venture.  Four of these shopping centers are located in Texas, two in Tennessee and one each in Florida and Georgia.  We sold a 70% interest in this joint venture to Hines REIT Retail Holdings, LLC and received proceeds of approximately $121.8 million.  We maintain a 30% ownership interest in this venture, which is consolidated in our financial statements.

During 2008, we sold nine shopping centers, of which five are located in Texas, one in California and three in Louisiana.  Sales proceeds from these dispositions totaled $138.4 million and generated gains of $66.3 million.

Industrial Properties.  At December 31, 2008, we owned, either directly or through our interest in real estate joint ventures or partnerships, 78 industrial projects and three other operating properties totaling approximately 17.7 million square feet of building area.  Our industrial properties consist of bulk warehouse, business distribution and office-service center assets ranging in size from 9,000 to 727,000 square feet.  Similar to our shopping centers, these properties are customarily constructed of masonry, steel and glass, and have lighted, concrete parking areas and are well landscaped.  The national and regional tenants in our industrial centers include Hitachi Transport Systems, Sears Logistics, Publix, Shell, Rooms to Go, UPS Supply Chain Solutions, Sanderson Industries, General Electric Company, G.E. Polymershapes, Inc., Interline Brands, Inc., Rooftop Systems Inc., Wells Fargo Bank and Iron Mountain.  Our properties are located in Arizona, California, Florida, Georgia, Tennessee, Texas and Virginia.

In 2008, we sold one industrial center totaling 59,000 square feet located in Texas.  Sales proceeds from this disposition totaled $5.6 million and generated a gain of $2.4 million.

Land Held for Development.  At December 31, 2008, we owned 31 parcels of unimproved land consisting of approximately 29.8 million square feet of land area located in Arizona, California, Colorado, Florida, Georgia, Louisiana, Nevada, North Carolina and Texas.  These properties include approximately .2 million square feet of land adjacent to certain of our existing developed properties, which may be used for expansion of these developments, as well as approximately 29.6 million square feet of land, which may be used for new development.  Most of the land held for development is served by roads and utilities and are suitable for development as shopping centers or industrial projects, and we intend to emphasize the development of these parcels for such purpose.  Due to our analysis of current economic considerations, including the effects of tenant bankruptcies, lack of available funding and halt of tenant expansion plans for new development projects and declines in the real estate values, plans related to our new development properties including land held for development changed, and the use of these assets was no longer certain which brought about an impairment change.  Impairments, primarily related to our new development properties, of $52.5 million were recongnized for the year ended December 31, 2008. 

New Development Properties. At December 31, 2008, we had 25 projects under construction or in preconstruction stages with an estimated final square footage of approximately 6.5 million.  These properties are slated to be completed over the next one to four years.

During 2008, we generated gains of $8.3 million from the sale of 24 parcels of land located in Arizona, California, Colorado, Florida, Georgia, Nevada, North Carolina and Texas, and the recognition of a deferred gain from the sale of a land parcel in Nevada.  In an unconsolidated real estate joint venture and partnership, two land parcels were sold in Colorado and Washington.  Our share of the sales proceeds and the gain generated totaled $.7 million and $.4 million, respectively.


ITEM 3.        Legal Proceedings

We are involved in various matters of litigation arising in the normal course of business.  While we are unable to predict with certainty the amounts involved, our management and counsel believe that when such litigation is resolved, our resulting liability, if any, will not have a material adverse effect on our consolidated financial statements.

ITEM 4.        Submission of Matters to a Vote of Shareholders

None.

PART II

ITEM 5.        Market for Registrant's Common Shares of Beneficial Interest, Related Shareholder Matters and Issuer Purchases of Equity Securities

Our common shares of beneficial interest are listed and traded on the New York Stock Exchange under the symbol "WRI."  The number of holders of record of our common shares of beneficial interest as of January 31, 2009 was 3,225.  The closing high and low sale prices per common share as reported on the New York Stock Exchange, and dividends per share paid for the fiscal quarters indicated were as follows:

   
High
    
Low
    
Dividends
  
                   
2008:
                  
Fourth
   $ 35.08     $ 10.10     $ .525  
Third
     40.00       27.38       .525  
Second
     38.71       30.32       .525  
First
     35.42       28.37       .525  
                         
2007:
                        
Fourth
   $ 44.82     $ 31.44     $ .495  
Third
     42.15       36.34       .495  
Second
     49.00       40.84       .495  
First
     52.16       46.06       .495  

The following table summarizes the equity compensation plans under which our common shares of beneficial interest may be issued as of December 31, 2008:
 

Plan category
  
Number of shares to
be issued upon exercise
of outstanding options,
warrants and rights
    
Weighted average
exercise price of
outstanding options,
warrants and rights
    
Number of shares
remaining available
for future issuance
  
                   
Equity compensation plans approved by shareholders
     3,317,655     $ 32.96       2,011,682  
                         
Equity compensation plans not approved by shareholders
     ―       ―       ―  
                         
Total
     3,317,655     $ 32.96       2,011,682  


Performance Graph

The graph below provides an indicator of cumulative total shareholder returns for us as compared with the S&P 500 Stock Index and the NAREIT All Equity Index, weighted by market value at each measurement point.  The graph assumes that $100 was invested on December 31, 2003 in our common shares of beneficial interest and that all dividends were reinvested by the shareholder.
 
Comparison of Five Year Cumulative Return
 
5-Yr Return Chart
 
 
   
2004
    
2005
    
2006
    
2007
    
2008
  
                               
Weingarten
     142.37       140.59       179.24       128.19       91.88  
S&P 500 Index
     110.88       116.33       134.70       142.10       89.53  
The NAREIT All Equity Index
     131.58       147.58       199.32       168.05       104.65  

There can be no assurance that our share performance will continue into the future with the same or similar trends depicted in the graph above.  We will not make or endorse any predications as to future share performance.
 


In July 2007, our Board of Trust Managers authorized a common share repurchase program as part of our ongoing investment strategy.  Under the terms of the program, we may purchase up to a maximum value of $300 million of our common shares of beneficial interest during the following two years.  Share repurchases may be made in the open market or in privately negotiated transactions at the discretion of management and as market conditions warrant.  We anticipate funding the repurchase of shares primarily through the proceeds received from our property disposition program, as well as from general corporate funds.

The maximum dollar value of shares that may yet be purchased under the program is $196.7 million.



ITEM 6.        Selected Financial Data

The following table sets forth our selected consolidated financial data and should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," the Consolidated Financial Statements and accompanying Notes in "Item 8. Financial Statements and Supplementary Data" and the financial schedules included elsewhere in this Form 10-K.

 
      (Amounts in thousands, except per share amounts)  
      Year Ended December 31,  
   
2008
    
2007
    
2006
    
2005
    
2004
  
                               
Revenues (primarily real estate rentals)
   $ 614,968     $ 583,767     $ 523,424     $ 473,974     $ 428,144  
Expenses:
                                        
    Depreciation and amortization
     155,912       128,061       117,443       106,949       95,219  
    Other
     269,803       197,365       170,196       143,106       134,284  
           Total
     425,715       325,426       287,639       250,055       229,503  
Operating Income
     189,253       258,341       235,785       223,919       198,641  
Interest Expense
     (148,475 )     (148,829 )     (145,374 )     (129,160 )     (116,142 )
Interest and Other Income, net
     4,334       8,486       9,044       2,854       1,389  
Loss on Redemption of Preferred Shares
                                     (3,566 )
Gain on Redemption of Convertible Senior Unsecured Notes
     10,658                                  
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
     12,196       19,853       14,655       6,610       5,384  
Income Allocated to Minority Interests
     (8,943 )     (10,237 )     (6,414 )     (6,060 )     (4,928 )
Gain on Land and Merchant Development Sales
     8,342       16,385       7,166       804          
Gain on Sale of Properties
     1,998       4,086       22,493       22,306       1,562  
Benefit (Provision) for Income Taxes
     10,148       (4,073 )     (1,366 )                
Income from Continuing Operations
     79,511       144,012       135,989       121,273       82,340  
Income from Discontinued Operations (1)
     72,170       94,005       169,021       98,380       59,041  
Net Income
   $ 151,681     $ 238,017     $ 305,010     $ 219,653     $ 141,381  
                                         
Net Income Available to Common Shareholders
   $ 115,120     $ 212,642     $ 294,909     $ 209,552     $ 133,911  
Per Share Data - Basic:
                                        
     Income from Continuing Operations
   $ 0.51     $ 1.39     $ 1.43     $ 1.25     $ 0.87  
     Net Income
   $ 1.36     $ 2.49     $ 3.36     $ 2.35     $ 1.55  
     Weighted Average Number of Shares
     84,474       85,504       87,719       89,224       86,171  
Per Share Data - Diluted:
                                        
     Income from Continuing Operations
   $ 0.51     $ 1.38     $ 1.43     $ 1.25     $ 0.87  
     Net Income
   $ 1.36     $ 2.44     $ 3.27     $ 2.31     $ 1.54  
     Weighted Average Number of Shares
     84,917       88,893       91,779       93,166       89,511  
                                         
Property (at cost)
   $ 4,915,472     $ 4,972,344     $ 4,445,888     $ 4,033,579     $ 3,751,607  
Total Assets
   $ 5,114,699     $ 4,993,343     $ 4,373,887     $ 3,737,741     $ 3,470,318  
Debt
   $ 3,171,537     $ 3,165,059     $ 2,941,039     $ 2,348,504     $ 2,138,842  
                                         
Other Data:
                                        
     Cash Flows from Operating Activities
   $ 220,150     $ 223,309     $ 242,592     $ 200,525     $ 203,886  
     Cash Flows from Investing Activities
   $ (115,391 )   $ (480,630 )   $ (314,686 )   $ (104,459 )   $ (349,654 )
     Cash Flows from Financing Activities
   $ (111,590 )   $ 252,095     $ 100,407     $ (97,791 )   $ 170,928  
     Cash Dividends per Common Share
   $ 2.10     $ 1.98     $ 1.86     $ 1.76     $ 1.66  
Funds from Operations: (2)
                                        
     Net Income Available to Common Shareholders
   $ 115,120     $ 212,642     $ 294,909     $ 209,552     $ 133,911  
     Depreciation and Amortization
     162,035       141,150       131,792       125,742       114,342  
     Gain on Sale of Properties
     (70,068 )     (86,076 )     (172,056 )     (87,561 )     (26,316 )
                          Total
   $ 207,087     $ 267,716     $ 254,645     $ 247,733     $ 221,937  


(1)
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" requires the operating results and gain (loss) on the sale of operating properties to be reported as discontinued operations for all periods presented.




(2)
The National Association of Real Estate Investment Trusts (“NAREIT”) defines funds from operations (“FFO”) as net income (loss) available to common shareholders computed in accordance with generally accepted accounting principles, excluding gains or losses from sales of real estate assets and extraordinary items, plus depreciation and amortization of operating properties, including our share of unconsolidated real estate joint ventures and partnerships.  We calculate FFO in a manner consistent with the NAREIT definition.
 
Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income by itself as the primary measure of our operating performance.  Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that uses historical cost accounting is insufficient by itself.  There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs.
 
FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity.  FFO does not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.

ITEM 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto and the comparative summary of selected financial data appearing elsewhere in this report.  Historical results and trends which might appear should not be taken as indicative of future operations.  Our results of operations and financial condition, as reflected in the accompanying consolidated financial statements and related footnotes, are subject to management's evaluation and interpretation of business conditions, retailer performance, changing capital market conditions and other factors which could affect the ongoing viability of our tenants.

Executive Overview

Weingarten Realty Investors is a real estate investment trust (“REIT”) organized under the Texas Real Estate Investment Trust Act.  We, and our predecessor entity, began the ownership and development of shopping centers and other commercial real estate in 1948.  Our primary business is leasing space to tenants in the shopping and industrial centers we own or lease.  We also manage centers for joint ventures in which we are partners or for other outside owners for which we charge fees.

We operate a portfolio of rental properties which includes neighborhood and community shopping centers and industrial properties of approximately 73.0 million square feet.  We have a diversified tenant base with our largest tenant comprising only 2.7% of total rental revenues during 2008.

Our long-term strategy is to focus on increasing funds from operations (“FFO”) and growing dividend payments to our common shareholders.  We do this through hands-on leasing, management and selected redevelopment of the existing portfolio of properties, through disciplined growth from selective acquisitions and new developments, and through the disposition of assets that no longer meet our ownership criteria.  We do this while remaining committed to maintaining a conservative balance sheet, a well-staggered debt maturity schedule and strong credit agency ratings.  The depressed economic environment and capital markets have caused us to currently refocus our efforts on maintaining our operating properties at current levels and managing our capital resources to ensure adequate liquidity.



We strive to maintain a strong, conservative capital structure, which provides ready access to a variety of attractive capital sources.  We carefully balance obtaining low cost financing with minimizing exposure to interest rate movements and matching long-term liabilities with the long-term assets acquired or developed.  The turmoil in the current capital markets has adversely affected both the pricing and the availability of both debt and equity capital.  Our strategy for the upcoming year is focused on the sourcing of new capital whether it is in the form of proceeds from asset dispositions, joint venture relationships, new financings or new equity issuances.

At December 31, 2008, we owned or operated under long-term leases, either directly or through our interest in real estate joint ventures or partnerships, a total of 379 developed income-producing properties and 25 properties under various stages of construction and development.  The total number of centers includes 323 neighborhood and community shopping centers, 78 industrial projects and three other operating properties located in 23 states spanning the country from coast to coast.

We also owned interests in 31 parcels of land held for development that totaled approximately 29.8 million square feet.

We had approximately 7,200 leases with 5,300 different tenants at December 31, 2008.

Leases for our properties range from less than a year for smaller spaces to over 25 years for larger tenants.  Rental revenues generally include minimum lease payments, which often increase over the lease term, reimbursements of property operating expenses, including ad valorem taxes, and additional rent payments based on a percentage of the tenants' sales.  The majority of our anchor tenants are supermarkets, value-oriented apparel/discount stores and other retailers or service providers who generally sell basic necessity-type goods and services.  Through this challenging economic environment, we believe stability of our anchor tenants, combined with convenient locations, attractive and well-maintained properties, high quality retailers and a strong tenant mix, should ensure the long-term success of our merchants and the viability of our portfolio.

In assessing the performance of our properties, management carefully tracks the occupancy of the portfolio.  The weakened economy contributed to a drop in our occupancy from 94.4% at December 31, 2007 to 92.6% at December 31, 2008.  While we will continue to monitor the economy and the effects on our retailers, we believe the significant diversification of our portfolio both geographically and by tenant base will allow us to maintain occupancy levels of above 90% as we move through the year, absent bankruptcies by multiple national or regional tenants.  Another important indicator of performance is the increase in rental rates on a same-space basis as we complete new leases and renew existing leases.  We completed 1,243 new leases or renewals during 2008 totaling 6.3 million square feet, increasing rental rates an average of 10.2% on a cash basis.

New Development
At December 31, 2008, we had 25 properties in various stages of development. We have invested $366.1 million to-date on these projects and, at completion, we estimate our total investment to be $470.7 million.  These properties are slated to open over the next one to four years with a projected return on investment of approximately 8.1% when completed.  Also, five additional properties have been stabilized during 2008 with a total investment of $89.5 million and a projected return on investment of 9.1%.

In 2008, we had $118.1 million in properties that were held for future development pending improvement in economic conditions.  Due to current economic factors, obtaining new projects in 2008 proved challenging as potential retail anchors delayed or halted their expansion plans due to the deterioration of the economy.  Due to our analysis of current economic considerations, including the effects of tenant bankruptcies, lack of available funding and halt of tenant expansion plans for new development projects and declines in the real estate values, plans related to our new development properties including land held for development changed, and the use of these assets was no longer certain which brought about an impairment charge.  Impairments, primarily related to our new development properties, of $52.5 million were recognized for the year ended December 31, 2008.  While we will continue to seek opportunities and monitor this market closely, we anticipate little if any investment in new projects in 2009.



 
Merchant development is a program where we acquire or develop a project with the objective of selling all or part of it, instead of retaining it in our portfolio on a long-term basis.  Also, disposition of land parcels are included in this program.  We generated gains of approximately $8.3 million from this program during 2008.  While our 2009 business plan calls for merchant development gains similar to those obtained in 2008, there is no assurance this will occur due to the depressed state of the commercial real estate markets.

Acquisitions and Joint Ventures
Acquisitions and joint venture arrangements are a key component of our strategy.  However, the turmoil in the capital markets has significantly reduced transactions in the marketplace and, therefore, created uncertainty with respect to pricing.  Partnering with institutional investors through real estate joint ventures enables us to acquire high quality assets in our target markets while also meeting our financial return objectives.  We benefit from access to lower-cost capital, as well as leveraging our expertise to provide fee-based services, such as asset management and the acquisition, leasing and management of properties, to the joint ventures.

During 2008, we acquired one shopping center and invested in a 25%-owned unconsolidated joint venture to acquire a 4,000 square foot pad building located in Florida for a purchase price of approximately $2.7 million.

In March 2008, we contributed 18 neighborhood/community shopping centers located in Texas with an aggregate value of approximately $227.5 million, and aggregating more than 2.1 million square feet, to a joint venture.  We sold an 85% interest in this joint venture to AEW Capital Management on behalf of one of its institutional clients.  Financing totaling $154.3 million was placed on the properties and guaranteed by us for tax planning purposes.

In August 2008, we executed a real estate limited partnership with a foreign institutional investor to purchase up to $250 million of retail properties in various states. Our ownership in this unconsolidated real estate limited partnership is 20.1%.  As of December 31, 2008, no properties had been purchased.

In November 2008, we contributed eight neighborhood/community shopping centers with an aggregate value of approximately $205.1 million, and aggregating approximately 1.1 million square feet, to a joint venture.  Four of these shopping centers are located in Texas, two in Tennessee and one each in Florida and Georgia.  We sold a 70% interest in this joint venture to Hines REIT Retail Holdings, LLC.  Financing totaling $100.0 million was placed on the properties and guaranteed by us for tax planning purposes.

Subsequent to December 31, 2008, we contributed two additional properties to the joint venture with Hines REIT Retail Holdings, LLC with an aggregate value of approximately $23.3 million, and aggregating approximately .1 million square feet.  These two shopping centers are located in Georgia and North Carolina, and we received proceeds of approximately $6.9 million.  Additionally, we have a commitment to contribute two additional properties to this joint venture in 2009.

Joint venture fee income for 2008 was approximately $7.2 million or a decrease of $1.0 million over the prior year.  This decrease is a result of acquisition fees recognized in 2007 that did not occur in 2008.

Dispositions
During 2008, we sold nine shopping centers and one industrial property for $144.0 million.  Although the availability of debt financing for prospective acquirers has decreased in the current capital markets, we expect to continue to dispose of non-core properties during 2009 as opportunities present themselves.  Dispositions are part of an ongoing portfolio management process where we prune our portfolio of properties that do not meet our geographic or growth targets and provide capital to recycle into properties that have barrier-to-entry locations within high growth metropolitan markets.  Over time, we expect this to produce a portfolio with higher occupancy rates and stronger internal revenue growth.



Summary of Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate our assumptions and estimates on an ongoing basis.  We base our estimates on historical experience and on various other assumptions that we believe 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.  Actual results may differ from these estimates under different assumptions or conditions.  We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition
Rental revenue is generally recognized on a straight-line basis over the life of the lease, which begins the date the leasehold improvements are substantially complete, if owned by us, or the date the tenant takes control of the space, if the leasehold improvements are owned by the tenant.  Revenue from tenant reimbursements of taxes, maintenance expenses and insurance is recognized in the period the related expense is recognized.  Revenue based on a percentage of tenants' sales is recognized only after the tenant exceeds their sales breakpoint.  In addition, in circumstances where we would provide a tenant improvement allowance for improvements that are owned by the tenant, we would recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease.  Other revenue is income from contractual agreements with third parties, tenants or partially owned real estate joint ventures or partnerships, which is recognized as the related services are performed under the respective agreements.

Real Estate Joint Ventures and Partnerships
To determine the method of accounting for partially owned real estate joint ventures and partnerships, we first apply the guidelines set forth in Financial Accounting Standards Board (“FASB”) Interpretation No. 46R (“FIN 46R”), "Consolidation of Variable Interest Entities."  Entities identified as variable interest entities are consolidated if we are determined to be the primary beneficiary of the partially owned real estate joint venture or partnership.

Partially owned real estate joint ventures and partnerships over which we exercise financial and operating control are consolidated in our financial statements.  In determining if we exercise financial and operating control, we consider factors such as ownership interest, authority to make decisions, kick-out rights and substantive participating rights.  If there are changes in these factors, these reconsideration events are assessed to determine if the consolidation treatment remains appropriate.  Management analyzes and assesses reconsideration events as soon as they become aware of them.  Partially owned real estate joint ventures and partnerships where we have the ability to exercise significant influence, but do not exercise financial and operating control, are accounted for using the equity method.  Decisions regarding consolidation of partially owned entities frequently require significant judgment by our management.  Errors in the assessment of consolidation could result in material changes to our consolidated financial statements.

Our investments in partially owned real estate joint ventures and partnerships are reviewed for impairment, periodically, if events or circumstances change indicating that the carrying amount of our investments may not be recoverable.  The ultimate realization of our investments in partially owned real estate joint ventures and partnerships is dependent on a number of factors, including the performance of each investment and market conditions.  We will record an impairment charge if we determine that a decline in the value of an investment is other than temporary.  This evaluation involves a considerable amount of judgment by our management.  Our overall future plans for the investment, our investment partner’s financial outlook and our views on current market and economic conditions may have a significant impact on the resulting factors analyzed for these purposes.



Property
Real estate assets are stated at cost less accumulated depreciation.  Depreciation is computed using the straight-line method, generally over estimated useful lives of 18-40 years for buildings and 10-20 years for parking lot surfacing and equipment.  Major replacements where the betterment extends the useful life of the asset are capitalized, and the replaced asset and corresponding accumulated depreciation are removed from the accounts.  All other maintenance and repair items are charged to expense as incurred.  If we do not allocate these costs appropriately or incorrectly estimate the useful lives of our real estate, depreciation expense may be misstated.

Acquisitions of properties are accounted for utilizing the purchase method and, accordingly, the results of operations of an acquired property are included in our results of operations from the date of acquisition.  We have used estimates of future cash flows and other valuation techniques to allocate the purchase price of acquired property among land, buildings on an "as if vacant" basis, tenant improvements and other identifiable intangibles.  Current economic and operational property conditions, known trends and changes expected in current market conditions are considered in the estimates of future cash flows used for purchase price allocation purposes.  Other identifiable intangible assets and liabilities include the effect of out-of-market leases, the value of having leases in place (“as is” versus “as if vacant” and absorption costs), out-of-market assumed mortgages and tenant relationships.  Depreciation and amortization is computed using the straight-line method, generally over estimated useful lives of 40 years for buildings and over the lease term which includes bargain renewal options for other identifiable intangible assets.  The impact of these estimates could result in significant differences related to the purchased assets, liabilities and resulting depreciation or amortization.  Initial valuations are subject to change until such information is finalized, no later than 12 months from the acquisition date.  The impact of incorrect estimates in connection with acquisition asset values and related estimated useful lives could be material to our consolidated financial statements.

Property also includes costs incurred in the development of new operating properties and properties in our merchant development program.  Merchant development is a new program in which we develop a project with the objective of selling all or part of it, instead of retaining it in our portfolio on a long-term basis.  Also, disposition of land parcels and non-operating properties are included in this program.  These properties are carried at cost and no depreciation is recorded on these assets until the commencement of rental revenue or no later than one year from the completion of major construction.  These costs include pre-acquisition costs directly identifiable with the specific project, development and construction costs, interest and real estate taxes.  Indirect development costs, including salaries and benefits, travel and other related costs that are directly attributable to the development of the property, are also capitalized.  The capitalization of such costs ceases at the earlier of one year from the completion of major construction or when the property, or any completed portion, becomes available for occupancy.  The impact of the estimates related to the allocation of indirect costs and interest could result in incorrect estimates in connection with determining the asset value which could be material to our consolidated financial statements.

Property also includes costs for tenant improvements paid by us, including reimbursements to tenants for improvements that are owned by us and will remain our property after the lease expires.

Our properties are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property, including any identifiable intangible assets (including site costs and capitalized interest), may not be recoverable.  In such an event, a comparison is made of the current and projected operating cash flows of each such property into the foreseeable future on an undiscounted basis to the carrying amount of such property.  Fair values are also determined by obtaining third-party broker and appraisal estimates.  In accordance with FASB’s Statement of Financial Accounting Standards (“SFAS”) No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” such carrying amount is adjusted, if necessary, to the estimated fair value to reflect an impairment in the value of the asset.

Due to our analysis of current economic considerations at each reporting period, including the effects of tenant bankruptcies, lack of available funding and halt of tenant expansion plans for new development projects and declines in the real estate values, plans related to our new development properties including land held for development changed, and the use of these assets was no longer certain which brought about an impairment charge in 2008.  Determining whether a property is impaired and, if impaired, the amount of required write-down to fair value requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation.  If market conditions continue to deteriorate or managements’ plans for certain properties change, additional write-downs could be required in the future.



Interest Capitalization
Interest is capitalized on land under development and buildings under construction based on rates applicable to borrowings outstanding during the period and the weighted average balance of qualified assets under development/construction during the period.  Differences in methodologies to calculate applicable interest rates and the cost of qualified assets can yield significant differences in the amounts capitalized and, as a result, the amount of depreciation recognized.

Deferred Charges
Debt financing costs are amortized primarily on a straight-line basis, which approximates the effective interest method, over the terms of the debt.  Lease costs represent the initial direct costs incurred in origination, negotiation and processing of a lease agreement.  Such costs include outside broker commissions and other independent third party costs, as well as salaries and benefits, travel and other internal costs directly related to completing a lease and are amortized over the life of the lease on a straight-line basis.  Costs related to supervision, administration, unsuccessful origination efforts and other activities not directly related to completed lease agreements are charged to expense as incurred. Differences in methodologies to calculate and defer these costs can yield differences in the amounts deferred and, accordingly, the amount of amortization recognized.

Sales of Real Estate
Sales of real estate include the sale of shopping center pads, property adjacent to shopping centers, shopping center properties, merchant development properties, investments in real estate joint ventures and partnerships and partial sales to real estate joint ventures and partnerships in which we participate.

We recognize profit on sales of real estate, including merchant development sales, in accordance with FASB’s SFAS No. 66 (“SFAS 66”), “Accounting for Sales of Real Estate.”  Profits are not recognized until (a) a sale is consummated; (b) the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay; (c) the seller’s receivable is not subject to future subordination; and (d) we have transferred to the buyer the usual risks and rewards of ownership in the transaction, and we do not have a substantial continuing involvement with the property.  A considerable amount of judgment by our management is used in this evaluation.

We recognize gains on the sale of real estate to joint ventures and partnerships in which we participate to the extent we receive cash from the joint venture or partnership, if it meets the sales criteria in accordance with SFAS 66, and we do not have a commitment to support the operations of the real estate joint venture or partnership to an extent greater than our proportionate interest in the real estate joint venture or partnership.

Accrued Rent and Accounts Receivable
Receivable balances outstanding include base rents, tenant reimbursements and receivables attributable to the straight-lining of rental commitments.  An allowance for the uncollectible portion of accrued rents and accounts receivable is determined based upon an analysis of balances outstanding, historical bad debt levels, tenant credit worthiness and current economic trends.  Additionally, estimates of the expected recovery of pre-petition and post-petition claims with respect to tenants in bankruptcy are considered in assessing the collectibility of the related receivables.  As these factors change, the allowance is subject to revision and may impact our results of operations.

Income Taxes
We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended.  As a REIT, we generally will not be subject to corporate level federal income tax on taxable income we distribute to our shareholders.  To be taxed as a REIT, we must meet a number of requirements including defined percentage tests concerning the amount of our assets and revenues that come from, or are attributable to, real estate operations.  As long as we distribute at least 90% of the taxable income of the REIT (without regard to capital gains or the dividends paid deduction) to our shareholders as dividends, we will not be taxed on the portion of our income we distribute as dividends.


The Tax Relief Extension Act of 1999 gave REITs the ability to conduct activities which a REIT was previously precluded from doing as long as such activities are performed in entities which have elected to be treated as taxable REIT subsidiaries under the IRS code.  These activities include buying or developing properties with the express purpose of selling them.  We conduct certain of these activities in taxable REIT subsidiaries that we have created.  We calculate and record income taxes in our consolidated financial statements based on the activities in those entities.  We also record deferred taxes for the temporary tax differences that have resulted from those activities as required under SFAS No. 109, “Accounting for Income Taxes.”  We use estimates in preparing our deferred tax amounts and if revised, these estimates could impact our results of operations.

Results of Operations
Comparison of the Year Ended December 31, 2008 to the Year Ended December 31, 2007

Revenues
Total revenues were $615.0 million for the year ended 2008 versus $583.8 million for the year ended 2007, an increase of $31.2 million or 5.3%.  This increase resulted primarily from an increase in rental revenues of $30.4 million and other income of $.8 million.

Property acquisitions and new development activity contributed $26.7 million of the rental income increase with $3.7 million resulting from 1,243 renewals and new leases, comprising 6.3 million square feet at an average rental rate increase of 10.2%.

Occupancy (leased space) of the portfolio as compared to the prior year was as follows:

   
December 31,
  
   
2008
    
2007
  
             
Shopping Centers
     93.0 %     95.1 %
Industrial
     91.6 %     92.0 %
Total
     92.6 %     94.4 %

Other income increased by $.8 million from the prior year due from an increase in lease cancellation revenue from various tenants.

Expenses
Total expenses for 2008 were $425.7 million versus $325.4 million in 2007, an increase of $100.3 million or 30.8%.

The increases in 2008 for depreciation and amortization expense ($27.8 million), operating expenses ($14.8 million) and ad valorem taxes ($6.4 million) were primarily a result of the properties acquired and developed during the year.  In addition, operating expenses increased as a result of Hurricane Ike in 2008 and depreciation expense increased as a result of redevelopment activities.  In 2008, an impairment loss was recorded of $52.5 million due to primarily our new development properties based on current economic conditions; including the lack of available funding, a halt in tenant expansion plans and declines in the real estate values.  The decrease in general and administrative expenses of $1.2 million results primarily from a reduction in our workforce.  Overall, direct operating costs and expenses (operating and ad valorem tax expense) of operating our properties as a percentage of rental revenues were 31.9% and 29.9% in 2008 and 2007, respectively.



Interest Expense
Interest expense totaled $148.5 million for 2008, down by $.4 million or .2% from 2007.  The components of interest expense were as follows (in thousands):

   
Year Ended December 31,
  
   
2008
    
2007
  
             
Gross interest expense
   $ 176,772     $ 180,612  
Over-market mortgage adjustment of acquired properties
     (8,007 )     (6,758 )
Capitalized interest
     (20,290 )     (25,025 )
                 
Total
   $ 148,475     $ 148,829  

Gross interest expense totaled $176.8 million in 2008, down $3.8 million or 2.1% from 2007.  The decrease in gross interest expense results primarily from a net gain of $2.8 million on the settlement of a forward starting swap in March 2008.  Over-market mortgage adjustment increased $1.2 million due primarily to a write-off of an intangible liability as a result of a loan pay off.  Capitalized interest decreased $4.7 million due to a decrease in the annualized average interest capitalization rate of 5.9% in 2008 compared to 8.4% in 2007.

Interest and Other Income
Interest and other income was $4.3 million in 2008 versus $8.5 million in 2007, a decrease of $4.2 million or 49.4%. This decrease resulted from the fair value decline in the assets held in a grantor trust related to our deferred compensation plan and a reduction in interest earned from a qualified escrow account.  Offsetting this $7.0 million decrease is the interest earned on notes receivable from real estate joint ventures and partnerships for new development activities and other receivables.

Gain on Redemption of Convertible Senior Unsecured Notes
The gain results from the purchase and cancellation of $37.8 million of our 3.95% convertible senior unsecured notes at a discount to par value.

Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
Our equity in earnings of real estate joint ventures and partnerships was $12.2 million in 2008 versus $19.9 million in 2007, a decrease of $7.7 million or 38.7%.  The decrease results primarily from our share of the write-off of pre-development costs of $4.6 million and impairment losses of $3.3 million in 2008.  No such activity is present in 2007.

Income Allocated to Minority Interests
Income allocated to minority interests was $8.9 million in 2008 versus $10.2 million in 2007, a decrease of $1.3 million or 12.7%.  This decrease resulted primarily from the 2007 gain on sale of three shopping centers that were each held in a 50%-owned consolidated entity.  Offsetting this decrease of $3.8 million is earnings related to our investment in two newly formed consolidated joint ventures in 2008.

Gain on Sale of Properties
Gain on sale of properties was $2.0 million in 2008 versus $4.1 million in 2007, a decrease of $2.1 million or 51.2%.  The gain in 2007 resulted primarily from gain deferrals and adjustments that did not recur in 2008.

Gain on Land and Merchant Development Sales
Gain on land and merchant development sales totaled $8.3 million in 2008.  We sold 24 land parcels, of which five each are located in Florida, North Carolina and Texas, three in Nevada, two each in Arizona and California and one each in Colorado and Georgia.  Also, in 2008 we realized a deferred gain of $2.1 million associated with a land parcel sale in Nevada.  The activity in 2007 of $16.4 million resulted primarily from the sale of two vacant industrial buildings in California, the River Pointe apartments in Texas, a shopping center in Arizona and 17 parcels of land, of which 11 are located in Texas, three in Arizona and one each in Florida, Louisiana and Tennessee.



Benefit (Provision) for Income Taxes
The decrease of $14.2 million resulted primarily to the decrease in income at our taxable REIT subsidiary associated with a reduction in merchant development gains, write-off of pre-development costs and impairment charges.

Income from Discontinued Operations
Income from discontinued operations was $72.2 million in 2008 versus $94.0 million in 2007, a decrease of $21.8 million or 23.2%.  This decrease was due primarily to the decrease in gain on sale of 10 properties in 2008 as compared to the gain on sale of 18 properties in 2007.  Also, the income from discontinued operations for 2007 includes the operating results of the properties disposed of in 2008.

Results of Operations
Comparison of the Year Ended December 31, 2007 to the Year Ended December 31, 2006

Revenues
Total revenues were $583.8 million for the year ended 2007 versus $523.4 million for the year ended 2006, an increase of $60.4 million or 11.5%.  This increase resulted primarily from an increase in rental revenues of $53.9 million and other income of $6.5 million.

Property acquisitions and new development activity contributed $56.6 million of the rental income increase with $4.8 million resulting from 1,261 renewals and new leases, comprising 7.0 million square feet at an average rental rate increase of 10.3%.  Offsetting these rental income increases was a decrease of $7.5 million, which resulted from the sale of an 80% interest in five industrial centers in the third quarter of 2006.

Occupancy (leased space) of the portfolio as compared to the prior year was as follows:

   
December 31,
  
   
2007
    
2006
  
             
Shopping Centers
     95.1 %     95.0 %
Industrial
     92.0 %     91.2 %
Total
     94.4 %     94.1 %

Other income increased by $6.5 million from the prior year.  This increase resulted primarily from the increase in joint venture fee income of $5.7 million and miscellaneous tenant revenue of $.8 million.

Expenses
Total expenses for 2007 were $325.4 million versus $287.6 million in 2006, an increase of $37.8 million or 13.1%.

The increases in 2007 for depreciation and amortization expense ($10.7 million), operating expenses ($18.0 million), ad valorem taxes ($5.9 million) and general and administrative expenses ($3.2 million) were primarily a result of the properties acquired and developed during the year, an increase in property insurance expenses as a result of the hurricanes experienced in 2005, and increases associated with additional headcount needed to achieve growth in the portfolio.  Overall, direct operating costs and expenses (operating and ad valorem tax expense) of operating our properties as a percentage of rental revenues were 29.9% in 2007 and 28.3% in 2006.



Interest Expense
Interest expense totaled $148.8 million for 2007, up $3.5 million or 2.4% from 2006.  The components of interest expense were as follows (in thousands):

   
Year Ended December 31,
  
   
2007
    
2006
  
             
Gross interest expense
   $ 180,612     $ 160,454  
Over-market mortgage adjustment of acquired properties
     (6,758 )     (7,464 )
Capitalized interest
     (25,025 )     (7,616 )
                 
Total
   $ 148,829     $ 145,374  

Gross interest expense totaled $180.6 million in 2007, up $20.2 million or 12.6% from 2006.  The increase in gross interest expense was due to an increase in the average debt outstanding from $2.5 billion in 2006 to $3.0 billion in 2007 at a weighted average interest rate of 5.9% in 2007 and 6.0% for 2006.  Capitalized interest increased $17.4 million due to an increase in new development activity, and the over-market mortgage adjustment decreased by $.7 million.

Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
Our equity in earnings of real estate joint ventures and partnerships was $19.9 million in 2007 versus $14.7 million in 2006, an increase of $5.2 million or 35.4%.  This increase was attributable primarily to our incremental income from our investments in newly formed joint ventures for the acquisition and development of retail and industrial properties.

Income Allocated to Minority Interests
Income allocated to minority interests was $10.2 million in 2007 versus $6.4 million in 2006, an increase of $3.8 million or 59.4%.  This increase resulted primarily from the gain on sale of three shopping centers that were each held in a 50% consolidated joint venture.

Gain on Sale of Properties
The decrease in gain on sale of properties of $18.4 million resulted primarily from the sale of an 80% interest in five industrial properties in the San Diego, Memphis and Atlanta markets in 2006.

Gain on Land and Merchant Development Sales
Gain on land and merchant development sales totaled $16.4 million in 2007.  We sold two vacant industrial buildings in San Diego, California; one shopping center in Phoenix, Arizona, the River Pointe apartments in Conroe, Texas and 17 parcels of land, of which 11 are located in Texas, three in Arizona, and one each in Florida, Louisiana, Tennessee.  The activity in 2006 of $7.1 million resulted from the disposition of the Timber Springs shopping center in Orlando, Florida and the sale of three parcels of land in Arizona (1) and Texas (2).

Provision for Income Taxes
The increase is attributable to an increase of $1.9 million in the Texas franchise tax, which was enacted in the second quarter of 2006 and an increase of $.8 million at our taxable REIT subsidiary.

Income from Discontinued Operations
Income from discontinued operations was $94.0 million in 2007 versus $169.0 million in 2006, a decrease of $75.0 million or 44.4%.  This decrease was due primarily to the decrease in gain on sale of 18 properties in 2007 as compared to the gain on sale of 23 properties in 2006.  Also, the income from discontinued operations for 2006 includes the operating results of the properties disposed of in 2008 and 2007.



Effects of Inflation

We have structured our leases in such a way as to remain largely unaffected should significant inflation occur.  Most of the leases contain percentage rent provisions whereby we receive increased rentals based on the tenants' gross sales.  Many leases provide for increasing minimum rentals during the terms of the leases through escalation provisions.  In addition, many of our leases are for terms of less than 10 years, which allow us to adjust rental rates to changing market conditions when the leases expire.  Most of our leases also require the tenants to pay their proportionate share of operating expenses and ad valorem taxes.  As a result of these lease provisions, increases due to inflation, as well as ad valorem tax rate increases, generally do not have a significant adverse effect upon our operating results as they are absorbed by our tenants.

Capital Resources and Liquidity

Our primary liquidity needs are payment of our common and preferred dividends, maintaining and operating our existing properties, payment of our debt service costs and funding planned growth.  Although we anticipate that cash flows from operating activities primarily in the form of rental revenues will decline due to tenant bankruptcies and store closings, we believe operating activities will continue to provide adequate capital for common and preferred dividends, debt service costs and the capital necessary to maintain and operate our existing properties.  While we project our occupancy could drop to the 90% level by mid-year 2009, the operating cash flow generated at that occupancy should remain adequate to provide capital for these liquidity needs.

While planned acquisitions are minimal, the primary sources of capital for funding any acquisitions and the new development program are our revolving credit facilities, cash generated from sale of properties and the formation of joint ventures, cash flow generated by our operating properties and proceeds from capital issuances, both debt and equity.  Amounts outstanding under the revolving credit agreement are retired as needed with proceeds from the issuance of long-term debt, common and preferred equity, cash generated from disposition of properties and cash flow generated by our operating properties.  As of December 31, 2008, the balance outstanding under our $575 million revolving credit facility was $383.0 million, and no amount was outstanding under our $30 million credit facility, which we use for cash management purposes.

The current credit market turmoil has significantly affected our ability to obtain additional capital; however, we have been able to complete some transactions and continue to pursue additional sources of capital.  As described under Investing Activities and Financing Activities below, we completed have completed in the fourth quarter of 2008 1) a $98 million common shares of beneficial interest equity offering, 2) a joint venture that has provided $121.8 million in cash, and 3) a new $100 million secured loan with a major life insurance company at a consolidated real estate joint venture.  We currently have two transactions in process including a $106 million industrial joint venture and a $200 million to $300 million retail joint venture.  We have term sheets for a $100 million secured loan with a major life insurance company and an unsecured term loan ranging from $100 million to $200 million. We presently have $78 million of dispositions under contract, none of which were deemed to be held for sale at December 31, 2008, and another $33 million under letters of intent.  Additionally, we have more than $300 million of individual properties currently being marketed for sale.  There can be no assurance that these transactions can be completed as planned.  With $2.7 billion in unencumbered properties, we have adequate assets to leverage or sell, to raise new capital.

Our business plan reflects cost reductions, cutbacks in new development expenditures and no operational growth, it also is capable of fully funding all new development and other capital needs including the $97 million of principal debt payments due in 2009.  However, if unexpected events result in the need for additional capital, we have discretionary capital expenditures that could be deferred, if necessary.  In the event additional unexpected capital needs arise, we also have the ability to pay up to 90% of our common share dividend in our common shares of beneficial interest, which would provide up to $42 million of cash savings per quarter.  Accordingly, we currently anticipate that our available cash resources and credit will be sufficient to meet our anticipated working capital, debt maturities and new development expenditures in 2009.


If market conditions continue to deteriorate, we have the ability to delay the funding of discretionary capital expenditures.  Also, without the availability of additional funds over the long-term, we may not be able to respond to competitive pressures, or take advantage of unanticipated opportunities.  We believe we are currently in compliance with our debt covenants. Our most restrictive debt covenants including debt to assets, fixed charge and unencumbered interest coverage ratios, limit the amount of additional leverage we can add; however, we believe the sources of capital described above are adequate to execute our current business plan and remain in compliance with our debt covenants.

Our capital structure also includes non-recourse secured debt that we assume in conjunction with our acquisitions program.  We also have non-recourse debt secured by acquired or developed properties held in several of our real estate joint ventures and partnerships.  We hedge the future cash flows of certain debt transactions, as well as changes in the fair value of our debt instruments, principally through interest rate swaps with major financial institutions.  We generally have the right to sell or otherwise dispose of our assets except in certain cases where we are required to obtain our joint venture partners’ consent or a third party consent for assets held in special purpose entities, which are 100% owned by us.

Investing Activities:

Acquisitions and Joint Ventures
Retail Properties.
In January 2008, we acquired a 4,000 square foot pad building located in Florida through a 25%-owned unconsolidated joint venture.

In March 2008, we contributed 18 neighborhood/community shopping centers located in Texas with an aggregate value of approximately $227.5 million, and aggregating more than 2.1 million square feet, to a joint venture.  We sold an 85% interest in this joint venture to AEW Capital Management on behalf of one of its institutional clients and received proceeds approximating $216.1 million.  We maintain a 15% ownership interest in this venture, which is consolidated in our financial statements.

In May 2008, we acquired Kirby Strip Center, a 10,000 square foot building located in Texas.

In August 2008, we executed a real estate limited partnership with a foreign institutional investor to purchase up to $250 million of retail properties in various states. Our ownership in this unconsolidated real estate limited partnership is 20.1%.  As of December 31, 2008, no properties have been purchased.

In November 2008, we contributed eight neighborhood/community shopping centers with an aggregate value of approximately $205.1 million, and aggregating approximately 1.1 million square feet, to a joint venture.  Four of these shopping centers are located in Texas, two in Tennessee and one each in Florida and Georgia.  We sold a 70% interest in this joint venture to Hines REIT Retail Holdings, LLC and received proceeds of approximately $121.8 million.  We maintain a 30% ownership interest in this venture, which is consolidated in our financial statements.

Subsequent to December 31, 2008, we contributed two additional properties to the joint venture with Hines REIT Retail Holdings, LLC with an aggregate value of approximately $23.3 million, and aggregating approximately .1 million square feet.  These two shopping centers are located in Georgia and North Carolina, and we received proceeds of approximately $6.9 million.  Additionally, we have a commitment to contribute two additional properties to this joint venture in 2009.

Industrial Properties.
There were no acquisitions of industrial properties during 2008.

Dispositions
Retail Properties.
During 2008, we sold nine shopping centers, of which five are located in Texas, one in California and three in Louisiana.  Sales proceeds from these dispositions totaled $138.4 million and generated gains of $66.3 million.



Industrial Properties.
During 2008, we sold one industrial center located in Texas.  Sales proceeds from this disposition totaled $5.6 million and generated a gain of $2.4 million.

New Development and Capital Expenditures
At December 31, 2008, we had 25 projects under construction or in preconstruction stages with a total square footage of approximately 6.5 million.  These properties are slated to be completed over the next one to four years.

Merchant Development Properties.
During 2008, we generated gains of $8.3 million from the sale of 24 parcels of land located in Arizona, California, Colorado, Florida, Georgia, Nevada, North Carolina and Texas, and the recognition of a deferred gain from the sale of a land parcel in Nevada.  In an unconsolidated real estate joint venture and partnership, two land parcels were sold in Colorado and Washington.  Our share of the sales proceeds and the gain generated totaled $.7 million and $.4 million, respectively.

Our new development projects are financed initially under our revolving credit facilities, using available cash generated from dispositions of properties or cash flow generated by our operating properties for new development activities.

Capital expenditures for additions to the existing portfolio, acquisitions, new development and our share of investments in unconsolidated real estate joint ventures and partnerships totaled $437.7 million in 2008 and $1.1 billion in both 2007 and 2006.  We have entered into commitments aggregating $102.4 million comprised principally of construction contracts which are generally due in 12 to 36 months.  We expect to invest a total of $470.7 million to complete construction of properties under various stages of development over the next one to four years.

Financing Activities:

Debt
Total debt outstanding was $3.2 billion at both December 31, 2008 and 2007.  Total debt at December 31, 2008 included $2.7 billion of which interest rates are fixed and $449.0 million, including the effect of $50 million of interest rate swaps, that bears interest at variable rates.  Additionally, debt totaling $1.0 billion was secured by operating properties while the remaining $2.1 billion was unsecured.

We have a $575 million unsecured revolving credit facility held by a syndicate of banks.  This unsecured revolving facility expires in February 2010 and provides a one year extension option available at our request.  Borrowing rates under this facility float at a margin over LIBOR, plus a facility fee.  The borrowing margin and facility fee, which are currently 60.0 and 15.0 basis points, respectively, are priced off a grid that is tied to our senior unsecured credit rating.  This facility includes a competitive bid feature where we are allowed to request bids for borrowings up to $287.5 million from the syndicate banks.  As of February 17, 2009, there was $393.0 million outstanding under this facility.  We also maintain a $30 million unsecured and uncommitted overnight facility that is used for cash management purposes, and as of February 17, 2009, there was no outstanding balance under this facility.  The available balance under our revolving credit agreement was $171.9 million at February 17, 2009, which is reduced by amounts outstanding for letters of credit.

We believe we were in full compliance with all our covenants as of December 31, 2008.  Our three most restrictive covenants include debt to assets, fixed charge and unencumbered interest coverage ratios.  These ratios as defined in our agreements were as follows at December 31, 2008:

Covenant
  
Restriction
  
Actual
Debt to Asset Ratio
  
Less than 60.0%
  
54.55%
Fixed Charge Ratio
  
Greater than 1.5
  
2.15
Unencumbered Interest Ratio
  
Greater than 2.0
  
2.56



In November 2008, we elected to repurchase a portion of the 3.95% convertible senior unsecured notes due 2026 in the open market.  We purchased and subsequently retired a face value of $37.8 million for $26.7 million resulting in a net gain of $10.7 million in 2008.  We originally issued $575 million notes in 2006 and the net proceeds from the sale of the debentures, after repurchasing 4.3 million of our common shares of beneficial interest, were used for general business purposes and to reduce amounts outstanding under our revolving credit facility.  The debentures are convertible under certain circumstances for our common shares of beneficial interest at an initial conversion rate of 20.3770 common shares of beneficial interest per $1,000 of principal amount of debentures (an initial conversion price of $49.075).  Upon the conversion of debentures, we will deliver cash for the principal return, as defined, and cash or common shares of beneficial interest, at our option, for the excess of the conversion value, as defined, over the principal return.  The debentures are redeemable for cash at our option beginning in 2011 for the principal amount plus accrued and unpaid interest.  Holders of the debentures have the right to require us to repurchase their debentures for cash equal to the principal of the debentures plus accrued and unpaid interest in 2011, 2016 and 2021 and in the event of a change in control.

In November 2008, we contributed assets to a joint venture with an institutional investor.  In conjunction with this transaction, the joint venture issued $100.0 million of fixed-rate long-term debt with a five year term at a rate of 6.0% that we guaranteed for tax planning purposes.  The net proceeds received from the issuance of this debt were used to reduce amounts outstanding under our $575 million revolving credit facility.

In March 2008, we contributed assets to a joint venture with an institutional investor.  In conjunction with this transaction, the joint venture issued $154.3 million of fixed-rate long-term debt with an average life of 7.3 years at an average rate of 5.4% that we guaranteed for tax planning purposes.  The net proceeds received from the issuance of this debt were used to reduce amounts outstanding under our $575 million revolving credit facility.

In January 2008, we elected to repay at par a fixed rate 8.33% mortgage totaling $121.8 million that was secured by 19 supermarket-anchored shopping centers in California originally acquired in April 2001.

During the year ended December 31, 2008, no debt or capital lease obligations were assumed in conjunction with acquisitions.

As of December 31, 2008 and 2007, we had two interest rate swap contracts designated as fair value hedges with an aggregate notional amount of $50.0 million that convert fixed interest payments at rates of 4.2% to variable interest payments of 2.0% and 5.0% at December 31, 2008 and 2007, respectively.  We could be exposed to losses in the event of nonperformance by the counter-parties; however, management believes the likelihood of such nonperformance is unlikely.

During the year ended December 31, 2007, the balance of secured debt that was assumed in conjunction with 2007 acquisitions was $99.4 million.  A capital lease obligation totaling $12.9 million was assumed and subsequently settled in 2007.

At December 31, 2007, we had two forward-starting interest rate swap contracts with an aggregate notional amount of $118.6 million to mitigate the risk of future fluctuations in interest rates on forecasted issuances of long-term debt.  These contracts were settled shortly after we contributed assets to a joint venture with an institutional investor and concurrently issued $154.3 million of fixed-rate long-term debt that we guaranteed.

In July, November and December 2007, swaps of $10 million, $5 million and $10 million, respectively, matured in conjunction with the maturity of the associated medium term notes.  These hedge contracts were designated as a fair value hedges.

In conjunction with the disposition of properties completed during 2007, we incurred a net loss of $.4 million on the early extinguishment of three loans totaling $22.2 million.

Equity
Common and preferred dividends increased to $213.6 million in 2008, compared to $194.5 million in 2007.  The dividend rate for our common shares of beneficial interest increased for each quarter of 2008 to $.525 compared to $.495 for the same period of 2007. Our dividend payout ratio on common equity for 2008, 2007 and 2006 approximated 85.9%, 63.2% and 64.0%, respectively, based on basic funds from operations for the respective periods.


In June and July of 2008, we redeemed $120 million and $80 million of depositary shares, respectively, retiring all of the Series G Cumulative Redeemable Preferred Shares.  Each depositary share represented one-hundredth of a Series G Cumulative Redeemable Preferred Share.  These depositary shares were redeemed, at our option, at a redemption price of $25 multiplied by a graded rate per depositary share based on the date of redemption plus any accrued and unpaid dividends thereon.  Upon the redemption of these shares, the related original issuance costs of $1.9 million were reported as a deduction in arriving at net income available to common shareholders.  In September 2007, these depositary shares were issued through a private placement, and net proceeds of $193.6 million were used to repay amounts outstanding under our credit facilities.  The Series G Preferred Shares paid a variable-rate quarterly dividend through July 2008 and had a liquidation preference of $2,500 per share.  The variable-rate dividend was calculated on the period’s three-month LIBOR rate plus a percentage determined by the number of days outstanding.

We issued $150 million and $200 million of depositary shares on June 6, 2008 and January 30, 2007, respectively.  Each depositary share represents one-hundredth of a Series F Cumulative Redeemable Preferred Share.  The depositary shares are redeemable, in whole or in part, on or after January 30, 2012 at our option, at a redemption price of $25 per depositary share, plus any accrued and unpaid dividends thereon.  The depositary shares are not convertible or exchangeable for any of our other property or securities.  The Series F Preferred Shares pay a 6.5% annual dividend and have a liquidation value of $2,500 per share.  Series F Preferred Shares issued in June 2008 were issued at a discount, resulting in an effective rate of 8.25%.  Net proceeds of $117.8 million and $194.0 million from the issuance in June 2008 and January 2007, respectively, were used to repay amounts outstanding under our revolving credit facilities and for general business purposes.  Subsequent to the 2008 issuance, our revolving credit facilities were used to finance the partial redemption of the Series G Cumulative Redeemable Preferred Shares as described above.

In October 2008, we issued 3.0 million common shares of beneficial interest at $34.20 per share.  Net proceeds from this offering were $98.1 million and were used to repay indebtedness outstanding under our revolving credit facilities and for other general corporate purposes.

In July 2007, our Board of Trust Managers authorized a common share repurchase program as part of our ongoing investment strategy.  Under the terms of the program, we may purchase up to a maximum value of $300 million of our common shares of beneficial interest during the following two years.  Share repurchases may be made in the open market or in privately negotiated transactions at the discretion of management and as market conditions warrant.  We anticipate funding the repurchase of shares primarily through the proceeds received from our property disposition program, as well as from general corporate funds.

During 2007, we repurchased 2.8 million common shares of beneficial interest at an average share price of $37.12 and cancelled 1.4 million common shares of beneficial interest in both 2008 and 2007.  As of December 31, 2008, the remaining value of common shares of beneficial interest available to be repurchased is $196.7 million.

In December 2008, we filed a universal shelf registration which is effective for the next three years.  We will continue to closely monitor both the debt and equity markets and carefully consider our available financing alternatives, including both public and private placements.



Contractual Obligations
We have debt obligations related to our mortgage loans and unsecured debt, including our credit facilities.  We have shopping centers that are subject to non-cancelable long-term ground leases where a third party owns and has leased the underlying land to us to construct and/or operate a shopping center.  In addition, we have non-cancelable operating leases pertaining to office space from which we conduct our business.  The table below excludes obligations related to a lawsuit in which we have recorded a $41 million contingent liability as discussed in Off-Balance Sheet Arrangements and our new development projects.  We have entered into commitments aggregating $102.4 million comprised principally of construction contracts which are generally due in 12 to 36 months.  The following table summarizes our primary contractual obligations as of December 31, 2008 (in thousands):
 
   
2009
    
2010
    
2011
    
2012
    
2013
    
Thereafter
    
Total
  
Mortgages and Notes Payable: (1)
                                          
Unsecured Debt (2)
   $ 123,652     $ 531,719     $ 293,856     $ 263,723     $ 230,175     $ 1,392,677     $ 2,835,802  
Secured Debt
     123,842       125,272       139,640       179,505       172,245       588,034       1,328,538  
                                                         
Ground Lease Payments
     3,568       3,528       3,439       3,251       3,222       129,400       146,408  
                                                         
Other Obligations (3)
     40,701                                               40,701  
                                                         
Total Contractual Obligations
   $ 291,763     $ 660,519     $ 436,935     $ 446,479     $ 405,642     $ 2,110,111     $ 4,351,449  

_______________
 
(1)  
Includes principal and interest with interest on variable-rate debt calculated using rates at December 31, 2008 excluding the effect of interest rate swaps, as they are currently in a net receivable position.
(2)  
Unsecured debt in 2010 includes the maturity of our revolving credit facility of $383.0 million at December 31, 2008, which we have the option to extend for a one-year period.
(3)  
Other obligations include income and ad valorem tax payments, contributions to our retirement plan and other employee payments.  Severance and change in control agreements have not been included as the amounts and payouts are unknown.

Off Balance Sheet Arrangements

As of December 31, 2008, none of our off-balance sheet arrangements had a material effect on our liquidity or availability of, or requirement for, our capital resources.  Letters of credit totaling $10.1 million and $9.2 million were outstanding under the revolving credit facility at December 31, 2008 and 2007, respectively.

In accordance with SFAS No. 133 (“SFAS 133”), “Accounting for Derivative Instruments and Hedging Activities,” our 3.95% convertible senior unsecured notes totaling $537.2 million, as of December 31, 2008, which are due 2026, meet the scope exception requirements; whereby the notes’ embedded features are not considered and treated as a derivative instrument.  We currently anticipate that the scope exception in SFAS 133 will continue to be available for these instruments.  Although we have not determined the financial impact, we believe there may be a material impact on our consolidated financial statements if these instruments were recorded.

We have entered into several unconsolidated real estate joint ventures and partnerships.  Under many of these agreements, we and our joint venture partners are required to fund operating capital upon shortfalls in working capital.  We have also committed to funding the capital requirements of several new development joint ventures.  As operating manager of most of these entities, we have considered these funding requirements in our business plan.



Reconsideration events could cause us to consolidate these joint ventures and partnerships.  We evaluate reconsideration events as we become aware of them.  Some triggers to be considered are additional contributions required by each partner and each partners’ ability to make those contributions.  Under certain of these circumstances, we may purchase our partner’s interest.  Many of our material unconsolidated real estate joint ventures are with entities which appear sufficiently stable to weather the current market crisis; however, if market conditions continue to deteriorate and our partners are unable to meet their commitments, there is a possibility we may have to consolidate these entities.  If we were to consolidate all of our unconsolidated real estate joint ventures, we would still be in compliance with our debt covenants, and we believe there would not be a material change in our credit ratings.

Related to our investment in a redevelopment project in Sheridan, Colorado that is held in an unconsolidated real estate joint venture, we, our joint venture partner and the joint venture have each provided a guaranty for the payment of any debt service shortfalls on bonds issued in connection with the project.  The Sheridan Redevelopment Agency issued $97 million of Series A bonds used for an urban renewal project.  The bonds are to be repaid with incremental sales and property taxes and a public improvement fee (“PIF”) to be assessed on current and future retail sales.  The incremental taxes and PIF are to remain intact until the bond liability has been paid in full, including any amounts we may have to provide.  At inception on February 27, 2007, we evaluated and determined that the fair value of the guaranty is nominal to us as the guarantor.  However, a liability has been recorded by the joint venture equal to amounts funded under the bonds.

In connection with the above project, we and our joint venture partner are also signatories to a completion guaranty that requires, among other things, certain infrastructure to be substantially completed and occupants of 75% of the retail space to be open for regular business as of December 31, 2008.  Under specified circumstances, the completion guaranty allows for extension of the completion date until June 30, 2009.  At inception on February 27, 2007, we evaluated the guaranty and determined that its then fair value was nominal.  By a letter dated December 1, 2008, the guarantors requested extension of the completion date pursuant to the terms of the guaranty.  On December 16, 2008, one of the parties benefited by the guaranty filed a lawsuit against us alleging that we were not entitled to the extension and is seeking $97 million in liquidated damages together with other relief.  On February 5, 2009, we filed an answer and counterclaim in which we asserted, among other things, that we were entitled to the extension.  We have recorded a contingent liability of $41 million as of December 31, 2008 based on our belief that we were entitled to the requested extension in December of 2008, but that since completion under the guaranty is not anticipated to be achieved by June 30, 2009, a provision of the guaranty requiring redemption of a certain portion of the outstanding bonds may be triggered.  The contingent liability of $41 million is based on a weighted probability analysis of potential outcomes.

Since the $41 million contingent liability would be funded through the joint venture and the joint venture would purchase the bonds, it has been recorded as an increase in our investment in real estate joint ventures and partnerships.  The increased basis in our investment did not result in an impairment to our investment in accordance to the Accounting Principles Board’s APB 18, “The Equity Method of Accounting for Investments in Common Stock.”

Also in connection with the Sheridan, Colorado joint venture and the issuance of the related Series A bonds, we, our joint venture partner and the joint venture have also provided a performance guaranty on behalf of the Sheridan Redevelopment Agency for the satisfaction of all obligations arising from two interest rate swap agreements for the combined notional amount of $97.0 million that matures in December 2029.  We evaluated and determined that the fair value of the guaranty both at inception and December 31, 2008 was nominal.

In July 2008, a 47.75%-owned unconsolidated real estate joint venture acquired an 83.34% interest in a joint venture owning a 919,000 square foot new development to be constructed in Aurora, Colorado.  The acquired joint venture is a variable interest entity to the unconsolidated joint venture since it provided a guaranty on debt obtained by the acquired joint venture which was approximately $28.3 million at December 31, 2008.  We have evaluated and determined that the fair value of the guaranty both at inception and December 31, 2008 was nominal.
 
In August 2008, we executed a real estate limited partnership with a foreign institutional investor to purchase up to $250 million of retail properties in various states.  Our ownership in this unconsolidated real estate limited partnership is 20.1%.  As of December 31, 2008, no properties had been purchased.



Funds from Operations

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, excluding gains or losses from sales of operating real estate assets and extraordinary items, plus depreciation and amortization of operating properties, including our share of unconsolidated real estate joint ventures and partnerships.  We calculate FFO in a manner consistent with the NAREIT definition.

Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income by itself as the primary measure of our operating performance.  Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that uses historical cost accounting is insufficient by itself.  There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs.

FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity.  FFO does not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.

FFO is calculated as follows (in thousands):

   
Year Ended December 31,
  
   
2008
    
2007
    
2006
  
Net income available to common shareholders
   $ 115,120     $ 212,642     $ 294,909  
Depreciation and amortization
     150,137       129,946       126,713  
Depreciation and amortization of unconsolidated real estate joint ventures and partnerships
     11,898       11,204       5,079  
Gain on sale of properties
     (70,066 )     (83,907 )     (168,004 )
Gain on sale of properties of unconsolidated real estate joint ventures and partnerships
     (2 )     (2,169 )     (4,052 )
Funds from operations
     207,087       267,716       254,645  
Funds from operations attributable to operating partnership units
             4,407       5,453  
Funds from operations assuming conversion of operating partnership units
   $ 207,087     $ 272,123     $ 260,098  
                         
                         
Weighted average shares outstanding - basic
     84,474       85,504       87,719  
Effect of dilutive securities:
                        
Share options and awards
     443       891       926  
Operating partnership units
             2,498       3,134  
Weighted average shares outstanding - diluted
     84,917       88,893       91,779  

Newly Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair Value Measurements.”  This statement defines fair value and establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.  The key changes to current practice are (1) the definition of fair value, which focuses on an exit price rather than an entry price; (2) the methods used to measure fair value, such as emphasis that fair value is a market-based measurement, not an entity-specific measurement, as well as the inclusion of an adjustment for risk, restrictions and credit standing and (3) the expanded disclosures about fair value measurements.  This statement does not require any new fair value measurements.



We adopted SFAS 157 in the first quarter of 2008 regarding our financial assets and liabilities currently recorded or disclosed at fair value.  The FASB has issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” which defers the provisions of SFAS 157 relating to nonfinancial assets and liabilities, and delays implementation by us until January 1, 2009.  SFAS 157 has not and is not expected to materially affect how we determine fair value, but it has resulted in certain additional disclosures.

In October 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active,” to clarify the provisions of SFAS 157 relating to valuing a financial asset when the market for that asset is not active.  This FSP was effective upon issuance and has not had a material effect on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158 (“SFAS 158”), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – An Amendment of FASB Statements No. 87, 88, 106, and 132R.”  This new standard requires an employer to: (a) recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur.  These changes will be reported in comprehensive income.  The requirement to recognize the funded status of a benefit plan and the disclosure requirements were effective for us as of December 31, 2006, and as a result we recognized an additional liability of $803,000.  The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for us on December 31, 2008.  The adoption of the measurement provision of SFAS 158 has not had a material effect on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities.”  SFAS 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.  This statement was effective for us on January 1, 2008, and we elected not to measure any of our current eligible financial assets or liabilities at fair value upon adoption; however, we do have the option to elect to measure eligible financial assets or liabilities acquired in the future at fair value.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations.”  SFAS 141R expands the original guidance’s definition of a business.  It broadens the fair value measurement and recognition to all assets acquired, liabilities assumed and interests transferred as a result of business combinations.  SFAS 141R requires expanded disclosures to improve the ability to evaluate the nature and financial effects of business combinations.  SFAS 141R is effective for us for business combinations made on or after January 1, 2009.  Due to current economic conditions, we do not plan any significant acquisitions in the upcoming year, thereby upon adoption, no material effect is anticipated.  However SFAS 141R could have a material effect on our accounting for future acquisition of properties.

In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51.”  SFAS 160 requires that a noncontrolling interest in an unconsolidated entity be reported as equity and any losses in excess of an unconsolidated entity’s equity interest be recorded to the noncontrolling interest.  The statement requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation.  SFAS 160 is effective for us on January 1, 2009 and many provisions will be applied retrospectively.  SFAS 160 may materially increase our shareholders’ equity, however due to the complexities and number of entities included in our minority interest, we have not yet been able to formalize the impact on our consolidated financial statements.  Future changes to noncontrolling interests could materially affect shareholders’ equity.  Also upon adoption, net income will no longer include income allocated to minority interests which may result in a material increase in net income.  However, income available to common shareholders should not be affected.

In March 2008, the FASB issued SFAS No. 161 (“SFAS 161”), “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.”  SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities.  SFAS 161 is effective for us on January 1, 2009.  Implementation of SFAS 161 will result in certain additional disclosures to be included in our consolidated financial statements.
 
 
 
In May 2008, the FASB issued FASB Staff Position No. APB 14-1 (“FSP APB 14-1”), “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).”  FSP APB 14-1 will require that the initial debt proceeds from the sale of our convertible and exchangeable senior debentures be allocated between a liability component and an equity component in a manner that will reflect our effective nonconvertible borrowing rate.  The resulting debt discount would be amortized using the effective interest method over the period the debt is expected to be outstanding as additional interest expense.  FSP APB 14-1 is effective for us on January 1, 2009 and requires retroactive application.  Upon the adoption of FSP APB 14-1, the unamortized debt discount as of December 31, 2008 of approximately $22.9 million will be included as a reduction of debt and approximately $41.5 million will be included as accumulated additional paid-in capital on our consolidated balance sheet.  Incremental interest expense will be approximately $8.3 million, $7.9 million and $3.2 million for the year ended December 31, 2008, 2007 and 2006, respectively.  Additionally, our gain on the redemption of convertible unsecured notes will approximate $12.9 million for the year ended December 31, 2008.

In June 2008, the FASB’s Emerging Issues Task Force (“EITF”) issued EITF Issue 07-5 (“EITF 07-5”), “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock.”  EITF 07-5 proposes a two step method in determining if an instrument previously qualifying for the scope exception of FASB Statement 133 will continue to qualify as an instrument indexed to the entity’s stock.  EITF 07-5 is effective for us on January 1, 2009.  We believe that the adoption of this standard on its effective date will not effect our consolidated financial statements.

In November 2008, the FASB’s EITF issued EITF Issue 08-6 (“EITF 08-6”), “Equity Method Investments Accounting Considerations.”  EITF 08-6 requires an investment accounted for under the equity method to be evaluated and recorded in accordance with SFAS 141R business combinations definition and modeling.  EITF 08-6 is effective for us for equity method investments made on or after January 1, 2009.  We believe that the adoption of this standard on its effective date will not have a material effect our consolidated financial statements.

In December 2008, the FASB issued FASB Staff Position No. FAS 140-4 and FIN 46(R)-8 (“FSP FAS 140-4”), “Disclosures by Public Entities (enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.”  FSP FAS 140-4 requires additional disclosures about transfers of financial assets under FASB Statement 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” and their involvement with variable interest entities under FIN 46R.  The disclosures required by FSP FAS 140-4 are intended to provide greater transparency to financial statement users.  FSP FAS 140-4 is effective for us on December 31, 2008.  FSP FAS 140-4 has resulted in certain additional footnote disclosures.

 
ITEM 7A.     Quantitative and Qualitative Disclosures About Market Risk
 

We use fixed and floating-rate debt to finance our capital requirements.  These transactions expose us to market risk related to changes in interest rates.  Derivative financial instruments are used to manage a portion of this risk, primarily interest rate swap agreements with major financial institutions.  These swap agreements expose us to credit risk in the event of non-performance by the counter-parties to the swaps.  We do not engage in the trading of derivative financial instruments in the normal course of business.  At December 31, 2008, we had fixed-rate debt of $2.7 billion and variable-rate debt of $449.0 million, after adjusting for the net effect of $50 million notional amount of interest rate swaps.  At December 31, 2007, we had fixed-rate debt of $2.8 billion and variable-rate debt of $321.7 million, after adjusting for the net effect of $50 million notional amount of interest rate swaps.  In the event interest rates were to increase 100 basis points, annual net income and cash flows would decrease by approximately $10.2 million and $3.2 million based upon the variable-rate debt and notes receivable outstanding at December 31, 2008 and 2007, respectively, and the fair value of fixed-rate debt at December 31, 2008 and 2007 would decrease by $143.3 million and $204.5 million, respectively.



ITEM 8.        Financial Statements and Supplementary Data

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Trust Managers and Shareholders of
Weingarten Realty Investors
Houston, Texas

We have audited the accompanying consolidated balance sheets of Weingarten Realty Investors and subsidiaries (the "Company") as of December 31, 2008 and 2007, and the related consolidated statements of income and comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2008.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Weingarten Realty Investors and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.

 

 
 
/s/Deloitte & Touche LLP
 
 

 
 
Houston, Texas
 
 
March 2, 2009
 

 

 


STATEMENTS OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)

   
Year Ended December 31,
  
   
2008
    
2007
    
2006
  
                   
Revenues:
                  
Rentals
   $ 600,918     $ 570,487     $ 516,669  
Other
     14,050       13,280       6,755  
                         
Total
     614,968       583,767       523,424  
                         
Expenses:
                        
Depreciation and amortization
     155,912       128,061       117,443  
Operating
     118,477       103,737       85,722  
Ad valorem taxes
     73,026       66,649       60,673  
General and administrative
     25,761       26,979       23,801  
Impairment loss
     52,539                  
                         
Total
     425,715       325,426       287,639  
                         
Operating Income
     189,253       258,341       235,785  
Interest Expense
     (148,475 )     (148,829 )     (145,374 )
Interest and Other Income, net
     4,334       8,486       9,044  
Gain on Redemption of Convertible Senior Unsecured Notes
     10,658                  
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
     12,196       19,853       14,655  
Income Allocated to Minority Interests
     (8,943 )     (10,237 )     (6,414 )
Gain on Sale of Properties
     1,998       4,086       22,493  
Gain on Land and Merchant Development Sales
     8,342       16,385       7,166  
Benefit (Provision) for Income Taxes
     10,148       (4,073 )     (1,366 )
Income from Continuing Operations
     79,511       144,012       135,989  
Operating Income from Discontinued Operations
     3,448       10,346       23,527  
Gain on Sale of Properties from Discontinued Operations
     68,722       83,659       145,494  
Income from Discontinued Operations
     72,170       94,005       169,021  
Net Income
     151,681       238,017       305,010  
                         
Dividends on Preferred Shares
     (34,711 )     (25,375 )     (10,101 )
Redemption Costs of Preferred Shares
     (1,850 )                
Net Income Available to Common Shareholders
   $ 115,120     $ 212,642     $ 294,909  
                         
Net Income Per Common Share - Basic:
                        
Income from Continuing Operations
   $ .51     $ 1.39     $ 1.43  
Income from Discontinued Operations
     .85       1.10       1.93  
Net Income
   $ 1.36     $ 2.49     $ 3.36  
                         
Net Income Per Common Share - Diluted:
                        
Income from Continuing Operations
   $ .51     $ 1.38     $ 1.43  
Income from Discontinued Operations
     .85       1.06       1.84  
Net Income
   $ 1.36     $ 2.44     $ 3.27  
                         
Comprehensive Income:
                        
Net Income
   $ 151,681     $ 238,017     $ 305,010  
Other Comprehensive Loss:
                        
    Unrealized loss on derivatives
             (5,014 )     (2,861 )
    Loss on derivatives
     (7,204 )                
    Amortization of loss on derivatives
     2,095       878       364  
    Minimum pension liability adjustment
     (9,092 )     1,161       (1,150 )
Other Comprehensive Loss
     (14,201 )     (2,975 )     (3,647 )
                         
Comprehensive Income
   $ 137,480     $ 235,042     $ 301,363  

See Notes to Consolidated Financial Statements.
 
 

CONSOLIDATED BALANCE SHEETS
  
(In thousands, except per share amounts)
  
             
   
December 31,
    
December 31,
  
   
2008
    
2007
  
  ASSETS            
Property
   $ 4,915,472     $ 4,972,344  
Accumulated Depreciation
     (812,323 )     (774,321 )
 Property, net
     4,103,149       4,198,023  
Investment in Real Estate Joint Ventures and Partnerships
     357,634       300,756  
 Total
     4,460,783       4,498,779  
Notes Receivable from Real Estate Joint Ventures and Partnerships
     232,544       81,818  
Unamortized Debt and Lease Costs
     119,951       114,969  
Accrued Rent and Accounts Receivable (net of allowance for doubtful accounts of $12,412 in 2008 and $8,721 in 2007)
     103,873       94,607  
Cash and Cash Equivalents
     58,946       65,777  
Restricted Deposits and Mortgage Escrows
     33,252       38,884  
Other
     105,350       98,509  
Total
   $ 5,114,699     $ 4,993,343  
                 
  LIABILITIES AND SHAREHOLDERS' EQUITY                
Debt
   $ 3,171,537     $ 3,165,059  
Accounts Payable and Accrued Expenses
     179,432       155,137  
Other
     90,461       104,439  
 Total
     3,441,430       3,424,635  
                 
Commitments and Contingencies
     41,000          
                 
Minority Interest
     204,031       96,885  
                 
Shareholders' Equity:
                
Preferred Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 10,000
                
6.75% Series D cumulative redeemable preferred shares of beneficial interest;  100 shares issued and outstanding in 2008 and 2007; liquidation preference $75,000
     3       3  
6.95% Series E cumulative redeemable preferred shares of beneficial interest; 29 shares issued and outstanding in 2008 and 2007; liquidation preference $72,500
     1       1  
6.5% Series F cumulative redeemable preferred shares of beneficial interest, 140 shares issued; 140 and 80 shares outstanding in 2008 and 2007, respectively; liquidation preference $350,000 in 2008 and $200,000 in 2007
     4       2  
Variable-rate Series G cumulative redeemable preferred shares of beneficial interest, 80 shares issued; none in 2008 and 80 shares outstanding in 2007; liquidation preference $200,000 in 2007
             2  
Common Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 150,000; shares issued and outstanding:
                
87,102 in 2008 and 85,146 in 2007
     2,625       2,565  
Treasury Shares of Beneficial Interest - par value, $.03 per share; none in 2008 and 1,370 shares in 2007
             (41 )
Accumulated Additional Paid-In Capital
     1,475,397       1,442,027  
Net Income in Excess of (Less Than) Accumulated Dividends
     (20,116 )     42,739  
Accumulated Other Comprehensive Loss
     (29,676 )     (15,475 )
Shareholders' Equity
     1,428,238       1,471,823  
    Total
   $ 5,114,699     $ 4,993,343  
                 
See Notes to Consolidated Financial Statements.
  
 
 
52
 

 
STATEMENTS OF CONSOLIDATED CASH FLOWS
  
(In thousands)
  
                   
                   
   
Year Ended December 31,
  
   
2008
    
2007
    
2006
  
Cash Flows from Operating Activities:
                  
Net Income
   $ 151,681     $ 238,017     $ 305,010  
Adjustments to reconcile net income to net cash provided by operating activities:
                        
Depreciation and amortization
     157,894       134,676       131,992  
Write-off of pre-development/acquisition costs
     11,724                  
Impairment loss
     52,539                  
Equity in earnings of real estate joint ventures and partnerships, net
     (12,196 )     (19,853 )     (14,655 )
Income allocated to minority interests
     8,943       10,237       6,414  
Gain on land and merchant development sales
     (8,342 )     (16,385 )     (7,166 )
Gain on sale of properties
     (70,720 )     (87,745 )     (167,987 )
Gain on redemption of convertible senior unsecured notes
     (10,658 )                
Distributions of income from unconsolidated real estate joint ventures and partnerships
     3,602       6,251       2,524  
Changes in accrued rent and accounts receivable
     (11,255 )     (22,276 )     (18,056 )
Changes in other assets
     (24,505 )     (26,813 )     (37,607 )
Changes in accounts payable and accrued expenses
     (36,397 )     4,852       43,641  
Other, net
     7,840       2,348       (1,518 )
Net cash provided by operating activities
     220,150       223,309       242,592  
                         
Cash Flows from Investing Activities:
                        
Investment in property
     (294,886 )     (753,462 )     (880,471 )
Proceeds from sale and disposition of properties, net
     265,421       341,383       661,175  
Change in restricted deposits and mortgage escrows
     2,688       56,331       (79,737 )
Notes receivable from real estate joint ventures and partnerships and other receivables:
                        
Advances
     (150,064 )     (145,735 )     (54,800 )
Collections
     46,254       82,852       47,617  
Real estate joint ventures and partnerships:
                        
Investments
     (4,759 )     (78,794 )     (21,547 )
Distributions of capital
     19,955       16,795       13,077  
Net cash used in investing activities
     (115,391 )     (480,630 )     (314,686 )
                         
Cash Flows from Financing Activities:
                        
Proceeds from issuance of:
                        
Debt
     486,060       270,092       780,782  
Common shares of beneficial interest, net
     101,016       4,010       4,570  
Preferred shares of beneficial interest, net
     117,891       387,678          
Purchase of marketable securities in connection with the legal defeasance of mortgage notes payable
             (22,536 )        
Repurchase of preferred shares of beneficial interest, net
     (195,824 )                
Repurchase of common shares of beneficial interest, net
             (103,366 )     (167,573 )
Principal payments of debt
     (396,902 )     (89,419 )     (327,601 )
Common and preferred dividends paid
     (213,569 )     (194,492 )     (173,010 )
Debt issuance costs paid
     (6,822 )     (1,451 )     (13,681 )
Other, net
     (3,440 )     1,579       (3,080 )
Net cash (used in) provided by financing activities
     (111,590 )     252,095       100,407  
                         
Net (decrease) increase in cash and cash equivalents
     (6,831 )     (5,226 )     28,313  
Cash and cash equivalents at January 1
     65,777       71,003       42,690  
Cash and cash equivalents at December 31
   $ 58,946     $ 65,777     $ 71,003  
                         
See Notes to Consolidated Financial Statements.
          



STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In thousands, except per share amounts)

Year Ended December 31, 2008, 2007 and 2006


 
   
Preferred
Shares
of
Beneficial
Interest
    
Common
Shares
of
Beneficial
Interest
    
Treasury
Shares
of
Beneficial
Interest
    
Accumulated
Additional
Paid-In
Capital
    
Net
Income in
Excess of
(Less Than)
Accumulated
Dividends
    
Accumulated
Other
Comprehensive
Loss
    
Total
  
                                           
Balance, January 1, 2006
   $ 4     $ 2,686           $ 1,288,432     $ (132,786 )   $ (8,050 )   $ 1,150,286  
Net income
                                   305,010               305,010  
Shares issued in exchange for interests in limited partnerships
             7             7,988                       7,995  
Shares cancelled
             (128 )           (167,445 )                     (167,573 )
Shares issued under benefit plans
             17             7,506                       7,523  
Dividends declared – common shares (1)
                                   (162,909 )             (162,909 )
Dividends declared – preferred shares (2)
                                   (10,101 )             (10,101 )
Adjustment to initially apply FASB Statement No. 158
                                           (803 )     (803 )
Other comprehensive loss
                                           (3,647 )     (3,647 )
Balance, December 31, 2006
     4       2,582             1,136,481       (786 )     (12,500 )     1,125,781  
Net income
                                   238,017               238,017  
Issuance of Series F preferred shares
     2                     193,972                       193,974  
Issuance of Series G preferred shares
     2                     193,548                       193,550  
Shares issued in exchange for interests in limited partnerships
             17             13,562                       13,579  
Shares repurchased (5)
                   $ (41 )     (49,966 )                     (50,007 )
Shares repurchased and cancelled
             (42 )             (53,317 )                     (53,359 )
Shares issued under benefit plans
             8               7,747                       7,755  
Dividends declared – common shares (1)
                                     (169,117 )             (169,117 )
Dividends declared – preferred shares (3)
                                     (25,375 )             (25,375 )
Other comprehensive loss
                                             (2,975 )     (2,975 )
Balance, December 31, 2007
     8       2,565       (41 )     1,442,027       42,739       (15,475 )     1,471,823  
Net income
                                     151,681               151,681  
Issuance of Series F preferred shares
     2                       116,949       883               117,834  
Redemption of Series G preferred shares
     (2 )                     (193,548 )     (1,850 )             (195,400 )
Issuance of common shares
             90               97,971                       98,061  
Shares issued in exchange for interests in limited partnerships
             2               3,295                       3,297  
Treasury shares cancelled (5)
             (41 )     41                               -  
Shares issued under benefit plans
             9               8,703                       8,712  
Dividends declared – common shares (1)
                                     (177,975 )             (177,975 )
Dividends declared – preferred shares (4)
                                     (35,594 )             (35,594 )
Other comprehensive loss
                                             (14,201 )     (14,201 )
Balance, December 31, 2008
   $ 8     $ 2,625     $ -     $ 1,475,397     $ (20,116 )   $ (29,676 )   $ 1,428,238  
 
 
(1)
Common dividends per share were $2.10, $1.98 and $1.86 for the year ended December 31, 2008, 2007 and 2006, respectively.
(2)
Series D and Series E preferred dividends per share were $50.63 and $173.75, respectively, for the year ended December 31, 2006.
(3)
Series D, E, F and G preferred dividends per share were $50.63, $173.75, $142.64 and $34.88, respectively, for the year ended December 31, 2007.
(4)
Series D, E, F and G preferred dividends per share were $50.63, $173.75, $162.50 and $73.73, respectively, for the year ended December 31, 2008.
(5)
A total of 1.4 million common shares of beneficial interest were purchased in 2007 and subsequently retired on January 11, 2008.


See Notes to Consolidated Financial Statements.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.          Summary of Significant Accounting Policies

Business
Weingarten Realty Investors is a real estate investment trust organized under the Texas Real Estate Investment Trust Act.  We, and our predecessor entity, began the ownership and development of shopping centers and other commercial real estate in 1948.  Our primary business is leasing space to tenants in the shopping and industrial centers we own or lease.  We also manage centers for joint ventures in which we are partners or for other outside owners for which we charge fees.

We operate a portfolio of properties that include neighborhood and community shopping centers and industrial properties of approximately 73.0 million square feet.  We have a diversified tenant base with our largest tenant comprising only 2.7% of total rental revenues during 2008.

We currently operate, and intend to operate in the future, as a real estate investment trust (“REIT”).

Basis of Presentation
Our consolidated financial statements include the accounts of our subsidiaries and certain partially owned real estate joint ventures or partnerships which meet the guidelines for consolidation.  All intercompany balances and transactions have been eliminated.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States.  Such statements require management to make estimates and assumptions that affect the reported amounts on our consolidated financial statements.  Actual results could differ from these estimates.

Revenue Recognition
Rental revenue is generally recognized on a straight-line basis over the life of the lease, which begins the date the leasehold improvements are substantially complete, if owned by us, or the date the tenant takes control of the space, if the leasehold improvements are owned by the tenant.  Revenue from tenant reimbursements of taxes, maintenance expenses and insurance is recognized in the period the related expense is recognized.  Revenue based on a percentage of tenants' sales is recognized only after the tenant exceeds their sales breakpoint.  In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease.  Other revenue is income from contractual agreements with third parties, tenants or partially owned real estate joint ventures or partnerships, which is recognized as the related services are performed under the respective agreements.

Real Estate Joint Ventures and Partnerships
To determine the method of accounting for partially owned real estate joint ventures and partnerships, we first apply the guidelines set forth in Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”).  Entities identified as variable interest entities are consolidated if we are determined to be the primary beneficiary of the partially owned real estate joint venture or partnership.

Partially owned real estate joint ventures and partnerships over which we exercise financial and operating control are consolidated in our financial statements.  In determining if we exercise financial and operating control, we consider factors such as ownership interest, authority to make decisions, kick-out rights and substantive participating rights.  Partially owned real estate joint ventures and partnerships where we have the ability to exercise significant influence, but do not exercise financial and operating control, are accounted for using the equity method.



Our investments in partially owned real estate joint ventures and partnerships are reviewed for impairment, periodically, if events or circumstances change indicating that the carrying amount of our investments may not be recoverable.  The ultimate realization of our investments in partially owned real estate joint ventures and partnerships is dependent on a number of factors, including the performance of each investment and market conditions.  In accordance with the Accounting Principles Board’s APB 18, “The Equity Method of Accounting for Investments in Common Stock,” we will record an impairment charge if we determine that a decline in the value of an investment is other than temporary.  Based on our analysis of the facts and circumstances at each reporting period, no impairment was recorded for the year ended December 31, 2008, 2007 and 2006.  However, due to the current credit and real estate market conditions, there is no certainty that impairments would not occur in the future.

Property
Real estate assets are stated at cost less accumulated depreciation.  Depreciation is computed using the straight-line method, generally over estimated useful lives of 18-40 years for buildings and 10-20 years for parking lot surfacing and equipment.  Major replacements where the betterment extends the useful life of the asset are capitalized and the replaced asset and corresponding accumulated depreciation are removed from the accounts.  All other maintenance and repair items are charged to expense as incurred.

Acquisitions of properties are accounted for utilizing the purchase method and, accordingly, the results of operations of an acquired property are included in our results of operations from the date of acquisition.  We have used estimates of future cash flows and other valuation techniques to allocate the purchase price of acquired property among land, buildings on an "as if vacant" basis, tenant improvements and other identifiable intangibles.  Other identifiable intangible assets and liabilities include the effect of out-of-market leases, the value of having leases in place (“as is” versus “as vacant” basis and absorption costs), out-of-market assumed mortgages and tenant relationships.  Depreciation and amortization is computed using the straight-line method, generally over estimated useful lives of 40 years for buildings and over the lease term which includes bargain renewal options for other identifiable intangible assets.  Initial valuations are subject to change until such information is finalized, no later than 12 months from the acquisition date.

Property also includes costs incurred in the development of new operating properties and properties in our merchant development program.  Merchant development is a new program in which we develop a project with the objective of selling all or part of it, instead of retaining it in our portfolio on a long-term basis.  Also, disposition of land parcels and non-operating properties are included in this program.  These properties are carried at cost and no depreciation is recorded on these assets until the commencement of rental revenue or no later than one year from the completion of major construction.  These costs include preacquisition costs directly identifiable with the specific project, development and construction costs, interest and real estate taxes.  Indirect development costs, including salaries and benefits, travel and other related costs that are directly attributable to the development of the property, are also capitalized.  The capitalization of such costs ceases at the earlier of one year from the completion of major construction or when the property, or any completed portion, becomes available for occupancy.

Property also includes costs for tenant improvements paid by us, including reimbursements to tenants for improvements that are owned by us and will remain our property after the lease expires.

Our properties are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property, including any identifiable intangible assets (including site costs and capitalized interest), may not be recoverable.  In such an event, a comparison is made of the current and projected operating cash flows of each such property into the foreseeable future on an undiscounted basis to the carrying amount of such property.  Fair values are also determined by obtaining third-party broker and appraisal estimates.  In accordance with FASB’s Statement of Financial Accounting Standards (“SFAS”) No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” such carrying amount is adjusted, if necessary, to the estimated fair value to reflect an impairment in the value of the asset.



Due to our analysis of current economic considerations at each reporting period, including the effects of tenant bankruptcies, lack of available funding and halt of tenant expansion plans for new development projects and declines in the real estate values, plans related to our new development properties including land held for development changed, and the use of these assets was no longer certain which brought about an impairment charge.  Impairments, primarily related to our new development properties, of $52.5 million were recognized for the year ended December 31, 2008.  No impairment was recorded for the year ended December 31, 2007 and 2006.  Determining whether a property is impaired and, if impaired, the amount of required write-down to fair value requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation.  If market conditions continue to deteriorate or managements’ plans for certain properties change, additional write-downs could be required in the future.

Some of our properties are held in single purpose entities.  A single purpose entity is a legal entity typically established at the request of a lender solely for the purpose of owning a property or group of properties subject to a mortgage.  There may be restrictions limiting the entity’s ability to engage in an activity other than owning or operating the property, assuming or guaranteeing the debt of any other entity, or dissolving itself or declaring bankruptcy before the debt has been repaid.  Most of our single purpose entities are 100% owned by us and are consolidated in our financial statements.

Interest Capitalization
Interest is capitalized on land under development and buildings under construction based on rates applicable to borrowings outstanding during the period and the weighted average balance of qualified assets under development/construction during the period.

Deferred Charges
Debt financing costs are amortized primarily on a straight-line basis, which approximates the effective interest method, over the terms of the debt.  Lease costs represent the initial direct costs incurred in origination, negotiation and processing of a lease agreement.  Such costs include outside broker commissions and other independent third party costs, as well as salaries and benefits, travel and other internal costs directly related to completing a lease and are amortized over the life of the lease on a straight-line basis.  Costs related to supervision, administration, unsuccessful origination efforts and other activities not directly related to completed lease agreements are charged to expense as incurred.

Sales of Real Estate
Sales of real estate include the sale of shopping center pads, property adjacent to shopping centers, shopping center properties, merchant development properties, investments in real estate joint ventures and partnerships and partial sales to real estate joint ventures and partnerships in which we participate.

We recognize profit on sales of real estate, including merchant development sales, in accordance with FASB’s SFAS No. 66 (“SFAS 66”), “Accounting for Sales of Real Estate.”  Profits are not recognized until (a) a sale is consummated; (b) the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay; (c) the seller’s receivable is not subject to future subordination; and (d) we have transferred to the buyer the usual risks and rewards of ownership in the transaction, and we do not have a substantial continuing involvement with the property.

We recognize gains on the sale of real estate to joint ventures and partnerships in which we participate to the extent we receive cash from the joint venture or partnership, if it meets the sales criteria in accordance with SFAS 66 and we do not have a commitment to support the operations of the real estate joint venture or partnership to an extent greater than our proportionate interest in the real estate joint venture or partnership.

Accrued Rent and Accounts Receivable, net
Receivable balances outstanding include base rents, tenant reimbursements and receivables attributable to the straight-lining of rental commitments.  An allowance for the uncollectible portion of accrued rents and accounts receivable is determined based upon an analysis of balances outstanding, historical bad debt levels, tenant credit worthiness and current economic trends.  Additionally, estimates of the expected recovery of pre-petition and post-petition claims with respect to tenants in bankruptcy are considered in assessing the collectibility of the related receivables.



Restricted Deposits and Mortgage Escrows
Restricted deposits and mortgage escrows consist of escrow deposits held by lenders primarily for property taxes, insurance and replacement reserves and restricted cash that is held for a specific use or in a qualified escrow account for the purposes of completing like-kind exchange transactions.  At December 31, 2008 and December 31, 2007, we had $22.5 million and $21.3 million of restricted cash, respectively, and $10.8 million and $17.6 million held in escrow related to our mortgages, respectively.

Other Assets
Other assets in our consolidated financial statements include investments held in grantor trusts, prepaid expenses, the value of above-market leases and the related accumulated amortization, deferred tax assets and other miscellaneous receivables.  Investments held in grantor trusts are adjusted to fair value at each period end with changes included in our Statements of Consolidated Income and Comprehensive Income.  Above-market leases are amortized over terms of the acquired leases.

Per Share Data
Net income per common share - basic is computed using net income available to common shareholders and the weighted average shares outstanding.  Net income per common share - diluted includes the effect of potentially dilutive securities for the periods indicated as follows (in thousands):

   
Year Ended December 31,
  
   
2008
    
2007
    
2006
  
                   
Numerator:
                  
Net income available to common shareholders – basic
   $ 115,120     $ 212,642     $ 294,909  
Income attributable to operating partnership units
             4,407       5,453  
Net income available to common shareholders – diluted
   $ 115,120     $ 217,049     $ 300,362  
                         
Denominator:
                        
Weighted average shares outstanding – basic
     84,474       85,504       87,719  
Effect of dilutive securities:
                        
Share options and awards
     443       891       926  
Operating partnership units
             2,498       3,134  
Weighted average shares outstanding – diluted
     84,917       88,893       91,779  

Options to purchase common shares of beneficial interest of 2.4 million in 2008 and .5 million in both 2007 and 2006, respectively, were not included in the calculation of net income per common share - diluted as the exercise prices were greater than the average market price for the year.  For the year ended December 31, 2008, 2.4 million of operating partnership units was not included in the calculation of net income per common share – diluted because these units had an anti-dilutive effect.

Income Taxes
We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended.  As a REIT, we generally will not be subject to corporate level federal income tax on taxable income we distribute to our shareholders.  To be taxed as a REIT, we must meet a number of requirements including defined percentage tests concerning the amount of our assets and revenues that come from, or are attributable to, real estate operations.  As long as we distribute at least 90% of the taxable income of the REIT to our shareholders as dividends, we will not be taxed on the portion of our income we distribute as dividends unless we have ineligible transactions.

The Tax Relief Extension Act of 1999 gave REITs the ability to conduct activities which a REIT was previously precluded from doing as long as such activities are performed in entities which have elected to be treated as taxable REIT subsidiaries under the IRS code.  These activities include buying or developing properties with the express purpose of selling them.  We conduct certain of these activities in taxable REIT subsidiaries that we have created.  We calculate and record income taxes in our consolidated financial statements based on the activities in those entities.  We also record deferred taxes for the temporary tax differences that have resulted from those activities as required under SFAS No. 109, “Accounting for Income Taxes.”



Cash and Cash Equivalents
All highly liquid investments with original maturities of three months or less are considered cash equivalents.  Cash and cash equivalents are primarily held at major financial institutions in the United States.  At December 31, 2008 and 2007, we had cash and cash equivalents in certain financials institutions in excess of federally insured levels.  We have diversified our cash and cash equivalents amongst several banking institutions in an attempt to minimize exposure to any one of these entities.  We believe we are not exposed to any significant credit risk and regularly monitor the financial stability of these financial institutions.  The Federal Deposit Insurance Corporation, or “FDIC,” generally only insures limited amounts per depositor per insured bank.  Beginning October 3, 2008 through December 31, 2009, the FDIC will insure up to $250,000 per depositor per insured bank; on January 1, 2010, the standard coverage limit will return to $100,000 for most deposit categories.  Unlimited deposit insurance coverage will be available to our non-interest bearing transaction accounts held at those institutions participating in FDIC’s Temporary Liquidity Guaranty program through December 31, 2009.

Cash Flow Information
We issued common shares of beneficial interest valued at $2.3 million, $13.6 million and $8.0 million during 2008, 2007 and 2006, respectively, in exchange for interests in real estate joint ventures and partnerships, which had been formed to acquire properties.  We also accrued $25.8 million, $15.5 million and $6.5 million during 2008, 2007 and 2006, respectively, associated with the construction of property.  Cash payments for interest on debt, net of amounts capitalized, of $154.8 million, $153.2 million and $139.1 million were made during 2008, 2007 and 2006, respectively.  A cash payment of $5.1 million, $.8 million and $.6 million for income taxes was made during 2008, 2007 and 2006, respectively.

In association with property acquisitions and investments in unconsolidated real estate joint ventures, items assumed were as follows (in thousands):

   
Year Ended December 31,
  
   
2008
    
2007
    
2006
  
                   
Debt
   $ -     $ 99,428     $ 140,740  
Obligations Under Capital Leases
     -       12,888       -  
Minority Interest
     634       27,932       15,816  
Net Assets and Liabilities
     8,450       14,322       21,597  

In connection with the sale of improved properties, we received notes receivable totaling $6.0 million during 2008.  Net assets and liabilities were reduced by $68.3 million during 2008 from the reorganization of four joint ventures, which were previously consolidated.  In addition, we recorded a $41 million non-cash contingent liability as an increase to our investment in real estate joint ventures and partnerships and accrued $8.5 million associated with Hurricane Ike.

In conjunction with the disposition of properties completed during 2007, we defeased three mortgage loans totaling $22.2 million and transferred marketable securities totaling $22.5 million in connection with the legal defeasance of these three loans.  Also, we settled a $12.9 million capital lease obligation.  Net assets and liabilities were reduced by $59.8 million during 2007 from the reorganization of three joint ventures, two of which were previously consolidated, to tenancy-in-common arrangements where we have a 50% interest.  This net reduction from the reorganization of three joint ventures was offset by the assumption of debt totaling $33.2 million.

In connection with the sale of an 80% interest in 12 properties in 2006, we retained a 20% unconsolidated investment of $90.6 million.  In connection with the sale of improved properties, we received notes receivable totaling $2.6 million in 2006.

Accumulated Other Comprehensive Loss
As of December 31, 2008, the balance in accumulated other comprehensive loss relating to derivatives and our retirement liability was $16.9 million and $12.8 million, respectively.  As of December 31, 2007, the balance in accumulated other comprehensive loss relating to derivatives and our retirement liability was $11.8 million and $3.7 million, respectively.


Reclassifications
The reclassification of prior years’ operating results for certain properties to discontinued operations was made to conform to the current year presentation.  This reclassification had no impact on previously reported net income, net income per share, shareholders’ equity or cash flows.

Note 2.          Newly Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair Value Measurements.”  This statement defines fair value and establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.  The key changes to current practice are (1) the definition of fair value, which focuses on an exit price rather than an entry price; (2) the methods used to measure fair value, such as emphasis that fair value is a market-based measurement, not an entity-specific measurement, as well as the inclusion of an adjustment for risk, restrictions and credit standing and (3) the expanded disclosures about fair value measurements.  This statement does not require any new fair value measurements.

We adopted SFAS 157 in the first quarter of 2008 regarding our financial assets and liabilities currently recorded or disclosed at fair value.  The FASB has issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” which defers the provisions of SFAS 157 relating to nonfinancial assets and liabilities, and delays implementation by us until January 1, 2009.  SFAS 157 has not and is not expected to materially affect how we determine fair value, but it has resulted in certain additional disclosures (see Note 18).

In October 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active,” to clarify the provisions of SFAS 157 relating to valuing a financial asset when the market for that asset is not active.  This FSP was effective upon issuance and has not had a material effect on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158 (“SFAS 158”), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – An Amendment of FASB Statements No. 87, 88, 106, and 132R.”  This new standard requires an employer to: (a) recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur.  These changes will be reported in comprehensive income.  The requirement to recognize the funded status of a benefit plan and the disclosure requirements were effective for us as of December 31, 2006, and as a result we recognized an additional liability of $803,000.  The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for us on December 31, 2008.  The adoption of the measurement provision of SFAS 158 has not had a material effect on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities.”  SFAS 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.  This statement was effective for us on January 1, 2008, and we elected not to measure any of our current eligible financial assets or liabilities at fair value upon adoption; however, we do have the option to elect to measure eligible financial assets or liabilities acquired in the future at fair value.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations.”  SFAS 141R expands the original guidance’s definition of a business.  It broadens the fair value measurement and recognition to all assets acquired, liabilities assumed and interests transferred as a result of business combinations.  SFAS 141R requires expanded disclosures to improve the ability to evaluate the nature and financial effects of business combinations.  SFAS 141R is effective for us for business combinations made on or after January 1, 2009.  Due to current economic conditions, we do not plan any significant acquisitions in the upcoming year, thereby upon adoption, no material effect is anticipated.  However SFAS 141R could have a material effect on our accounting for future acquisition of properties.


In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51.”  SFAS 160 requires that a noncontrolling interest in an unconsolidated entity be reported as equity and any losses in excess of an unconsolidated entity’s equity interest be recorded to the noncontrolling interest.  The statement requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation.  SFAS 160 is effective for us on January 1, 2009 and many provisions will be applied retrospectively.  SFAS 160 may materially increase our shareholders’ equity; however due to the complexities and number of entities included in our minority interest, we have not yet been able to formalize the impact on our consolidated financial statements.  Future changes to noncontrolling interests could materially affect shareholders’ equity.  Also upon adoption, net income will no longer include income allocated to minority interests which may result in a material increase in net income.  However, income available to common shareholders should not be affected.

In March 2008, the FASB issued SFAS No. 161 (“SFAS 161”), “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.”  SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities.  SFAS 161 is effective for us on January 1, 2009.  Implementation of SFAS 161 will result in certain additional disclosures to be included in our consolidated financial statements.
 
In May 2008, the FASB issued FASB Staff Position No. APB 14-1 (“FSP APB 14-1”), “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).”  FSP APB 14-1 will require that the initial debt proceeds from the sale of our convertible and exchangeable senior debentures be allocated between a liability component and an equity component in a manner that will reflect our effective nonconvertible borrowing rate.  The resulting debt discount would be amortized using the effective interest method over the period the debt is expected to be outstanding as additional interest expense.  FSP APB 14-1 is effective for us on January 1, 2009 and requires retroactive application.  Upon the adoption of FSP APB 14-1, the unamortized debt discount as of December 31, 2008 of approximately $22.9 million will be included as a reduction of debt and approximately $41.5 million will be included as accumulated additional paid-in capital on our consolidated balance sheet.  Incremental interest expense will be approximately $8.3 million, $7.9 million and $3.2 million for the year ended December 31, 2008, 2007 and 2006, respectively.  Additionally, our gain on the redemption of convertible unsecured notes will approximate $12.9 million for the year ended December 31, 2008.

In June 2008, the FASB’s Emerging Issues Task Force (“EITF”) issued EITF Issue 07-5 (“EITF 07-5”), “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock.”  EITF 07-5 proposes a two step method in determining if an instrument previously qualifying for the scope exception of FASB Statement 133 will continue to qualify as an instrument indexed to the entity’s stock.  EITF 07-5 is effective for us on January 1, 2009.  We believe that the adoption of this standard on its effective date will not effect our consolidated financial statements.

In November 2008, the FASB’s EITF issued EITF Issue 08-6 (“EITF 08-6”), “Equity Method Investments Accounting Considerations.”  EITF 08-6 requires an investment accounted for under the equity method to be evaluated and recorded in accordance with SFAS 141R business combinations definition and modeling.  EITF 08-6 is effective for us for equity method investments made on or after January 1, 2009.  We believe that the adoption of this standard on its effective date will not have a material effect our consolidated financial statements.

In December 2008, the FASB issued FASB Staff Position No. FAS 140-4 and FIN 46(R)-8 (“FSP FAS 140-4”), “Disclosures by Public Entities (enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.”  FSP FAS 140-4 requires additional disclosures about transfers of financial assets under FASB Statement 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” and their involvement with variable interest entities under FIN 46R.  The disclosures required by FSP FAS 140-4 are intended to provide greater transparency to financial statement users.  FSP FAS 140-4 is effective for us on December 31, 2008.  FSP FAS 140-4 has resulted in certain additional disclosures included in Note 3.


Note 3.          Variable Interest Entities

Management determines whether an entity is a variable interest entity (“VIE”) and, if so, determines which party is the primary beneficiary by analyzing which party absorbs a majority of the expected losses or a majority of the expected residual returns of the VIE, or both.  Significant judgments and assumptions inherent in this analysis include the design of the entity structure, the nature of the entity’s operations, future cash flow projections, the entity’s financing and capital structure, and contractual relationships and terms.  We consolidate a VIE when we have determined that we are the primary beneficiary.  Assets held by VIEs which are currently consolidated approximate $241.9 million and none at December 31, 2008 and 2007, respectively.  Entities for which we are the primary beneficiary and we consolidate are described below.

In March 2008, we contributed 18 neighborhood/community shopping centers located in Texas with an aggregate value of approximately $227.5 million, and aggregating more than 2.1 million square feet, to a joint venture.  The activities of this venture principally consist of owning and operating these shopping centers.  We sold an 85% interest in this joint venture to AEW Capital Management on behalf of one of its institutional clients and received proceeds of approximately $216.1 million.  Financing totaling $154.3 million was placed on the properties and guaranteed solely by us for tax planning purposes.  This venture is deemed to be a variable interest entity and, due to our guaranty of the debt, we are the primary beneficiary and have consolidated this joint venture.  Our maximum exposure to loss associated with this joint venture is primarily limited to our guaranty of the debt, which was approximately $154.3 million at December 31, 2008.

We also contributed eight neighborhood/community shopping centers with an aggregate value of approximately $205.1 million, and aggregating approximately 1.1 million square feet, to a joint venture in November 2008.  Four of these shopping centers are located in Texas, two in Tennessee and one each in Florida and Georgia.  The activities of this venture principally consist of owning and operating these shopping centers.  We sold a 70% interest in this joint venture to Hines REIT Retail Holdings, LLC and received proceeds of approximately $121.8 million.  Financing totaling $100.0 million was placed on the properties and guaranteed solely by us for tax planning purposes.  This venture is deemed to be a variable interest entity and, due to our guaranty of the debt, we are the primary beneficiary and have consolidated this joint venture.  Our maximum exposure to loss associated with this joint venture is primarily limited to our guaranty of the debt, which was approximately $100.0 million at December 31, 2008.

Restrictions on the use of these assets are significant because they are secured as collateral for their debt, and we would be required to obtain our partners’ approval in accordance with the partnership agreements on any major transactions.  The impact of these transactions on our consolidated financial statements has been limited to changes in minority interest and reductions in debt from our partners’ contributions.

In addition, we have an unconsolidated joint venture with an interest in an entity which is deemed to be a VIE as described.  In July 2008, a 47.75%-owned unconsolidated real estate joint venture acquired an 83.34% interest in a joint venture owning a 919,000 square foot new development to be constructed in Aurora, Colorado.  The unconsolidated joint venture provided a guaranty on debt obtained by acquired joint venture.  The unconsolidated joint venture’s maximum exposure to loss is limited to the guaranty of the debt, which was approximately $28.3 million at December 31, 2008.

Note 4.          Derivatives and Hedging

In order to manage our interest rate risk, we occasionally hedge the future cash flows of our debt transactions, as well as changes in the fair value of our debt instruments, principally through interest rate swaps with major financial institutions.  In accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” we recognize all derivatives as either assets or liabilities at fair value and have designated our current interest rate swaps as fair value hedges of fixed rate borrowings.  At December 31, 2008 and 2007, we had two interest rate swap contracts designated as fair value hedges with an aggregate notional amount of $50.0 million that convert fixed interest payments at rates of 4.2% to variable interest payments of 2.0% and 5.0% at December 31, 2008 and 2007, respectively.  We have determined that they are highly effective in limiting our risk of changes in the fair value of fixed-rate notes attributable to changes in variable interest rates.


Also, at December 31, 2007, we had two forward-starting interest rate swap contracts with an aggregate notional amount of $118.6 million, which were designated as cash flow hedges to mitigate the risk of future fluctuations in interest rates on forecasted issuances of long-term debt.

On March 20, 2008, the cash flow hedge was completed through the issuance of $154.3 million of fixed-rate long-term debt issued by a joint venture that is consolidated by us.  A loss of $12.8 million was recorded in accumulated other comprehensive loss based on the fair value of the interest rate swap contracts on that date.  On March 27, 2008, the interest rate swap contracts were settled resulting in a loss of $10.0 million.  For the period between the completion of the cash flow hedge and the settlement of the swap contracts, a gain of $2.8 million was recognized as a reduction of interest expense.

In July, November and December 2007, swaps of $10 million, $5 million and $10 million, respectively, matured in conjunction with the maturity of the associated medium term notes.  These hedge contracts were designated as fair value hedges.

Changes in the fair value of interest rate swap contracts designated as fair value hedges, as well as changes in the fair value of the related debt being hedged, are recorded in earnings each reporting period.  For the twelve months ended December 31, 2008 and 2007, these changes in fair value offset.  The derivative instruments at December 31, 2008 were reported at their fair values in other assets, net of accrued interest, of $4.6 million, and we had no derivative instruments reported in other liabilities.  At December 31, 2007, derivative instruments were reported at their fair values in other liabilities, net of accrued interest, of $5.8 million, and we had no derivative instruments reported in other assets.

As of December 31, 2008 and December 31, 2007, the balance in accumulated other comprehensive loss relating to derivatives was $16.9 million and $11.8 million, respectively.  Amounts amortized to interest expense were $2.1 million in 2008, $.9 million in 2007 and $.4 million in 2006.  Within the next 12 months, approximately $2.2 million of the balance in accumulated other comprehensive loss is expected to be amortized to interest expense.

The interest rate swaps decreased interest expense and increased net income by $.8 million and decreased the average interest rate of our debt by .03% in 2008.  The interest rate swaps increased interest expense and decreased net income by $.6 million and $.5 million in 2007 and 2006, respectively, and increased the average interest rate of our debt by .02% in both 2007 and 2006.  We could be exposed to losses in the event of nonperformance by the counter-parties; however, management believes the likelihood of such nonperformance is unlikely.

Note 5.          Debt

Our debt consists of the following (in thousands):

   
December 31,
  
   
2008
    
2007
  
             
Debt payable to 2030 at 4.5% to 8.8%
   $ 2,755,475     $ 2,876,445  
Unsecured notes payable under revolving credit agreements
     383,000       255,000  
Obligations under capital leases
     29,725       29,725  
Industrial revenue bonds payable to 2015 at 2.4% to 2.1%
     3,337       3,889  
                 
Total
   $ 3,171,537     $ 3,165,059  



The grouping of total debt between fixed and variable-rate as well as between secured and unsecured is summarized below (in thousands):
 
   
December 31,
  
   
2008
    
2007
  
             
As to interest rate (including the effects of interest rate swaps):
            
Fixed-rate debt
   $ 2,722,510     $ 2,843,320  
Variable-rate debt
     449,027       321,739  
                 
Total
   $ 3,171,537     $ 3,165,059  
                 
As to collateralization:
                
Unsecured debt
   $ 2,139,392     $ 2,095,506  
Secured debt
     1,032,145       1,069,553  
                 
Total
   $ 3,171,537     $ 3,165,059  

We have a $575 million unsecured revolving credit facility held by a syndicate of banks that expires in February 2010 and provides a one-year extension option available at our request.  Borrowing rates under this facility float at a margin over LIBOR, plus a facility fee.  The borrowing margin and facility fee, which are currently 60.0 and 15.0 basis points, respectively, are priced off a grid that is tied to our senior unsecured credit ratings.  This facility retains a competitive bid feature that allows us to request bids for amounts up to $287.5 million from each of the syndicate banks, allowing us an opportunity to obtain pricing below what we would pay using the pricing grid.

At December 31, 2008 and December 31, 2007, the balance outstanding under the revolving credit facility was $383.0 million at a variable interest rate of 1.6% and $255.0 million at a variable interest rate of 5.4%, respectively.  We also have an agreement for a $30 million unsecured and uncommitted overnight facility with a bank that we use for cash management purposes, of which no amounts were outstanding at December 31, 2008 and December 31, 2007.  Letters of credit totaling $10.1 million and $9.2 million were outstanding under the revolving credit facility at December 31, 2008 and December 31, 2007, respectively.  The available balance under our revolving credit agreement was $181.9 million and $310.8 million at December 31, 2008 and December 31, 2007, respectively.  During the twelve months ended December 31, 2008, the maximum balance and weighted average balance outstanding under both facilities combined were $503.0 million and $362.0 million, respectively, at a weighted average interest rate of 3.4%.  During 2007, the maximum balance and weighted average balance outstanding under both facilities combined were $312.4 million and $96.7 million, respectively, at a weighted average interest rate of 6.1%.

In November 2008, we contributed assets to a joint venture with an institutional investor.  In conjunction with this transaction, the joint venture issued $100.0 million of fixed-rate secured long-term debt with a five year term at a rate of 6.0% that we guaranteed.  The net proceeds received from the issuance of this debt were used to reduce amounts outstanding under our $575 million revolving credit facility.

In March 2008, we contributed assets to a joint venture with an institutional investor.  In conjunction with this transaction, the joint venture issued $154.3 million of fixed-rate secured long-term debt with an average life of 7.3 years at an average rate of 5.4% that we guaranteed.  We received all of the proceeds from the issuance of this debt and such proceeds were used to reduce amounts outstanding under our $575 million revolving credit facility.

In January 2008, we elected to repay at par a fixed-rate 8.33% mortgage totaling $121.8 million that was secured by 19 supermarket-anchored shopping centers in California originally acquired in April 2001.

As of December 31, 2007, the balance of secured debt that was assumed in conjunction with 2007 acquisitions was $99.4 million.  A capital lease obligation totaling $12.9 million was assumed and subsequently settled in 2007.  No debt or capital lease obligations were assumed in 2008 in conjunction with acquisitions.

Various leases and properties, and current and future rentals from those lease and properties, collateralize certain debt.  At December 31, 2008 and December 31, 2007, the carrying value of such property aggregated $1.8 billion and $1.9 billion, respectively.


Scheduled principal payments on our debt (excluding $383.0 million due under our revolving credit agreements, $21.0 million of certain capital leases, $4.6 million fair value of interest rate swaps and $21.7 million of non-cash debt-related items) are due during the following years (in thousands):

2009
   $ 96,987  
2010
     127,975  
2011
     303,412  
2012
     334,701  
2013
     413,440  
2014
     374,743  
2015
     249,780  
2016
     147,123  
2017
     29,391  
2018
     54,007  
Thereafter
     609,636  
Total
   $ 2,741,195  

Our various debt agreements contain restrictive covenants, including minimum interest and fixed charge coverage ratios, minimum unencumbered interest coverage ratios, minimum net worth requirements and maximum total debt levels.  We believe we were in compliance with all restrictive covenants as of December 31, 2008.

In August 2006, we issued an offering of $575 million of 3.95% convertible senior unsecured notes due 2026.  Interest is payable semi-annually in arrears on February 1 and August 1 of each year, beginning February 1, 2007.  The debentures are convertible under certain circumstances for our common shares of beneficial interest at an initial conversion rate of 20.3770 common shares of beneficial interest per $1,000 of principal amount of debentures (an initial conversion price of $49.075).  In addition, the conversion rate may be adjusted if certain change in control transactions or other specified events occur on or prior to August 4, 2011.  Upon the conversion of debentures, we will deliver cash for the principal return, as defined, and cash or common shares of beneficial interest, at our option, for the excess of the conversion value, as defined, over the principal return.  The debentures are redeemable for cash at our option beginning in 2011 for the principal amount plus accrued and unpaid interest.  Holders of the debentures have the right to require us to repurchase their debentures for cash equal to the principal of the debentures plus accrued and unpaid interest in 2011, 2016 and 2021 and in the event of a change in control.  In November 2008, we elected to repurchase a portion of these notes in the open market.  We purchased and subsequently retired $37.8 million face for $26.7 million resulting in a net gain of $10.7 million in the fourth quarter of 2008.

In connection with the issuance of these debentures, we filed a registration statement related to the resale of the debentures and the common shares of beneficial interest issuable upon the conversion of the debentures.  This registration statement has been declared effective by the SEC.

Note 6.          Preferred Shares

In June and July of 2008, we redeemed $120 million and $80 million of depositary shares, respectively, retiring all of the Series G Cumulative Redeemable Preferred Shares.  Each depositary share represented one-hundredth of a Series G Cumulative Redeemable Preferred Share.  These depositary shares were redeemed, at our option, at a redemption price of $25 multiplied by a graded rate per depositary share based on the date of redemption plus any accrued and unpaid dividends thereon.  Upon the redemption of these shares, the related original issuance costs of $1.9 million were reported as a deduction in arriving at net income available to common shareholders.  In September 2007, these depositary shares were issued through a private placement, and net proceeds of $193.6 million were used to repay amounts outstanding under our credit facilities.  The Series G Preferred Shares paid a variable-rate quarterly dividend through July 2008 and had a liquidation preference of $2,500 per share.  The variable-rate dividend was calculated on the period’s three-month LIBOR rate plus a percentage determined by the number of days outstanding.  At December 31, 2007, the variable-rate dividend was 5.9%.


We issued $150 million and $200 million of depositary shares on June 6, 2008 and January 30, 2007, respectively.  Each depositary share represents one-hundredth of a Series F Cumulative Redeemable Preferred Share.  The depositary shares are redeemable, in whole or in part, on or after January 30, 2012 at our option, at a redemption price of $25 per depositary share, plus any accrued and unpaid dividends thereon.  The depositary shares are not convertible or exchangeable for any of our other property or securities.  The Series F Preferred Shares pay a 6.5% annual dividend and have a liquidation value of $2,500 per share.  Series F Preferred Shares issued in June 2008 were issued at a discount, resulting in an effective rate of 8.25%.  Net proceeds of $117.8 million and $194.0 million from the issuance in June 2008 and January 2007, respectively, were used to repay amounts outstanding under our revolving credit facilities and for general business purposes.  Subsequent to the 2008 issuance, our revolving credit facilities were used to finance the partial redemption of the Series G Cumulative Redeemable Preferred Shares as described above.

In July 2004, we issued $72.5 million of depositary shares with each share representing one-hundredth of a Series E Cumulative Redeemable Preferred Share.  The depositary shares are redeemable at our option on or after July 8, 2009, in whole or in part, for cash at a redemption price of $25 per depositary share, plus any accrued and unpaid dividends thereon.  The depositary shares are not convertible or exchangeable for any of our other property or securities.  The Series E preferred shares pay a 6.95% annual dividend and have a liquidation value of $2,500 per share.

In April 2003, $75 million of depositary shares were issued with each share representing one-thirtieth of a Series D Cumulative Redeemable Preferred Share.  The depositary shares are currently redeemable at our option, in whole or in part, for cash at a redemption price of $25 per depositary share, plus any accrued and unpaid dividends thereon.  The depositary shares are not convertible or exchangeable for any of our property or securities.  The Series D preferred shares pay a 6.75% annual dividend and have a liquidation value of $750 per share.

Note 7.          Common Shares of Beneficial Interest

In July 2007, our Board of Trust Managers authorized a common share repurchase program as part of our ongoing investment strategy.  Under the terms of the program, we may purchase up to a maximum value of $300 million of our common shares of beneficial interest during the following two years.  Share repurchases may be made in the open market or in privately negotiated transactions at the discretion of management and as market conditions warrant.  We anticipate funding the repurchase of shares primarily through the proceeds received from our property disposition program, as well as from general corporate funds.

During 2007, we repurchased 2.8 million common shares of beneficial interest at an average share price of $37.12 and cancelled 1.4 million common shares of beneficial interest in both 2008 and 2007.  As of December 31, 2008, the remaining value of common shares of beneficial interest available to be repurchased under the common share repurchase plan is $196.7 million.

In October 2008, we sold 3.0 million common shares of beneficial interest at $34.20 per share.  Net proceeds from this offering were $98.1 million and were used to repay indebtedness outstanding under our revolving credit facilities and for other general corporate purposes.

Note 8.          Treasury Shares of Beneficial Interest

At December 31, 2007, a total of 1.4 million common shares of beneficial interest were repurchased by us at an average share price of $36.47.  These shares were subsequently retired on January 11, 2008.



Note 9.          Property

Our property consisted of the following (in thousands):

   
December 31,
  
   
2008
    
2007
  
             
Land
   $ 964,982     $ 974,145  
Land held for development
     118,078       62,033  
Land under development
     101,587       223,827  
Buildings and improvements
     3,488,385       3,533,037  
Construction in-progress
     242,440       179,302  
                 
Total
   $ 4,915,472     $ 4,972,344  

The following carrying charges were capitalized (in thousands):

   
Year Ended December 31,
  
   
2008
    
2007
    
2006
  
                   
Interest
   $ 20,290     $ 25,025     $ 7,616  
Ad valorem taxes
     2,730       1,985       780  
                         
Total
   $ 23,020     $ 27,010     $ 8,396  

During 2008, we invested $176.3 million in new developments projects.  We commenced three new development projects, of which two are located in Texas and one in Florida.  Of these, one property is held in a 70%-owned consolidated real estate joint venture.  We also disposed of nine shopping centers, one industrial property and 24 land parcels.

In 2008, five real estate joint venture agreements were amended, which produced a reduction of $143.3 million to property as these ventures were previously included in this caption of our consolidated financial statements and are now accounted for under the equity method of accounting and are included as investment in real estate joint ventures and partnerships.

An impairment charge, as described in Note 1, of $52.5 million was recognized for the year ended December 31, 2008, and no impairment was recorded for the year ended December 31, 2007 and 2006.

Note 10.        Discontinued Operations

During 2008, one industrial center located in Texas and nine shopping centers, five of which were located in Texas, one in California and three in Louisiana, were sold.  In 2007, we sold 17 shopping centers and one industrial center, 10 of which were located in Texas, three in Louisiana, two each in Colorado and Illinois, and one in Georgia.  The operating results of these properties have been reclassified and reported as discontinued operations in the Statements of Consolidated Income and Comprehensive Income in accordance with SFAS No. 144, as well as any gains on the respective disposition.  Revenues recorded in operating income from discontinued operations totaled $7.8 million in 2008, $26.2 million in 2007 and $55.6 million in 2006.  Included in the Consolidated Balance Sheet at December 31, 2007 were $108.4 million of property and $40.1 million of accumulated depreciation related to properties sold during 2008.

The discontinued operations reported in 2008 had no debt that was required to be repaid upon their disposition.

In 2007, we incurred a net loss of $.4 million on the defeasance of three loans totaling $22.2 million that were required to be settled upon the disposition of the related properties.  These defeasance costs were recognized as interest expense and have been reclassified and reported as discontinued operations.


We elected not to allocate other consolidated interest to discontinued operations because the interest savings to be realized from the proceeds of the sale of these operations was not material.

Note 11.        Notes Receivable from Real Estate Joint Ventures and Partnerships

We have ownership interests in a number of real estate joint ventures and partnerships.  Notes receivable from these entities bear interest ranging from 2.8% to 10.0% at December 31, 2008 and 5.7% to 10.0% at December 31, 2007.  These notes are due at various dates through 2028 and are generally secured by real estate assets.  We believe these notes are fully collectible and no allowance has been recorded at December 31, 2008 and 2007.  We recognized interest income on these notes as follows, in millions: $4.0 in 2008, $1.5 in 2007 and $1.3 in 2006.

Note 12.        Related Parties

Through our management activities and transactions with our real estate joint venture and partnerships, we had accounts receivables of $2.0 million and $4.7 million outstanding as of December 31, 2008 and 2007, respectively.  We also had accounts payable and accrued expenses of $10.2 million and $2.2 million outstanding as of December 31, 2008 and 2007, respectively.  For the year ended December 31, 2008, 2007 and 2006, we recorded joint venture fee income of $5.9 million, $5.0 million and $1.9 million, respectively.

In 2008, we contributed 18 neighborhood/community shopping centers located in Texas with an aggregate value of approximately $227.5 million, and aggregating more than 2.1 million square feet, to a joint venture.  We sold an 85% interest in this joint venture to AEW Capital Management on behalf of one of its institutional clients and received proceeds approximating $216.1 million.  We maintain a 15% ownership interest in this venture, which is consolidated in our financial statements.

We also contributed eight neighborhood/community shopping centers with an aggregate value of approximately $205.1 million, and aggregating approximately 1.1 million square feet, to a joint venture in November 2008.  Four of these shopping centers are located in Texas, two in Tennessee and one each in Florida and Georgia.  We sold a 70% interest in this joint venture to Hines REIT Retail Holdings, LLC and received proceeds of approximately $121.8 million. We maintain a 30% ownership interest in this venture, which is consolidated in our financial statements.

Subsequent to December 31, 2008, we contributed two additional properties to the joint venture with Hines REIT Retail Holdings, LLC with an aggregate value of approximately $23.3 million, and aggregating approximately .1 million square feet.  These two shopping centers are located in Georgia and North Carolina, and we received proceeds of approximately $6.9 million.

In 2007, we acquired our partner’s 50% interest in a shopping center in Las Vegas, Nevada.  As part of this transaction, our $22.2 million note receivable from this partner was settled.

In 2007, we sold a 12.6% interest in a shopping center located in Lafayette, Louisiana to our outside partner.  Sales proceeds and the gain generated totaled $4.4 million and $.8 million, respectively.



Note 13.        Investment in Real Estate Joint Ventures and Partnerships

We own interests in real estate joint ventures or limited partnerships and have tenancy-in-common interests in which we exercise significant influence, but do not have financial and operating control.  We account for these investments using the equity method, and our interests range from 7.8% to 75%.  Combined condensed financial information of these ventures (at 100%) is summarized as follows (in thousands):

   
December 31,
  
   
2008
    
2007
  
             
Combined Condensed Balance Sheets
            
             
Property
   $ 1,951,771     $ 1,660,915  
Accumulated depreciation
     (129,227 )     (71,998 )
Property, net
     1,822,544       1,588,917  
                 
Other assets
     256,688       238,166  
                 
Total
   $ 2,079,232     $ 1,827,083  
                 
Debt (primarily mortgage payable)
   $ 472,486     $ 378,206  
Notes and accounts payable to Weingarten Realty Investors
     248,969       87,191  
Other liabilities
     149,265       138,150  
Accumulated equity
     1,208,512       1,223,536  
                 
Total
   $ 2,079,232     $ 1,827,083  


   
Year Ended December 31,
  
   
2008
    
2007
    
2006
  
                   
Combined Condensed Statements of Income
                  
                   
Revenues
   $ 162,737     $ 146,642     $ 65,002  
                         
Expenses:
                        
Depreciation and amortization
     41,146       38,574       15,390  
Interest
     20,424       23,093       17,398  
Operating
     37,592       22,396       8,750  
Ad valorem taxes
     18,739       15,767       6,187  
General and administrative
     6,055       1,243       783  
Impairment loss
     5,151                  
                         
Total
     129,107       101,073       48,508  
                         
Gain on land and merchant development sales
     933       1,295       1,938  
Gain on sale of properties
     13       5,422       5,991  
Net income
   $ 34,576     $ 52,286     $ 24,423  

Our investment in real estate joint ventures and partnerships, as reported on our Consolidated Balance Sheets, differs from our proportionate share of the entities' underlying net assets due to basis differentials, which arose upon the transfer of assets to the joint ventures.  The basis differentials, which totaled $12.1 million and $15.8 million at December 31, 2008 and December 31, 2007, respectively, are generally amortized over the useful lives of the related assets.



In accordance with SFAS 144, our real estate joint ventures and partnerships determined that the carrying amount of certain properties was not recoverable and that the properties should be written down to fair value.  Our unconsolidated real estate joint ventures and partnerships recorded an impairment charge of $5.2 million as of December 31, 2008, and no impairment was recorded for the year ended December 31, 2007 and 2006.

Fees earned by us for the management of these real estate joint ventures and partnerships totaled $5.9 million in 2008, $5.0 million in 2007 and $1.9 million in 2006.

During 2008, a 25%-owned unconsolidated real estate joint venture acquired a 4,000 square foot building located in Port Charlotte, Florida.  A 50%-owned unconsolidated real estate joint venture was formed for the purposes of developing an industrial building in Houston, Texas, while a 32%-owned unconsolidated real estate joint venture commenced construction of a retail property in Salt Lake City, Utah.

In July 2008, a 47.75%-owned unconsolidated real estate joint venture acquired an 83.34% interest in a joint venture owning a 919,000 square foot new development to be constructed in Aurora, Colorado.

In August 2008, we executed a real estate limited partnership with a foreign institutional investor to purchase up to $250 million of retail properties in various states.  Our ownership in this unconsolidated real estate limited partnership is 20.1%.  As of December 31, 2008, no properties have been purchased.

In December 2008, a 50%-owned real estate joint venture was executed related to the redevelopment project in Sheridan, Colorado.  The joint venture entered into a financing arrangement totaling $6.7 million, which matures in December 2038 and is secured by its property.

Effective December 31, 2008, four previously consolidated joint venture agreements were amended, which triggered a reconsideration event and resulted in the de-consolidation of these entities from our consolidated financial statements.

During 2007, a 25%-owned unconsolidated real estate joint venture acquired two shopping centers.  Cole Park Plaza is located in Chapel Hill, North Carolina, and Sunrise West is located in Sunrise, Florida.  A 50%-owned unconsolidated real estate joint venture was formed for the purpose of developing a retail shopping center.  A 20%-owned unconsolidated real estate joint venture acquired seven industrial properties, one each in Ashland and Chester, Virginia, two in Colonial Heights, Virginia and three in Richmond, Virginia.  We invested in a 20%-owned unconsolidated real estate joint venture, which acquired three retail power centers:  Pineapple Commons located in Stuart, Florida; Mansell Crossing located in Alpharetta, Georgia; and Preston Shepard Place located in Plano, Texas.  We acquired a 10% interest in two retail shopping centers each through a tenancy-in-common arrangement that are located in San Jose, California and Destin, Florida.

In March 2007, three joint ventures, two of which were previously consolidated, were reorganized and our 50% interest in each of these properties is now held in a tenancy-in-common arrangement.

In November 2007, we sold a 12.6% interest in a shopping center located in Lafayette, Louisiana to our outside partner.  Sales proceeds and the gain generated totaled $4.4 million and $.8 million, respectively.

In December 2007, we acquired our partner’s 50% interest in a shopping center located in Las Vegas, Nevada, which was previously held in an unconsolidated real estate joint venture.

In December 2007, a retail center in Highland Ranch, Colorado was sold.  This property was held in a 40%-owned unconsolidated real estate joint venture, and our share of the sales proceeds and the gain generated was $11.2 million and $2.2 million, respectively.  Also, a land parcel was sold in Liberty Lakes, Washington, which was held in a 50%-owned unconsolidated real estate joint venture.  Our share of the sales proceeds and the gain generated totaled $1.5 million and $.6 million, respectively.



Note 14.        Federal Income Tax Considerations

We qualify as a REIT under the provisions of the Internal Revenue Code, and therefore, no tax is imposed on our taxable income distributed to shareholders.  To maintain our REIT status, we must distribute at least 90% of our ordinary taxable income to our shareholders and meet certain income source and investment restriction requirements.

Taxable income differs from net income for financial reporting purposes principally because of differences in the timing of recognition of depreciation, rental revenue, compensation expense and gain from sales of property.  As a result of these differences, the book value of our net fixed assets exceeds the tax basis by $220 million at December 31, 2008 and $275 million at December 31, 2007.

The following table reconciles net income to REIT taxable income for the year ended December 31, 2008, 2007 and 2006 (in thousands):

 
   
2008
    
2007
    
2006
  
                   
Net Income
   $ 151,681     $ 238,017     $ 305,010  
Net (income) loss of taxable REIT subsidiaries included above
     34,803       (6,352 )     (4,264 )
Net Income from REIT operations
     186,484       231,665       300,746  
Book depreciation and amortization including discontinued operations
     157,893       134,676       131,992  
Tax depreciation and amortization
     (144,816 )     (98,238 )     (86,002 )
Book/tax difference on gains/losses from capital transactions
     35,891       (76,054 )     (128,628 )
Deferred/prepaid/above and below market rents, net (1)
     (20,113 )     (7,349 ))     574  
Impairment loss
     31,461                  
Other book/tax differences, net (1)
     (31,267 )     10,047       (23,108 )
REIT taxable income
     215,533       194,747       195,574  
Dividends paid deduction
     (215,533 )     (194,747 )     (195,574 )
Dividends paid in excess of taxable income
   $ -     $ -     $ -  
 
_______________
(1) Certain amounts in prior periods have been reclassified to conform to the current year presentation.

 
The dividends paid deduction in 2008, 2007 and 2006 includes designated dividends of $4.7 million from 2009, $10.9 million from 2008 and $10.2 million from 2007, respectively.

For federal income tax purposes, the cash dividends distributed to common shareholders are characterized as follows:

   
2008
    
2007
    
2006
  
                   
Ordinary income
     45.5 %     85.6 %     76.2 %
Capital gain distributions
     54.5       14.4       23.8  
                         
Total
     100.0 %     100.0 %     100.0 %

Our taxable REIT subsidiary is subject to federal, state and local income taxes.  We have recorded a federal income tax benefit of $12.1 million for the year ended December 31, 2008.  A federal tax provision of $2.1 million and $1.3 million has been recorded for the year ended December 31, 2007 and 2006, respectively.  Also, a current tax obligation of $.6 million and $2.3 million has been recorded at December 31, 2008 and 2007, respectively, in association with this tax.




 
Our deferred tax assets and liabilities consisted of the following (in thousands):

   
December 31,
  
   
2008
    
2007
  
             
Deferred Assets:
            
Impairment loss
   $ 9,936        
Allowance on other assets
     1,363        
Interest expense
     861     $ 267  
Book/tax basis differential
             884  
Other
     174          
                 
Total
   $ 12,334     $ 1,151  
                 
Deferred Liabilities:
                
Pre-development costs
           $ 1,411  
Straight-line rentals
   $ 152          
 
We have reviewed our tax positions under FASB’s Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.”  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements.  The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken, or expected to be taken, in a tax return.  A tax position may only be recognized in the financial statements if it is more likely than not that the tax position will be sustained upon examination.  We believe it is more likely than not that our tax positions will be sustained in any tax examinations.
 
In May 2006, the State of Texas enacted a new business tax (the “Revised Texas Franchise Tax”) that replaced its existing franchise tax.  In general, legal entities that do business in Texas are subject to the Revised Texas Franchise Tax.  Most REITs are subject to the Revised Franchise Tax, whereas they were previously exempt.  The Revised Texas Franchise Tax became effective for franchise tax reports due on or after January 1, 2008 and is based on revenues earned during the fiscal year.

Because the Revised Texas Franchise Tax is determined by applying a tax rate to a base that considers both revenues and expenses, it is considered an income tax and is accounted for in accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes.”

For the year ended December 31, 2008, 2007 and 2006, we recorded a provision for the Revised Texas Franchise Tax of $2.2 million, $2.0 million and $.1 million, respectively.  The deferred tax assets associated with this tax each totaled $.1 million as of December 31, 2008 and 2007, and the deferred tax liabilities totaled $.2 million and $.1 million as of December 31, 2008 and 2007, respectively.  Also, a current tax obligation of $2.4 million and $2.0 million has been recorded at December 31, 2008 and 2007, respectively, in association with this tax.

Note 15.        Leasing Operations

The terms of our leases range from less than one year for smaller tenant spaces to over 25 years for larger tenant spaces.  In addition to minimum lease payments, most of the leases provide for contingent rentals (payments for taxes, maintenance and insurance by lessees and an amount based on a percentage of the tenants' sales).  Future minimum rental income from non-cancelable tenant leases at December 31, 2008, in millions, is: $441.8 in 2009; $385.3 in 2010; $311.0 in 2011; $245.0 in 2012; $186.2 in 2013; and $770.2 thereafter.  The future minimum rental amounts do not include estimates for contingent rentals.  Such contingent rentals, in millions, aggregated $131.7 in 2008, $126.3 in 2007 and $119.0 in 2006.
 
 

 
Note 16.        Commitments and Contingencies

We are engaged in the operation of shopping centers, which are either owned or, with respect to certain shopping centers, operated under long-term ground leases.  These ground leases expire at various dates through 2069, with renewal options.  Space in our shopping centers is leased to tenants pursuant to agreements that provide for terms ranging generally from one month to 25 years and, in some cases, for annual rentals subject to upward adjustments based on operating expense levels, sales volume, or contractual increases as defined in the lease agreements.

Scheduled minimum rental payments under the terms of all non-cancelable operating leases in which we are the lessee, principally for shopping center ground leases, for the subsequent five years and thereafter ending December 31, are as follows (in thousands):

2009
   $ 3,568  
2010
     3,528  
2011
     3,439  
2012
     3,251  
2013
     3,222  
Thereafter
     129,400  
    $ 146,408  

Rental expense (including insignificant amounts for contingent rentals) for operating leases was, in millions:  $4.0 in 2008; $3.4 in 2007 and $3.2 in 2006.
 
The scheduled future minimum revenues under subleases, applicable to the ground lease rentals above, under the terms of all non-cancelable tenant leases, assuming no new or renegotiated leases or option extensions for the subsequent five years and thereafter ending December 31, are as follows (in thousands):

2009
   $ 34,253  
2010
     30,343  
2011
     26,057  
2012
     22,066  
2013
     18,578  
Thereafter
     88,457  
    $ 219,754  

Property under capital leases, consisting of four shopping centers at both December 31, 2008 and 2007 aggregated $29.1 million, and is included in buildings and improvements.  Amortization of property under capital leases is included in depreciation and amortization expense, and the balance of accumulated depreciation associated with these capital leases at December 31, 2008 and 2007 was $15.4 million and $14.2 million, respectively.  Future minimum lease payments under these capital leases total $48.2 million, with annual payments due, in millions, $2.0 in each of 2009 and 2010; $2.1 in each of 2011 and 2012 and $2.2 in 2013; and $37.8 thereafter.  The amount of these total payments representing interest is $18.5 million.  Accordingly, the present value of the net minimum lease payments was $29.7 million at December 31, 2008.

We participate in six real estate ventures structured as DownREIT partnerships that have properties in Arkansas, California, Georgia, North Carolina, Texas and Utah.  As a general partner, we have operating and financial control over these ventures and consolidate their operations in our consolidated financial statements.  These ventures allow the outside limited partners to put their interest to the partnership for our common shares of beneficial interest or an equivalent amount in cash.  We may acquire any limited partnership interests that are put to the partnership, and we have the option to redeem the interest in cash or a fixed number of our common shares of beneficial interest, at our discretion.  We also participate in a real estate venture that has a property in Texas that allows its outside partner to put operating partnership units to us for our common shares of beneficial interest or an equivalent amount of cash.  We have the option to redeem these units in cash or a fixed number of our common shares of beneficial interest, at our discretion.  In 2008 and 2007, we issued common shares of beneficial interest valued at $2.3 million and $13.6 million, respectively, in exchange for certain of these limited partnership interests or operating partnership units.  The aggregate redemption value of the operating partnership units was approximately $46 million and $76 million as of December 31, 2008 and 2007, respectively.
 
 

In January 2007, we acquired two retail properties in Arizona.  This purchase transaction includes an earnout provision of approximately $29 million that is contingent upon the subsequent development of space by the property seller.  This contingency agreement expires in 2010.  We have an estimated obligation of $3.9 million and $4.2 million recorded as of December 31, 2008 and 2007, respectively.  Since inception of this obligation, $8.8 million has been paid.  Amounts paid or accrued under such earnouts are treated as additional purchase price and capitalized to the related property.

In April 2007, we acquired an industrial building located in Virginia.  This purchase transaction includes an earnout provision of approximately $6 million that is contingent upon the lease up of vacant space by the property seller.  This contingency agreement expires in 2009.   We have an estimated obligation of $2.3 million and $5.6 million recorded as of December 31, 2008 and 2007, respectively.  Since inception of this obligation, $3.3 million has been paid.  Amounts paid or accrued under such earnouts are treated as additional purchase price and capitalized to the related property.

In August 2006, we acquired a portfolio of five properties, including four properties in Georgia and one in Florida.  The purchase agreement allows for the subsequent development and leasing of an additional phase of Brookwood Marketplace by the property seller.  If the terms of the purchase agreement are met by the seller, the purchase price would be increased by approximately $6.9 million.  This agreement expired in August 2008; however, we have entered into a 180-day extension period per the terms of the purchase agreement.  We have an estimated obligation of $1.6 million recorded as of December 31, 2008, and we had no obligation recorded for this contingency as of December 31, 2007.  Since inception of this obligation, $1.3 million has been paid.  Amounts paid or accrued under such earnouts are treated as additional purchase price and capitalized to the related property.

We are subject to numerous federal, state and local environmental laws, ordinances and regulations in the areas where we own or operate properties.  We are not aware of any material contamination, which may have been caused by us or any of our tenants that would have a material effect on our consolidated financial statements.

As part of our risk management activities, we have applied and been accepted into state sponsored environmental programs which will limit our expenses if contaminants need to be remediated.  We also have an environmental insurance policy that covers us against third party liabilities and remediation costs.

While we believe that we do not have any material exposure to environmental remediation costs, we cannot give absolute assurance that changes in the law or new discoveries of contamination will not result in increased liabilities to us.

Related to our investment in a redevelopment project in Sheridan, Colorado that is held in an unconsolidated real estate joint venture, we, our joint venture partner and the joint venture have each provided a guaranty for the payment of any debt service shortfalls on bonds issued in connection with the project.  The Sheridan Redevelopment Agency issued $97 million of Series A bonds used for an urban renewal project.  The bonds are to be repaid with incremental sales and property taxes and a public improvement fee (“PIF”) to be assessed on current and future retail sales.  The incremental taxes and PIF are to remain intact until the bond liability has been paid in full, including any amounts we may have to provide.  At inception on February 27, 2007, we evaluated and determined that the fair value of the guaranty is nominal to us as the guarantor.  However, a liability has been recorded by the joint venture equal to amounts funded under the bonds.

 
 
In connection with the above project, we and our joint venture partner are also signatories to a completion guaranty that requires, among other things, certain infrastructure to be substantially completed and occupants of 75% of the retail space to be open for regular business as of December 31, 2008.  Under specified circumstances, the completion guaranty allows for extension of the completion date until June 30, 2009.  At inception on February 27, 2007, we evaluated the guaranty and determined that its then fair value was nominal.  By a letter dated December 1, 2008, the guarantors requested extension of the completion date pursuant to the terms of the guaranty.  On December 16, 2008, one of the parties benefited by the guaranty filed a lawsuit against us alleging that we were not entitled to the extension and is seeking $97 million in liquidated damages together with other relief.  On February 5, 2009, we filed an answer and counterclaim in which we asserted, among other things, that we were entitled to the extension.  We have recorded a contingent liability of $41 million as of December 31, 2008 based on our belief that we were entitled to the requested extension in December of 2008, but that since completion under the guaranty is not anticipated to be achieved by June 30, 2009, a provision of the guaranty requiring redemption of a certain portion of the outstanding bonds may be triggered.  The contingent liability of $41 million is based on a weighted probability analysis of potential outcomes.

Since the $41 million contingent liability would be funded through the joint venture and the joint venture would purchase the bonds, it has been recorded as an increase in our investment in real estate joint ventures and partnerships.  The increased basis in our investment did not result in an impairment to our investment in accordance to the Accounting Principles Board’s APB 18, “The Equity Method of Accounting for Investments in Common Stock.”

Also in connection with the Sheridan, Colorado joint venture and the issuance of the related Series A bonds, we, our joint venture partner and the joint venture have also provided a performance guaranty on behalf of the Sheridan Redevelopment Agency for the satisfaction of all obligations arising from two interest rate swap agreements for the combined notional amount of $97.0 million that matures in December 2029.  We evaluated and determined that the fair value of the guaranty both at inception and December 31, 2008 was nominal.

We are also involved in various matters of litigation arising in the normal course of business.  While we are unable to predict with certainty the amounts involved, our management and counsel are of the opinion that, when such litigation is resolved, any additional liability, if any, will not have a material effect on our consolidated financial statements.



Note 17.        Identified Intangible Assets and Liabilities

Identified intangible assets and liabilities associated with our property acquisitions are as follows (in thousands):

   
December 31,
  
   
2008
    
2007
  
             
Identified Intangible Assets:
            
Above-Market Leases (included in Other Assets)
   $ 17,921     $ 18,590  
Above-Market Leases – Accumulated Amortization
     (9,771 )     (7,323 )
Below-Market Assumed Mortgages (included in Debt)
     2,072       2,072  
Below-Market Assumed Mortgages – Accumulated Amortization
     (525 )     (246 )
Valuation of In Place Leases (included in Unamortized Debt and Lease Cost)
     64,027       59,498  
Valuation of In Place Leases – Accumulated Amortization
     (29,104 )     (22,308 )
                 
    $ 44,620     $ 50,283  
                 
Identified Intangible Liabilities:
                
Below-Market Leases (included in Other Liabilities)
   $ 38,712     $ 39,141  
Below-Market Leases – Accumulated Amortization
     (18,265 )     (11,949 )
Above-Market Assumed Mortgages (included in Debt)
     53,895       58,414  
Above-Market Assumed Mortgages – Accumulated Amortization
     (28,284 )     (24,517 )
                 
    $ 46,058     $ 61,089  

These identified intangible assets and liabilities are amortized over the applicable lease terms as defined by FASB's SFAS No. 98, "Accounting for Leases" or the remaining lives of the assumed mortgages, as applicable.

The net amortization of above-market and below-market leases increased rental revenues by $3.5 million, $3.2 million and $1.3 million in 2008, 2007 and 2006, respectively.  The estimated net amortization of these intangible assets and liabilities will increase rental revenues for each of the next five years as follows (in thousands):

2009
   $ 2,695  
2010
     1,879  
2011
     1,372  
2012
     1,117  
2013
     982  

The amortization of the in place lease intangible assets recorded in depreciation and amortization, was $8.5 million, $8.3 million and $7.6 million in 2008, 2007 and 2006, respectively.  The estimated amortization of this intangible asset will increase depreciation and amortization for each of the next five years as follows (in thousands):

2009
   $ 6,700  
2010
     5,868  
2011
     4,591  
2012
     3,702  
2013
     2,884  



The amortization of above-market and below-market assumed mortgages decreased interest expense by $8.0 million, $6.7 million and $7.3 million in 2008, 2007 and 2006, respectively.  The estimated amortization of these intangible assets and liabilities will decrease interest expense for each of the next five years as follows (in thousands):

2009
   $ 4,337  
2010
     3,713  
2011
     2,416  
2012
     1,242  
2013
     798  

Note 18.        Fair Value Measurements

On January 1, 2008, we adopted SFAS 157 for our financial assets and liabilities.  SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  SFAS 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability.  As a basis for considering market participant assumptions in fair value measurements, SFAS 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

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

The fair value of our financial instruments was determined using available market information and appropriate valuation methodologies as defined by SFAS 157 as of December 31, 2008.  Unless otherwise described below, all other financial instruments are carried at amounts which approximate their fair values.
 
Debt
The fair values of our financial instruments approximate their carrying value in our financial statements except for debt.  We estimated the fair value of our debt based on quoted market prices for publicly-traded debt and on the discounted estimated future cash payments to be made for other debt.  The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assumes the debt is outstanding through maturity and considers the debt’s collateral (if applicable).  We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed.  Since such amounts are estimates that are based on limited available market information for similar transactions, there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument.  Fixed-rate debt with carrying values of $2.7 billion and $2.8 billion at December 31, 2008 and 2007, respectively, have fair values of approximately $2.3 billion and $2.9 billion, respectively.  Variable-rate debt with carrying values of $449.0 million and $321.7 million as of December 31, 2008 and 2007, respectively, has fair values of approximately $432.1 million and $321.7 million, respectively.




Investments held in grantor trusts
These assets are valued based on publicly quoted market prices.
 
Derivative instruments
We use interest rate swaps with major financial institutions to manage our interest rate risk.  The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative.  This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.  The fair values of our interest rate swaps have been determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).  The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

To comply with the provisions of SFAS 157, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counter-party’s nonperformance risk in the fair value measurements.  In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral, thresholds and guarantees.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counter-parties.  However, as of December 31, 2008, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.  As a result, we have determined that the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2008, aggregated by the level in the fair value hierarchy in which those measurements fall, are as follows (in thousands):

   
Quoted Prices in Active Markets for Identical Assets and Liabilities
(Level 1)
    
Significant Other Observable Inputs
(Level 2)
    
Significant Unobservable Inputs
(Level 3)
    
Fair Value at December 31, 2008
  
                         
Assets:
                        
Derivative instruments
         $ 4,625           $ 4,625  
Investments held in grantor trusts
   $ 25,595                     25,595  
Total
   $ 25,595     $ 4,625       -     $ 30,220  
                                 

Note 19.        Share Options and Awards

In 1992, we adopted the Employee Share Option Plan that grants 100 share options to every employee, excluding officers, upon completion of each five-year interval of service.  This plan expires in 2012 and provides options for a maximum of 225,000 common shares of beneficial interest, of which .2 million is available for future grant of options or awards at December 31, 2008.  Options granted under this plan are exercisable immediately.

In 1993, we adopted the Incentive Share Option Plan that provided for the issuance of up to 3.9 million common shares of beneficial interest, either in the form of restricted shares or share options.  This plan expired in 2002, but some awards made pursuant to it remain outstanding as of December 31, 2008.  The share options granted to non-officers vest over a three-year period beginning after the grant date, and for officers vest over a seven-year period beginning two years after the grant date.



In 2001, we adopted the Long-term Incentive Plan for the issuance of options and share awards.  In 2006, the maximum number of common shares of beneficial interest issuable under this plan was increased to 4.8 million common shares of beneficial interest, of which 1.8 million is available for the future grant of options or awards at December 31, 2008.  This plan expires in 2011.  The share options granted to non-officers vest over a three-year period beginning after the grant date, and share options and restricted shares for officers vest over a five-year period after the grant date.  Restricted shares granted to trust managers and options or awards granted to retirement eligible employees are expensed immediately.

The grant price for the Employee Share Option Plan is equal to the closing price of our common shares of beneficial interest on the date of grant.  The grant price of the Long-term Incentive Plan is calculated as an average of the high and low of the quoted fair value of our common shares of beneficial interest on the date of grant.  In both plans, these options expire upon termination of employment or 10 years from the date of grant.  In the Long-term Incentive Plan, restricted shares for officers and trust managers are granted at no purchase price.  Our policy is to recognize compensation expense for equity awards ratably over the vesting period, except for retirement eligible amounts.  Compensation expense, net of forfeitures, associated with share options and restricted shares totaled $4.9 million in 2008, $5.1 million in 2007 and $4.9 million in 2006, of which $1.3 million in 2008, 2007 and 2006 was capitalized.

The fair value of share options and restricted shares is estimated on the date of grant using the Black-Scholes option pricing method based on the expected weighted average assumptions in the following table.  The dividend yield is an average of the historical yields at each record date over the estimated expected life.  We estimate volatility using our historical volatility data for a period of 10 years, and the expected life is based on historical data from an option valuation model of employee exercises and terminations.  The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.  The fair value and weighted average assumptions are as follows:

   
Year Ended December 31,
  
   
2008
    
2007
    
2006
  
                   
Fair value per share option
   $ 3.07     $ 4.29     $ 4.97  
Dividend yield
     5.1 %     5.5 %     5.7 %
Expected volatility
     18.8 %     18.1 %     18.2 %
Expected life (in years)
     6.2       6.0       5.9  
Risk-free interest rate
     2.8 %     4.1 %     4.4 %

Following is a summary of the option activity for the three years ended December 31, 2008:
 
         
Weighted
  
   
Shares
    
Average
  
   
Under
    
Exercise
  
   
Option
    
Price
  
             
Outstanding, January 1, 2006
     3,179,646     $ 27.47  
Granted
     544,346       47.41  
Forfeited or expired
     (65,996 )     28.63  
Exercised
     (510,843 )     20.73  
Outstanding, December 31, 2006
     3,147,153       31.99  
Granted
     7,821       42.63  
Forfeited or expired
     (73,156 )     35.78  
Exercised
     (241,528 )     23.24  
Outstanding, December 31, 2007
     2,840,290       32.66  
Granted
     832,106       32.22  
Forfeited or expired
     (174,376 )     35.85  
Exercised
     (180,365 )     21.99  
Outstanding, December 31, 2008
     3,317,655     $ 32.96  


The total intrinsic value of options exercised was $2.2 million in 2008, $5.0 million in 2007 and $10.3 million in 2006.  As of December 31, 2008 and 2007, there was approximately $3.4 million and $3.3 million, respectively, of total unrecognized compensation cost related to unvested share options, which is expected to be amortized over a weighted average of 1.7 years and 2.0 years, respectively.

The following table summarizes information about share options outstanding and exercisable at December 31, 2008:

   
Outstanding
    
Exercisable
  
       
Weighted
                        
Weighted
      
       
Average
  
Weighted
    
Aggregate
          
Weighted
  
Average
  
Aggregate
  
       
Remaining
  
Average
    
Intrinsic
          
Average
  
Remaining
  
Intrinsic
  
Range of
      
Contractual
  
Exercise
    
Value
          
Exercise
  
Contractual
  
Value
  
Exercise Prices
  
Number
  
Life
  
Price
    
(000’s)
    
Number
    
Price
  
Life
  
(000’s)
  
                                             
$17.94 - $26.91
     882,939  
3.0 years
   $ 22.11               822,163     $ 21.93  
3.0 years
        
                                                     
$26.92 - $40.38
     1,946,412  
7.3 years
   $ 34.25               963,427     $ 35.11  
5.8 years
        
                                                     
$40.39 - $49.62
     488,304  
7.9 years
   $ 47.46               213,878     $ 47.46  
7.9 years
        
                                                     
Total
     3,317,655  
6.2 years
   $ 32.96     $ -       1,999,468     $ 31.01  
4.9 years
   $ -  

A summary of the status of unvested restricted shares for the year ended December 31, 2008 is as follows:

   
Unvested
    
Weighted
  
   
Restricted
    
Average Grant
  
   
Shares
    
Date Fair Value
  
             
Outstanding, January 1, 2008
     117,539     $ 41.45  
Granted
     129,260       32.28  
Vested
     (61,426 )     36.94  
Forfeited
     (17,971 )     36.65  
Outstanding, December 31, 2008
     167,402     $ 36.54  

As of December 31, 2008 and 2007, there was approximately $4.1 million and $4.4 million, respectively, of total unrecognized compensation cost related to unvested restricted shares, which is expected to be amortized over a weighted average of 2.3 years and 2.7 years, respectively.

Note 20.        Employee Benefit Plans

We have a Savings and Investment Plan pursuant to which eligible employees may elect to contribute from 1% of their salaries to the maximum amount established annually by the Internal Revenue Service.  Employee contributions are matched by us at the rate of $.50 per $1.00 for the first 6% of the employee's salary.  The employees vest in the employer contributions ratably over a five year period.  Compensation expense related to the plan was $1.0 million in both 2008 and 2007 and $.8 million in 2006.

We also have an Employee Share Purchase Plan under which 562,500 of our common shares of beneficial interest have been authorized.  These shares, as well as common shares of beneficial interest purchased by us on the open market, are made available for sale to employees at a discount of 15% from the quoted market price as defined by the plan.  Shares purchased by the employee under the plan are restricted from being sold for two years from the date of purchase or until termination of employment.  A total of 36,119, 30,437 and 24,181 shares were purchased by employees at an average price of $24.52, $33.49 and $35.38 during 2008, 2007 and 2006, respectively.



Effective April 1, 2002, we converted a noncontributory pension plan to a noncontributory cash balance retirement plan ("Retirement Plan") under which each participant received an actuarially determined opening balance.  Annual additions to each participant's account include a service credit ranging from 3-5% of compensation, depending on years of service, and an interest credit based on the ten-year US Treasury Bill rate not to be less than 2.05%.  Vesting generally occurs after three years of service.  Certain participants were grandfathered under the prior pension plan formula.  In addition to the plan described above, effective September 1, 2002, we established two separate and independent nonqualified supplemental retirement plans ("SRP") for certain employees, the assets of which are held in a grantor trust.  These unfunded plans provide benefits in excess of the statutory limits of our noncontributory cash balance retirement plan.  Annual additions to each participant's account include a service credit ranging from 3-5% of compensation, depending on years of service, and an interest credit of 7.5%.  Vesting generally occurs after three years of service.  We have elected to use the actuarial present value of the vested benefits to which the participant is entitled if the participant separates immediately from the SRP, as defined in EITF 88-1, “Determination of Vested Benefit Obligation for a Defined Benefit Pension Plan.”

At December 31, 2006, we adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.”  As a result of the adoption we recognized additional minimum liability directly to accumulated other comprehensive income of $803,000.

The estimated net loss, prior service cost, and transition obligation that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $1,051,000, ($117,000) and zero, respectively.

The following tables summarize changes in the benefit obligation, the plan assets and the funded status of our pension plans as well as the components of net periodic benefit costs, including key assumptions.  The measurement dates for plan assets and obligations were December 31, 2008 and 2007.

   
Fiscal Year End
  
   
2008
    
2007
  
Change in Projected Benefit Obligation:
            
Benefit obligation at beginning of year
   $ 41,083     $ 38,997  
Service cost
     2,414       3,846  
Interest cost
     2,639       2,175  
Actuarial (gains) losses
     1,093       (1,325 )
Benefit payments
     (1,081 )     (2,610 )
Benefit obligation at end of year
   $ 46,148     $ 41,083  
                 
Change in Plan Assets:
                
Fair value of plan assets at beginning of year
   $ 20,434     $ 17,933  
Actual return on plan assets
     (5,946 )     1,185  
Employer contributions
     2,065       3,926  
Benefit payments
     (1,081 )     (2,610 )
Fair value of plan assets at end of year
   $ 15,472     $ 20,434  
                 
Unfunded Status at End of Year:
   $ 30,676     $ 20,649  
                 
Accumulated benefit obligation
   $ 45,052     $ 40,101  
                 
Amounts recognized in accumulated other comprehensive loss consist of:
                
Net loss
   $ 13,262     $ 4,287  
Prior service credit
     (470 )     (587 )
Total amount recognized
   $ 12,792     $ 3,700  



The following is the required information for other changes in plan assets and benefit obligations recognized in other comprehensive income:

   
2008
    
2007
  
2006
               
Net loss (gain)
   $ 9,231     $ (925 )
NA
Amortization of net gain
     (256 )     (353 )
NA
Amortization of prior service cost
     117       117  
NA
Total recognized in other comprehensive income
   $ 9,092     $ (1,161 )
NA
                   
                   
Total recognized in net periodic benefit costs and other comprehensive income
   $ 12,093     $ 3,511  
NA

The following is the required information for plans with an accumulated benefit obligation in excess of plan assets at each year end:

   
2008
    
2007
  
             
Projected benefit obligation
   $ 46,149     $ 41,083  
Accumulated benefit obligation
     45,052       40,101  
Fair value of plan assets
     15,472       20,434  

At December 31, 2008 and 2007, the Retirement Plan was underfunded by $10.7 million and $2.7 million, respectively, and is included in the accounts payable and accrued expenses.  The SRP was underfunded by $20.0 million and $17.9 million, respectively, and is included in other liabilities.

The components of net periodic benefit cost for both plans are as follows (in thousands):

   
2008
    
2007
    
2006
  
                   
Service cost
   $ 2,414     $ 3,846     $ 3,090  
Interest cost
     2,639       2,175       2,309  
Expected return on plan assets
     (1,832 )     (1,500 )     (1,385 )
Prior service cost
     (117 )     (117 )     (128 )
Recognized (gain) loss
     (104 )     269       407  
                         
Total
   $ 3,000     $ 4,673     $ 4,293  

The assumptions used to develop periodic expense for both plans are shown below:

   
2008
    
2007
    
2006
  
                   
Discount rate – Retirement Plan and SRP
     6.25 %     5.75 %     5.75 %
Salary scale increases – Retirement Plan
     4.00 %     4.00 %     4.00 %
Salary scale increases – SRP
     5.00 %     5.00 %     5.00 %
Long-term rate of return on assets – Retirement Plan
     8.50 %     8.50 %     8.50 %

The selection of the discount rate follows the guidance provided in SFAS No. 87, "Employers' Accounting for Pensions."  The selection of the discount rate is made annually after comparison to yields based on high quality fixed-income investments.  The salary scale is the composite rate which reflects anticipated inflation, merit increases, and promotions for the group of covered participants.  The long-term rate of return is a composite rate for the trust.  It is derived as the sum of the percentages invested in each principal asset class included in the portfolio multiplied by their respective expected rates of return.  We considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.  This analysis resulted in the selection of 8.50% as the long-term rate of return assumption for 2008.



The assumptions used to develop the actuarial present value of the benefit obligations at year-end for both plans are shown below:

   
2008
    
2007
    
2006
  
                   
Discount rate – Retirement Plan and SRP
     6.00 %     6.25 %     5.75 %
Salary scale increases – Retirement Plan
     4.00 %     4.00 %     4.00 %
Salary scale increases – SRP
     5.00 %     5.00 %     5.00 %

The expected contribution to be paid for the Retirement plan by us during 2009 is approximately $4.3 million.  The expected benefit payments for the next ten years for both plans are as follows, in millions: $1.9 in 2009; $1.8 in each of 2010 and 2011; $3.9 in 2012, $1.9 in 2013 and $13.0 in 2014 through 2018.

The participant data used in determining the liabilities and costs was collected as of January 1, 2008 and no significant changes have occurred through December 31, 2008.

The allocation of the fair value of plan assets as provided by the plan trustee was as follows (in thousands):

   
December 31,
  
   
2008
    
2007
  
             
Cash and short-term investments
     4 %     3 %
Mutual funds – equity
     61 %     69 %
Mutual funds – fixed income
     35 %     28 %
                 
Total
     100 %     100 %

Our investment policy and strategy for plan assets require that plan assets be allocated based on a "Broad Market Diversification" model.  At December 31, 2008, approximately 60% of plan assets are allocated to equity investments and 40% to fixed income investments.  On a quarterly basis, the plan assets are reviewed in an effort to maintain this asset allocation.  Selected investment funds are monitored as reasonably necessary to permit our Investment Committee to evaluate any material changes to the investment fund's performance.

We also have a deferred compensation plan for eligible employees allowing them to defer portions of their current cash salary or share-based compensation.  Deferred amounts are deposited in a grantor trust, which are included in Other Assets, and are reported as compensation expense in the year service is rendered.  Cash deferrals are invested based on the employee’s investment selections from a mix of assets based on a “Broad Market Diversification” model.  Deferred share-based compensation cannot be diversified, and distributions from this plan are made in the same form as the original deferral.

Note 21.        Segment Information

The reportable segments presented are the segments for which separate financial information is available, and for which operating performance is evaluated regularly by senior management in deciding how to allocate resources and in assessing performance.  We evaluate the performance of the reportable segments based on net operating income, defined as total revenues less operating expenses and ad valorem taxes.  Management does not consider the effect of gains or losses from the sale of property in evaluating segment operating performance.

The shopping center segment is engaged in the acquisition, development and management of real estate, primarily anchored neighborhood and community shopping centers located in Arizona, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, Louisiana, Maine, Missouri, Nevada, New Mexico, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Utah and Washington.  The customer base includes supermarkets, discount retailers, drugstores and other retailers who generally sell basic necessity-type commodities.  The industrial segment is engaged in the acquisition, development and management of bulk warehouses and office/service centers.  Its properties are located in California, Florida, Georgia, Tennessee, Texas and Virginia, and the customer base is diverse.  Included in "Other" are corporate-related items, insignificant operations and costs that are not allocated to the reportable segments.



Information concerning our reportable segments is as follows (in thousands):

   
Shopping
                    
   
Center
    
Industrial
    
Other
    
Total
  
                         
Year Ended December 31, 2008:
                        
Revenues
   $ 548,249     $ 57,913     $ 8,806     $ 614,968  
Net Operating Income (Loss)
     382,839       40,769       (143 )     423,465  
    Equity in Earnings (Loss) of Real Estate Joint Ventures and Partnerships, net
     15,012       1,428       (4,244 )     12,196  
Capital Expenditures
     247,723       22,315       29,052       299,090  
                                 
Year Ended December 31, 2007:
                                
Revenues
   $ 519,233     $ 53,650     $ 10,884     $ 583,767  
Net Operating Income
     371,697       37,151       4,533       413,381  
    Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
     18,309       1,348       196       19,853  
Capital Expenditures
     771,590       91,881       24,874       888,345  
                                 
Year Ended December 31, 2006:
                                
Revenues
   $ 467,307     $ 53,429     $ 2,688     $ 523,424  
Net Operating Income (Loss)
     340,072       37,362       (405 )     377,029  
    Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
     13,713       377       565       14,655  
Capital Expenditures
     920,017       96,504       5,582       1,022,103  
                                 
As of December 31, 2008:
                                
    Investment in Real Estate Joint Ventures and Partnerships
   $ 318,003     $ 39,631     $ -     $ 357,634  
Total Assets
     3,747,037       348,691       1,018,971       5,114,699  
                                 
As of December 31, 2007:
                                
    Investment in Real Estate Joint Ventures and Partnerships
   $ 261,293     $ 35,103     $ 4,360     $ 300,756  
Total Assets
     3,908,105       353,157       732,081       4,993,343  
                                 
As of December 31, 2006:
                                
    Investment in Real Estate Joint Ventures and Partnerships
   $ 174,587     $ 25,156     $ 4,096     $ 203,839  
Total Assets
     3,516,080       324,343       533,464       4,373,887  
 

 
Net operating income reconciles to Income from Continuing Operations as shown on the Statements of Consolidated Income and Comprehensive Income as follows (in thousands):


   
2008
    
2007
    
2006
  
                   
Total Segment Net Operating Income
   $ 423,465     $ 413,381     $ 377,029  
Depreciation and Amortization
     (155,912 )     (128,061 )     (117,443 )
General and Administrative
     (25,761 )     (26,979 )     (23,801 )
Impairment Loss
     (52,539 )                
Interest Expense
     (148,475 )     (148,829 )     (145,374 )
Interest and Other Income, net
     4,334       8,486       9,044  
Gain on Redemption of Convertible Senior Unsecured Notes
     10,658                  
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
     12,196       19,853       14,655  
Income Allocated to Minority Interests
     (8,943 )     (10,237 )     (6,414 )
Gain on Sale of Properties
     1,998       4,086       22,493  
Gain on Land and Merchant Development Sales
     8,342       16,385       7,166  
Benefit (Provision) for Income Taxes
     10,148       (4,073 )     (1,366 )
Income from Continuing Operations
   $ 79,511     $ 144,012     $ 135,989  

Note 22.        Quarterly Financial Data (Unaudited)

Summarized quarterly financial data is as follows (in thousands):

   
First
    
Second
      
Third
    
Fourth
      
                               
2008:
                              
Revenues (3)
   $ 152,096     $ 153,678       $ 158,017     $ 151,177      
Net income (loss) available to common shareholders
     28,776       66,999   (1)     29,053       (9,708 ) (2)  
Net income (loss) per common share – basic
     0.34       0.80   (1)     0.35       (0.11 ) (2)  
Net income (loss) per common share – diluted
     0.34       0.79   (1)     0.34       (0.11 ) (2)  
                                       
2007:
                                      
Revenues (3)
   $ 139,776     $ 141,314     $ 152,194     $ 150,483    
Net income available to common shareholders
     46,657       70,002   (1)     38,281       57,702   (1)  
Net income per common share – basic
     0.54       0.81   (1)     0.45       0.68   (1)  
Net income per common share – diluted
     0.53       0.79   (1)     0.44       0.67   (1)  
______________________
(1)  
The quarter results include significant gains on the sale of properties.
(2)  
The quarter results include significant impairment charges.
(3)  
Revenues from the sale of operating properties have been reclassified and reported as operating income from discontinued operations for all periods presented.

****

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

Not applicable.



ITEM 9A.     Controls and Procedures

Under the supervision and with the participation of our principal executive officer and principal financial officer, management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of December 31, 2008.  Based on that evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2008.

There has been no change to our internal control over financial reporting during the quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Weingarten Realty Investors and its subsidiaries ("WRI") maintain a system of internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act,  which is a process designed under the supervision of WRI's principal executive officer and principal financial officer and effected by WRI's Board of Trust Managers, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

WRI's internal control over financial reporting includes those policies and procedures that:
 
§ Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of WRI's assets;
 
§ Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of WRI are being made only in accordance with authorizations of management and trust managers of WRI; and
 
§ Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of WRI's assets that could have a material effect on the financial statements.

WRI's management has responsibility for establishing and maintaining adequate internal control over financial reporting for WRI.  Management, with the participation of WRI's Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of WRI's internal control over financial reporting as of December 31, 2008 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on their evaluation of WRI's internal control over financial reporting, WRI's management along with the Chief Executive and Chief Financial Officers believe that WRI's internal control over financial reporting is effective as of December 31, 2008.

Deloitte & Touche LLP, WRI's independent registered public accounting firm that audited the consolidated financial statements and financial statement schedules included in this Form 10-K, has issued an attestation report on the effectiveness of WRI's internal control over financial reporting.


March 2, 2009



 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Trust Managers and Shareholders of
Weingarten Realty Investors
Houston, Texas

We have audited the internal control over financial reporting of Weingarten Realty Investors and subsidiaries (the "Company") as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report On Internal Control Over Financial Reporting.  Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of trust managers, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and trust managers of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2008 of the Company and our report dated March 2, 2009 expressed an unqualified opinion on those financial statements.
 

 
 
/s/Deloitte & Touche LLP
 
 

 
 
Houston, Texas
March 2, 2009
 


ITEM 9B.     Other Information

Not applicable.

PART III

ITEM 10.      Trust Managers, Executive Officers and Corporate Goverance of the Registrant

Information with respect to our trust managers and executive officers is incorporated herein by reference to the "Proposal One - Election of Trust Managers - Nominees," "Executive Officers" and “Share Ownership of Certain Beneficial Owners and Management—Section 16(a) Beneficial Ownership Reporting Compliance” sections of our definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2009.

Code of Ethics

We have adopted a code of business and ethics for trust managers, officers and employees, known as the Code of Conduct and Ethics.  The Code of Conduct and Ethics is available on our website at www.weingarten.com.  Shareholders may request a free copy of the Code of Conduct and Ethics from:

Weingarten Realty Investors
Attention:  Investor Relations
2600 Citadel Plaza Drive, Suite 125
Houston, Texas 77008
(713) 866-6000
                                             www.weingarten.com

We have also adopted a Code of Conduct for Financial Managers setting forth a code of ethics applicable to our principal executive officer, principal financial officer and financial managers, which is available on our website at www.weingarten.com.  Shareholders may request a free copy of the Code of Conduct for Financial Managers from the address and phone number set forth above.

Governance Guidelines

We have adopted Trust Managers Governance Guidelines, which are available on our website at www.weingarten.com.  Shareholders may request a free copy of the Trust Managers Governance Guidelines from the address and phone number set forth above under "—Code of Ethics."

ITEM 11.      Executive Compensation

Information with respect to executive compensation is incorporated herein by reference to the “Executive Compensation,” “Proposal One - Election of Trust Managers,” “Compensation Committee Report,” “Summary Compensation Table” and “Trust Manager Compensation Table” sections of our definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2009.



 
ITEM 12.      Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The "Share Ownership of Certain Beneficial Owners and Management" section of our definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2009 is incorporated herein by reference.

The following table summarizes the equity compensation plans under which our common shares of beneficial interest may be issued as of December 31, 2008:

   
Number of shares to
  
Weighted average
    
   
be issued upon exercise
  
exercise price of
  
Number of shares
   
of outstanding options,
  
outstanding options,
  
remaining available
Plan category
  
warrants and rights
  
warrants and rights
  
for future issuance
             
Equity compensation plans approved by shareholders
  
3,317,655
  
$ 32.96
  
2,011,682
             
Equity compensation plans not approved by shareholders
  
―
  
―
  
―
             
Total
  
3,317,655
  
$ 32.96
  
2,011,682

ITEM 13.      Certain Relationships and Related Transactions, and Trust Manager Independence

The “Governance of Our Company,” “Compensation Committee Interlocks and Insider Participation" and “Certain Transactions” sections of our definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2009 are incorporated herein by reference.

ITEM 14.      Principal Accountant Fees and Services

The "Independent Registered Public Accounting Firm Fees" section within “Proposal Two – Ratification of Independent Registered Public Accounting Firm” of our definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 1, 2009 is incorporated herein by reference.




PART IV

ITEM 15.      Exhibits and Financial Statement Schedules

(a)
  
Financial Statements and Financial Statement Schedules:
Page
         
 
(1)
(A)
Report of Independent Registered Public Accounting Firm
50
   
(B)
Financial Statements
  
     
(i)
Statements of Consolidated Income and Comprehensive Income for the year ended December 31, 2008, 2007 and 2006
51
     
(ii)
Consolidated Balance Sheets as of December 31, 2008 and 2007
52
     
(iii)
Statements of Consolidated Cash Flows for the year ended December 31, 2008, 2007 and 2006
53
     
(iv)
Statements of Consolidated Shareholders' Equity for the year ended December 31, 2008, 2007 and 2006
54
     
(v)
Notes to Consolidated Financial Statements
55

 
(2)
Financial Statement Schedules:
         
   
Report of Independent Registered Public Accounting Firm
97
   
Schedule
  
     
     
II
Valuation and Qualifying Accounts
98
     
III
Real Estate and Accumulated Depreciation
99
     
IV
Mortgage Loans on Real Estate
109

All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements and notes hereto.

(b)
  
Exhibits:
     
3.1
—
Restated Declaration of Trust (filed as Exhibit 3.1 to WRI's Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by reference).
3.2
—
Amendment of the Restated Declaration of Trust (filed as Exhibit 3.2 to WRI's Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by reference).
3.3
—
Second Amendment of the Restated Declaration of Trust (filed as Exhibit 3.3 to WRI's Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by reference).
3.4
—
Third Amendment of the Restated Declaration of Trust (filed as Exhibit 3.4 to WRI's Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by reference).
3.5
—
Fourth Amendment of the Restated Declaration of Trust dated April 28, 1999 (filed as Exhibit 3.5 to WRI's Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).
3.6
—
Fifth Amendment of the Restated Declaration of Trust dated April 20, 2001 (filed as Exhibit 3.6 to WRI's Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).
3.7
—
Amended and Restated Bylaws of WRI (filed as Exhibit 99.2 to WRI's Registration Statement on Form 8-A dated February 23, 1998 and incorporated herein by reference).
3.8
—
Amendment of Bylaws-Direct Registration System, Section 7.2(a) dated May 3, 2007 (filed as Exhibit 3.8 to WRI’s Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference).
4.1
—
Subordinated Indenture dated as of May 1, 1995 between WRI and Chase Bank of Texas, National Association (formerly, Texas Commerce Bank National Association) (filed as Exhibit 4(a) to WRI's Registration Statement on Form S-3 (No. 33-57659) and incorporated herein by reference).
4.2
—
Subordinated Indenture dated as of May 1, 1995 between WRI and Chase Bank of Texas, National Association (formerly, Texas Commerce Bank National Association) (filed as Exhibit 4(b) to WRI's Registration Statement on Form S-3 (No. 33-57659) and incorporated herein by reference).



4.3
—
Form of Fixed Rate Senior Medium Term Note (filed as Exhibit 4.19 to WRI’s Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference).
4.4
—
Form of Floating Rate Senior Medium Term Note (filed as Exhibit 4.20 to WRI’s Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference).
4.5
—
Form of Fixed Rate Subordinated Medium Term Note (filed as Exhibit 4.21 to WRI’s Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference).
4.6
—
Form of Floating Rate Subordinated Medium Term Note (filed as Exhibit 4.22 to WRI’s Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference).
4.7
—
Statement of Designation of 6.75% Series D Cumulative Redeemable Preferred Shares (filed as Exhibit 3.1 to WRI’s Registration Statement on Form 8-A dated April 17, 2003 and incorporated herein by reference).
4.8
—
Statement of Designation of 6.95% Series E Cumulative Redeemable Preferred Shares (filed as Exhibit 3.1 to WRI’s Registration Statement on Form 8-A dated July 8, 2004 and incorporated herein by reference).
4.9
—
Statement of Designation of 6.50% Series F Cumulative Redeemable Preferred Shares (filed as Exhibit 3.1 to WRI’s Registration Statement on Form 8-A dated January 29, 2007 and incorporated herein by reference).
4.10
—
6.75% Series D Cumulative Redeemable Preferred Share Certificate (filed as Exhibit 4.2 to WRI’s Registration Statement on Form 8-A dated April 17, 2003 and incorporated herein by reference).
4.11
—
6.95% Series E Cumulative Redeemable Preferred Share Certificate (filed as Exhibit 4.2 to WRI’s Registration Statement on Form 8-A dated July 8, 2004 and incorporated herein by reference).
4.12
—
6.50% Series F Cumulative Redeemable Preferred Share Certificate (filed as Exhibit 4.2 to WRI’s Registration Statement on Form 8-A dated January 29, 2007 and incorporated herein by reference).
  
4.13
—
Form of Receipt for Depositary Shares, each representing 1/30 of a share of 6.75% Series D Cumulative Redeemable Preferred Shares, par value $.03 per share (filed as Exhibit 4.3 to WRI’s Registration Statement on Form 8-A dated April 17, 2003 and incorporated herein by reference).
  
4.14
—
Form of Receipt for Depositary Shares, each representing 1/100 of a share of 6.95% Series E Cumulative Redeemable Preferred Shares, par value $.03 per share (filed as Exhibit 4.3 to WRI’s Registration Statement on Form 8-A dated July 8, 2004 and incorporated herein by reference).
  
4.15
—
Form of Receipt for Depositary Shares, each representing 1/100 of a share of 6.50% Series F Cumulative Redeemable Preferred Shares, par value $.03 per share (filed as Exhibit 4.3 to WRI’s Registration Statement on Form 8-A dated January 29, 2007 and incorporated herein by reference).
  
4.16
—
Form of 7% Notes due 2011 (filed as Exhibit 4.17 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).
  
4.17
—
Form of 3.95% Convertible Senior Notes due 2026 (filed as Exhibit 4.2 to WRI’s Form 8-K on August 2, 2006 and incorporated herein by reference).
  
10.1†
—
1988 Share Option Plan of WRI, as amended (filed as Exhibit 10.1 to WRI’s Annual Report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference).
  
10.2†
—
The Savings and Investment Plan for Employees of Weingarten Realty Investors dated December 17, 2003 (filed as Exhibit 10.34 on WRI’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference).
  
10.3†
—
The Savings and Investment Plan for Employees of WRI, as amended (filed as Exhibit 4.1 to WRI’s Registration Statement on Form S-8 (No. 33-25581) and incorporated herein by reference).
  
10.4†
—
First Amendment to the Savings and Investment Plan for Employees of Weingarten Realty Investors dated August 1, 2005 (filed as Exhibit 10.25 on WRI’s Form 10-Q for the quarter ended September 30, 2005 and incorporated herein by reference).
  
10.5†
—
The Fifth Amendment to Savings and Investment Plan for Employees of WRI (filed as Exhibit 4.1.1 to WRI’s Post-Effective Amendment No. 1 to Registration Statement on Form S-8 (No. 33-25581) and incorporated herein by reference).
  
10.6†
—
Mandatory Distribution Amendment for the Savings and Investment Plan for Employees of Weingarten Realty Investors dated August 1, 2005 (filed as Exhibit 10.26 on WRI’s Form 10-Q for the quarter ended September 30, 2005 and incorporated herein by reference).
  
10.7†
—
The 1993 Incentive Share Plan of WRI (filed as Exhibit 4.1 to WRI’s Registration Statement on Form S-8 (No. 33-52473) and incorporated herein by reference).
  
10.8†
—
1999 WRI Employee Share Purchase Plan (filed as Exhibit 10.6 to WRI’s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).
  



10.9†
—
2001 Long Term Incentive Plan (filed as Exhibit 10.7 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).
  
10.10
—
Master Promissory Note in the amount of $20,000,000 between WRI, as payee, and Chase Bank of Texas, National Association (formerly, Texas Commerce Bank National Association), as maker, effective December 30, 1998 (filed as Exhibit 4.15 to WRI’s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference).
  
10.11†
—
Weingarten Realty Retirement Plan restated effective April 1, 2002 (filed as Exhibit 10.29 on WRI’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference).
  
10.12†
—
First Amendment to the Weingarten Realty Retirement Plan, dated December 31, 2003 (filed as Exhibit 10.33 on WRI’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference).
  
10.13†
—
First Amendment to the Weingarten Realty Pension Plan, dated August 1, 2005 (filed as Exhibit 10.27 on WRI’s Form 10-Q for the quarter ended September 30, 2005 and incorporated herein by reference).
10.14†
—
Mandatory Distribution Amendment for the Weingarten Realty Retirement Plan dated August 1, 2005 (filed as Exhibit 10.28 on WRI’s Form 10-Q for the quarter ended September 30, 2005 and incorporated herein by reference).
10.15†
—
Weingarten Realty Investors Supplemental Executive Retirement Plan amended and restated effective September 1, 2002 (filed as Exhibit 10.10 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.16†
—
First Amendment to the Weingarten Realty Investors Supplemental Executive Retirement Plan amended on November 3, 2003 (filed as Exhibit 10.11 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.17†
—
Second Amendment to the Weingarten Realty Investors Supplemental Executive Retirement Plan amended October 22, 2004 (filed as Exhibit 10.12 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.18†
—
Third Amendment to the Weingarten Realty Investors Supplemental Executive Retirement Plan amended October 22, 2004 (filed as Exhibit 10.13 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.19†
—
Weingarten Realty Investors Retirement Benefit Restoration Plan adopted effective September 1, 2002 (filed as Exhibit 10.14 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.20†
—
First Amendment to the Weingarten Realty Investors Retirement Benefit Restoration Plan amended on November 3, 2003 (filed as Exhibit 10.15 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.21†
—
Second Amendment to the Weingarten Realty Investors Retirement Benefit Restoration Plan amended October 22, 2004 (filed as Exhibit 10.16 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.22†
—
Third Amendment to the Weingarten Realty Pension Plan dated December 23, 2005 (filed as Exhibit 10.30 on WRI’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference).
10.23†
—
Weingarten Realty Investors Deferred Compensation Plan amended and restated as a separate and independent plan effective September 1, 2002 (filed as Exhibit 10.17 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.24†
—
Supplement to the Weingarten Realty Investors Deferred Compensation Plan amended on April 25, 2003 (filed as Exhibit 10.18 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.25†
—
First Amendment to the Weingarten Realty Investors Deferred Compensation Plan amended on November 3, 2003 (filed as Exhibit 10.19 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.26†
—
Second Amendment to the Weingarten Realty Investors Deferred Compensation Plan, as amended, dated October 13, 2005 (filed as Exhibit 10.29 on WRI’s Form 10-Q for the quarter ended September 30, 2005 and incorporated herein by reference).



10.27†
—
Trust Under the Weingarten Realty Investors Deferred Compensation Plan amended and restated effective October 21, 2003 (filed as Exhibit 10.21 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.28†
—
Fourth Amendment to the Weingarten Realty Investors Deferred Compensation Plan, dated December 23, 2005 (filed as Exhibit 10.31 on WRI’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference).
10.29†
—
Trust Under the Weingarten Realty Investors Retirement Benefit Restoration Plan amended and restated effective October 21, 2003 (filed as Exhibit 10.22 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.30†
—
Trust Under the Weingarten Realty Investors Supplemental Executive Retirement Plan amended and restated effective October 21, 2003 (filed as Exhibit 10.23 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.31†
—
First Amendment to the Trust Under the Weingarten Realty Investors Deferred Compensation Plan, Supplemental Executive Retirement Plan, and Retirement Benefit Restoration Plan amended on March 16, 2004 (filed as Exhibit 10.24 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by reference).
10.32†
—
Third Amendment to the Weingarten Realty Investors Deferred Compensation Plan dated August 1, 2005 (filed as Exhibit 10.30 on WRI’s Form 10-Q for the quarter ended September 30, 2005 and incorporated herein by reference).
10.33
—
Amended and Restated Credit Agreement dated February 22, 2006 among Weingarten Realty Investors, the Lenders Party Hereto and JPMorgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.32 on WRI’s Form 10-K for the year ended December 31, 2005 and incorporated herein by reference).
10.34
—
Amendment Agreement dated November 7, 2007 to the Amended and Restated Credit Agreement (filed as Exhibit 10.34 on WRI’s Form 10-Q for the quarter ended September 30, 2007 and incorporated herein by reference).
10.35†
—
Fifth Amendment to the Weingarten Realty Investors Deferred Compensation Plan (filed as Exhibit 10.34 to WRI’s Form 10-Q for quarter ended June 30, 2006 and incorporated herein by reference).
10.36†
—
Restatement of the Weingarten Realty Investors Supplemental Executive Retirement Plan dated August 4, 2006 (filed as Exhibit 10.35 to WRI’s Form 10-Q for the quarter ended September 30, 2006 and incorporated herein by reference).
10.37†
—
Restatement of the Weingarten Realty Investors Deferred Compensation Plan dated August 4, 2006 (filed as Exhibit 10.36 to WRI’s Form 10-Q for the quarter ended September 30, 2006 and incorporated herein by reference).
10.38†
—
Restatement of the Weingarten Realty Investors Retirement Benefit Restoration Plan dated August 4, 2006 (filed as Exhibit 10.37 to WRI’s Form 10-Q for the quarter ended September 30, 2006 and incorporated herein by reference).
10.39†
—
Amendment No. 1 to the Weingarten Realty Investors Supplemental Executive Retirement Plan dated December 15, 2006 (filed as Exhibit 10.38 on WRI’s Form 10-K for the year ended December 31, 2006 and incorporated herein by reference).
10.40†
—
Amendment No. 1 to the Weingarten Realty Investors Retirement Benefit Restoration Plan dated December 15, 2006 (filed as Exhibit 10.39 on WRI’s Form 10-K for the year ended December 31, 2006 and incorporated herein by reference).
10.41†
—
Amendment No. 1 to the Weingarten Realty Investors Deferred Compensation Plan dated December 15, 2006 (filed as Exhibit 10.40 on WRI’s Form 10-K for the year ended December 31, 2006 and incorporated herein by reference).
10.42†
—
Final 401(k)/401(m) Regulations Amendment dated December 15, 2006 (filed as Exhibit 10.41 on WRI’s Form 10-K for the year ended December 31, 2006 and incorporated herein by reference).
10.43†
—
Amendment No. 2 to the Weingarten Realty Investors Retirement Benefit Restoration Plan dated November 9, 2007 (filed as Exhibit 10.43 on WRI’s Form 10-K for the year ended December 31, 2007 and incorporated herein by reference).
10.44†
—
Amendment No. 2 to the Weingarten Realty Investors Deferred Compensation Plan dated November 9, 2007 (filed as Exhibit 10.44 on WRI’s Form 10-K for the year ended December 31, 2007 and incorporated herein by reference).



10.45†
—
Amendment No. 2 to the Weingarten Realty Investors Supplemental Executive Retirement Plan dated November 9, 2007 (filed as Exhibit 10.45 on WRI’s Form 10-K for the year ended December 31, 2007 and incorporated herein by reference).
10.46†
—
Severance Benefit and Stay Pay Bonus Plan dated September 20, 2007 (filed as Exhibit 10.46 on WRI’s Form 10-K for the year ended December 31, 2007 and incorporated herein by reference).
10.47†
—
2007 Reduction in Force Severance Pay Plan dated November 6, 2007 (filed as Exhibit 10.47 on WRI’s Form 10-K for the year ended December 31, 2007 and incorporated herein by reference).
10.48†
—
Fifth Amendment to the Weingarten Realty Retirement Plan, dated August 1, 2008 (filed as Exhibit 10.48 on WRI’s Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference).
10.49†
—
Amendment No. 3 to the Weingarten Realty Investors Retirement Benefit Restoration Plan dated November 17, 2008 (filed as Exhibit 10.1 on WRI’s Form 8-K on December 4, 2008 and incorporated herein by reference).
10.50†
—
Amendment No. 3 to the Weingarten Realty Investors Deferred Compensation Plan dated November 17, 2008 (filed as Exhibit 10.2 on WRI’s Form 8-K on December 4, 2008 and incorporated herein by reference).
10.51†
—
Amendment No. 3 to the Weingarten Realty Investors Supplemental Executive Retirement Plan dated November 17, 2008 (filed as Exhibit 10.3 on WRI’s Form 8-K on December 4, 2008 and incorporated herein by reference).
10.52†
—
Amendment No. 1 to the Weingarten Realty Investors 2001 Long Term Incentive Plan dated November 17, 2008 (filed as Exhibit 10.4 on WRI’s Form 8-K on December 4, 2008 and incorporated herein by reference).
10.53†
—
The Savings and Investment Plan for Employees of Weingarten Realty Investors Amendment for the Final 415 Regulations dated November 17, 2008 (filed as Exhibit 10.5 on WRI’s Form 8-K on December 4, 2008 and incorporated herein by reference).
10.54†*
—
10.55†*
—
10.56†*
—
10.57†*
—
12.1*
—
14.1
—
Code of Ethical Conduct for Senior Financial Officers – Andrew M. Alexander (filed as Exhibit 14.1 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by reference).
14.2
—
Code of Ethical Conduct for Senior Financial Officers – Stephen C. Richter (filed as Exhibit 14.2 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by reference).
14.3
—
Code of Ethical Conduct for Senior Financial Officers – Joe D. Shafer (filed as Exhibit 14.3 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by reference).
21.1*
—
 Listing of Subsidiaries of the Registrant.
23.1*
—
31.1*
—
31.2*
—
32.1**
—
32.2**
—
 
_____________
 
*
Filed with this report.
 
**
Furnished with this report.
 
†
Management contract or compensation plan or arrangement.


SIGNATURES

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

 
WEINGARTEN REALTY INVESTORS
     
     
 
By:
/s/  Andrew M. Alexander
   
Andrew M. Alexander
   
Chief Executive Officer

Date:  March 2, 2009

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that each of Weingarten Realty Investors, a real estate investment trust organized under the Texas Real Estate Investment Trust Act, and the undersigned trust managers and officers of Weingarten Realty Investors hereby constitutes and appoints Andrew M. Alexander, Stanford Alexander, Stephen C. Richter and Joe D. Shafer or any one of them, its or his true and lawful attorney-in-fact and agent, for it or him and in its or his name, place and stead, in any and all capacities, with full power to act alone, to sign any and all amendments to this Report, and to file each such amendment to the Report, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as it or he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirement of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:


 
Signature
Title
Date
       
       
       
By:
/s/  Stanford Alexander
Chairman
March 2, 2009
 
Stanford Alexander
and Trust Manager
  
       
By:
/s/  Andrew M. Alexander
Chief Executive Officer,
March 2, 2009
 
Andrew M. Alexander
President and Trust Manager
  
       
By:
/s/  James W. Crownover
Trust Manager
March 2, 2009
 
James W. Crownover
    
       
By:
/s/  Robert J. Cruikshank
Trust Manager
March 2, 2009
 
Robert J. Cruikshank
    
       
By:
/s/  Melvin Dow
Trust Manager
March 2, 2009
 
Melvin Dow
    
       
By:
/s/  Stephen A. Lasher
Trust Manager
March 2, 2009
 
Stephen A. Lasher
    
       
By:
/s/  Stephen C. Richter
Executive Vice President and
March 2, 2009
 
Stephen C. Richter
Chief Financial Officer
  
       



By:
/s/  Douglas W. Schnitzer
Trust Manager
March 2, 2009
 
Douglas W. Schnitzer
    
       
By:
/s/  Joe D. Shafer
Vice President/Chief Accounting Officer
March 2, 2009
 
Joe D. Shafer
(Principal Accounting Officer)
  
       
By:
/s/  C. Park Shaper
Trust Manager
March 2, 2009
 
C. Park Shaper
    
       
By:
/s/  Marc J. Shapiro
Trust Manager
March 2, 2009
 
Marc J. Shapiro
    
       



 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Trust Managers and Shareholders of
Weingarten Realty Investors
Houston, Texas

We have audited the consolidated financial statements of Weingarten Realty Investors and subsidiaries (the "Company") as of December 31, 2008 and 2007, and for each of the three years in the period ended December 31, 2008, and the Company's internal control over financial reporting as of December 31, 2008, and have issued our reports thereon dated March 2, 2009; such reports are included elsewhere in this Form 10-K.  Our audits also included the consolidated financial statement schedules of the Company listed in Item 15.  These consolidated financial statement schedules are the responsibility of the Company's management.  Our responsibility is to express an opinion based on our audits.  In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.


/s/Deloitte & Touche LLP

Houston, Texas
March 2, 2009




Schedule II

WEINGARTEN REALTY INVESTORS
VALUATION AND QUALIFYING ACCOUNTS
December 31, 2008, 2007, and 2006

(Amounts in thousands)

         
Charged
              
   
Balance at
    
to costs
          
Balance
  
   
beginning
    
and
    
Deductions
    
at end of
  
Description
  
of period
    
expenses
    
(A)
    
period
  
                         
2008
                        
Allowance for Doubtful Accounts
   $ 8,721     $ 11,441     $ 7,750     $ 12,412  
2007
                                
Allowance for Doubtful Accounts
   $ 5,995     $ 5,929     $ 3,203     $ 8,721  
2006
                                
Allowance for Doubtful Accounts
   $ 4,673     $ 3,917     $ 2,595     $ 5,995  
_______________

Note A - Write-offs of accounts receivable previously reserved.


 
Schedule III
 
WEINGARTEN REALTY INVESTORS
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2008

(Amounts in thousands)
 

   
Initial Cost to Company
    
Gross Amounts at Close of Period
                            
Description
  
Land
    
Building and Improvements
    
Cost Capitalized Subsequent to Acquisition
    
Land
    
Building and Improvements
    
Total (D)
    
Accumulated Depreciation
    
Total Costs, Net of Accumulated Depreciation
    
Encumbrances (A)
        
Date of Acquisition / Construction
                                                               
Shopping Center:
                                                              
                                                               
10-Federal Shopping Center
   $ 1,791     $ 7,470     $ 38     $ 1,791     $ 7,508     $ 9,299     $ (4,617 )   $ 4,682     $ -     B  
03/20/2008
580 Market Place
     3,892       15,570       377       3,889       15,950       19,839       (3,212 )     16,627       -        
04/02/2001
Academy Place
     1,537       6,168       1,150       1,532       7,323       8,855       (2,351 )     6,504       -        
10/22/1997
Alabama Shepherd Shopping Ctr
     637       2,026       5,884       1,062       7,485       8,547       (2,788 )     5,759       -        
04/30/2004
Angelina Village
     200       1,777       9,773       1,127       10,623       11,750       (5,039 )     6,711       -        
04/30/1991
Arcade Square
     1,497       5,986       424       1,495       6,412       7,907       (1,390 )     6,517       -        
04/02/2001
Argyle Village Shopping Center
     4,524       18,103       658       4,526       18,759       23,285       (3,623 )     19,662       -        
11/30/2001
Arrowhead Festival S/C
     1,294       154       2,596       1,366       2,678       4,044       (924 )     3,120       -        
12/31/2000
Avent Ferry Shopping Center
     1,952       7,814       1,024       1,952       8,838       10,790       (1,723 )     9,067       (1,155 )      
04/04/2002
Ballwin Plaza
     2,988       12,039       1,788       3,017       13,798       16,815       (3,351 )     13,464       -        
10/01/1999
Bartlett Towne Center
     3,479       14,210       620       3,443       14,866       18,309       (3,218 )     15,091       (6,949 )      
05/15/2001
Basha's Valley Plaza
     1,414       5,818       1,490       1,422       7,300       8,722       (2,624 )     6,098       -        
12/31/1997
Bayshore Plaza
     728       1,452       684       728       2,136       2,864       (1,885 )     979       -        
08/21/1981
Baywood Shopping Center
     -       3       5       -       8       8       (8 )     -       -        
01/04/1990
Bell Plaza
     1,322       7,151       75       1,322       7,226       8,548       (2,277 )     6,271       -     B  
03/20/2008
Bellaire Blvd Shopping Center
     124       37       -       124       37       161       (36 )     125       -     C  
11/13/2008
Best in the West
     13,191       77,159       2,998       13,194       80,154       93,348       (7,333 )     86,015       (36,288 )      
04/28/2005
Boca Lyons Plaza
     3,676       14,706       249       3,651       14,980       18,631       (2,829 )     15,802       -        
08/17/2001
Boswell Towne Center
     1,488       -       1,755       615       2,628       3,243       (949 )     2,294       -        
12/31/2003
Boulevard Market Place
     340       1,430       352       340       1,782       2,122       (921 )     1,201       -        
09/01/1990
Braeswood Square Shopping Ctr.
     -       1,421       1,118       -       2,539       2,539       (2,051 )     488       -        
05/28/1969
Broadway & Ellsworth
     152       -       1,116       356       912       1,268       (312 )     956       -        
12/31/2002
Broadway Marketplace
     898       3,637       781       906       4,410       5,316       (1,810 )     3,506       -        
12/16/1993
Broadway Shopping Center
     234       3,166       1       235       3,166       3,401       (2,221 )     1,180       -     B  
03/20/2008
Brookwood Marketplace
     7,050       15,134       6,925       7,576       21,533       29,109       (967 )     28,142       (19,775 )      
08/22/2006
Brookwood Square Shopping Ctr
     4,008       19,753       915       4,008       20,668       24,676       (2,660 )     22,016       -        
12/16/2003
Brownsville Commons
     1,333       5,536       5       1,333       5,541       6,874       (366 )     6,508       -        
05/22/2006
Buena Vista Marketplace
     1,958       7,832       533       1,956       8,367       10,323       (1,759 )     8,564       -        
04/02/2001
Bull City Market
     930       6,651       38       930       6,689       7,619       (596 )     7,023       -        
06/10/2005
Burbank Station
     20,366       28,832       43       20,378       28,863       49,241       (1,082 )     48,159       -        
07/03/2007
Calder Shopping Center
     134       278       368       134       646       780       (533 )     247       -        
03/31/1965
Camelback Village Square
     -       8,720       525       -       9,245       9,245       (3,365 )     5,880       -        
09/30/1994
Camp Creek Mktpl II
     6,169       32,036       863       4,697       34,371       39,068       (2,058 )     37,010       (22,857 )      
08/22/2006
Capital Square
     1,852       7,406       629       1,852       8,035       9,887       (1,517 )     8,370       -        
04/04/2002
Cedar Bayou Shopping Center
     63       307       91       63       398       461       (360 )     101       -        
09/20/1977
Centerwood Plaza
     915       3,659       1,426       914       5,086       6,000       (868 )     5,132       -        
04/02/2001
Central Plaza
     1,710       6,900       2,340       1,710       9,240       10,950       (3,009 )     7,941       -        
03/03/1998
Centre at Post Oak
     13,731       115       20,865       17,874       16,837       34,711       (9,621 )     25,090       -        
12/31/1996
Champions Village
     7,205       36,579       43       7,205       36,622       43,827       (9,953 )     33,874       -     C  
11/13/2008
Charleston Commons SC
     23,230       36,877       1,049       23,210       37,946       61,156       (1,935 )     59,221       (31,686 )      
12/20/2006
Cherokee Plaza
     22,219       9,718       -       22,219       9,718       31,937       (586 )     31,351       -     C  
11/13/2008
Chino Hills Marketplace
     7,218       28,872       8,798       7,234       37,654       44,888       (6,544 )     38,344       (23,303 )      
08/20/2002
College Park Shopping Center
     2,201       8,845       4,569       2,641       12,974       15,615       (5,578 )     10,037       (11,004 )      
11/16/1998
Colonial Plaza
     10,806       43,234       7,853       10,813       51,080       61,893       (9,625 )     52,268       -        
02/21/2001


 
Schedule III
(Continued)
 

   
Initial Cost to Company
    
Gross Amounts at Close of Period
                            
Description
  
Land
    
Building and Improvements
    
Cost Capitalized Subsequent to Acquisition
    
Land
    
Building and Improvements
    
Total (D)
    
Accumulated Depreciation
    
Total Costs, Net of Accumulated Depreciation
    
Encumbrances (A)
        
Date of Acquisition / Construction
                                                               
Commons at Dexter Lake I
   $ 2,923     $ 12,007     $ -     $ 2,923     $ 12,007     $ 14,930     $ (2,378 )   $ 12,552     $ -     C  
11/13/2008
Commons at Dexter Lake II
     2,023       6,940       -       2,023       6,940       8,963       (551 )     8,412       -     C  
11/13/2008
Coronado Shopping Center
     246       1,009       592       246       1,601       1,847       (973 )     874       -        
01/03/1992
Countryside Centre
     13,908       26,387       452       13,943       26,804       40,747       (999 )     39,748       (26,951 )      
07/06/2007
Countryside Centre-Albertson's
     1,616       3,432       -       1,616       3,432       5,048       (129 )     4,919       -        
07/06/2007
Creekside Center
     1,732       6,929       833       1,730       7,764       9,494       (1,501 )     7,993       -        
04/02/2001
Crossroads Shopping Center
     -       2,083       1,428       -       3,511       3,511       (3,086 )     425       -        
05/11/1972
Cullen Place
     -       -       264       -       264       264       (175 )     89       -        
02/17/1966
Cullen Plaza Shopping Center
     106       2,841       168       106       3,009       3,115       (2,411 )     704       -     B  
03/20/2008
Custer Park Shopping Center
     503       2,005       8,117       2,017       8,608       10,625       (3,062 )     7,563       -        
03/31/2000
Cypress Pointe
     3,468       8,700       288       3,468       8,988       12,456       (4,631 )     7,825       -        
04/04/2002
Cypress Station Square
     3,736       8,374       (729 )     2,389       8,992       11,381       (7,931 )     3,450       -        
12/06/1972
Dallas Commons Shopping Center
     1,582       4,969       21       1,582       4,990       6,572       (292 )     6,280       -        
09/14/2006
Danville Plaza Shopping Center
     -       3,360       1,764       -       5,124       5,124       (4,673 )     451       -        
09/30/1960
De Vargas Shopping Center
     5,142       14,261       6,745       5,186       20,962       26,148       (8,156 )     17,992       -        
07/23/1999
Discovery Plaza
     2,193       8,772       194       2,191       8,968       11,159       (1,778 )     9,381       -        
04/02/2001
Durham Festival
     1,924       10,020       774       1,924       10,794       12,718       (1,722 )     10,996       -        
09/30/2003
Eastdale Shopping Center
     1,423       5,809       1,532       1,417       7,347       8,764       (2,448 )     6,316       -        
12/31/1997
Eastern Horizon
     10,282       16       (496 )     1,569       8,233       9,802       (2,653 )     7,149       -        
12/31/2002
Eastpark Shopping Center
     634       3,392       (3,976 )     47       3       50       -       50       -        
12/31/1970
Edgebrook Shopping Center
     183       1,914       11       183       1,925       2,108       (1,584 )     524       -     B  
03/20/2008
El Camino Shopping Center
     4,431       20,557       3,743       4,429       24,302       28,731       (1,920 )     26,811       (11,834 )      
05/21/2004
Embassy Lakes Shopping Center
     2,803       11,268       146       2,803       11,414       14,217       (1,774 )     12,443       -        
12/18/2002
Entrada de Oro Plaza SC
     6,041       10,511       264       6,115       10,701       16,816       (517 )     16,299       -        
01/22/2007
Falls Pointe Shopping Center
     3,535       14,289       107       3,522       14,409       17,931       (2,289 )     15,642       (10,949 )      
12/17/2002
Festival on Jefferson Court
     5,041       13,983       1,357       5,041       15,340       20,381       (1,645 )     18,736       -        
12/22/2004
Fiesta Center
     -       4,730       336       -       5,066       5,066       (3,045 )     2,021       -        
12/31/1990
Fiesta Market Place
     137       429       -       137       429       566       (429 )     137       -     B  
03/20/2008
Fiesta Trails
     8,825       32,790       1,938       8,825       34,728       43,553       (4,900 )     38,653       (24,172 )      
09/30/2003
Flamingo Pines Shopping Center
     10,403       35,014       721       10,410       35,728       46,138       (3,536 )     42,602       -        
01/28/2005
Food King Place
     140       212       491       115       728       843       (398 )     445       -        
06/01/1967
Fountain Plaza
     1,319       5,276       113       1,095       5,613       6,708       (2,343 )     4,365       -        
03/10/1994
Francisco Center
     1,999       7,997       3,867       2,403       11,460       13,863       (4,737 )     9,126       (9,996 )      
11/16/1998
Freedom Centre
     2,929       15,302       4,475       6,944       15,762       22,706       (852 )     21,854       (2,176 )      
06/23/2006
Galleria Shopping Center
     10,795       10,339       8,134       10,804       18,464       29,268       (962 )     28,306       (20,473 )      
12/11/2006
Galveston Place
     2,713       5,522       6,229       3,279       11,185       14,464       (6,811 )     7,653       (2,487 )      
11/30/1983
Gateway Plaza
     4,812       19,249       1,122       4,808       20,375       25,183       (4,127 )     21,056       -        
04/02/2001
Gillham Circle
     36       201       236       36       437       473       (292 )     181       -        
05/04/1948
Glenbrook Square Shopping Ctr
     632       3,576       121       632       3,697       4,329       (1,530 )     2,799       -     B  
03/20/2008
Grayson Commons
     3,180       9,023       7       3,163       9,047       12,210       (942 )     11,268       (6,950 )      
11/09/2004
Greenhouse Marketplace
     992       4,901       160       992       5,061       6,053       (673 )     5,380       -        
01/28/2004
Greenhouse Marketplace
     3,615       17,870       815       3,618       18,682       22,300       (2,342 )     19,958       (12,365 )      
01/28/2004
Griggs Road Shopping Center
     257       2,303       40       257       2,343       2,600       (2,086 )     514       -     B  
03/20/2008
Hallmark Town Center
     1,368       5,472       693       1,367       6,166       7,533       (1,293 )     6,240       -        
04/02/2001
Harrisburg Plaza
     1,278       3,924       383       1,278       4,307       5,585       (3,593 )     1,992       -     B  
03/20/2008
Harrison Pointe Center
     7,173       13,493       1,051       7,153       14,564       21,717       (2,011 )     19,706       -        
01/30/2004


 
Schedule III
(Continued)
 

   
Initial Cost to Company
    
Gross Amounts at Close of Period
                            
Description
  
Land
    
Building and Improvements
    
Cost Capitalized Subsequent to Acquisition
    
Land
    
Building and Improvements
    
Total (D)
    
Accumulated Depreciation
    
Total Costs, Net of Accumulated Depreciation
    
Encumbrances (A)
        
Date of Acquisition / Construction
                                                               
Heights Plaza Shopping Center
   $ 58     $ 699     $ 1,830     $ 612     $ 1,975     $ 2,587     $ (1,061 )   $ 1,526     $ -        
06/30/1995
Heritage Station
     6,253       3,989       (305 )     6,139       3,798       9,937       (406 )     9,531       (6,111 )      
12/15/2006
High House Crossing
     2,576       10,305       173       2,576       10,478       13,054       (1,851 )     11,203       (8,689 )      
04/04/2002
Highland Square
     -       -       1,887       -       1,887       1,887       (194 )     1,693       -        
10/06/1959
Hollywood Hills Plaza
     966       3,865       (202 )     1,400       3,229       4,629       (464 )     4,165       -        
04/29/2003
Hollywood Hills Plaza
     6,997       27,990       3,737       6,278       32,446       38,724       (4,652 )     34,072       (20,671 )      
04/29/2003
Humblewood Shopping Center
     2,215       4,724       2,782       1,166       8,555       9,721       (7,656 )     2,065       -        
03/09/1977
I45/Telephone Rd.
     678       11,182       438       678       11,620       12,298       (3,404 )     8,894       -     B  
03/20/2008
Independence Plaza
     2,006       8,318       2,447       1,995       10,776       12,771       (2,935 )     9,836       -        
12/31/1997
Johnston Road Plaza
     3,671       11,829       18       3,673       11,845       15,518       (1,067 )     14,451       (9,912 )      
06/10/2005
Killeen Marketplace
     2,262       9,048       456       2,275       9,491       11,766       (1,989 )     9,777       -        
12/21/2000
Kirby Strip Center
     1,201       945       1       1,202       945       2,147       (15 )     2,132       -        
05/27/2008
Kohl's Shopping Center
     2,298       9,193       95       2,298       9,288       11,586       (2,031 )     9,555       -        
04/24/2000
Kroger/Fondren Square
     1,383       2,810       726       1,387       3,532       4,919       (2,895 )     2,024       -        
09/30/1985
Lake Pointe Market
     1,404       -       4,122       1,960       3,566       5,526       (1,530 )     3,996       -        
12/31/2004
Lake Washington Square
     1,232       4,928       704       1,235       5,629       6,864       (917 )     5,947       -        
06/28/2002
Lakeside Marketplace
     6,064       22,989       1,092       6,150       23,995       30,145       (1,500 )     28,645       (18,883 )      
08/22/2006
Largo Mall
     10,817       40,906       1,052       10,810       41,965       52,775       (5,148 )     47,627       -        
03/01/2004
Laveen Village Marketplace
     1,190       -       4,832       1,006       5,016       6,022       (1,093 )     4,929       -        
08/15/2003
Lawndale Shopping Center
     82       927       195       82       1,122       1,204       (848 )     356       -     B  
03/20/2008
League City Plaza
     1,918       7,592       64       1,918       7,656       9,574       (3,102 )     6,472       -     B  
03/20/2008
Leesville Towne Centre
     7,183       17,162       321       7,183       17,483       24,666       (2,194 )     22,472       (10,066 )      
01/30/2004
Little Brier Creek
     942       3,393       303       1,433       3,205       4,638       (220 )     4,418       -        
07/10/2006
Little York Plaza Shopping Ctr
     342       5,170       283       342       5,453       5,795       (4,028 )     1,767       -     B  
03/20/2008
Lone Star Pavilion
     2,186       10,341       58       2,221       10,364       12,585       (2,388 )     10,197       (5,500 )      
04/30/2004
Lynnwood Collection S/C
     2,231       8,477       548       2,231       9,025       11,256       (1,035 )     10,221       -        
12/03/2004
Lyons Avenue Shopping Center
     249       1,183       23       249       1,206       1,455       (994 )     461       -     B  
03/20/2008
Madera Village Shopping Center
     3,788       13,507       352       3,816       13,831       17,647       (627 )     17,020       (9,825 )      
03/13/2007
Manhattan Plaza
     4,645       -       19,886       5,000       19,531       24,531       (5,028 )     19,503       -        
12/31/2004
Market at Southside
     953       3,813       821       958       4,629       5,587       (1,269 )     4,318       -        
08/28/2000
Market at Town Center-Sgrlnd
     8,600       26,627       16,929       8,600       43,556       52,156       (12,066 )     40,090       -        
12/23/1996
Market at Westchase SC
     1,199       5,821       2,074       1,415       7,679       9,094       (4,338 )     4,756       -        
02/15/1991
Market Street Shopping Center
     424       1,271       1,320       424       2,591       3,015       (1,446 )     1,569       -        
04/26/1978
Marketplace at Seminole Towne
     15,067       53,743       1,779       21,734       48,855       70,589       (2,857 )     67,732       (45,140 )      
08/21/2006
Markham Square Shopping Center
     1,236       3,075       1,763       1,139       4,935       6,074       (4,222 )     1,852       -        
06/18/1974
Markham West Shopping Center
     2,694       10,777       3,747       2,696       14,522       17,218       (4,062 )     13,156       -        
09/18/1998
Marshall's Plaza
     1,802       12,315       467       1,804       12,780       14,584       (1,188 )     13,396       (6,540 )      
06/01/2005
Mendenhall Commons
     2,655       9,165       47       2,655       9,212       11,867       (574 )     11,293       -     C  
11/13/2008
Menifee Town Center
     1,827       7,307       4,301       1,824       11,611       13,435       (2,021 )     11,414       -        
04/02/2001
Millpond Center
     3,155       9,706       954       3,161       10,654       13,815       (1,014 )     12,801       (865 )      
07/28/2005
Mineral Springs Village
     794       3,175       194       794       3,369       4,163       (640 )     3,523       -        
04/04/2002
Mission Center
     1,237       4,949       5,896       2,120       9,962       12,082       (3,635 )     8,447       -        
12/18/1995
Mktplace at Seminole Outparcel
     1,000       -       137       1,020       117       1,137       -       1,137       -        
08/21/2006
Monte Vista Village Center
     1,485       58       4,895       755       5,683       6,438       (1,570 )     4,868       -        
12/31/2004
Montgomery Plaza Shopping Ctr.
     2,500       9,961       9,139       2,884       18,716       21,600       (7,662 )     13,938       -        
06/09/1993
Moore Plaza
     6,445       26,140       5,666       6,487       31,764       38,251       (10,049 )     28,202       -        
03/20/1998


 
Schedule III
(Continued)
 

   
Initial Cost to Company
    
Gross Amounts at Close of Period
                            
Description
  
Land
    
Building and Improvements
    
Cost Capitalized Subsequent to Acquisition
    
Land
    
Building and Improvements
    
Total (D)
    
Accumulated Depreciation
    
Total Costs, Net of Accumulated Depreciation
    
Encumbrances (A)
        
Date of Acquisition / Construction
                                                               
New Boston Rd. Shopping Center
   $ 329     $ 2,152     $ 1,396     $ 329     $ 3,548     $ 3,877     $ (3,098 )   $ 779     $ -        
06/01/1959
North Creek Plaza
     6,915       25,625       865       6,954       26,451       33,405       (2,975 )     30,430       (3,745 )      
08/19/2004
North Main Place
     68       53       522       68       575       643       (275 )     368       -        
06/29/1976
North Oaks Shopping Center
     3,644       22,040       1,848       3,644       23,888       27,532       (16,629 )     10,903       -     B  
03/20/2008
North Towne Plaza
     960       3,928       6,081       879       10,090       10,969       (4,985 )     5,984       -        
02/15/1990
North Triangle Shops
     -       431       218       15       634       649       (341 )     308       -        
01/15/1977
Northbrook Shopping Center
     1,629       4,489       2,877       1,713       7,282       8,995       (6,128 )     2,867       -        
11/06/1967
Northridge Shopping Center
     7,087       28,361       2,966       7,102       31,312       38,414       (5,751 )     32,663       -        
03/25/2002
Northwoods Shopping Center
     1,768       7,071       163       1,772       7,230       9,002       (1,277 )     7,725       -        
04/04/2002
Oak Forest Shopping Center
     760       2,726       2,338       748       5,076       5,824       (4,154 )     1,670       -        
12/30/1976
Oak Grove Market Center
     5,758       10,508       (313 )     5,861       10,092       15,953       (437 )     15,516       (7,358 )      
06/15/2007
Oak Park Village
     678       3,332       -       678       3,332       4,010       (1,338 )     2,672       -     C  
11/13/2008
Oracle Crossing
     4,614       18,274       21,180       10,582       33,486       44,068       (1,279 )     42,789       -        
01/22/2007
Oracle Wetmore Shopping Center
     24,686       26,878       2,342       23,102       30,804       53,906       (1,476 )     52,430       -        
01/22/2007
Orchard Green Shopping Center
     777       1,477       1,760       786       3,228       4,014       (2,073 )     1,941       -        
10/11/1973
Orleans Station
     165       -       57       185       37       222       (37 )     185       -        
06/29/1976
Overton Park Plaza
     9,266       37,789       894       9,264       38,685       47,949       (5,094 )     42,855       -        
10/24/2003
Palmer Plaza
     765       3,081       2,347       827       5,366       6,193       (3,172 )     3,021       -        
07/31/1980
Palmilla Center
     1,258       -       12,649       3,280       10,627       13,907       (4,439 )     9,468       -        
12/31/2002
Paradise Marketplace
     2,153       8,612       744       2,155       9,354       11,509       (3,464 )     8,045       -        
07/20/1995
Park Plaza Shopping Center
     257       7,815       864       314       8,622       8,936       (7,570 )     1,366       -        
01/24/1975
Parkway Pointe
     1,252       5,010       578       1,260       5,580       6,840       (1,208 )     5,632       (1,779 )      
06/29/2001
Parliament Square II
     2       10       1,176       3       1,185       1,188       (168 )     1,020       -        
06/24/2005
Parliament Square Shopping Ctr
     443       1,959       1,047       443       3,006       3,449       (1,610 )     1,839       -        
03/18/1992
Pavilions at San Mateo
     3,272       26,215       378       5,181       24,684       29,865       (5,253 )     24,612       (14,000 )      
04/30/2004
Pembroke Commons
     6,401       25,420       3,127       6,419       28,529       34,948       (6,332 )     28,616       -        
12/01/1999
Perimeter Village
     29,701       42,337       (2,506 )     34,404       35,128       69,532       (1,465 )     68,067       -        
07/03/2007
Phelan West Shopping Center
     401       -       1,221       414       1,208       1,622       (531 )     1,091       -        
06/03/1998
Pinecrest Plaza Shopping Ctr
     5,837       19,166       782       5,837       19,948       25,785       (1,974 )     23,811       (10,912 )      
04/06/2005
Pitman Corners
     2,686       10,745       1,469       2,693       12,207       14,900       (2,335 )     12,565       (9,308 )      
04/08/2002
Plantation Centre
     3,463       14,821       291       3,471       15,104       18,575       (1,644 )     16,931       (4,672 )      
08/19/2004
Portairs Shopping Center
     902       3,720       2,630       902       6,350       7,252       (4,770 )     2,482       -        
07/21/1988
Prien Lake Plaza
     63       960       76       41       1,058       1,099       (24 )     1,075       -        
07/26/2007
Promenade Shopping Center
     1,058       4,248       491       941       4,856       5,797       (954 )     4,843       (3,965 )      
03/18/2004
Prospector's Plaza
     3,746       14,985       566       3,716       15,581       19,297       (3,088 )     16,209       -        
04/02/2001
Publix at Laguna Isles
     2,913       9,554       103       2,914       9,656       12,570       (1,283 )     11,287       (7,772 )      
10/31/2003
Publix at Princeton Lakes
     2,740       10,519       384       2,192       11,451       13,643       (684 )     12,959       (7,950 )      
08/22/2006
Pueblo Anozira Shopping Center
     2,750       11,000       3,582       2,768       14,564       17,332       (5,360 )     11,972       -        
06/16/1994
Rainbow Plaza
     6,059       24,234       1,337       6,081       25,549       31,630       (7,401 )     24,229       -        
10/22/1997
Rainbow Plaza I
     3,883       15,540       411       3,896       15,938       19,834       (3,379 )     16,455       -        
12/28/2000
Rancho Encanto
     957       3,829       4,112       962       7,936       8,898       (1,403 )     7,495       -        
04/28/1997
Rancho San Marcos Village
     3,533       14,138       3,792       3,887       17,576       21,463       (2,649 )     18,814       -        
02/26/2003
Rancho Towne & Country
     1,161       4,647       319       1,166       4,961       6,127       (1,793 )     4,334       -        
10/16/1995
Randalls Center/Kings Crossing
     3,570       8,147       -       3,570       8,147       11,717       (3,902 )     7,815       -     C  
11/13/2008
Randall's/Norchester Village
     1,852       4,510       1,189       1,904       5,647       7,551       (3,843 )     3,708       -        
09/30/1991
Ravenstone Commons
     2,616       7,986       (180 )     2,580       7,842       10,422       (751 )     9,671       (6,035 )      
03/22/2005


 
Schedule III
(Continued)
 

   
Initial Cost to Company
    
Gross Amounts at Close of Period
                            
Description
  
Land
    
Building and Improvements
    
Cost Capitalized Subsequent to Acquisition
    
Land
    
Building and Improvements
    
Total (D)
    
Accumulated Depreciation
    
Total Costs, Net of Accumulated Depreciation
    
Encumbrances (A)
        
Date of Acquisition / Construction
                                                               
Red Mountain Gateway
   $ 2,166     $ 89     $ 9,146     $ 2,737     $ 8,664     $ 11,401     $ (2,578 )   $ 8,823     $ -        
12/31/2003
Regency Centre
     3,791       15,390       664       2,180       17,665       19,845       (1,113 )     18,732       (9,675 )      
07/28/2006
Regency Panera Tract
     1,825       3,126       65       1,400       3,616       5,016       (218 )     4,798       -        
07/28/2006
Reynolds Shops Shopping Center
     4,276       9,186       34       4,276       9,220       13,496       (548 )     12,948       -        
09/14/2006
Richmond Square
     1,993       953       1,685       2,966       1,665       4,631       (915 )     3,716       -        
12/31/1996
River Oaks Shopping Center
     1,354       1,946       349       1,363       2,286       3,649       (1,871 )     1,778       -        
12/04/1992
River Oaks Shopping Center
     3,534       17,741       20,776       3,979       38,072       42,051       (14,199 )     27,852       -        
12/04/1992
Rockwall Market Center
     5,344       22,700       252       5,341       22,955       28,296       (4,681 )     23,615       (12,500 )      
04/30/2004
Rose-Rich Shopping Center
     502       2,738       2,825       502       5,563       6,065       (4,730 )     1,335       -        
03/01/1982
Roswell Corners
     5,835       20,465       688       5,835       21,153       26,988       (2,495 )     24,493       (10,636 )      
06/24/2004
Roswell Corners
     301       982       -       301       982       1,283       (113 )     1,170       -        
06/24/2004
San Marcos Plaza
     1,360       5,439       184       1,358       5,625       6,983       (1,145 )     5,838       -        
04/02/2001
Sandy Plains Exchange
     2,468       7,549       171       2,469       7,719       10,188       (1,080 )     9,108       (6,299 )      
10/17/2003
Scottsdale Horizon
     -       3,241       18       1       3,258       3,259       (156 )     3,103       -        
01/22/2007
Shasta Crossroads
     2,844       11,377       194       2,842       11,573       14,415       (2,298 )     12,117       -        
04/02/2001
Shawnee Village S/C
     1,470       5,881       2,172       1,333       8,190       9,523       (2,677 )     6,846       (6,610 )      
04/19/1996
Sheldon Forest Shopping Center
     374       635       254       354       909       1,263       (743 )     520       -        
05/14/1970
Sheldon Forest Shopping Center
     629       1,955       800       629       2,755       3,384       (2,543 )     841       -        
05/14/1970
Shoppes at Bears Path
     3,252       5,503       445       3,290       5,910       9,200       (268 )     8,932       (3,373 )      
03/13/2007
Shoppes of Parkland
     5,413       16,726       882       9,506       13,515       23,021       (948 )     22,073       (15,745 )      
05/31/2006
Shoppes of South Semoran
     4,283       9,785       (96 )     5,508       8,464       13,972       (310 )     13,662       (9,855 )      
08/31/2007
Shops at Three Corners
     6,215       9,303       5,259       6,224       14,553       20,777       (6,725 )     14,052       -        
12/31/1989
Silver Creek Plaza
     3,231       12,924       2,702       3,228       15,629       18,857       (3,333 )     15,524       -        
04/02/2001
Six Forks Shopping Center
     6,678       26,759       2,711       6,728       29,420       36,148       (5,245 )     30,903       -        
04/04/2002
South Semoran - Pad
     1,056       -       21       1,077       -       1,077       -       1,077       -        
09/06/2007
Southampton Center
     4,337       17,349       693       4,333       18,046       22,379       (3,649 )     18,730       -        
04/02/2001
Southgate Shopping Center
     127       116       84       127       200       327       (157 )     170       -        
10/15/1948
Southgate Shopping Center
     571       3,402       4,287       531       7,729       8,260       (5,690 )     2,570       -        
03/26/1958
Southgate Shopping Center
     232       8,389       144       232       8,533       8,765       (4,643 )     4,122       -     B  
03/20/2008
Spring Plaza Shopping Center
     863       2,288       46       863       2,334       3,197       (2,043 )     1,154       -     B  
03/20/2008
Squaw Peak Plaza
     816       3,266       868       818       4,132       4,950       (1,330 )     3,620       -        
12/20/1994
Steele Creek Crossing
     310       11,774       3,210       3,281       12,013       15,294       (1,159 )     14,135       (7,719 )      
06/10/2005
Steeplechase
     1,492       6,034       3,143       1,489       9,180       10,669       (3,468 )     7,201       -        
07/28/1993
Stella Link Shopping Center
     227       423       1,489       294       1,845       2,139       (1,486 )     653       -        
07/10/1970
Stella Link Shopping Center
     2,602       1,418       4       2,602       1,422       4,024       (48 )     3,976       -        
08/21/2007
Stonehenge Market
     4,740       19,001       1,122       4,740       20,123       24,863       (3,726 )     21,137       (7,177 )      
04/04/2002
Stony Point Plaza
     3,489       13,957       607       3,453       14,600       18,053       (2,914 )     15,139       -        
04/02/2001
Studewood Shopping Center
     261       552       -       261       552       813       (552 )     261       -        
05/25/1984
Summer Center
     2,379       8,343       3,697       2,396       12,023       14,419       (2,155 )     12,264       -        
05/15/2001
Summerhill Plaza
     1,945       7,781       1,630       1,943       9,413       11,356       (2,018 )     9,338       -        
04/02/2001
Sunset 19 Shopping Center
     5,519       22,076       399       5,547       22,447       27,994       (4,104 )     23,890       (13,509 )      
10/29/2001
Sunset Shopping Center
     1,121       4,484       868       1,120       5,353       6,473       (1,166 )     5,307       -        
04/02/2001
Tamiami Trail Shops
     3,269       13,075       1,513       3,391       14,466       17,857       (2,000 )     15,857       -        
06/30/2003
Tates Creek Centre
     4,802       25,366       2,037       6,302       25,903       32,205       (3,254 )     28,951       -        
03/01/2004
Taylorsville Town Center
     2,179       9,718       618       2,180       10,335       12,515       (1,431 )     11,084       -        
12/19/2003
Texas City Plaza
     143       117       (117 )     143       -       143       -       143       -        
05/04/1948


 
Schedule III
(Continued)
 

   
Initial Cost to Company
    
Gross Amounts at Close of Period
                            
Description
  
Land
    
Building and Improvements
    
Cost Capitalized Subsequent to Acquisition
    
Land
    
Building and Improvements
    
Total (D)
    
Accumulated Depreciation
    
Total Costs, Net of Accumulated Depreciation
    
Encumbrances (A)
        
Date of Acquisition / Construction
                                                               
The Plaza at Cottonwood
   $ 3,061     $ 12,613     $ 23     $ 3,061     $ 12,636     $ 15,697     $ (1,317 )   $ 14,380     $ (9,177 )      
10/27/2004
The Village Arcade
     -       6,657       564       -       7,221       7,221       (4,120 )     3,101       -        
12/31/1992
Thompson Bridge Commons
     3,045       9,264       3,545       3,016       12,838       15,854       (924 )     14,930       (6,510 )      
04/26/2005
Thousand Oaks Shopping Center
     2,973       13,142       4       2,973       13,146       16,119       (1,983 )     14,136       -     B  
03/20/2008
TJ Maxx Plaza
     3,400       19,283       740       3,430       19,993       23,423       (2,487 )     20,936       -        
03/01/2004
Town & Country Shopping Center
     2,512       2,744       (3,904 )     300       1,052       1,352       (865 )     487       -        
01/05/1988
Town & Country Shopping Center
     -       3,891       3,716       -       7,607       7,607       (4,184 )     3,423       -        
01/31/1989
Town and Country - Hammond, LA
     1,030       7,404       203       1,029       7,608       8,637       (3,869 )     4,768       -        
12/30/1997
Tropicana Beltway Center
     13,947       42,186       25       13,949       42,209       56,158       (4,253 )     51,905       (34,955 )      
11/20/2007
Tropicana Marketplace
     2,118       8,477       645       2,120       9,120       11,240       (3,316 )     7,924       -        
07/24/1995
Tyler Shopping Center
     5       21       3,662       300       3,388       3,688       (1,711 )     1,977       -        
12/31/2002
Uintah Gardens
     2,209       13,051       2,101       2,205       15,156       17,361       (1,195 )     16,166       (6,305 )      
12/22/2005
University Palms Shopping Ctr
     2,765       10,181       -       2,765       10,181       12,946       (1,406 )     11,540       -     C  
11/13/2008
University Plaza
     1,360       5,439       3,202       1,362       8,639       10,001       (3,468 )     6,533       -        
03/18/1996
Val Vista Towne Center
     2,614       8       8,000       2,985       7,637       10,622       (3,469 )     7,153       -        
12/31/2001
Valley Shopping Center
     4,293       13,736       401       8,170       10,260       18,430       (720 )     17,710       -        
04/07/2006
Valley View Shopping Center
     1,006       3,980       1,999       1,006       5,979       6,985       (2,516 )     4,469       -        
11/20/1996
Venice Pines Shopping Center
     1,432       5,730       69       1,077       6,154       7,231       (1,241 )     5,990       -        
06/06/2001
Village Arcade II Phase III
     -       16       14,975       -       14,991       14,991       (6,782 )     8,209       -        
12/31/1996
Village Arcade-Phase II
     -       787       134       -       921       921       (501 )     420       -        
12/31/1992
Vizcaya Square Shopping Center
     3,044       12,226       217       3,044       12,443       15,487       (1,911 )     13,576       -        
12/18/2002
West Jordan Town Center
     4,306       17,776       1,515       4,308       19,289       23,597       (2,411 )     21,186       (14,482 )      
12/19/2003
Westchase Shopping Center
     3,085       7,920       5,814       3,189       13,630       16,819       (10,580 )     6,239       (14,061 )      
08/29/1978
Westgate Shopping Center
     245       1,425       379       245       1,804       2,049       (1,592 )     457       -        
07/02/1965
Westhill Village Shopping Ctr.
     408       3,002       4,387       437       7,360       7,797       (4,459 )     3,338       -        
05/01/1958
Westland Fair
     6,715       10,506       2,799       6,735       13,285       20,020       (3,280 )     16,740       -        
12/29/2000
Westland Fair
     20,847       -       7,180       20,999       7,028       28,027       (3,458 )     24,569       -        
12/29/2000
Westland Terrace Plaza
     1,649       6,768       2,587       2,526       8,478       11,004       (902 )     10,102       -        
10/22/2003
Westminster Center
     11,215       44,871       5,047       11,204       49,929       61,133       (9,824 )     51,309       -        
04/02/2001
Westminster Plaza
     1,759       7,036       387       1,759       7,423       9,182       (1,212 )     7,970       (6,405 )      
06/21/2002
Westmont Shopping Center
     940       3,929       1,338       966       5,241       6,207       (4,965 )     1,242       -        
04/28/1971
Westwood Village Shopping Ctr.
     -       6,968       1,810       -       8,778       8,778       (7,199 )     1,579       (2,115 )      
08/25/1978
Whitehall Commons
     2,529       6,901       73       2,522       6,981       9,503       (599 )     8,904       (4,987 )      
10/06/2005
Winter Park Corners
     2,159       8,636       165       2,159       8,801       10,960       (1,662 )     9,298       -        
09/06/2001
Wolflin Village Shopping Ctr
     846       4,374       2,258       695       6,783       7,478       (4,158 )     3,320       -        
01/03/1992
Wyoming Mall
     1,919       7,678       4,324       2,193       11,728       13,921       (705 )     13,216       -        
03/31/1995
      834,296       2,563,697       502,512       868,516       3,031,989       3,900,505       (703,504 )     3,197,001       (703,163 )        
                                                                                 
Industrial:
                                                                                
                                                                                 
1625 Diplomat Drive
     506       3,107       78       508       3,183       3,691       (244 )     3,447       -        
12/22/2005
1801 Massaro
     865       3,461       (83 )     671       3,572       4,243       (511 )     3,732       -        
04/24/2003
3500 Atlanta Industrial Pkwy
     770       795       28       770       823       1,593       (87 )     1,506       -        
10/14/2004
3550 Southside Industrial Pkwy
     449       1,666       -       449       1,666       2,115       (198 )     1,917       -        
05/04/2004
610 and 11th Street Warehouses
     253       3,593       (906 )     76       2,864       2,940       (1,762 )     1,178       -        
09/13/1974
Atlanta Industrial Park
     1,946       7,785       1,832       2,078       9,485       11,563       (1,530 )     10,033       (850 )      
02/19/2003


 
Schedule III
(Continued)

 
   
Initial Cost to Company
    
Gross Amounts at Close of Period
                            
Description
  
Land
    
Building and Improvements
    
Cost Capitalized Subsequent to Acquisition
    
Land
    
Building and Improvements
    
Total (D)
    
Accumulated Depreciation
    
Total Costs, Net of Accumulated Depreciation
    
Encumbrances
 (A)
        
Date of Acquisition / Construction
                                                               
Atlanta Industrial Park
   $ 657     $ 2,626     $ 200     $ 479     $ 3,004     $ 3,483     $ (487 )   $ 2,996     $ -        
02/19/2003
Beltway 8 at West Bellfort
     674       -       8,709       784       8,599       9,383       (3,979 )     5,404       -        
12/31/2001
Blankenship Distribution Cntr.
     271       1,097       632       273       1,727       2,000       (641 )     1,359       -        
08/07/1998
Braker 2 Business Center
     394       1,574       323       394       1,897       2,291       (472 )     1,819       -        
09/28/2000
Brookhollow Business Center
     734       2,938       1,972       736       4,908       5,644       (2,258 )     3,386       -        
07/27/1995
Central Park N/W Ph 6
     697       2,786       3,200       700       5,983       6,683       (3,117 )     3,566       -        
12/17/1992
Central Park N/W Ph VII
     433       1,735       1,876       433       3,611       4,044       (1,760 )     2,284       -        
03/29/1994
Central Plano Business Park
     1,343       5,578       433       1,344       6,010       7,354       (578 )     6,776       -        
09/28/2005
Corporate Center Park
     1,027       4,114       2,490       1,027       6,604       7,631       (2,436 )     5,195       -        
05/23/1997
Crestview
     7,424       555       (7,140 )     206       633       839       (538 )     301       -        
11/10/1980
Crosspoint Warehouse
     441       1,762       195       441       1,957       2,398       (475 )     1,923       -        
12/23/1998
Enterchange at Northlake A
     4,051       7,804       (95 )     1,624       10,136       11,760       (422 )     11,338       -        
04/20/2007
Enterchange at Walthall D
     3,190       7,618       6,025       2,493       14,340       16,833       (572 )     16,261       -        
04/20/2007
Freeport Business Center
     3,196       10,032       868       3,203       10,893       14,096       (918 )     13,178       -        
07/22/2005
Freeport Commerce Center
     598       2,918       639       1,536       2,619       4,155       (193 )     3,962       -        
11/29/2006
Hopewell Industrial Center
     926       8,074       129       2,740       6,389       9,129       (343 )     8,786       (4,074 )      
11/03/2006
Houston Cold Storage Warehouse
     1,087       4,347       1,923       1,072       6,285       7,357       (1,757 )     5,600       -        
06/12/1998
Interwest Business Park
     1,449       5,795       1,438       1,461       7,221       8,682       (1,748 )     6,934       -        
12/22/2000
ISOM Business Center
     2,661       6,699       438       2,662       7,136       9,798       (639 )     9,159       -        
10/24/2005
Jester Plaza
     360       6       2,694       361       2,699       3,060       (1,361 )     1,699       -        
06/24/1996
Jupiter Business Center
     588       2,353       932       588       3,285       3,873       (1,085 )     2,788       -        
07/27/1999
Kempwood Industrial Park
     734       3,044       55       129       3,704       3,833       (1,149 )     2,684       -        
08/27/1996
Kennesaw 75
     3,012       7,659       65       3,007       7,729       10,736       (759 )     9,977       -        
02/23/2005
Lakeland Industrial Center
     3,265       13,059       1,827       3,266       14,885       18,151       (3,432 )     14,719       -        
12/06/2001
Lakeland Interstate Bus. Park
     1,526       9,077       (271 )     547       9,785       10,332       (516 )     9,816       (5,290 )      
01/11/2007
Manana / 35 Business Center
     1,323       5,293       1,499       1,315       6,800       8,115       (2,348 )     5,767       -        
07/27/1999
McGraw Hill Distribution Ctr
     3,155       18,906       2       3,157       18,906       22,063       (1,379 )     20,684       -        
02/14/2006
Midpoint I-20 Distrib. Center
     1,254       7,070       2,895       2,820       8,399       11,219       (460 )     10,759       -        
10/13/2006
Midway Business Center
     1,078       4,313       2,044       1,078       6,357       7,435       (2,365 )     5,070       -        
07/27/1999
Newkirk Business Center
     686       2,745       828       686       3,573       4,259       (1,242 )     3,017       -        
07/27/1999
Northeast Crossing
     392       1,568       1,022       350       2,632       2,982       (981 )     2,001       -        
07/27/1999
Northwest Crossing
     1,274       2,892       1,483       824       4,825       5,649       (1,784 )     3,865       -        
07/27/1999
Oak Hill Business Park
     1,294       5,279       1,091       1,299       6,365       7,664       (1,691 )     5,973       -        
10/18/2001
O'Connor Road Business Park
     1,028       4,110       903       1,029       5,012       6,041       (1,185 )     4,856       -        
12/22/2000
Railwood
     7,072       7,965       (1,566 )     2,870       10,601       13,471       (3,981 )     9,490       -        
12/31/1975
Randol Mill Place
     371       1,513       674       372       2,186       2,558       (884 )     1,674       -        
12/31/1998
Red Bird
     406       1,622       221       406       1,843       2,249       (586 )     1,663       -        
09/29/1998
Regal Distribution Center
     801       3,208       820       806       4,023       4,829       (1,444 )     3,385       -        
04/17/1998
Riverview Distribution Center
     1,518       9,613       257       1,521       9,867       11,388       (353 )     11,035       -        
08/10/2007
Rutland 10 Business Center
     738       2,951       490       739       3,440       4,179       (895 )     3,284       -        
09/28/2000
Sherman Plaza Business Park
     705       2,829       2,001       710       4,825       5,535       (1,994 )     3,541       -        
04/01/1999
South Loop Business Park
     168       575       100       168       675       843       (644 )     199       -        
12/04/1975
Southpark 3075
     1,251       8,385       (47 )     1,213       8,376       9,589       (272 )     9,317       -        
10/03/2007
Southpark A, B, C
     1,079       4,375       637       1,080       5,011       6,091       (1,274 )     4,817       -        
09/28/2000
Southpoint
     4,167       10,967       399       4,168       11,365       15,533       (842 )     14,691       -        
12/29/2005
Southpoint Business Center
     597       2,392       873       600       3,262       3,862       (997 )     2,865       -        
05/20/1999


Schedule III
(Continued)

 
   
Initial Cost to Company
    
Gross Amounts at Close of Period
                            
Description
  
Land
    
Building and Improvements
    
Cost Capitalized Subsequent to Acquisition
    
Land
    
Building and Improvements
    
Total (D)
    
Accumulated Depreciation
    
Total Costs, Net of Accumulated Depreciation
    
Encumbrances (A)
        
Date of Acquisition / Construction
                                                               
Southport Business Park 5
   $ 562     $ 2,172     $ 1,280     $ 562     $ 3,452     $ 4,014     $ (1,008 )   $ 3,006     $ -        
12/23/1998
Southwest Park II
     197       791       791       200       1,579       1,779       (1,006 )     773       -        
05/14/1993
Space Center Industrial Park
     1,036       4,143       1,419       1,025       5,573       6,598       (1,633 )     4,965       -        
05/29/1998
Stonecrest Business Center
     601       2,439       1,588       601       4,027       4,628       (1,518 )     3,110       -        
06/03/1997
Tampa East Ind. Portfolio
     5,424       18,155       1,165       5,409       19,335       24,744       (1,498 )     23,246       -        
11/21/2005
Town and Country Commerce Ctr
     4,188       9,628       (577 )     4,311       8,928       13,239       (262 )     12,977       -        
06/29/2007
West Loop Commerce Center
     2,203       1,672       (847 )     536       2,492       3,028       (2,382 )     646       -        
12/14/1981
West-10 Business Center
     -       3,125       1,717       -       4,842       4,842       (3,583 )     1,259       -        
08/28/1992
West-10 Business Center II
     414       1,662       742       389       2,429       2,818       (1,210 )     1,608       -        
08/20/1997
Westgate Business Center
     1,472       3,471       2,003       1,470       5,476       6,946       (1,050 )     5,896       -        
12/12/2003
Westlake 125
     1,174       6,630       70       1,066       6,808       7,874       (221 )     7,653       -        
10/03/2007
Wirt Road & I10
     1,003       -       45       1,048       -       1,048       -       1,048       -        
05/24/2007
      94,158       296,116       56,528       79,886       366,916       446,802       (78,939 )     367,863       (10,214 )        
                                                                                 
Other
                                                                                
                                                                                 
1919 North Loop West
     1,334       8,451       9,734       1,337       18,182       19,519       (798 )     18,721       -        
12/05/2006
Citadel Building
     3,236       6,168       7,152       534       16,022       16,556       (10,906 )     5,650       -        
12/30/1975
Phoenix Office Building
     1,696       3,255       924       1,773       4,102       5,875       (207 )     5,668       -        
01/31/2007
      6,266       17,874       17,810       3,644       38,306       41,950       (11,911 )     30,039       -          
                                                                                 
Land Held/Under Development:
                                                                                
                                                                                 
Ambassador Parcel D
     98       -       -       98       -       98       -       98       -        
10/26/2007
Citadel Drive at Loop 610
     3,747       -       (239 )     3,508       -       3,508       -       3,508       -        
12/30/1975
ClayPoint Distribution Park
     2,413       3,117       17,264       2,897       19,897       22,794       (1,999 )     20,795       -        
06/23/1999
Colonial Landing
     1,813       14,577       11,193       -       27,583       27,583       (1,829 )     25,754       -        
04/26/2006
Crabtree Towne Center
     18,810       54       (8,919 )     9,043       902       9,945       -       9,945       -        
01/31/2007
Cullen Blvd. at East Orem
     172       -       3       175       -       175       -       175       -        
02/24/1975
Curry Ford Road
     1,878       7       (39 )     1,817       29       1,846       -       1,846       -        
10/05/2007
Decatur 215
     32,525       8,200       (17,559 )     15,846       7,320       23,166       -       23,166       -        
12/26/2007
Epic Village St. Augustine
     2,263       1,171       1,824       2,306       2,952       5,258       -       5,258       -        
04/09/2008
Festival Plaza
     751       6       123       794       86       880       -       880       -        
12/08/2006
Gateway Station
     1,622       3       8,008       1,821       7,812       9,633       (67 )     9,566       -        
07/21/2006
Gladden Farms
     1,619       4       1,744       1,713       1,654       3,367       -       3,367       -        
08/21/2007
Harrison Pointe Pad
     1,057       -       -       1,057       -       1,057       -       1,057       -        
05/01/2008
Horne Street Market
     4,239       37       4,683       4,742       4,217       8,959       -       8,959       -        
06/22/2007
Lockwood Drive
     313       -       (319 )     (6 )     -       (6 )     -       (6 )     -        
11/14/1949
Mainland Mall-Tracts 1 & 2
     321       -       69       390       -       390       -       390       -        
11/29/1967
Mohave Crossroads
     5,033       63       37,295       5,574       36,817       42,391       (290 )     42,101       -        
06/12/2007
North Towne Plaza JV
     6,646       99       8,116       11,515       3,346       14,861       -       14,861       -        
12/27/2006
NW Freeway at Gessner
     5,052       -       (3,577 )     1,475       -       1,475       -       1,475       -        
11/16/1972
Palm Coast Landing Outparcels
     1,302       149       (286 )     762       403       1,165       -       1,165       -        
04/30/2008
Phillips Crossing
     -       1       24,827       665       24,163       24,828       (300 )     24,528       -        
10/06/2006
Phillips Landing
     1,521       1,625       9,929       1,953       11,122       13,075       (451 )     12,624       -        
12/14/2005
Raintree Ranch Center
     11,442       595       16,036       10,983       17,090       28,073       (1,127 )     26,946       -        
06/15/2006



 
Schedule III
(Continued)
 

   
Initial Cost to Company
    
Gross Amounts at Close of Period
                            
Description
  
Land
    
Building and Improvements
    
Cost Capitalized Subsequent to Acquisition
    
Land
    
Building and Improvements
    
Total (D)
    
Accumulated Depreciation
    
Total Costs, Net of Accumulated Depreciation
    
Encumbrances (A)
        
Date of Acquisition / Construction
                                                               
Ridgeway Trace
   $ 26,629     $ 544     $ 6,157     $ 19,865     $ 13,465     $ 33,330     $ -     $ 33,330     $ -        
11/09/2006
River Pointe Venture
     2,874       -       (2,063 )     811       -       811       -       811       -        
08/04/2004
Rock Prarie Marketplace
     2,364       -       10,254       11,278       1,340       12,618       -       12,618       -        
05/15/2006
Shreveport
     356       -       130       486       -       486       -       486       -        
05/22/1973
South Fulton Crossing
     14,373       154       (7,429 )     4,970       2,128       7,098       -       7,098       -        
01/10/2007
Southern Pines Place
     8,046       73       (1,895 )     5,998       226       6,224       -       6,224       -        
02/09/2007
Stanford Court
     693       -       21       714       -       714       -       714       -        
04/20/1981
Stevens Ranch
     36,939       46       525       37,351       159       37,510       -       37,510       -        
05/16/2007
Surf City Crossing
     3,220       52       1,053       3,937       388       4,325       -       4,325       -        
12/06/2006
The Shoppes @ Wilderness Oaks
     11,081       50       730       11,518       343       11,861       -       11,861       -        
06/19/2008
The Shoppes at Caveness Farms
     7,235       135       1,117       3,702       4,785       8,487       -       8,487       -        
01/17/2006
The Shoppes at Parkwood Ranch
     5,605       52       6,444       4,123       7,978       12,101       (12 )     12,089       -        
01/02/2007
Thompson Bridge Commons
     604       -       (79 )     525       -       525       -       525       -        
07/28/2005
Tomball Marketplace
     9,616       262       20,576       15,190       15,264       30,454       -       30,454       -        
04/12/2006
University Place
     500       85       524       500       609       1,109       (14 )     1,095       -        
02/08/2008
Village Shopping Center
     64       714       (689 )     89       -       89       -       89       -        
12/31/2002
Waterford Village
     5,830       -       6,537       4,178       8,189       12,367       (111 )     12,256       -        
06/11/2004
West 11th @ Loop 610
     1,667       -       -       1,667       -       1,667       -       1,667       -        
12/14/1981
Westover Square
     4,435       20       (423 )     3,418       614       4,032       -       4,032       -        
08/01/2006
Westwood Center
     10,497       36       5,346       7,442       8,437       15,879       (3 )     15,876       -        
01/26/2007
Wilcrest/Bissonnet-Alief Tr1-4
     7,228       -       (6,309 )     919       -       919       -       919       -        
11/10/1980
York Plaza
     162       -       (45 )     117       -       117       -       117       -        
08/28/1972
      264,655       31,931       150,658       217,926       229,318       447,244       (6,203 )     441,041       -          
                                                                                 
Balance of Portfolio (not to exceed 5% of total)
     48,855       163,963       (133,848 )     14,676       64,295       78,971       (11,766 )     67,205       -          
                                                                                 
Total of Portfolio
   $ 1,248,230     $ 3,073,581     $ 593,660     $ 1,184,648     $ 3,730,824     $ 4,915,472     $ (812,323 )   $ 4,103,149     $ (713,377 )        

 
Depreciation is computed using the straight-line method, generally over estimated useful lives of 18-40 years for buildings and 10-20 years for parking lot surfacing and equipment.  Tenant and leasehold improvements are depreciated over the remaining life of the lease or the useful life whichever is shorter.

Note A -
Encumbrances do not include $40.4 million outstanding under fixed-rate mortgage debt associated with five properties each held in a tenancy-in-common arrangement.

Note B -
Property is collateral for a $154.3 million fixed-rate mortgage.

Note C -
Property is collateral for $100.0 million fixed-rate mortgage.

Note D -
The book value of our net fixed asset exceeds the tax basis by approximately $220 million at December 31, 2008.

 
Schedule III
(Continued)
 

The changes in total cost of the properties for the year ended December 31, 2008, 2007 and 2006 were as follows:

   
2008
    
2007
    
2006
  
                   
Balance at beginning of year
   $ 4,972,344     $ 4,445,888     $ 4,033,579  
Additions at cost
     299,090       888,345       1,022,103  
Retirements or sales
     (355,962 )     (361,889 )     (609,794 )
                         
Balance at end of year
   $ 4,915,472     $ 4,972,344     $ 4,445,888  

The changes in accumulated depreciation for the year ended December 31, 2008, 2007 and 2006 were as follows:

   
2008
    
2007
    
2006
  
                   
Balance at beginning of year
   $ 774,321     $ 707,005     $ 679,642  
Additions at cost
     118,160       114,956       110,406  
Retirements or sales
     (80,158 )     (47,640 )     (83,043 )
                         
Balance at end of year
   $ 812,323     $ 774,321     $ 707,005  




Schedule IV

WEINGARTEN REALTY INVESTORS
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 2008

(Amounts in thousands)

           
Final
  
Periodic
  
Face
    
Carrying
  
     
Interest
    
Maturity
  
Payment
  
Amount of
    
Amount of
  
 
State
  
Rate
    
Date
  
Terms
  
Mortgages
    
Mortgages(A)
  
                             
SHOPPING CENTERS:
                            
FIRST MORTGAGES:
                            
    Eastex Venture
TX
     8.00 %     10-31-09  
$317 Annual P & I
   $ 564     $ 564  
                                     
363-410 Burma, LLC
  
TN
     6.50 %     07-01-11  
$212 Annual P & I
     2,515       2,515  
                                     
KIPP Finance Corporation
TX
     7.00 %     01-31-11  
$220 Annual P & I
     3,537       3,537  
                                     
WRI-SRP Cole Park Plaza, LLC
NC
     5.66 %     02-01-12  
At Maturity
     6,200       6,200  
                                     
SHOPPING CENTERS:
                                    
CONSTRUCTION LOANS:
                                    
    Palm Coast Center, LLC
FL
     3.65 %     04-13-10  
At Maturity
     28,611       28,611  
                                     
    WRI Alliance Riley Venture
CA
     7.50 %     11-20-10  
At Maturity
     25,987       25,987  
                                     
    WRI Alliance Riley Venture III
CA
     4.45 %     11-20-10  
At Maturity
     26,847       26,847  
                                     
    Weingarten I-4 Clermont Landing, LLC
FL
     2.75 %     06-14-10  
At Maturity
     22,559       22,559  
                                     
    Weingarten Miller Buckingham, LLC
CO
     2.75 %     07-09-11  
At Maturity
     16,395       16,395  
                                     
    Weingarten Miller Equiwest Salt Lake, LLC
UT
     2.75 %     03-13-12  
At Maturity
     13,070       13,070  
                                     
    Weingarten Miller MDH Buckingham, LLC
CO
     2.75 %     07-09-11  
At Maturity
     28,274       28,274  
                                     
    Weingarten Sheridan, LLC
CO
     2.75 %     12-15-10  
At Maturity
     62,184       62,184  
                                     
TOTAL MORTGAGE LOANS ON REAL ESTATE
                       $ 236,743     $ 236,743  

Note A -
The aggregate cost at December 31, 2008 for federal income tax purposes is $236,743.
 
Changes in mortgage loans for the year ended December 31, 2008, 2007 and 2006 are summarized below.

   
2008
    
2007
    
2006
  
                   
Balance, Beginning of Year
   $ 79,898     $ 5,308     $ 2,791  
Additions to Existing Loans
     201,803       155,855       3,347  
Collections of Principal
     (44,958 )     (81,265 )     (830 )
                         
Balance, End of Year
   $ 236,743     $ 79,898     $ 5,308  

109