UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 8-K

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



Date of report (Date of earliest event reported):  December 4, 2008

WEINGARTEN REALTY INVESTORS
(Exact name of Registrant as specified in its Charter)

Texas
1-9876
74-1464203
(State or other jurisdiction of incorporation or organization)
(Commission file number)
(I.R.S. Employer Identification Number)


2600 Citadel Plaza Drive, Suite 300, Houston, Texas 77008
(Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code:  (713) 866-6000


Not applicable
(Former name or former address, if changed since last report)






 
 
 


ITEM 8.01.  OTHER EVENTS

Weingarten Realty Investors is filing this Form 8-K to update our historical financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2007 filed on February 29, 2008, for discontinued operations that have resulted from dispositions of real estate assets during the period from January 1, 2008 through September 30, 2008 in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”  This Current Report on Form 8-K updates the information in Items 1, 2, 6, 7 and 8 of our Form 10-K for the year ended December 31, 2007 to reflect those properties as discontinued operations for comparison purposes.

The information contained in this Current Report on Form 8-K is presented as of December 31, 2007, and other than as indicated above, has not been updated to reflect developments subsequent to that date.

ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS

10.1
Amendment No. 3 to the Weingarten Realty Investors Retirement Benefit Restoration Plan dated November 17, 2008.
10.2
Amendment No. 3 to the Weingarten Realty Investors Deferred Compensation Plan dated November 17, 2008.
10.3
Amendment No. 3 to the Weingarten Realty Investors Supplemental Executive Retirement Plan dated November 17, 2008.
10.4
Amendment No. 1 to Weingarten Realty Investors 2001 Long Term Incentive Plan dated November 17, 2008.
10.5
The Savings and Investment Plan for Employees of Weingarten Realty Investors Amendment for the Final 415 Regulations dated November 17, 2008.
12.1
Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Dividends.
23.1
Consent of Independent Registered Public Accounting Firm.
99.1  
Item 1.  Business, Item 2. Properties, Item 6.  Selected Financial Data, Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8.  Financial Statements and Supplementary Data.

 
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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
  WEINGARTEN REALTY INVESTORS  
       
Date:  December 4, 2008
By:
/s/ Joe D. Shafer  
    Joe D. Shafer  
   
Vice President/Chief Accounting Officer
(Principal Accounting Officer)
 
 



 
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INDEX TO EXHIBITS
 

10.1
10.2
10.3
10.4
10.5
12.1
23.1
99.1  

 
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EXHIBIT 10.1
 
Amendment No. 3 to the
Weingarten Realty Investors
Retirement Benefit Restoration Plan

WHEREAS, Weingarten Realty Investors (the “Employer”) sponsors the Weingarten Realty Investors Retirement Benefit Restoration Plan (the “Plan”); and

WHEREAS, the purpose of the Plan is to supplement the retirement benefit provided under the terms of the Weingarten Realty Pension Plan, as amended (the “Pension Plan”) for selected eligible employees; and

WHEREAS, the Employer desires to amend the Plan to further reflect the Plan’s compliance with Internal Revenue Code Section 409A and guidance issued thereunder;

NOW, THEREFORE, the Employer amends the Plan as follows, effective as of January 1, 2008:

1.           Section 6.2(a) of the Plan is hereby amended, as underlined, to be and read as follows:

 
(a)
General Rule .  Distribution of the vested balance of a Participant’s Accounts shall be made in accordance with his or her election which indicates the Participant’s choice with respect to the form of distribution among the options available under Section 6.3 hereof. The Participant may make a separate election as to the form of distribution in the event of death and the time at which distribution is to commence following death. Such distribution elections must be made at the time the Participant completes his or her initial Participation Agreement in accordance with Section 2.1. A Participant may modify his or her previously-made elections relating to the form of distribution and may modify the time at which distribution would otherwise commence under Section 6.4 hereof in accordance with Section 6.2(b). Notwithstanding the preceding, if an Eligible Employee is participating in the Plan in 2005, 2006, 2007 or 2008 and has not previously designated the form of distribution of his or her Accounts or desires to modify a previously-filed distribution election, he or she must make or modify such an election, as the case may be, and file it with the Administrator on or before December 31, 2008 ; provided, however, that a Participant may not file a modified payment election in 2006 that has the effect of deferring payment of amounts the Participant would otherwise receive in 2006 or cause payments to be made in 2006 that would otherwise be made subsequent to 2006; likewise the Participant may not  file a modified payment election in 2007 that has the effect of deferring payment of amounts the Participant would otherwise receive in 2007 or cause payments to be made in 2007 that would otherwise be made subsequent to 2007; likewise, the Participant may not  file a modified payment election in 2008 that has the effect of deferring payment of
 

 
 
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amounts the Participant would otherwise receive in 2008 or cause payments to be made in 2008 that would otherwise be made subsequent to 2008 . The elections referred to in the immediately preceding sentence shall not be required to meet the requirements of Section 6.2(b).

2.           Section 6.4(c) of the Plan is hereby amended to be and read as follows:

(c)  
Notwithstanding anything contained herein to the contrary, if a Participant is a Specified Employee and separates from service for a reason other than death, such Participant’s distribution may not commence earlier than six (6) months from the date of his or her separation from service.  Any payment that would have been made within six (6) months of the Participant’s separation from service without regard to the foregoing sentence shall instead be made on the first day of the month following the date that is six (6) months from the date on which the Participant separated from service.
 
3.           Section 6.5 is hereby deleted from the Plan.

 

IN WITNESS WHEREOF, Weingarten Realty Investors has caused this instrument to be executed by its duly authorized officer this 17 day of November, 2008, effective as of January 1, 2008.

Weingarten Realty Investors
By:
/s/ Stephen C. Richter
Its (Title):
Executive Vice President/CFO

 
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EXHIBIT 10.2

 
Amendment No. 3 to the
Weingarten Realty Investors
Deferred Compensation Plan


WHEREAS , Weingarten Realty Investors (the “Employer”) sponsors the Weingarten Realty Investors Deferred Compensation Plan (the “Plan”) under the terms of which eligible participants are entitled to defer a portion of their compensation; and
 
WHEREAS , the Employer desires to amend the Plan to further reflect the Plan’s compliance with Internal Revenue Code Section 409A and guidance issued thereunder;

NOW THEREFORE , the Employer amends the Plan as follows, effective as of January 1, 2008 or as otherwise stated herein.

1.           Section 7.1(a) of the Plan is hereby amended, as underlined, to be and read as follows:

 
(a)
General Rule . Distribution of the Participant’s Accounts shall be made in accordance with the Participant’s election with respect to the form of payment.  The Participant may make a separate election as to the form of distribution in the event of death and the time at which distribution is to commence following death. Such elections shall be made by the Participant at the time the Participant makes his or her initial Deferral Election. A Participant may modify his or her previously-made elections relating to the form of distribution and may modify the time at which distribution would otherwise commence under Sections 7.2 or 7.3 hereof in accordance with Section 7.1(b). Notwithstanding the preceding, if an Eligible Employee is participating in the Plan in 2005, 2006, 2007 or 2008 and has not previously designated the form of distribution of his or her Accounts or desires to modify a previously-filed distribution election, he or she must make or modify such an election, as the case may be, and file it with the Administrator on or before December 31, 2008 ; provided, however, that a Participant may not file a modified distribution election in 2006 that has the effect of deferring payment of amounts the Participant would otherwise receive in 2006 or cause payments to be made in 2006 that would otherwise be made subsequent to 2006; likewise, the Participant may not file a modified distribution election in 2007 that has the effect of deferring payment of amounts the Participant would otherwise receive in 2007 or cause payments to be made in 2007 that would otherwise be made subsequent to 2007; and likewise, the Participant may not file a modified distribution election in 2008 that has the effect of deferring payment of amounts the Participant would otherwise receive in 2008 or cause payments to be made in 2008 that would otherwise be made subsequent to 2008 . The elections referred to in the immediately preceding sentence shall not be required to meet the requirements of Section 7.1(b). If the Administrator separately accounts for Deferrals in each Plan Year, the Participant may make separate distribution elections with respect to each

 
1
 

Plan Year’s Deferral Election, in which case each separate distribution election shall be effective with respect to the Deferrals to which the election relates.

2.           Section 7.1(c) of the Plan is hereby amended to be and read as follows:

 
(c)
Distribution to Specified Employees . Notwithstanding anything contained herein to the contrary, if a Participant is a Specified Employee and separates from service for a reason other than death, distribution of such Participant’s Accounts may not commence earlier than six (6) months from the date of his or her separation from service. Any payment that would have been made within the first six months following the date on which the Participant separated from service without regard to this subsection (c) shall be made on the first day of the month following the date that is six months following the date on which the Participant separated from service.
 
3.           7.2(a)(ii) of the Plan is hereby amended to be and read as follows:
 
 
(ii)
Commencement of Payment . Retirement Account payments shall be made or commence as of the first day of the month immediately following the month in which the Participant Retires, unless Section 7.1(c) hereof requires a later payment date, as described therein; provided, however, that the Participant may elect, in accordance with Section 7.1(b), to defer payment to a later date.  If an installment form of distribution is elected, annual installment payments subsequent to the first payment shall be made on each succeeding anniversary of the date the first payment was made.
 
4.             Section 7.3(c) of the Plan is hereby amended to be and read as follows:
 
(c)  
Commencement of Distribution . Payment under this Section 7.3 shall commence as of the first day of the month following the month in which the Participant dies, separates from service due to Disability, or separates from service for any other reason other than Retirement, unless Section 7.1(c) hereof requires a later payment date, as described therein; provided, however, that the Participant may elect, in accordance with Section 7.1(b), to defer payment to a later date. If an installment form of distribution is elected, annual installment payments subsequent to the first payment shall be made on each succeeding anniversary of the date the first payment was made.
 
5.           Section 7.4(a) is hereby deleted from the Plan.                                                                                                                                
 


 
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IN WITNESS WHEREOF , WEINGARTEN REALTY INVESTORS has caused this instrument to be executed by its duly authorized officer this 17 day of November, 2008, effective as of January 1, 2008, or as otherwise stated herein.
 

WEINGARTEN REALTY INVESTORS
 
By:
/s/ Stephen C. Richter
Its (Title):
Executive Vice President/CFO

 
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EXHIBIT 10.3
 
Amendment No. 3 to the
Weingarten Realty Investors
Supplemental Executive Retirement Plan


WHEREAS, Weingarten Realty Investors (the “Employer”) sponsors the Weingarten Realty Investors Supplemental Executive Retirement Plan (the “Plan”); and

WHEREAS, the purpose of the Plan is to supplement the retirement benefit provided under the terms of the Weingarten Realty Pension Plan, as amended (the “Pension Plan”) for selected eligible employees; and

WHEREAS, the Employer desires to amend the Plan to further reflect the Plan’s compliance with Internal Revenue Code Section 409A and guidance issued thereunder;

NOW, THEREFORE, the Employer amends the Plan as follows, effective as of January 1, 2008:

1.           Section 6.2(a) of the Plan is hereby amended, as underlined, to be and read as follows:
 

 
(a)
General Rule .  Distribution of the vested balance of a Participant’s Accounts shall be made in accordance with his or her election which indicates the Participant’s choice with respect to the form of distribution among the options available under Section 6.3 hereof. The Participant may make a separate election as to the form of distribution in the event of death and the time at which distribution is to commence following death. Such distribution elections must be made at the time the Participant completes his or her initial Participation Agreement in accordance with Section 2.1. A Participant may modify his or her previously-made elections relating to the form of distribution and may modify the time at which distribution would otherwise commence under Section 6.4 hereof in accordance with Section 6.2(b). Notwithstanding the preceding, if an Eligible Employee is participating in the Plan in 2005, 2006, 2007 or 2008 and has not previously designated the form of distribution of his or her Accounts or desires to modify a previously-filed distribution election, he or she must make or modify such an election, as the case may be, and file it with the Administrator on or before December 31, 2008 ; provided, however, that a Participant may not file a modified payment election in 2006 that has the effect of deferring payment of amounts the Participant would otherwise receive in 2006 or cause payments to be made in 2006 that would otherwise be made subsequent to 2006; likewise, the Participant may not  file a modified payment election in 2007 that has the effect of deferring payment of amounts the Participant would otherwise receive in 2007 or cause payments to be made in 2007 that would otherwise be made subsequent to 2007; likewise, the Participant may not  file a modified

 
1
 

 
 
 
payment election in 2008 that has the effect of deferring payment of amounts the Participant would otherwise receive in 2008 or cause payments to be made in 2008 that would otherwise be made subsequent to 2008 . The elections referred to in the immediately preceding sentence shall not be required to meet the requirements of Section 6.2(b).

2.           Section 6.4(c) of the Plan is hereby amended to be and read as follows:

(c)  
Notwithstanding anything contained herein to the contrary, if a Participant is a Specified Employee and separates from service for a reason other than death, such Participant’s distribution may not commence earlier than six (6) months from the date of his or her separation from service.  Any payment that would have been made within six (6) months of the Participant’s separation from service without regard to the foregoing sentence shall instead be made on the first day of the month following the date that is six (6) months from the date on which the Participant separated from service.
 
3.           Section 6.5 is hereby deleted from the Plan.

IN WITNESS WHEREOF, Weingarten Realty Investors has caused this instrument to be executed by its duly authorized officer this 17 day of November, 2008, effective as of January 1, 2008.


Weingarten Realty Investors
 
By:
/s/ Stephen C. Richter
Its (Title):
Executive Vice President/CFO

2
 

 
 
 
Exhibit 10.4

AMENDMENT NO. 1 TO
WEINGARTEN REALTY INVESTORS
2001 LONG TERM INCENTIVE PLAN


WHEREAS, Weingarten Realty Investors, a Texas real estate investment trust (the "Company"), has heretofore adopted the Weingarten Realty Investors 2001 Long Term Incentive Plan (the "Plan"); and
WHEREAS, Section 409A (“Code Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”), was enacted on October 22, 2004, and related Treasury Regulations were published April 10, 2007 and are effective January 1, 2008; and
WHEREAS, the Company has determined it to be necessary and advisable to amend the Plan to cause the terms of the Plan to reflect compliance with the applicable provisions of Code Section 409A and the Treasury Regulations issued thereunder; and
WHEREAS, the Company intends that this Amendment, and all Awards issued pursuant to the Plan, be interpreted and administered consistent with the provisions of Code Section 409A and the Treasury Regulations issued thereunder, including the exemptions from Code Section 409A available under such Code Section and Regulations; and
WHEREAS, the Company has the power to amend the Plan pursuant to Section 1.13 of the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows, effective January 1, 2008:
1.           Section 1.3(k) of the Plan is hereby amended to be and read as follows:
 
 
(k)
"Fair Market Value" of any Shares shall mean (i) if the Shares are readily tradable on an established securities market , the closing price of a share on the Option Date ; (ii) if the Shares are traded on an exchange or market in which prices are reported on a bid and asked prices, the closing price for a Share on the Option Date ; or (iii) if the Shares are not readily tradable on an established securities

 
1
 


market nor traded on the over-the-counter market, then with respect to Non-Qualified Share Options, such value as the Committee, in good faith, shall determine in accordance with Treasury Regulation Section 1.409A-1(b)(5)(iv)(B), and with respect to any other Award hereunder , such value as the Committee, in good faith, shall determine.

2.           Section 1.3(q) of the Plan is hereby amended, as underlined, to be and read as follows:

 
(q)
"Permitted Modification" shall be deemed to be any modification of an Award which is made in connection with a Corporate Transaction and which provides in connection with a Share Option, that subsequent to the consummation of the Corporate Transaction (i) the exercise price of such Share Option will be proportionately adjusted to reflect the exchange ratio applicable to the particular Corporate Transaction and/or (ii) the nature and amount of consideration to be received upon exercise of the Share option will be the same (on a per share basis) as was received by Persons who were holders of shares of Common Stock immediately prior to the consummation of the Corporate Transaction, provided, however, as follows: (i) any such adjustments to Awards that are considered “deferred compensation” within the meaning of Code Section 409A shall be made in compliance with the requirements of Code Section 409A unless the Participant consents otherwise; (ii) any such adjustments to Awards that are not considered “deferred compensation” subject to Code Section 409A shall be made in such a manner as to ensure that after such adjustment, the Awards either continue not to be subject to Code Section 409A or comply with the requirements of Code Section 409A unless the Participant consents otherwise; and (iii) the Committee shall not have the authority to make any adjustments under this Section to the extent that the existence of such authority would cause an Award that is not intended to be subject to Code Section 409A to be subject thereto .

3.           Section 1.4 of the Plan is hereby amended by adding the following paragraph (f) at the end thereof to be and read as follows:

 
(f)
Compliance with Code Section 409A . It is the intention of the Company that no Award shall be “deferred compensation” subject to Code Section 409A unless and to the extent that the Committee specifically determines otherwise, and the Plan and the terms and conditions of all Awards shall be interpreted accordingly. Notwithstanding any provision of the Plan to the contrary, in the event that the Committee determines that any Award may be subject to Code Section 409A, the Committee may adopt such amendment to the Plan and the applicable Award agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions that the Committee determines are necessary or appropriate to (1) exempt the Award from Code Section 409A and/or preserve the intended tax treatment of the benefits

 
2
 

 
provided with respect to the Award or (2) comply with the requirements of Code Section 409A.

4.           Section 1.10 of the Plan is hereby amended, as underlined, to be and read as follows:
 
1.10        Adjustments to Number of Shares Subject to the Plan .  In the event of any change in the outstanding Shares of the Company by reason of any stock dividend, split, spinoff, recapitalization, merger, consolidation, combination, extraordinary dividend, exchange of shares or other similar change, the aggregate number of Shares with respect to which awards may be made under the Plan, the terms and the number of Shares of any outstanding Share Options and Restricted Shares, and the purchase price of a Share under any Share Options, may be equitably adjusted by the Board in its sole discretion, provided, however, as follows: (i) any such adjustments to Awards that are considered “deferred compensation” within the meaning of Code Section 409A shall be made in compliance with the requirements of Code Section 409A unless the Participant consents otherwise; (ii) any such adjustments to Awards that are not considered “deferred compensation” subject to Code Section 409A shall be made in such a manner as to ensure that after such adjustment, the Awards either continue not to be subject to Code Section 409A or comply with the requirements of Code Section 409A unless the Participant consents otherwise; and (iii) the Committee shall not have the authority to make any adjustments under this Section to the extent that the existence of such authority would cause an Award that is not intended to be subject to Code Section 409A to be subject thereto .

5.           Section 1.14 of the Plan is hereby amended, as underlined, to be and read as follows:
 
1.14        Amendment and Adjustments to Awards .   Subject to the limitations described herein , the Committee may amend, modify or terminate any outstanding Award with the Participant's consent at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including, without limitation, to change the date or dates as of which and/or the terms and conditions pursuant to which (a) a Share Option becomes exercisable or (b) to amend the terms of any outstanding Share Option to provide an exercise price per share which is higher or lower than the then current exercise price per share of such outstanding Award or (c) to cancel an Award and grant a new Award in substitution therefore under such different terms and conditions as the Committee determines in its sole discretion to be appropriate including, but not limited to, having an exercise price per share which may be higher or lower than the exercise price per share of the cancelled Award.  The Committee may also make adjustments in the terms and conditions of, and the criteria included in agreements evidencing Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 1.11 of the Plan) affecting the Company, or the financial statements of the Company or any Subsidiary, or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate to prevent reduction or enlargement of the benefits or potential benefits intended to be made available pursuant to the Plan.  Any provision of the Plan or any Award Agreement to the contrary notwithstanding, the Committee may cause any Award granted to be cancelled in consideration of a cash payment or alternative Award made to the holder of such cancelled Award equal in value to the Fair Market Value of such

 
3
 

cancelled Award.  The determinations of value pursuant to this Section shall be made by the Committee in its sole discretion. Notwithstanding the immediately preceding provisions of this Section 1.14, with respect to a Non-Qualified Share Option, no modifications described in this Section 1.14 shall be made to such Option unless such modification is permitted pursuant to Treasury Regulation Section 1.409A-1(b)(5)(v) and will not cause the Non-Qualified Share Option to be considered “deferred compensation” within the meaning of Code Section 409A.

6.           Section 3.4(c) of the Plan is hereby amended, as underlined, to be and read as follows:

 
(c)
As soon as practicable following the time of exercise of a Non-Qualified Share Option, a certificate representing the Shares so purchased shall be delivered to the Participant. Upon exercise, the Participant shall in no event be entitled to any accumulated dividends, other securities or cash to which he or she would have been entitled had he or she actually owned the Shares subject to the Option as of the Option Date .
 


[Signature page follows]

 
4
 

IN WITNESS WHEREOF, the Company has caused this AMENDMENT NO. 1 TO WEINGARTEN REALTY INVESTORS 2001 LONG TERM INCENTIVE PLAN to be executed in its name and on its behalf this 17 day of November, 2008, to be effective January 1, 2008.

WEINGARTEN REALTY INVESTORS
 
By:
/s/ Stephen C. Richter
Name:
Stephen C. Richter
Title:
Executive Vice President/CFO


 
 
5

Exhibit 10.5
THE SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES OF WEINGARTEN REALTY INVESTORS
 
AMENDMENT FOR THE FINAL 415 REGULATIONS


ARTICLE I
PREAMBLE

  1.1
Effective date of Amendment . This Amendment is effective for limitation years and plan years beginning on or after July 1, 2007, except as otherwise provided herein.

  1.2
Superseding of inconsistent provisions.   This Amendment supersedes the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Amendment.

  1.3
Employer's Election.   The Employer adopts all Articles of this Amendment.

  1.4
Construction.   Except as otherwise provided in this Amendment, any reference to "Section" in this Amendment refers only to sections within this Amendment, and is not a reference to the Plan. The Article and Section numbering in this Amendment is solely for purposes of this Amendment, and does not relate to any Plan article, section or other numbering designations.

  1.5
Effect of restatement of Plan. If the Employer restates the Plan, then this Amendment shall remain in effect after such restatement unless the provisions in this Amendment are restated or otherwise become obsolete (e.g., if the Plan is restated onto a plan document which incorporates the final Code §415 Regulation provisions).

ARTICLE II
EMPLOYER ELECTIONS

  2.1
Default Provisions.   The following defaults shall apply.

           (a)
The provisions of the Plan setting forth the definition of compensation for purposes of Code § 415 (hereinafter referred to as "415 Compensation"), as well as compensation for purposes of determining Highly Compensated Employees pursuant to Code § 414(q) and for top-heavy purposes under Code § 416 (including the determination of Key Employees), shall be modified by:

                  (1)
including payments for unused sick, vacation or other leave paid after severance of employment, unle ss the current plan Compensation definition specifically excludes one or more of these categories.  To the extent some but not all of these forms of leave payments are currently excluded from plan Compensation, only those particular excluded categories shall remain excluded for purposes of this Amendment and 415 Compensation shall be the same as what the Plan currently provides in this regard (Section 3.2(b)),

                  (2)
including scheduled payments from nonqualified unfunded deferred compensation plans paid either before or after severance of employment unl ess the current plan Compensation definition excludes such compensation, then 415 Compensation shall be the same as what the Plan currently provides in this regard (Section 3.2(b)),

                  (3)
excluding salary continuation payments for participants in military service unl ess the current plan Compensation definition includes such compensation, then 415 Compensation shall be the same as what the Plan currently provides in this regard (Section 3.2(c)), and

                  (4)
excluding salary continuation payments for disabled participants unl ess the current plan Compensation definition includes such compensation, then 415 Compensation shall be the same as what the Plan currently provides in this regard (Section 3.2(d)).

           b.
The "first few weeks rule" does not apply for purposes of 415 Compensation (Section 3.3).



 
 
 

ARTICLE III
FINAL SECTION 415 REGULATIONS

  3.1
Effective date. The provisions of this Article III shall apply to limitation and plan years beginning on and after July 1, 2007.

  3.2
415 Compensation paid after severance from employment. 415 Compensation shall be adjusted, as set forth herein for the following types of compensation paid after a Participant's severance from employment with the Employer maintaining the Plan (or any other entity that is treated as the Employer pursuant to Code § 414(b), (c), (m) or (o)). However, amounts described in subsections (a) and (b) below may only be included in 415 Compensation to the extent such amounts are paid by the later of 2 1/2 months after severance from employment or by the end of the limitation year that includes the date of such severance from employment. Any other payment of compensation paid after severance of employment that is not described in the following types of compensation is not considered 415 Compensation within the meaning of Code § 415(c)(3), even if payment is made within the time period specified above.

(a)    Regular pay. 415 Compensation shall include regular pay after severance of employment if:

(1)     The payment is regular compensation for services during the participant's regular working hours, or compensation for services outside the participant's regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and

(2)     The payment would have been paid to the participant prior to a severance from employment if the participant had continued in employment with the Employer.

(b)    Leave cashouts and deferred compensation. Unless otherwise specified in Section 2.1(a), leave cashouts shall be included in 415 Compensation if those amounts would have been included in the definition of 415 Compensation if they were paid prior to the participant's severance from employment, and the amounts are payment for unused accrued bona fide sick, vacation, or other leave, but only if the participant would have been able to use the leave if employment had continued. In addition, unless otherwise specified in Section 2.1(a) deferred compensation shall be included in 415 Compensation  if the compensation would have been included in the definition of 415 Compensation if it had been paid prior to the participant's severance from employment, and the compensation is received pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid at the same time if the participant had continued in employment with the Employer and only to the extent that the payment is includible in the participant's gross income.

(c)    Salary continuation payments for military service participants. Unless otherwise specified in Section 2.1(a), 415 Compensation does not include payments to an individual who does not currently perform services for the Employer by reason of qualified military service (as that term is used in Code § 414(u)(1)) to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Employer rather than entering qualified military service.

(d)    Salary continuation payments for disabled Participants.   Unless otherwise specified in Section 2.1(a), 415 Compensation does not include compensation paid to a participant who is permanently and totally disabled (as defined in Code § 22(e)(3)). This provision shall apply to all participants.

  3.3
Administrative delay ("the first few weeks") rule. 415 Compensation for a limitation year shall not include amounts earned but not paid during the limitation year solely because of the timing of pay periods and pay dates.

  3.4
Inclusion of certain nonqualified deferred compensation amounts. If the Plan's definition of Compensation for purposes of Code § 415 is the definition in Regulation Section 1.415(c)-2(b) (Regulation Section 1.415-2(d)(2) under the Regulations in effect for limitation years beginning prior to July 1, 2007) and the simplified compensation definition of Regulation 1.415(c)-2(d)(2) (Regulation Section 1.415-2(d)(10) under the Regulations in effect for limitation years prior to July 1, 2007) is not used, then 415 Compensation shall include amounts that are includible in the gross income of a Participant under the rules of Code § 409A or Code § 457(f)(1)(A) or because the amounts are constructively received by the Participant. (Note if the Plan’s definition of Compensation is W-2 wages or wages for withholding purposes, then these amounts are already included in Compensation.)

 
 
 

  3.5
Definition of annual additions.   The Plan's definition of "annual additions" is modified as follows:

(a)    Restorative payments . Annual additions for purposes of Code § 415 shall not include restorative payments. A restorative payment is a payment made to restore losses to a Plan resulting from actions by a fiduciary for which there is reasonable risk of liability for breach of a fiduciary duty under ERISA or under other applicable federal or state law, where participants who are similarly situated are treated similarly with respect to the payments. Generally, payments are restorative payments only if the payments are made in order to restore some or all of the plan's losses due to an action (or a failure to act) that creates a reasonable risk of liability for such a breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). This includes payments to a plan made pursuant to a Department of Labor order, the Department of Labor's Voluntary Fiduciary Correction Program, or a court-approved settlement, to restore losses to a qualified defined contribution plan on account of the breach of fiduciary duty (other than a breach of fiduciary duty arising from failure to remit contributions to the Plan). Payments made to the Plan to make up for losses due merely to market fluctuations and other payments that are not made on account of a reasonable risk of liability for breach of a fiduciary duty under ERISA are not restorative payments and generally constitute contributions that are considered annual additions.

(b)    Other Amounts. Annual additions for purposes of Code § 415 shall not include: (1) The direct transfer of a benefit or employee contributions from a qualified plan to this Plan; (2) Rollover contributions (as described in Code §§ 401(a)(31), 402(c)(1), 403(a)(4), 403(b)(8), 408(d)(3), and 457(e)(16)); (3) Repayments of loans made to a participant from the Plan; and (4) Repayments of amounts described in Code § 411(a)(7)(B) (in accordance with Code § 411(a)(7)(C)) and Code § 411(a)(3)(D) or repayment of contributions to a governmental plan (as defined in Code § 414(d)) as described in Code § 415(k)(3), as well as Employer restorations of benefits that are required pursuant to such repayments.

(c)    Date of tax-exempt Employer contributions . Notwithstanding anything in the Plan to the contrary, in the case of an Employer that is exempt from Federal income tax (including a governmental employer), Employer contributions are treated as credited to a participant's account for a particular limitation year only if the contributions are actually made to the plan no later than the 15th day of the tenth calendar month following the end of the calendar year or fiscal year (as applicable, depending on the basis on which the employer keeps its books) with or within which the particular limitation year ends.

  3.6
Change of limitation year . The limitation year may only be changed by a Plan amendment. Furthermore, if the Plan is terminated effective as of a date other than the last day of the Plan's limitation year, then the Plan is treated as if the Plan had been amended to change its limitation year.

  3.7
Excess Annual Additions. Notwithstanding any provision of the Plan to the contrary, if the annual additions (within the meaning of Code § 415) are exceeded for any participant, then the Plan may only correct such excess in accordance with the Employee Plans Compliance Resolution System (EPCRS) as set forth in Revenue Procedure 2006-27 or any superseding guidance, including, but not limited to, the preamble of the final §415 regulations.

  3.8
Aggregation and Disaggregation of Plans.   

(a)   For purposes of applying the limitations of Code § 415, all defined contribution plans (without regard to whether a plan has been terminated) ever maintained by the Employer (or a "predecessor employer") under which the participant receives annual additions are treated as one defined contribution plan. The "Employer" means the Employer that adopts this Plan and all members of a controlled group or an affiliated service group that includes the Employer (within the meaning of Code §§ 414(b), (c), (m) or (o)), except that for purposes of this Section, the determination shall be made by applying Code § 415(h), and shall take into account tax-exempt organizations under Regulation Section 1.414(c)-5, as modified by Regulation Section 1.415(a)-1(f)(1). For purposes of this Section:

   (1)     A former Employer is a "predecessor employer" with respect to a participant in a plan maintained by an Employer if the Employer maintains a plan under which the participant had accrued a benefit while performing services for the former Employer, but only if that benefit is provided under the plan maintained by the Employer. For this purpose, the formerly affiliated plan rules in Regulation Section 1.415(f)-1(b)(2) apply as if the Employer and predecessor Employer constituted a single employer under the rules described in Regulation Section 1.415(a)-1(f)(1) and (2) immediately prior to the cessation of affiliation (and as if they constituted two, unrelated employers under the rules described in Regulation Section 1.415(a)-1(f)(1) and (2) immediately after the cessation of affiliation) and cessation of affiliation was the event that gives rise to the predecessor employer relationship, such as a transfer of benefits or plan sponsorship.

 
 
 

   (2)     With respect to an Employer of a participant, a former entity that antedates the Employer is a "predecessor employer" with respect to the participant if, under the facts and circumstances, the employer constitutes a continuation of all or a portion of the trade or business of the former entity.

(b)    Break-up of an affiliate employer or an affiliated service group. For purposes of aggregating plans for Code § 415, a "formerly affiliated plan" of an employer is taken into account for purposes of applying the Code § 415 limitations to the employer, but the formerly affiliated plan is treated as if it had terminated immediately prior to the "cessation of affiliation." For purposes of this paragraph, a "formerly affiliated plan" of an employer is a plan that, immediately prior to the cessation of affiliation, was actually maintained by one or more of the entities that constitute the employer (as determined under the employer affiliation rules described in Regulation Section 1.415(a)-1(f)(1) and (2)), and immediately after the cessation of affiliation, is not actually maintained by any of the entities that constitute the employer (as determined under the employer affiliation rules described in Regulation Section 1.415(a)-1(f)(1) and (2)). For purposes of this paragraph, a "cessation of affiliation" means the event that causes an entity to no longer be aggregated with one or more other entities as a single employer under the employer affiliation rules described in Regulation Section 1.415(a)-1(f)(1) and (2) (such as the sale of a subsidiary outside a controlled group), or that causes a plan to not actually be maintained by any of the entities that constitute the employer under the employer affiliation rules of Regulation Section 1.415(a)- 1(f)(1) and (2) (such as a transfer of plan sponsorship outside of a controlled group).

(c)    Midyear Aggregation . Two or more defined contribution plans that are not required to be aggregated pursuant to Code § 415(f) and the Regulations thereunder as of the first day of a limitation year do not fail to satisfy the requirements of Code § 415 with respect to a participant for the limitation year merely because they are aggregated later in that limitation year, provided that no annual additions are credited to the participant's account after the date on which the plans are required to be aggregated.


This Amendment has been executed this 17 day of November, 2008.

WEINGARTEN REALTY INVESTORS
By:
/s/ Stephen C. Richter
 
EMPLOYER
 
 
 
 
 

                      EXHIBIT 12.1  
                               
WEINGARTEN REALTY INVESTORS
 
COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
 
AND PREFERRED DIVIDENDS
 
(Amounts in thousands)
 
                               
                               
                               
   
Year Ended December 31,
 
   
2007
   
2006
   
2005
   
2004
   
2003
 
Income from continuing operations
  $ 145,412     $ 137,179     $ 122,428     $ 83,501     $ 77,876  
Equity earnings of real estate joint ventures and partnerships, net
    (19,853 )     (14,655 )     (6,610 )     (5,384 )     (4,681 )
Income allocated to minority interests
    10,237       6,414       6,060       4,928       2,723  
Provision for income taxes
    4,073       1,366                          
Fixed charges
    207,104       171,617       149,907       134,640       114,492  
Amortization of capitalized interest
    2,084       2,234       2,366       2,360       1,698  
Distributions of income from real estate joint ventures and partnerships
    6,251       2,524       2,603       1,204       1,543  
Capitalized interest
    (25,025 )     (7,616 )     (2,629 )     (4,992 )     (6,361 )
Preferred dividends
    (25,375 )     (10,101 )     (10,101 )     (7,470 )     (15,912 )
    Net income as adjusted
  $ 304,908     $ 288,962     $ 264,024     $ 208,787     $ 171,378  
                                         
Fixed charges:
                                       
Interest on indebtedness
  $ 148,829     $ 145,374     $ 129,160     $ 116,142     $ 90,214  
Out-of-market mortgage adjustment
    6,758       7,464       7,056       5,073       975  
Capitalized interest
    25,025       7,616       2,629       4,992       6,361  
Preferred dividends
    25,375       10,101       10,101       7,470       15,912  
Portion of rents representative of the interest factor
    1,117       1,062       961       963       1,030  
    Fixed charges
  $ 207,104     $ 171,617     $ 149,907     $ 134,640     $ 114,492  
                                         
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
                                       
 
    1.47       1.68       1.76       1.55       1.50  
                                         
                                         
RATIO OF EARNINGS TO FIXED CHARGES
    1.68       1.79       1.89       1.64       1.74  

 

 
 

 

 
Exhibit 23.1
 
 

 
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
We consent to the incorporation by reference in Registration Statements No. 33-20964, No. 33-24364, No. 33-41604, No. 33-52473, No. 33-54402, No. 33-54404, No. 333-94945, No. 333-37823 and No. 333-37831 on Forms S-8, in Post-Effective Amendment No. 1 to Registration Statement No. 33-25581 on Form S-8 and in Registration Statements No. 333-104559, No. 333-121506, No. 333-122342, No. 333-122448, No. 333-124298, No. 333-127969, No. 333-134908, No. 333-138336 and No. 333-142418 on Forms S-3   of our report dated February 29, 2008 (December 4, 2008 as to the effects of the 2008 discontinued operations described in Note 9), relating to the consolidated financial statements of Weingarten Realty Investors appearing in this Current Report on Form 8-K of Weingarten Realty Investors dated December 4, 2008.
 
 

 
 
/s/ Deloitte & Touche LLP
 
 
Houston, Texas
 
 
December 4, 2008
 

 
EXHIBIT 99.1
 


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, 2007, we owned or operated under long-term leases, either directly or through our interest in real estate joint ventures or partnerships, a total of 383 developed income-producing properties and 32 properties under various stages of construction and development.  The total number of centers includes 335 neighborhood and community shopping centers located in 22 states spanning the country from coast to coast.  We also owned 77 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 72.8 million square feet. 

We also owned interests in 19 parcels of unimproved land held for future development that totaled approximately 9.9 million square feet.

At December 31, 2007, we employed 485 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 10 regional offices located in various parts of the United States.

Investment and Operating Strategy.   Our 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.  Our estimated gross investment in the 32 properties currently under development or predevelopment is $628.7 million.

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

At December 31, 2007, neighborhood and community shopping centers generated 89.0% of total revenue and industrial properties accounted for 9.1%.  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.

 
1
 

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 35.3% 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 3.0% and 1.6%, respectively, of our total rental revenues for the year ended December 31, 2007.  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.  We have a credit rating of BBB+ from Standard & Poors and Baa1 from Moody's Investor Services.  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, 2007, our ratio of funds from operations to combined fixed charges and preferred dividends was 2.2 to 1 and our debt to total market capitalization was 49.3%.

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, 2007, of our 415 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 77 properties are located in other parts of Texas.  We also have 19 parcels of unimproved land, 11 of which are located in Houston and its surrounding areas and three 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 softened in 2007.  The residential mortgage and capital markets began showing signs of stress, primarily in the form of escalating default rates on sub-prime mortgages and declining residential housing prices nationwide.  This “credit” crisis spread to the broader commercial credit markets and has generally reduced the availability of financing and widened spreads.  These factors, coupled with a slowing economy, may negatively impact the volume of real estate transactions and cap rates, which could negatively impact stock price performance of public real estate companies, including ours. While the housing market and energy prices may affect 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 changes.  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 strong employment growth and higher than average rent growth among larger metropolitan areas.  However, if these economic conditions persist in 2008 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.

 
2
 

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 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.  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 49 through 79 herein.


 
3
 

ITEM 2.        Properties

At December 31, 2007, our real estate properties consisted of 415 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):

 
Center and Location
 
Building
 
Land
   
Area
 
Area
 
Retail
           
Arizona
           
Arrowhead Festival S.C., 75th Ave. at W. Bell Rd., Glendale
     
176,458
 
157,000
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
     
102,271
 
445,000
Fry's Ellsworth Plaza, Broadway Rd. at Ellsworth Rd., Mesa
     
73,608
 
58,000
Fry's Valley Plaza, S. McClintock at E. Southern, Tempe
     
145,104
 
570,000
Gladden Farms, Lon Adams Rd at Tangerine Farms Rd
 
(1)(2)
 
119,685
 
464,785
Laveen Village Market, Baseline Rd. at  51st St., Phoenix
     
111,644
 
372,274
Madera Village, Tanque Verde Rd. and Catalina Hwy, Tucson
     
106,626
 
419,000
Mohave Crossroads, Bullhead Parkway at State Route 95, Bullhead City
 
(2)
 
302,230
 
1,356,023
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)
 
128,106
 
759,000
Rancho Encanto, 35th Avenue at Greenway Rd., Phoenix
     
70,909
 
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)
 
69,300
 
658,567
University Plaza, Plaza Way at Milton Rd., Flagstaff
     
166,321
 
919,000
Val Vista Towne Center, Warner at Val Vista Rd., Gilbert
     
216,372
 
366,000
Arizona, Total
   
3,498,040
 
13,123,089
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
     
130,856
 
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
 
 
 

4

 
Center and Location
 
Building
 
Land
   
Area
 
Area
 
Jess Ranch Marketplace, Bear Valley Road at Jess Ranch Parkway, Apple Valley
 
(1)(2)(3)
 
275,595
 
0
Jess Ranch Phase III, Bear Valley Road at Jess Ranch Parkway, Apple Valley
 
(1)(2)(3)
 
71,500
 
1,692,000
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
Ralphs Redondo, Hawthorne Blvd. at 182nd St., Redondo Beach
  (4)  
66,700
 
431,000
Rancho San Marcos Village, San Marcos Blvd. at Rancho Santa Fe Rd., San Marcos
     
120,829
 
541,000
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
     
411,278
 
1,739,000
California, Total
   
4,495,047
 
16,567,575
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
Buckingham Square, Mississippi at Havana, Aurora
 
(1)(2)
 
142,500
 
0
CityCenter Englewood, S. Santa Fe at Hampden Ave., Englewood
 
(1)
 
360,543
 
452,941
Crossing at Stonegate, Jordon Rd. at Lincoln Ave., Parker
 
(1)
 
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
 
310,000
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)
 
380,638
 
4,270,000
Thorncreek Crossing, Washington St. at 120th St., Thornton
 
(1)
 
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)
 
97,042
 
636,000
Colorado, Total
   
3,135,456
 
12,571,197
Florida
           
Alafaya Square, Alafaya Trail, Oviedo
 
(1)(3)
 
176,486
 
915,000
Argyle Village, Blanding at Argyle Forest Blvd., Jacksonville
     
304,447
 
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)
 
144,019
 
2,289,949
Colonial Landing, East Colonial Dr. at Maguire Boulevard, Orlando
 
(1)(2)
 
263,267
 
980,000
Colonial Plaza, E. Colonial Dr. at Primrose Dr., Orlando
     
496,628
 
2,009,000
Countryside Centre, US Highway 19 at Countryside Boulevard
     
242,123
 
906,440
Curry Ford, Young Pines and Curry Ford Rd, Orange County
 
(2)
 
0
 
132,422
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
     
179,937
 
618,000
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
     
575,388
 
1,888,000

5

 
Center and Location
 
Building
 
Land
   
Area
 
Area
 
Market at Southside, Michigan Ave. at Delaney Ave., Orlando
     
159,835
 
349,000
Marketplace at Seminole Towne Center, Central Florida Greenway and Rinehart Road, Sanford
     
493,761
 
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)
 
303,146
 
1,384,772
Palm Lakes Plaza, Atlantic Boulevard and Rock Island Road, Maragate
 
(1)(3)
 
116,402
 
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
     
314,417
 
1,394,000
Phillips Crossing, Interstate 4 and Sand Lake Road, Orlando
 
(2)
 
91,350
 
697,000
Phillips Landing, Turkey Lake Rd., Orlando
 
(2)
 
253,888
 
311,000
Pineapple Commons, Us Highway 1 and Britt Rd.
 
(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
Shoppes at Parkland, Hillsboro Boulevard at State Road #7, Parkland
     
145,652
 
905,000
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
     
161,871
 
540,000
University Palms, Alafaya Trail at McCullough Rd., Oviedo
     
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
     
250,954
 
361,000
Winter Park Corners, Aloma Ave. at Lakemont Ave., Winter Park
     
102,397
 
400,000
Florida, Total
 
 
 
8,956,278
 
38,647,724
Georgia
           
Brookwood Marketplace, Peachtree Parkway at Mathis Airport Rd., Suwannee
     
367,170
 
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
     
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
     
68,389
 
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
South Fulton Town Center, NWC South Fulton Parkway @ Hwy 92, Union City
 
(1)(2)
 
178,601
 
3,554,000
Thompson Bridge Commons, Thompson Bridge Rd. at Mt. Vernon Rd., Gainesville
     
78,351
 
540,000
Georgia, Total
   
2,814,194
 
13,642,036
Illinois
           
Burbank Station, S. Cicero Ave. at W. 78th St.
     
303,566
 
1,013,380
Illinois, Total
   
303,566
 
1,013,380

6


 
Center and Location
 
Building
 
Land
   
Area
 
Area
 
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
     
124,486
 
590,000
Tates Creek, Tates Creek at Man O'War, Lexington
     
179,450
 
660,000
Kentucky, Total
   
673,899
 
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
Conn's Building, Ryan at 17th St., Lake Charles
  (4)  
23,201
 
36,000
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
     
263,615
 
894,000
Orleans Station, Paris, Robert E. Lee at Chatham, New Orleans
     
0
 
31,000
Park Terrace, U.S. Hwy. 171 at Parish, DeRidder
  (4)  
131,127
 
520,000
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)
 
342,968
 
1,029,415
Seigen Plaza, Siegen Lane at Honore Lane, Baton Rouge
     
349,737
 
1,000,000
Southgate, Ryan at Eddy, Lake Charles
     
170,588
 
511,000
Town & Country Plaza, U.S. Hwy. 190 West, Hammond
     
226,102
 
645,000
University Place, 70th St. at Youree Dr., Shreveport
 
(1)(3)
 
395,272
 
1,078,431
Westwood Village, W. Congress at Bertrand, Lafayette
     
141,346
 
942,000
Louisiana, Total
   
2,888,420
 
7,986,711
Maine
           
The Promenade, Essex at Summit, Lewiston
 
(1)
 
205,034
 
962,667
Maine, Total
   
205,034
 
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)
 
56,534
 
654,000
Missouri, Total
   
257,449
 
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
 
1,316,000
College Park S.C., E. Lake Mead Blvd. at Civic Ctr. Dr., North Las Vegas
     
167,654
 
721,000
Decatur 215, Decatur at 215
 
(1)(2)
 
0
 
1,103,810
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
 
2,344,000
Nevada, Total
   
3,520,712
 
13,107,810

7

 
Center and Location
 
Building
 
Land
   
Area
 
Area
 
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
     
270,271
 
1,309,000
New Mexico, Total
   
1,418,615
 
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
 
1,343,000
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
     
112,615
 
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
     
469,780
 
1,843,000
Southern Pines, U.S. 15-501 and Bruce Wood Rd, Southern Pines
 
(2)
 
0
 
1,047,000
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
 
(2)
 
48,756
 
2,538,476
Waterford Village, US Hwy 17 & US Hwy 74/76, Leland
 
(1)(2)
 
52,781
 
1,264,000
Whitehall Commons, NWC of Hwy. 49 at I-485, Charlotte
     
444,596
 
360,000
North Carolina, Total
   
3,572,639
 
19,855,476
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

8

 
Center and Location
 
Building
 
Land
   
Area
 
Area
 
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
     
61,538
 
272,792
Commons at Dexter Lake, Dexter at N. Germantown, Memphis
     
166,958
 
740,208
Highland Square, Summer at Highland, Memphis
     
14,490
 
84,000
Mendenhall Commons, South Mendenahall Rd. and Sanderlin Avenue, Memphis
     
80,206
 
250,000
Ridgeway Trace, Memphis
 
(2)
 
137,740
 
275,915
Summer Center, Summer Ave. at Waring Rd., Memphis
     
148,708
 
560,000
Tennessee, Total
 
     
789,004
 
2,956,915
Texas
           
10/Federal, I-10 at Federal
     
132,472
 
474,000
Alabama-Shepherd, S. Shepherd at W. Alabama
     
56,110
 
176,000
Angelina Village, Hwy. 59 at Loop 287, Lufkin
     
256,940
 
1,835,000
Bayshore Plaza, Spencer Hwy. at Burke Rd.
     
121,966
 
196,000
Bell Plaza, 45th Ave. at Bell St., Amarillo
     
130,529
 
682,000
Bellaire Boulevard, Bellaire at S. Rice
     
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
     
74,477
 
220,000
Broadway, S. Broadway at W. 9th St., Tyler
     
60,400
 
259,000
Brodie Oaks, South Lamar Blvd. at Loop 360, Austin
  (4)  
335,942
 
1,050,000
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.
     
383,779
 
1,391,000
Coronado, 34th St. at Wimberly Dr., Amarillo
     
46,829
 
201,000
Crestview, Bissonnet at Wilcrest
     
8,970
 
35,000
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
     
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
  (4)  
114,373
 
664,000
Edgebrook, Edgebrook at Gulf Fwy.
     
78,324
 
360,000
Fiesta Trails, I-10 at DeZavala Rd., San Antonio
     
488,370
 
1,589,000
Fiesta Village, Quitman at Fulton
     
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
Gateway Station, I-35W and McAlister Rd., Burleson
 
(1)(2)
 
30,000
 
344,286
Gillham Circle, Gillham Circle at Thomas, Port Arthur
     
33,134
 
94,000
Glenbrook Square, Telephone Road
     
76,483
 
320,000
Griggs Road, Griggs at Cullen
     
80,114
 
382,000
Harrisburg Plaza, Harrisburg at Wayside
     
93,438
 
334,000
Heights Plaza, 20th St. at Yale
     
71,777
 
228,000
Horne Street Market, I-30 & Horne Street, Fort Worth
 
(2)
 
0
 
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
     
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
 
 

9

 
Center and Location
 
Building
 
Land
   
Area
 
Area
 
Jacinto City, Market at Baca
 
(1)
 
49,138
 
134,000
Killeen Marketplace, 3200 E. Central Texas Expressway, Killeen
     
251,137
 
512,000
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.
     
51,393
 
177,000
League City Plaza, I-45 at F.M. 518, League City
     
126,990
 
680,000
Little York Plaza, Little York at E. Hardy
     
117,353
 
483,000
Lone Star Pavilions, Texas at Lincoln Ave., College Station
     
106,907
 
439,000
Lyons Avenue, Lyons at Shotwell
     
67,629
 
178,000
Market at Nolana, Nolana Ave and 29th St., McAllen
 
(1)(2)(3)
 
222,248
 
508,000
Market at Sharyland Place, U.S. Expressway 83 and Shary Road, Mission
 
(1)(2)(3)
 
91,411
 
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
     
417,279
 
1,646,000
North Park Plaza, Eastex Fwy. at Dowlen, Beaumont
 
(1)(3)
 
281,401
 
636,000
North Sharyland Towne Crossing, Shary Rd. at North Hwy. 83, Mission
 
(1)(2)(3)
 
0
 
966,000
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
Northway, Northwest Fwy. at 34th
  (4)  
217,136
 
793,000
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
     
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., Plano
 
(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.
     
127,525
 
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
     
234,198
 
609,000
River Pointe, I-45 at Loop 336, Conroe
  (4)  
189,703
 
310,000
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
Sharyland Towne Crossing, Shary Rd. at Hwy. 83, Mission
 
(1)(2)(3)
 
343,583
 
2,008,000
Sheldon Forest North , North, I-10 at Sheldon
     
22,040
 
131,000
 
 

10

 
Center and Location
 
Building
 
Land
   
Area
 
Area
 
Sheldon Forest South , North, I-10 at Sheldon
 
(1)
 
75,340
 
328,000
Shops at Three Corners, S. Main at Old Spanish Trail
 
(1)
 
252,140
 
1,007,143
South 10th St. HEB, S. 10th St. at Houston St., McAllen
 
(1)(3)
 
103,702
 
368,000
Southcliff, I-20 at Grandbury Rd., Ft. Worth
  (4)  
115,827
 
568,000
Southgate, Calder Ave. at 6th St., Beaumont
     
33,555
 
118,000
Southgate, W. Fuqua at Hiram Clark
     
125,440
 
533,000
Spring Plaza, Hammerly at Campbell
     
56,166
 
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
Stevens Ranch, NEC SH 211 and Potranco Road, San Antonio
 
(1)(2)
 
0
 
8,656,243
Studemont, Studewood at E. 14th St
     
28,466
 
91,000
Ten Blalock Square, I-10 at Blalock
     
97,217
 
321,000
Thousand Oaks, Thousand Oaks Dr. at Jones Maltsberger Rd., San Antonio
     
162,882
 
730,000
Tomball Marketplace, FM 2920 and Future 249, Tomball
 
(2)
 
85,000
 
2,431,000
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)
 
0
 
369,741
Westwood Center, Culebra Road and Westwood Loop, San Antonio
 
(2)
 
5,000
 
1,262,177
Wolflin Village, Wolflin Ave. at Georgia St., Amarillo
     
193,284
 
421,000
Texas, Total
   
16,567,314
 
72,539,689
Utah
           
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
 
1,660,045
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
 
112,088
Washington, Total
   
607,602
 
1,862,088
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
 
 

11

 
Center and Location
 
Building
 
Land
   
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
South Park 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
     
390,141
 
1,761,000
Corporate Center Park I and II, Putnam Dr. at Research Blvd., Austin
     
119,452
 
326,000
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
     
219,245
 
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.
     
113,218
 
327,000
Kempwood Industrial, Kempwood Dr. at Blankenship Dr.
 
(1)(3)
 
219,489
 
530,000
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
 
 

12

 
Center and Location
 
Building
 
Land
   
Area
 
Area
 
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 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
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
 
0
Wells  Branch Corporate Center, Wells Branch Pkwy., Austin
 
(4)
 
59,144
 
183,000
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
   
9,004,225
 
22,474,953
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
     
171,222
 
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
   
2,395,222
 
6,774,973
             
Other
 
           
Arizona
           
Arcadia Biltmore Plaza, Campbell Ave. at North 36th St., Phoenix
     
13,879
 
74,000
Arizona, Total
     
13,879
 
74,000
Texas
           
1919 North Loop West, Hacket Drive at West Loop 610 North
     
132,978
 
157,000
Citadel Plaza, Citadel Plaza Dr.
     
13,460
 
170,931
Texas, Total
     
146,438
 
327,931
 
 
13
 
 
Center and Location
 
 
 
Land
   
 
 
Area
 
Unimproved Land
 
   
Arizona
   
Mohave Crossroads
 
7,185
Arizona, Total
 
7,185
Louisiana
   
70th St. at Mansfield Rd., Shreveport
 
41,704
U.S. Highway 171 at Parish, DeRidder
 
462,000
Louisiana, Total
 
503,704
North Carolina
   
Crabtree Towne Center, Creedmoor (Highway 50) and Crabtree Valley Avenue, Raleigh  
576,000
The Shoppes at Caveness Farms
 
3,380,000
North Carolina, Total
 
3,956,000
Texas
   
9th Ave. at 25th St., Port Arthur
 
243,000
Bissonnet at Wilcrest
 
84,629
Citadel Plaza at 610 North Loop
 
137,000
East Orem
 
122,000
Festival Plaza, Helotes, TX   75,000
Highway 3 at Highway 1765, Texas City
 
201,000
Kirkwood at Dashwood Drive
 
322,000
Mesa Road at Tidwell
 
901,000
Northwest Freeway at Gessner
 
340,456
River Pointe Drive at Interstate 45, Conroe
 
118,483
Rock Prairie Marketplace, Rock Prairie Rd. at Hwy. 6, College Station   2,590,000
Shaver at Southmore, Pasadena
 
17,000
West Little York at Interstate 45
 
161,000
West Loop North at Interstate 10
 
145,000
Texas, Total
 
5,457,568

14

 
Weingarten Realty Investors
Property Listing at December 31, 2007
             
ALL PROPERTIES BY STATE
 
Number of
Properties
 
Building Total
Square Feet
 
Land Total
Square Feet
Arizona
 
26
 
3,511,919
 
13,204,274
Arkansas
 
3
 
357,740
 
1,489,000
California
 
30
 
5,221,813
 
18,327,575
Colorado
 
12
 
3,135,456
 
12,571,197
Florida
 
50
 
10,621,084
 
42,772,724
Georgia
 
24
 
5,034,164
 
20,731,167
Illinois
 
1
 
303,566
 
1,013,380
Kansas
 
2
 
250,855
 
454,000
Kentucky
 
4
 
673,899
 
3,176,000
Louisiana
 
15
 
2,888,420
 
8,490,415
Maine
 
1
 
205,034
 
962,667
Missouri
 
2
 
257,449
 
1,307,000
Nevada
 
13
 
3,520,712
 
13,107,810
New Mexico
 
6
 
1,418,615
 
4,489,000
North Carolina
 
27
 
3,572,639
 
23,811,476
Oklahoma
 
2
 
171,657
 
682,000
Oregon
 
3
 
273,466
 
672,288
South Carolina
 
1
 
86,120
 
436,000
Tennessee
 
9
 
1,928,931
 
5,613,915
Texas
 
167
 
25,717,977
 
100,800,141
Utah
 
3
 
663,767
 
1,660,045
Virginia
 
9
 
2,395,222
 
6,774,973
Washington
 
5
 
607,602
 
1,862,088
Grand Total
 
415
 
72,818,107
 
284,409,135
Total Retail
 
335
 
55,506,874
 
229,201,690
Total Industrial
 
77
 
17,150,916
 
44,881,057
Total Unimproved Land
 
 
     
  9,924,457
Total Other
 
3
 
160,317
 
401,931
 
___________________________
Total square footage includes 464,561 square feet of building area and 11,875,005   square feet of land leased from others.
 
Footnotes for detail property listing
 
(1)  Denotes partial ownership.   The square feet figures represent WRI's 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 accouting principles.
 
(4)  Property was sold subsequent to December 31, 2007 and is reported as part of discontinued operations. 
 
NOTE:  Square feet is reflective of area available to be leased.  Certain listed properties may have additional square feet that are not under WRI ownership.

15

 
General.   In 2007, no single property accounted for more than 1.8% 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, 2007; 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, 2007 was 94.4% compared to 94.1% as of December 31, 2006.

Substantially all 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 65 real estate joint ventures or partnerships that hold 116 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, 2007, we owned or operated under long-term leases, either directly or through our interest in real estate joint ventures or partnerships, a total of 303 developed income-producing properties and 32 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 7,500 separate leases with 5,700 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, Barnes & Noble and Gap. The diversity of our tenant base is also evidenced by the fact that our largest tenant accounted for only 3.0% of rental revenues during 2007.

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 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.

 
16
 

Most of our leases provide for the monthly payment in advance of fixed minimum rentals, the tenants' prorata 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.

During 2007, we invested approximately $458.4 million in the acquisition of operating retail properties.  Approximately $417.3 million was invested in 13 shopping centers and $41.1 million was invested in four unconsolidated joint ventures to acquire seven retail properties.

A portfolio of six retail properties was purchased in January and March 2007, including five properties in Tucson, Arizona and one in Scottsdale, Arizona.  The centers are leased to a diverse mix of national retailers including Wal-Mart, Safeway, Walgreens, Kohl’s, Home Depot, PetSmart and Circuit City.  This acquisition added 801,551 square feet to our portfolio and represented a total investment of $140 million.  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.

Cherokee Plaza, acquired in January 2007, is a 98,553 square foot grocery-anchored neighborhood center located in the prestigious Buckhead area in Atlanta, Georgia.  The 100% occupied property is anchored by a 57,000 square foot Kroger.

Sunrise West Shopping Center, acquired in January 2007, is a 76,321 square foot grocery-anchored neighborhood center located in Sunrise (Miami), Florida.  This property is anchored by a 44,000 square foot Publix.  Cole Park Plaza, acquired in February 2007, is an 82,258 square foot retail development located in Chapel Hill (Durham), North Carolina next to our existing Chatham Crossing shopping center.  Both Sunrise and Cole Park were acquired through an existing unconsolidated joint venture with AEW Capital Management.

Oak Grove Market Center, acquired in June 2007, is a 97,207 square foot grocery-anchored shopping center located in Portland, Oregon.  The center is anchored by a 53,000 square foot Safeway.

In July 2007, we acquired a portfolio of five retail power centers, adding 1.4 million square feet to our portfolio under management.  Three of the retail power centers in Florida, Georgia and Texas were acquired through a new unconsolidated real estate joint venture with PNC Realty Investors on behalf of its institutional client, AFL-CIO Building Investment Trust (the “BIT”).  We own 20% of this joint venture with the BIT owning 80%.  The remaining two centers, one in Atlanta, Georgia and the other in Chicago, Illinois, were wholly acquired by us.

Countryside Centre, a 242,123 square foot community center located in the St. Petersburg/Clearwater Area of Florida, was also acquired in July 2007.  This center is anchored by Albertson’s, TJ Maxx, Home Goods and Shoe Carnival.

Stella Link Shopping Center is a 28,510 square foot shopping center located in Houston, Texas, which was acquired in August 2007.  This retail center is adjacent to one of our operating properties, which is anchored by Sellers Brothers and Burke’s Outlet.

The Shoppes at South Semoran is a 101,535 square foot shopping center located in suburban Orlando, Florida, which was acquired in September 2007.  This 100% occupied center is anchored by a 57,000 square foot Winn Dixie.

In September 2007, we acquired a 10% interest in Tully Corners Shopping Center through a tenancy-in-common arrangement.  This 115,992 square foot grocery-anchored shopping center, located in San Jose, California, is anchored by Save Mart, Petco and Party City.

 
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In October 2007, we acquired a 10% interest in Paradise Key Shopping Center through a tenancy-in-common arrangement.  This 271,777 square foot grocery-anchored shopping center is located in Destin, Florida.

In December 2007, we acquired our partner’s 50% interest in Tropicana Beltway located in Las Vegas, Nevada.  The center is anchored by Lowe’s and Wal-Mart.

In 2007, we sold 17 shopping centers totaling 1.8 million square feet of building area, of which nine were located in Texas, three in Louisiana, two each in Colorado and Illinois and one in Georgia.  Sales proceeds from these dispositions totaled $243.2 million and generated gains of $80.9 million.  Three of these shopping centers were each held in a 50% consolidated real estate joint venture.  These real estate joint ventures are consolidated in our financial statements because we exercise financial and operating control.

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 gain generated was $11.2 million and $2.2 million, respectively.

During 2008, we sold eight shopping centers, of which five each are located in Texas, one in California and two in Louisiana.  Sales proceeds from these dispositions totaled $108.2 million, and they are reported as discontinued operations.

Industrial Properties.   At December 31, 2007, we owned, either directly or through our interest in real estate joint ventures or partnerships, 77 industrial projects and three other operating properties totaling approximately 17.3 million square feet of building area.  Our industrial properties consist of bulk warehouse, business distribution and office-service center assets ranging in size from 13,000 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, Stone Container, General Electric Company, G.E. Polymershapes, Inc., Interline Brands, Inc., Constar International, Inc., Rooftop Systems Inc., Wells Fargo Bank and Iron Mountain.  Our properties are located in California, Florida, Georgia, Tennessee, Texas and Virginia.  During 2007, we invested approximately $85.8 million in the acquisition of seven industrial properties and one office building, and $21.2 million was invested in an unconsolidated real estate joint venture to acquire seven industrial properties.

Lakeland Business Park, acquired in January 2007, is a 100% leased 168,400 square foot industrial business center located in Lakeland (Tampa), Florida.

In April and May 2007, we acquired a portfolio of 10 high quality industrial buildings located in Richmond, Virginia for a purchase price of $136 million, including $6 million that is contingent upon the lease up of vacant space by the property seller.  This contingency agreement expires in 2009.  Eight of the buildings were acquired through an existing 20%-owned unconsolidated joint venture with PNC Realty Investors on behalf of its institutional client the BIT.  The remaining two buildings were acquired directly by us.  This portfolio added 2.4 million square feet under management.

Town & Country Commerce Center, acquired in June 2007, is a 206,000 square foot industrial distribution center located in Houston, Texas.  The property is 100% leased to Arizona Tile and Seitel Solution Tech Center.

Riverview Distribution Center, acquired in August 2007, is a 265,200 square foot industrial center located in Atlanta, Georgia.  It is anchored by 109,000 square foot CHEP USA.

In October 2007, we acquired Westlake Industrial Centre, a 154,464 square foot industrial building, and Southpark Industrial Centre, a 234,525 square foot industrial center, both of which are located in Atlanta, Georgia.

In 2007, we sold an industrial distribution center totaling 152,000 square feet and an industrial building totaling 90,000 square feet.  Both of these properties are located in Texas.  Sales proceeds from these dispositions totaled $10.7 million and generated gains of $3.7 million.

 
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During 2008, we sold one industrial center located in Texas.  Sales proceeds from this disposition totaled $5.6 million, and it is reported as discontinued operations.

Unimproved Land.   At December 31, 2007, we owned 19 parcels of unimproved land consisting of approximately 9.9 million square feet of land area located in Arizona, Louisiana, North Carolina and Texas.  These properties include approximately 1.6 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 8.3 million square feet of land, which may be used for new development.  Most of these unimproved properties are 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.

New Development Properties .   At December 31, 2007, we had 32 projects under construction or in preconstruction stages with an estimated final square footage of approximately 9.1 million.  These properties are slated to be completed over the next one to five years .

In 2007, under our merchant development program, 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 were located in Texas, three in Arizona and one each in Florida, Louisiana and Tennessee.  Sales proceeds from these dispositions totaled $103.0 million and generated gains of $16.4 million.  At a 50%-owned unconsolidated joint venture, a land parcel was sold in Liberty Lakes, Washington.  Our share of the sales proceeds and the gain generated totaled $1.5 million and $.6 million, respectively.


 
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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,  
   
2007
   
2006
   
2005
   
2004
   
2003
 
                               
Revenues (primarily real estate rentals)
  $ 586,674     $ 526,183     $ 476,619     $ 430,696     $ 349,456  
Expenses:
                                       
    Depreciation and amortization
    129,002       118,519       108,031       96,240       75,591  
    Other
    197,931       170,689       143,514       134,654       107,213  
           Total
    326,933       289,208       251,545       230,894       182,804  
Operating Income
    259,741       236,975       225,074       199,802       166,652  
Interest Expense
    (148,829 )     (145,374 )     (129,160 )     (116,142 )     (90,214 )
Interest and Other Income
    8,486       9,044       2,854       1,389       1,552  
Loss on Redemption of Preferred Shares
                            (3,566 )     (2,739 )
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
    19,853       14,655       6,610       5,384       4,681  
Income Allocated to Minority Interests
    (10,237 )     (6,414 )     (6,060 )     (4,928 )     (2,723 )
Gain on Land and Merchant Development Sales
    16,385       7,166       804                  
Gain on Sale of Properties
    4,086       22,493       22,306       1,562       667  
Provision for Income Taxes
    (4,073 )     (1,366 )                        
Income from Continuing Operations
    145,412       137,179       122,428       83,501       77,876  
Income from Discontinued Operations (1)
    92,605       167,831       97,225       57,880       38,404  
Net Income
  $ 238,017     $ 305,010     $ 219,653     $ 141,381     $ 116,280  
                                         
Net Income Available to Common Shareholders
  $ 212,642     $ 294,909     $ 209,552     $ 133,911     $ 97,880  
Per Share Data - Basic:
                                       
     Income from Continuing Operations
  $ 1.41     $ 1.45     $ 1.26     $ 0.88     $ 0.76  
     Net Income
  $ 2.49     $ 3.36     $ 2.35     $ 1.55     $ 1.24  
     Weighted Average Number of Shares
    85,504       87,719       89,224       86,171       78,800  
Per Share Data - Diluted:
                                       
     Income from Continuing Operations
  $ 1.40     $ 1.44     $ 1.26     $ 0.88     $ 0.76  
     Net Income
  $ 2.44     $ 3.27     $ 2.31     $ 1.54     $ 1.24  
     Weighted Average Number of Shares
    88,893       91,779       93,166       89,511       81,574  
                                         
Property (at cost)
  $ 4,972,344     $ 4,445,888     $ 4,033,579     $ 3,751,607     $ 3,200,091  
Total Assets
  $ 4,993,343     $ 4,373,887     $ 3,737,741     $ 3,470,318     $ 2,923,094  
Debt
  $ 3,165,059     $ 2,941,039     $ 2,348,504     $ 2,138,842     $ 1,835,126  
                                         
Other Data:
                                       
Cash Flows from Operating Activities
  $ 223,309     $ 242,592     $ 200,525     $ 203,886     $ 162,316  
Cash Flows from Investing Activities
  $ (480,630 )   $ (314,686 )   $ (105,459 )   $ (349,654 )   $ (331,503 )
Cash Flows from Financing Activities
  $ 252,095     $ 100,407     $ (97,791 )   $ 170,928     $ 168,623  
Cash Dividends per Common Share
  $ 1.98     $ 1.86     $ 1.76     $ 1.66     $ 1.56  
Funds from Operations: (2)
                                       
     Net Income Available to Common Shareholders
  $ 212,642     $ 294,909     $ 209,552     $ 133,911     $ 97,880  
     Depreciation and amortization
    141,150       131,792       125,742       114,342       90,367  
     Gain on Sale of Properties
    (86,076 )     (172,056 )     (87,561 )     (26,316 )     (7,273 )
                          Total
  $ 267,716     $ 254,645     $ 247,733     $ 221,937     $ 180,974  


 
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(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 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 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.
 

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 72.8 million square feet.  We have a diversified tenant base with our largest tenant comprising only 3.0% of total rental revenues during 2007.

We 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.

 
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We continue 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 certain financial instruments.  However, based on our business plan for the upcoming year, we believe that asset dispositions, joint venture relationships and existing capital resources such as our revolving credit facilities will provide adequate capital to execute our business plan.

At December 31, 2007, we owned or operated under long-term leases, either directly or through our interest in real estate joint ventures or partnerships, a total of 383 developed income-producing properties and 32 properties under various stages of construction and development.  The total number of centers includes 335 neighborhood and community shopping centers, 77 industrial projects and three other operating properties located in 23 states spanning the country from coast to coast.

We also owned interests in 19 parcels of unimproved land held for future development that totaled approximately 9.9 million square feet.

We had approximately 7,500 leases with 5,700 different tenants at December 31, 2007.

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.  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.  Occupancy for the total portfolio was 94.4% at December 31, 2007 compared to 94.1% at December 31, 2006.  Historically, occupancy for the total portfolio has never fallen below 90.0%.  We expect our existing portfolio occupancy to continue at this level due to our tenant diversification and a strong tenant anchor base in 2008. Another important indicator of performance is the spread in rental rates on a same-space basis as we complete new leases and renew existing leases.  We completed 1,261 new leases or renewals during 2007 totaling 7.0 million square feet, increasing rental rates an average of 10.3% on a cash basis.

In the first quarter of 2006, we articulated a new long-term growth strategy with a planned three-year implementation.  The key elements of this strategy are as follows:

·  
A much greater focus on new development, including merchant development, with $300 million in annual new development completions beginning in 2009.

·  
Increased use of joint ventures for acquisitions including the recapitalization (or partial sale) of existing assets, which provide the opportunity to further increase returns on investment through the generation of fee income from leasing and management services we will provide to the venture.

·  
Further recycling capital through the active disposition of non-core properties and reinvesting the proceeds into properties with barriers to entry within high growth metropolitan markets.  This, combined with our continuous focus on our assets, produces a higher quality portfolio with higher occupancy rates and much stronger internal revenue growth.

During 2007 and 2006, we made excellent progress in the execution of this long-term growth strategy as described in the following sections on new development, acquisitions and joint ventures and dispositions.


 
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New Development
At December 31, 2007, we had 32 properties in various stages of development, including our merchant development program, which is up from 26 properties under development a year ago.  We have invested $341.0 million to-date on these projects and, at completion we estimate our total investment to be $628.7 million.  These properties are slated to open over the next one to five years with a projected return on investment of approximately 9% when completed.

In addition to these projects, we have a development pipeline with eight development sites under contract, which will represent a projected investment of approximately $178 million.  Due to current economic factors, obtaining new projects over the next year may prove challenging as potential retail anchors are delaying their expansion plans due to the softening of the economy.  We will continue to seek opportunities and monitor this market closely.

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.  We generated gains of approximately $16.4 million from this program during 2007.  We expect to generate similar gains in 2008 and throughout future years.

Acquisitions and Joint Ventures
During 2007, we acquired 20 shopping centers, 14 industrial properties, our partner’s 50% interest in a retail center and one other operating property for a purchase price of approximately $565 million.  Included in that total were seven retail properties and seven industrial properties purchased as part of unconsolidated real estate joint ventures.  It is possible that, consistent with our strategy, some of the other acquired properties will also be contributed to future joint ventures.

Acquisitions are a key component of our strategy.  However, the turmoil in the credit markets has significantly reduced transactions in the marketplace and, therefore, created uncertainty with respect to pricing.  Partnering with institutional investors through 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 the acquisition, leasing and management of properties, to the joint ventures.

Joint venture fee income for 2007 was approximately $8.2 million or an increase of $5.7 million over 2006.  This is a direct result of our strategy initiative to develop new joint venture relationships.  We expect continued strong growth in joint venture income during the upcoming year.

Dispositions
During 2007, we sold 17 shopping centers, one industrial distribution center and one industrial building for $253.9 million.  Also, one shopping center in an unconsolidated joint venture was sold, of which our share of the sales proceeds totaled $11.2 million.

During the first nine months of 2008, eight shopping centers and one industrial center were sold, which represented 1.0 million square feet.  Sales proceeds totaled $113.8 million, and they are reported as discontinued operations.

Although lenders for prospective acquirers have tightened their underwriting criteria, we expect to continue to dispose of non-core properties during the coming year 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 much stronger internal revenue growth.


 
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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, "Consolidation of Variable Interest Entities."  Based upon our analysis, we have determined that we have no interests in variable interest entities.

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.  We will record an impairment charge if we determine that a decline in the value of an investment is other than temporary.

Property
Real estate assets are stated at cost less accumulated depreciation, which, in the opinion of management, is not in excess of the individual property's estimated undiscounted future cash flows, including estimated proceeds from disposition.  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.

 
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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 one to 25 years 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.

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, 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.  Our overall future plans for a property and our views on current market and economic conditions may have a significant impact on the resulting estimated future cash flows of a property that are analyzed for these purposes.  The property carrying amount is adjusted, if necessary, to the estimated fair value to reflect an impairment in the value of the asset.

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 and lease costs are amortized primarily on a straight-line basis, which approximates the effective interest method, over the terms of the debt and over the lives of leases, respectively.  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 the leases.  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.


 
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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 Statement of Financial Accounting Standards (“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
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 the 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 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.”  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, 2007 to the Year Ended December 31, 2006

Revenues
Total revenues were $586.7 million for the year ended 2007 versus $526.2 million for the year ended 2006, an increase of $60.5 million or 11.5%.  This increase resulted primarily from an increase in rental revenues of $54.0 million and other income of $6.5 million.

Property acquisitions and new development activity contributed $56.6 million of the rental income increase with $4.9 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.

 
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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 $326.9 million versus $289.2 million in 2006, an increase of $37.7 million or 13.0%.

The increases in 2007 for depreciation and amortization expense ($10.4 million), operating expenses ($18.1 million), ad valorem taxes ($6.0 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 29.8% 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%-owned consolidated entity.

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 .


 
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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 and 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 margin 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 $92.6 million in 2007 versus $167.8 million in 2006, a decrease of $75.2 million or 44.8%.  This decrease was due primarily to the decrease in gain on sale of 17 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 2007 and the first nine months of 2008.

Results of Operations
Comparison of the Year Ended December 31, 2006 to the Year Ended December 31, 2005

Revenues
Total revenues increased by $49.6 million or 10.4% in 2006 ($526.2 million in 2006 versus $476.6 million in 2005).  This increase resulted primarily from the increase in rental revenues of $49.0 million or 10.4%.

Property acquisitions and new development activity contributed $35.6 million of the rental income increase.  The remaining increase of $13.4 million resulted from 1,264 renewals and new leases, comprising 6.1 million square feet at an average rental rate increase of 7.5%.

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

   
December 31,
 
   
2006
   
2005
 
             
Shopping Centers
    95.0 %     94.6 %
Industrial
    91.2 %     93.1 %
Total
    94.1 %     94.2 %

Expenses
Total expenses increased by $37.7 million or 15.0% in 2006 ($289.2 million in 2006 versus $251.5 million in 2005).

The increases in 2006 for depreciation and amortization expense ($10.5 million), operating expenses ($14.7 million) and ad valorem taxes ($6.1 million) and general and administrative expense ($6.4 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 headcount increases to support the growth of 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 28.3% in 2006 and 26.8% in 2005.


 
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Interest Expense
Interest expense totaled $145.4 million for 2006, up $16.2 million or 12.6% from 2005.  The components of interest expense were as follows (in thousands):

   
Year Ended December 31,
 
   
2006
   
2005
 
             
Gross interest expense
  $ 160,454     $ 138,845  
Over-market mortgage adjustment of acquired properties
    (7,464 )     (7,056 )
Capitalized interest
    (7,616 )     (2,629 )
                 
Total
  $ 145,374     $ 129,160  

Gross interest expense totaled $160.5 million in 2006, up $21.6 million or 15.6% from 2005.  The increase in gross interest expense was due to an increase in the average debt outstanding from $2.2 billion in 2005 to $2.5 billion in 2006 at a weighted average interest rate of 6.0% in 2006 and 6.1% for 2005.  Capitalized interest increased $5.0 million due to an increase in new development activity, and the over-market mortgage adjustment increased by $.4 million.

Interest and Other Income
Interest and other income was $9.0 million in 2006 versus $2.9 million in 2005, an increase of $6.1 million or 210.3%. This increase was attributable to interest earned from a qualified escrow account for the purposes of completing like-kind exchanges, construction loans associated with our new development activities, excess proceeds from our $575 million Convertible Debt Offering and assets held in a grantor trust related to our deferred compensation plan.

Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
Equity in earnings of real estate joint ventures and partnerships increased by $8.1 million or 122.7% in 2006 ($14.7 million in 2006 versus $6.6 million in 2005).  This increase was attributable primarily to our share of the gains generated from the disposition of two shopping centers in Texas totaling $4.0 million, a gain of $1.1 million associated with land and merchant development activities in Texas and Washington and incremental income from our investments in newly formed joint ventures in 2005 and 2006 for the acquisition and development of retail and industrial properties.

Gain on Sale of Properties
The gain of $22.5 million and $22.3 million in 2006 and 2005, respectively, resulted primarily from the sale of an 80% interest in five industrial properties in the San Diego, Memphis and Atlanta markets and two retail centers in Louisiana, respectively, in which we retained a continuing 20% operating interest.

Gain on Land and Merchant Development Sales
Gain on land and merchant development sales of $7.1 million in 2006 resulted from the gain from the sale of the Timber Springs shopping center in Orlando, Florida and the sale of three parcels of land in Arizona (1) and Texas (2).  The activity in 2005 resulted from the sale of a parcel of land in Orlando, Florida.

Provision for Income Taxes
The amount reported in 2006 includes the tax expense in our taxable REIT subsidiary and the deferred tax impact attributable to the Texas margin tax enacted in the second quarter of 2006.

Income from Discontinued Operations
Income from discontinued operations increased by $70.6 million ($167.8 million in 2006 versus $97.2 million in 2005).  This increase was due to the disposition of 23 properties totaling 3.5 million square feet that provided sales proceeds of $308.2 million and generated gains of $145.5 million.  The 2005 caption includes the operating results of properties disposed in 2007 and 2006 plus the disposition of 16 properties and a vacant building totaling 1.3 million square feet in 2005.  The 2005 dispositions provided sales proceeds of $133.8 million and generated gains of $65.5 million.  The operating results for both 2006 and 2005 include the effect of the disposition of nine properties during the first nine months of 2008.


 
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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.  We anticipate that cash flows from operating activities will continue to provide adequate capital for all common and preferred dividend payments and debt service costs, as well as the capital necessary to maintain and operate our existing properties.  We do not anticipate that the current turmoil in the capital markets will have a significant effect on our ability to obtain capital or to execute our business plan. We believe that asset dispositions, real estate joint venture relationships and existing capital resources such as our revolving credit facilities will provide adequate capital.  Our most restrictive debt covenants 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.

Primary sources of capital for funding our acquisitions and new development programs are our revolving credit facilities, cash generated from sales of properties, transactions with venture partners, cash flow generated by our operating properties and proceeds from capital issuances as needed.  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 dispositions of properties and cash flow generated by our operating properties.  As of December 31, 2007, the balance outstanding under our $575 million revolving credit facility was $255.0 million, and no amounts were outstanding under our $30 million credit facility, which we use for cash management purposes.

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 a third party consent, such as assets held in entities in which we have less than 100% ownership.

Investing Activities :

Acquisitions
Retail Properties .
A portfolio of six retail properties was purchased in January and March 2007, including five properties in Tucson, Arizona and one in Scottsdale, Arizona.  The centers are leased to a diverse mix of national retailers including Wal-Mart, Safeway, Walgreens, Kohl’s, Home Depot, PetSmart and Circuit City.  This acquisition added 801,551 square feet to our portfolio and represented a total investment of $140 million.  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.

Cherokee Plaza, acquired in January 2007, is a 98,553 square foot grocery-anchored neighborhood center located in the prestigious Buckhead area in Atlanta, Georgia.  The 100% occupied property is anchored by a 57,000 square foot Kroger.

 
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Sunrise West Shopping Center, acquired in January 2007, is a 76,321 square foot grocery-anchored neighborhood center located in Sunrise (Miami), Florida.  This property is anchored by a 44,000 square foot Publix.  Cole Park Plaza, acquired in February 2007, is an 82,258 square foot retail development located in Chapel Hill (Durham), North Carolina next to our existing Chatham Crossing shopping center.  Both Sunrise and Cole Park were acquired through an existing unconsolidated joint venture with AEW Capital Management.

Oak Grove Market Center, acquired in June 2007, is a 97,207 square foot grocery-anchored shopping center located in Portland, Oregon.  The center is anchored by a 53,000 square foot Safeway.

In July 2007, we acquired a portfolio of five retail power centers, adding 1.4 million square feet to our portfolio under management.  Three of the retail power centers in Florida, Georgia and Texas were acquired through a new unconsolidated real estate joint venture with PNC Realty Investors on behalf of its institutional client, AFL-CIO Building Investment Trust (the “BIT”).  We own 20% of this joint venture with the BIT owning 80%.  The remaining two centers, one in Atlanta, Georgia and the other in Chicago, Illinois, were wholly acquired by us.

Countryside Centre, a 242,123 square foot community center located in the St. Petersburg/Clearwater Area of Florida, was also acquired in July 2007.  This center is anchored by Albertson’s, TJ Maxx, Home Goods and Shoe Carnival.

Stella Link Shopping Center is a 28,510 square foot shopping center located in Houston, Texas, which was acquired in August 2007.  This retail center is adjacent to one of our operating properties, which is anchored by Sellers Brothers and Burke’s Outlet.

The Shoppes at South Semoran is a 101,535 square foot shopping center located in suburban Orlando, Florida, which was acquired in September 2007.  This 100% occupied center is anchored by a 57,000 square foot Winn Dixie.

In September 2007, we acquired a 10% interest in Tully Corners Shopping Center through a tenancy-in-common arrangement.  This 115,992 square foot grocery-anchored shopping center, located in San Jose, California, is anchored by Save Mart, Petco and Party City.

In October 2007, we acquired a 10% interest in Paradise Key Shopping Center through a tenancy-in-common arrangement.  This 271,777 square foot grocery-anchored shopping center is located in Destin, Florida.

In December 2007, we acquired our partner’s 50% interest in Tropicana Beltway located in Las Vegas, Nevada.  The center is anchored by Lowe’s and Wal-Mart.

Industrial Properties.
Lakeland Business Park, acquired in January 2007, is a 100% leased 168,400 square foot industrial business center located in Lakeland (Tampa), Florida.

In April and May 2007, we acquired a portfolio of 10 high quality industrial buildings located in Richmond, Virginia for a purchase price of $136 million, including $6 million that is contingent upon the lease up of vacant space by the property seller.  This contingency agreement expires in 2009.  Eight of the buildings were acquired through an existing 20%-owned unconsolidated joint venture with PNC Realty Investors on behalf of its institutional client the BIT.  The remaining two buildings were acquired directly by us.  This portfolio added 2.4 million square feet under management.

Town & Country Commerce Center, acquired in June 2007, is a 206,000 square foot industrial distribution center located in Houston, Texas.  The property is 100% leased to Arizona Tile and Seitel Solution Tech Center.

Riverview Distribution Center, acquired in August 2007, is a 265,200 square foot industrial center located in Atlanta, Georgia.  It is anchored by 109,000 square foot CHEP USA.

In October 2007, we acquired Westlake Industrial Centre, a 154,464 square foot industrial building, and Southpark Industrial Centre, a 234,525 square foot industrial center, both of which are located in Atlanta, Georgia.

 
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The cash requirements for these acquisitions were initially financed under our revolving credit facilities, using available cash generated from dispositions of properties or using cash flow generated by our operating properties.

Dispositions
Retail Properties.
In 2007, we sold 17 shopping centers totaling 1.8 million square feet of building area, of which nine were located in Texas, three in Louisiana, two each in Colorado and Illinois and one in Georgia.  Sales proceeds from these dispositions totaled $243.2 million and generated gains of $80.9 million.  Three of these shopping centers were each held in a 50% consolidated real estate joint venture.  These real estate joint ventures are consolidated in our financial statements because we exercise financial and operating control.

In December 2007, a retail center in Highland Ranch, Colorado was sold.  This property was held in a 40%-owned unconsolidated joint venture, and our share of the sales proceeds and the gain generated was $11.2 million and $2.2 million, respectively.

During 2008, we sold eight shopping centers, of which five each are located in Texas, one in California and two in Louisiana.  Sales proceeds from these dispositions totaled $108.2 million, and they are reported as discontinued operations.

Industrial Properties.
In 2007, we sold an industrial distribution center totaling 152,000 square feet and an industrial building totaling 90,000 square feet.  Both of these properties are located in Texas.  Sales proceeds from these dispositions totaled $10.7 million and generated gains of $3.7 million.

During 2008, we sold one industrial center located in Texas.  Sales proceeds from this disposition totaled $5.6 million, and it is reported as discontinued operations.

New Development and Capital Expenditures
At December 31, 2007, we had 32 projects under construction or in preconstruction stages with an estimated final square footage of approximately 9.1 million.  These properties are slated to be completed over the next one to five years .

In 2007, under our merchant development program, 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 and Tennessee.  Sales proceeds from these dispositions totaled $103.0 million and generated gains of $16.4 million.  At a 50%-owned unconsolidated joint venture, a land parcel was sold in Liberty Lakes, Washington.  Our share of the sales proceeds and the gain generated totaled $1.5 million and $.6 million, respectively.

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

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 $1.1 billion in both 2007 and 2006 and $455.1 million in 2005.  We expect to invest approximately $127.0 million in 2008, $100.5 million in 2009, $53.3 million in 2010, $7.8 million in 2011 and $1.4 million in 2012 to complete construction of 32 properties under various stages of development.  We also expect to invest $8.3 million to acquire projects in 2008 and $1.8 in 2009.

Financing Activities:

Debt
Total debt outstanding increased to $3.2 billion at December 31, 2007 from $2.9 billion at December 31, 2006.  Total debt at December 31, 2007 included $2.8 billion of which interest rates are fixed and $321.7 million, including the effect of $50 million of interest rate swaps, that bears interest at variable rates.  Additionally, debt totaling $1.1 billion was secured by operating properties while the remaining $2.1 billion was unsecured.

 
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In November 2007, we increased our revolving credit facility from $400 million to $575 million and amended certain covenants of this facility.  This unsecured revolving credit facility held by a syndicate of banks 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 42.5 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 15, 2008, there was $380.0 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 15, 2008, there was no outstanding balance under this facility.  The available balance under our revolving credit agreement was $184.6 million at February 15, 2008, which is reduced by amounts outstanding for letters of credit and our overnight facility.  We are in full compliance with the covenants of our unsecured revolving credit facilities as of December 31, 2007.

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.

In August 2006, we issued $575 million of 3.95% convertible senior unsecured notes due 2026.  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 December 2006, we issued $75 million of 10-year unsecured fixed rate medium term notes at 6.1% including the effect of an interest rate swap that had hedged the transaction.  Proceeds from this issuance were used to repay balances under our revolving credit facilities, to cash settle a forward hedge and for general business purposes.

In May 2006, we entered into a forward-starting interest rate swap with a notional amount of $74.0 million.  In December 2006, we terminated this interest rate swap in conjunction with the issuance of the $75.0 million of medium term notes.  The termination fee of $4.1 million is being amortized over the life of the medium term note.

At December 31, 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 rate interest payments at rates of 4.2% to variable interest payments.  Also, at December 31, 2007, we had two forward-starting interest rate swap contracts with an aggregate notional amount of $118.6 million.  These contracts have been designated as cash flow hedges and mitigate the risk of increasing interest rates on forecasted long-term debt issuances over a maximum period of two years.  We could be exposed to losses in the event of nonperformance by the counter-parties; however, management believes the likelihood of such nonperformance is remote.

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 acquisitions completed during 2007, we assumed $99.4 million of non-recourse debt secured by the related properties.   A capital lease obligation totaling $12.9 million was assumed and subsequently settled in 2007.  As of December 31, 2006, the balance of non-recourse secured debt that was assumed in conjunction with 2006 acquisitions was $140.7 million.

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.

 
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Equity
Common and preferred dividends increased to $194.5 million in 2007, compared to $173.0 million in 2006.  The dividend rate for our common shares of beneficial interest increased for each quarter of 2007 to $.495 compared to $.465 for the same period of 2006.  Our dividend payout ratio on common equity for 2007, 2006 and 2005 approximated 63.2%, 64.0% and 63.4%, respectively, based on basic funds from operations for the respective periods.

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 next 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 have repurchased and cancelled 1.4 million common shares of beneficial interest at an average share price of $37.75.  At December 31, 2007, a total of 1.4 million common shares of beneficial interest were outstanding that were purchased at an average share price of $36.47.  These shares were subsequently retired on January 11, 2008.

In July 2006, our Board of Trust Managers authorized the repurchase of our common shares of beneficial interest to a total of $207 million, and we used $167.6 million of the net proceeds from the $575 million debt offering to purchase 4.3 million common shares of beneficial interest at $39.26 per share.

On September 25, 2007, we issued $200 million of depositary shares in a private placement, and the net proceeds of $193.6 million were used to repay amounts outstanding under our credit facilities.  Each depositary share represents one-hundredth of a Series G Cumulative Redeemable Preferred Share.  The depositary shares are redeemable, in whole or in part on or after September 25, 2007 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.  The depositary shares are not convertible or exchangeable for any of our other property or securities.  The Series G Preferred Shares pay a variable-rate quarterly dividend through September 2008 and then a variable-rate monthly dividend and have a liquidation preference of $2,500 per share.  The variable-rate dividend is calculated on the period’s three-month LIBOR rate plus a percentage determined by the number of days outstanding.  Further, the rate may vary if any of our outstanding preferred shares are downgraded.  The variable-rate dividend is not to exceed 20%.

On January 30, 2007, we issued $200 million of depositary shares.  Each depositary share represents one-hundredth of a 6.5% 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 preference of $2,500 per share.  Net proceeds of $194.0 million were used to repay amounts outstanding under our credit facilities and for general business purposes.

In September 2004, the SEC declared effective two additional shelf registration statements totaling $1.55 billion, of which $1.35 billion was available as of February 15, 2008.  In addition, we have $85.4 million available as of February 15, 2008 under our $1 billion shelf registration statement, which became effective in April 2003.  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.

 
34
 

Contractual Obligations

The following table summarizes our primary contractual obligations as of December 31, 2007 (in thousands):


   
2008
   
2009
   
2010
   
2011
   
2012
   
Thereafter
   
Total
 
Mortgages and Notes
                                         
Payable:(1)
                                         
Unsecured Debt
  $ 156,400     $ 123,522     $ 394,810     $ 860,566     $ 242,216     $ 797,690     $ 2,575,204  
Secured Debt
    249,818       134,079       116,324       141,532       167,306       555,800       1,364,859  
                                                         
Ground Lease Payments
    2,436       2,961       2,917       2,862       2,821       113,568       127,565  
                                                         
Obligations to Acquire Projects
    8,306       1,824                                       10,130  
                                                         
Obligations to Develop Projects
    126,957       100,583       53,284       7,799       1,370               289,993  
                                                         
Total Contractual Obligations
  $ 543,917     $ 362,969     $ 567,335     $ 1,012,759     $ 413,713     $ 1,467,058     $ 4,367,751  

_______________
  (1)            Includes principal and interest with interest on variable-rate debt calculated using rates at December 31, 2007 excluding the effect of interest rate swaps.

Off Balance Sheet Arrangements

As of December 31, 2007 and December 31, 2006, none of our off-balance sheet arrangements had a material affect on our liquidity or availability of, or requirement for, our capital resources.  Letters of credit totaling $9.2 million and $10.1 million were outstanding under the revolving credit facility at December 31, 2007 and 2006, respectively.

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 guarantee for the payment of any annual sinking fund requirement 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 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.  We have evaluated and determined that the fair value of the guarantee is nominal.  However, due to the guarantee, a liability has been recorded by the joint venture equal to amounts funded under the bonds.

Funds from Operations

The National Association of Real Estate Investment Trusts 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.

 
35
 

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,  
   
2007
   
2006
   
2005
 
                   
Net income available to common shareholders
  $ 212,642     $ 294,909     $ 209,552  
Depreciation and amortization
    129,946       126,713       122,203  
Depreciation and amortization of unconsolidated joint ventures
    11,204       5,079       3,539  
Gain on sale of properties
    (83,907 )     (168,004 )     (87,569 )
(Gain) loss on sale of properties of unconsolidated joint ventures
    (2,169 )     (4,052 )     8  
Funds from operations
    267,716       254,645       247,733  
Funds from operations attributable to operating partnership units
    4,407       5,453       5,218  
Funds from operations assuming conversion of OP units
  $ 272,123     $ 260,098     $ 252,951  
                         
Weighted average shares outstanding - basic
    85,504       87,719       89,224  
Effect of dilutive securities:
                       
Share options and awards
    891       926       860  
Operating partnership units
    2,498       3,134       3,082  
Weighted average shares outstanding - diluted
    88,893       91,779       93,166  


Newly Issued Accounting Pronouncements

In June 2006, the FASB issued FASB 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.  There are also several disclosure requirements.  We adopted FIN 48 as of January 1, 2007, and its adoption did not have a material effect on our consolidated financial statements.

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 are required to adopt SFAS 157 in the first quarter of 2008 regarding our financial assets and liabilities.  The FASB has issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157,” to defer the provisions of SFAS 157 relating to nonfinancial assets and liabilities that delays implementation by us until January 1, 2009.  SFAS 157 is not expected to materially affect how we determine fair value, but may result in certain additional disclosures.

 
36
 

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 (the “Measurement Provision”) is effective for fiscal years ending after December 15, 2008.  We have assessed the potential impact of the Measurement Provision of SFAS 158 and concluded that its adoption will not have 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 is effective for us on January 1, 2008.  We are currently evaluating the impact that the adoption of SFAS 159 will have on our consolidated financial statements.

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.  While we have not formally quantified the effect, we expect the adoption of SFAS 141R to have a material effect on our consolidated financial statements if our property acquisitions fall under the definition of a business.

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 will 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 on January 1, 2009 and most provisions will be applied retrospectively.  We are currently evaluating the impact SFAS 160 will have on our consolidated financial statements.

On August 31, 2007, the FASB authorized a proposed FASB Staff Position (the “proposed FSP”) that, if issued, would affect the accounting for our convertible and exchangeable senior debentures.  If issued in the form expected, the proposed FSP would 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.  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.  The proposed FSP has not been issued, but the FASB has indicated that it is expected to be effective for fiscal years beginning after December 15, 2007 and requires retroactive application.  Upon the adoption of the proposed FSP on January 1, 2008, we have estimated the unamortized debt discount (as of December 31, 2007) to be approximately $34.5 million to be included as a reduction of Debt and approximately $46.3 million as Accumulated Additional Paid-In Capital in our condensed consolidated balance sheet.  We have estimated incremental Interest Expense to be approximately $8.4 million and $3.4 million for the years ended December 31, 2007 and 2006.

 
37
 

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, 2007 and 2006, 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, 2007.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our 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, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
 
 
/s/Deloitte & Touche LLP
 
Houston, Texas
February 29, 2008 (December 4, 2008 as to the effects
of the 2008 discontinued operations described in Note 9)

 
38
 


STATEMENTS OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
 
(In thousands, except per share amounts)
 
                   
             
   
Year Ended December 31,
 
   
2007
   
2006
   
2005
 
                   
Revenues:
                 
  Rentals
  $ 573,385     $ 519,420     $ 470,446  
  Other
    13,289       6,763       6,173  
      Total
    586,674       526,183       476,619  
                         
Expenses
                       
  Depreciation and amortization
    129,002       118,519       108,031  
  Operating
    104,165       86,073       71,372  
  Ad valorem taxes
    66,787       60,815       54,763  
  General and administrative
    26,979       23,801       17,379  
      Total
    326,933       289,208       251,545  
                         
Operating Income
    259,741       236,975       225,074  
Interest Expense
    (148,829 )     (145,374 )     (129,160 )
Interest and Other Income
    8,486       9,044       2,854  
Equity in Earnings of Real Estate Joint Ventures and  Partnerships, net
    19,853       14,655       6,610  
Income Allocated to Minority Interests
    (10,237 )     (6,414 )     (6,060 )
Gain on Sale of Properties
    4,086       22,493       22,306  
Gain on Land and Merchant Development Sales
    16,385       7,166       804  
Provision for Income Taxes
    (4,073 )     (1,366 )        
      Income from Continuing Operations
    145,412       137,179       122,428  
Operating Income from Discontinued Operations
    8,946       22,337       31,766  
Gain on Sale of Properties from Discontinued Operations
    83,659       145,494       65,459  
      Income from Discontinued Operations
    92,605       167,831       97,225  
Net Income
    238,017       305,010       219,653  
Dividends on Preferred Shares
    (25,375 )     (10,101 )     (10,101 )
Net Income Available to Common Shareholders
  $ 212,642     $ 294,909     $ 209,552  
Net Income Per Common Share - Basic:
                       
  Income from Continuing Operations
  $ 1.41     $ 1.45     $ 1.26  
  Income from Discontinued Operations
    1.08       1.91       1.09  
  Net Income
  $ 2.49     $ 3.36     $ 2.35  
Net Income Per Common Share - Diluted:
                       
  Income from Continuing Operations
  $ 1.40     $ 1.44     $ 1.26  
  Income from Discontinued Operations
    1.04       1.83       1.05  
  Net Income
  $ 2.44     $ 3.27     $ 2.31  
                         
Net Income
  $ 238,017     $ 305,010     $ 219,653  
Other Comprehensive Loss:
                       
  Unrealized loss on derivatives
    (5,014 )     (2,861 )     (1,943 )
  Amortization of loss on derivatives
    878       364       340  
  Minimum pension liability adjustment
    1,161       (1,150 )     (1,704 )
Other Comprehensive Loss
    (2,975 )     (3,647 )     (3,307 )
Comprehensive Income
  $ 235,042     $ 301,363     $ 216,346  
 
See Notes to Consolidated Financial Statements.

 
39
 


CONSOLIDATED BALANCE SHEETS
 
(In thousands, except per share amounts)
 
             
             
   
December 31,
   
December 31,
 
   
2007
   
2006
 
             
ASSETS
           
Property
  $ 4,972,344     $ 4,445,888  
Accumulated Depreciation
    (774,321 )     (707,005 )
Property, net
    4,198,023       3,738,883  
Investment in Real Estate Joint Ventures and Partnerships
    300,756       203,839  
Total
    4,498,779       3,942,722  
Notes Receivable from Real Estate Joint Ventures and Partnerships
    81,818       3,971  
Unamortized Debt and Lease Costs
    114,969       112,873  
Accrued Rent and Accounts Receivable (net of allowance for doubtful
               
accounts of $8,721 in 2007 and $5,995 in 2006)
    94,607       78,893  
Cash and Cash Equivalents
    65,777       71,003  
Restricted Deposits and Mortgage Escrows
    38,884       94,466  
Other
    98,509       69,959  
  Total
  $ 4,993,343     $ 4,373,887  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
Debt
  $ 3,165,059     $ 2,941,039  
Accounts Payable and Accrued Expenses
    155,137       132,821  
Other
    104,439       86,566  
Total
    3,424,635       3,160,426  
Minority Interest
    96,885       87,680  
                 
Commitments and Contingencies
               
                 
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 2007 and 2006; aggregate liquidation preference $75,000
    3       3  
6.95% Series E cumulative redeemable preferred shares of beneficial interest; 29 shares issued and outstanding in 2007 and 2006; aggregate liquidation preference $72,500
    1       1  
6.5% Series F cumulative redeemable preferred shares of beneficial interest; 80 shares issued and outstanding in 2007; aggregate liquidation preference $200,000
    2          
Variable-rate Series G cumulative redeemable preferred shares of beneficial interest, 80 shares issued and outstanding in 2007; aggregate liquidation preference $200,000
    2          
Common Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 150,000; shares issued and outstanding: 85,146 in 2007 and 85,765 in 2006
    2,565       2,582  
Treasury Shares of Beneficial Interest - par value, $.03 per share; 1,370 shares outstanding in 2007
    (41 )         
Accumulated Additional Paid-In Capital
    1,442,027       1,136,481  
Net Income in Excess of (Less Than) Accumulated Dividends
    42,739       (786 )
Accumulated Other Comprehensive Loss
    (15,475 )     (12,500 )
Shareholders' Equity
    1,471,823       1,125,781  
  Total
  $ 4,993,343     $ 4,373,887  
See Notes to Consolidated Financial Statements.
 

 
40

 
STATEMENTS OF CONSOLIDATED CASH FLOWS
 
(In thousands)
 
                   
                   
   
Year Ended December 31,
 
   
2007
   
2006
   
2005
 
Cash Flows from Operating Activities:
                 
Net Income
  $ 238,017     $ 305,010     $ 219,653  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation and amortization
    134,676       131,992       128,573  
Equity in earnings of real estate joint ventures and partnerships, net
    (19,853 )     (14,655 )     (6,681 )
Income allocated to minority interests
    10,237       6,414       6,060  
Gain on land and merchant development sales
    (16,385 )     (7,166 )     (804 )
Gain on sales of properties
    (87,745 )     (167,987 )     (87,765 )
Distributions of income from real estate joint ventures and partnerships
    6,251       2,524       2,603  
Changes in accrued rent and accounts receivable
    (22,276 )     (18,056 )     (3,281 )
Changes in other assets
    (26,813 )     (37,607 )     (30,769 )
Changes in accounts payable and accrued expenses
    4,852       43,641       (27,964 )
Other, net
    2,348       (1,518 )     900  
Net cash provided by operating activities
    223,309       242,592       200,525  
                         
Cash Flows from Investing Activities:
                       
Investment in property
    (753,462 )     (880,471 )     (259,730 )
Proceeds from sales and disposition of property, net
    341,383       661,175       201,363  
Change in restricted deposits and mortgage escrows
    56,331       (79,737 )     1,764  
Mortgage bonds and notes receivable from real estate joint ventures and partnerships:
                       
Advances
    (145,735 )     (54,800 )     (30,852 )
Collections
    82,852       47,617       5,278  
Real estate joint ventures and partnerships:
                       
Investments
    (78,794 )     (21,547 )     (29,233 )
Distributions of capital
    16,795       13,077       5,951  
Net cash used in investing activities
    (480,630 )     (314,686 )     (105,459 )
                         
Cash Flows from Financing Activities:
                       
Proceeds from issuance of:
                       
  Debt
    270,092       780,782       148,347  
Common shares of beneficial interest
    4,010       4,570       2,829  
Preferred shares of beneficial interest, net
    387,678                  
Purchase of marketable securities in connection with the legal defeasance of mortgage notes payable
    (22,536 )                
Repurchase of common shares of beneficial interest, net
    (103,366 )     (167,573 )        
Principal payments of debt
    (89,419 )     (327,601 )     (82,810 )
Common and preferred dividends paid
    (194,492 )     (173,010 )     (167,196 )
Debt issuance cost paid
    (1,451 )     (13,681 )        
Other, net
    1,579       (3,080 )     1,039  
Net cash provided by (used in) financing activities
    252,095       100,407       (97,791 )
                         
Net (decrease) increase in cash and cash equivalents
    (5,226 )     28,313       (2,725 )
Cash and cash equivalents at January 1
    71,003       42,690       45,415  
Cash and cash equivalents at December 31
  $ 65,777     $ 71,003     $ 42,690  
                         
See Notes to Consolidated Financial Statements.
 


 
41
 

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

Year Ended December 31, 2007, 2006, and 2005


                           
Net
             
   
Preferred
   
Common
   
Treasury
         
Income in
             
   
Shares
   
Shares
   
Shares
   
Accumulated
   
Excess of
   
Accumulated
       
   
of
   
of
   
of
   
Additional
   
(Less Than)
   
Other
       
   
Beneficial
   
Beneficial
   
Beneficial
   
Paid-In
   
Accumulated
   
Comprehensive
       
   
Interest
   
Interest
   
Interest
   
Capital
   
Dividends
   
Loss
   
Total
 
                                           
Balance, January 1, 2005
  $ 4     $ 2,672           $ 1,283,270     $ (185,243 )   $ (4,743 )   $ 1,095,960  
Net income
                                  219,653               219,653  
Shares issued in exchange for interests in limited partnerships
            1             1,302                       1,303  
Valuation adjustment on shares issued in exchange for interests in limited  partnerships
                          550                       550  
Shares issued under benefit plans
            13             3,310                       3,323  
Dividends declared – common shares (1)
                                  (157,095 )             (157,095 )
Dividends declared – preferred shares (2)
                                  (10,101 )             (10,101 )
Other comprehensive loss
                                          (3,307 )     (3,307 )
Balance, December 31, 2005
    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 (4)
                  $ (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  

(1)
Common dividends per share were $1.98, $1.86 and $1.76 for the year ended December 31, 2007, 2006 and 2005, respectively.
(2)
Series D and Series E preferred dividends per share were $50.63 and $173.75, respectively, for both the year ended December 31, 2006 and 2005.
(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)
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.

 
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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 72.8 million square feet.  We have a diversified tenant base with our largest tenant comprising only 3.0% of total rental revenues during 2007.

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 significant 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 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, “Consolidation of Variable Interest Entities.”  Based upon our analysis, we have determined that we have no interests in variable interest entities.

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.  We will record an impairment charge if we determine that a decline in the value of an investment is other than temporary.  No impairment was recorded for the years ended December 31, 2007, 2006 and 2005.

 
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Property
Real estate assets are stated at cost less accumulated depreciation, which, in the opinion of management, is not in excess of the individual property's estimated undiscounted future cash flows, including estimated proceeds from disposition.  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 one to 25 years 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, 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.  Such carrying amount is adjusted, if necessary, to the estimated fair value to reflect an impairment in the value of the asset.  No impairment was recorded for the years ended December 31, 2007, 2006 and 2005.

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.


 
44
 

Deferred Charges
Debt and lease costs are amortized primarily on a straight-line basis, which approximates the effective interest method, over the terms of the debt and over the lives of leases, respectively.  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 the leases.  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 Statement of Financial Accounting Standards (“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
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 in a qualified escrow account for the purposes of completing like-kind exchange transactions.  At December 31, 2007 and December 31, 2006, we had $21.3 million and $79.4 million held for like-kind exchange transactions, respectively, and $17.6 million and $15.1 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.

 
45
 

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,
 
   
2007
   
2006
   
2005
 
                   
Numerator:
                 
Net income available to common shareholders – basic
  $ 212,642     $ 294,909     $ 209,552  
Income attributable to operating partnership units
    4,407       5,453       5,218  
Net income available to common shareholders – diluted
  $ 217,049     $ 300,362     $ 214,770  
                         
Denominator:
                       
Weighted average shares outstanding – basic
    85,504       87,719       89,224  
Effect of dilutive securities:
                       
Share options and awards
    891       926       860  
Operating partnership units
    2,498       3,134       3,082  
Weighted average shares outstanding - diluted
    88,893       91,779       93,166  

Options to purchase common shares of beneficial interest of .5 million in both 2007 and 2006 and .9 million in 2005, 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.

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 Flow Information
All highly liquid investments with original maturities of three months or less are considered cash equivalents.  We issued common shares of beneficial interest valued at $13.6 million, $8.0 million and $1.3 million during 2007, 2006 and 2005, respectively, in exchange for interests in real estate joint ventures and partnerships, which had been formed to acquire properties.  We also accrued $15.5 million, $6.5 million and $4.9 million during 2007, 2006 and 2005, respectively, associated with the construction of property.  Cash payments for interest on debt, net of amounts capitalized, of $153.2 million, $139.1 million and $135.4 million were made during 2007, 2006 and 2005, respectively.  A cash payment of $.8 million and $.6 million for federal income taxes was made during 2007 and 2006, respectively.


 
46
 

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

   
Year Ended December 31,
 
   
2007
   
2006
   
2005
 
                   
Debt
  $ 99,428     $ 140,740     $ 135,330  
Obligations Under Capital Leases
    12,888                  
Minority Interest
    27,932       15,816       6,871  
Net Assets and Liabilities
    14,322       21,597       31,983  

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 and two properties in 2005, we retained a 20% unconsolidated investment of $90.6 million and $14.7 million, respectively.  In connection with the sale of improved properties, we received notes receivable totaling $2.6 million in 2006.  In 2005, a $15.5 million capital lease obligation was settled, and debt of $11.1 million was assumed.

Reclassifications
The reclassification of prior years’ operating results for certain properties to discontinued operations was made to conform to the current year presentation.  We also reclassified the net balance of our below-market assumed mortgages from Other Liabilities to Debt and our above-market assumed mortgages from Other Assets to Debt.  For additional information see Note 9, “Discontinued Operations” and Note 16, “Identified Intangible Assets and Liabilities,” respectively.  These reclassifications had no impact on previously reported net income, net income per share, shareholders’ equity or cash flows.

Note 2.          Newly Issued Accounting Pronouncements

In June 2006, the FASB issued FASB 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.  There are also several disclosure requirements.  We adopted FIN 48 as of January 1, 2007, and its adoption did not have a material effect on our consolidated financial statements.

 
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 are required to adopt SFAS 157 in the first quarter of 2008 regarding our financial assets and liabilities. The FASB has issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157,” to defer the provisions of SFAS 157 relating to nonfinancial assets and liabilities that delays implementation by us until January 1, 2009.  SFAS 157 is not expected to materially affect how we determine fair value, but may result in certain additional disclosures.
 

 
47
 

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 (the “Measurement Provision”) is effective for fiscal years ending after December 15, 2008.  We have assessed the potential impact of the Measurement Provision of SFAS 158 and concluded that its adoption will not have 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 is effective for us on January 1, 2008.  We are currently evaluating the impact that the adoption of SFAS 159 will have on our consolidated financial statements.

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.  We expect the adoption of SFAS 141R to have a material effect on our consolidated financial statements.  While we have not formally quantified the effect, we expect the adoption of SFAS 141R to have a material effect on our consolidated financial statements if our property acquisitions fall under the definition of a business.

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 will 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 on January 1, 2009 and most provisions will be applied retrospectively.  We are currently evaluating the impact SFAS 160 will have on our consolidated financial statements.

On August 31, 2007, the FASB authorized a proposed FASB Staff Position (the “proposed FSP”) that, if issued, would affect the accounting for our convertible and exchangeable senior debentures.  If issued in the form expected, the proposed FSP would 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.  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.  The proposed FSP has not been issued, but the FASB has indicated that it is expected to be effective for fiscal years beginning after December 15, 2007 and requires retroactive application.  Upon the adoption of the proposed FSP on January 1, 2008, we have estimated the unamortized debt discount (as of December 31, 2007) to be approximately $34.5 million to be included as a reduction of Debt and approximately $46.3 million as Accumulated Additional Paid-In Capital on our condensed consolidated balance sheet.  We have estimated incremental Interest Expense to be approximately $8.4 million and $3.4 million for the years ended December 31, 2007 and 2006.


 
48
 

Note 3.          Derivatives and Hedging

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.  At December 31, 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.  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 lock the swap rate at 5.2% effective through January 2018.  The purpose of these forward-starting swaps, which are designated as cash flow hedges, is to mitigate the risk of future fluctuations in interest rates on forecasted issuances of long-term debt.  We have determined that they are highly effective in offsetting future variable interest cash flows on anticipated long-term debt issuances.

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 fair value hedges, as well as changes in the fair value of the hedged item attributable to the hedge risk, are recorded in earnings each reporting period.  For the twelve months ended December 31, 2007 and 2006, these changes in fair value offset through earnings.  At December 31, 2007, we had no derivative instruments reported in Other Assets.  The derivative instruments at December 31, 2006 were reported at their fair values in Other Assets, net of accrued interest, of $.1 million, and as Other Liabilities, net of accrued interest, of $5.8 million and $3.2 million at December 31, 2007 and December 31, 2006, respectively.

As of December 31, 2007 and December 31, 2006, the balance in Accumulated Other Comprehensive Loss relating to derivatives was $11.8 million and $7.6 million, respectively, and amounts amortized to Interest Expense were $.9 million in 2007, $.4 million in 2006 and $.3 million in 2005.  Within the next 12 months, approximately $.9 million of the balance in Accumulated Other Comprehensive Loss is expected to be amortized to Interest Expense.

The interest rate swaps increased interest expense and decreased net income by $.6 million, $.5 million and $1.3 million in 2007, 2006 and 2005, respectively, and increased the average interest rate of our debt by .02% in 2007 and 2006 and .1% in 2005.  We could be exposed to losses in the event of nonperformance by the counter-parties; however, management believes the likelihood of such nonperformance is remote.

Note 4.          Debt

Our debt consists of the following (in thousands):

   
December 31,
 
   
2007
   
2006
 
             
Debt payable to 2030 at 4.5% to 8.8%
  $ 2,876,445     $ 2,888,892  
Unsecured notes payable under revolving credit agreements
    255,000       18,000  
Obligations under capital leases
    29,725       29,725  
Industrial revenue bonds payable to 2015 at 3.5% to 5.4%
    3,889       4,422  
                 
Total
  $ 3,165,059     $ 2,941,039  


 
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The grouping of total debt between fixed and variable-rate as well as between secured and unsecured is summarized below (in thousands):

   
December 31 ,
 
   
2007
   
2006
 
             
As to interest rate (including the effects of interest rate swaps):
           
Fixed-rate debt
  $ 2,843,320     $ 2,825,640  
Variable-rate debt
    321,739       115,399  
                 
Total
  $ 3,165,059     $ 2,941,039  
                 
As to collateralization:
               
Unsecured debt
  $ 2,095,506     $ 1,910,216  
Secured debt
    1,069,553       1,030,823  
                 
Total
  $ 3,165,059     $ 2,941,039  

In November 2007, we increased our revolving credit facility from $400 million to $575 million and amended certain covenants of this facility.  This unsecured revolving credit facility held by a syndicate of banks 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 42.5 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, 2007 and December 31, 2006, the balance outstanding under the revolving credit facility was $255 million at a variable interest rate of 5.4% and $18 million at a variable interest rate of 5.8%, respectively.  We also have an agreement for an unsecured and uncommitted overnight facility totaling $30 million as of December 31, 2007 and $20 million at December 31, 2006 with a bank that we use for cash management purposes, of which no amounts were outstanding at each respective date.  Letters of credit totaling $9.2 million and $10.1 million were outstanding under the revolving credit facility at December 31, 2007 and 2006, respectively.  The available balance under our revolving credit agreement was $310.8 million and $371.9 million at December 31, 2007 and December 31, 2006, respectively.  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%.  During 2006, the maximum balance and weighted average balance outstanding under both facilities combined were $368.2 million and $179.1 million, respectively, at a weighted average interest rate of 5.5%.

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.

In conjunction with acquisitions completed during 2007, we assumed $99.4 million of nonrecourse debt secured by the related properties.  A capital lease obligation totaling $12.9 million was assumed and subsequently settled in 2007.  As of December 31, 2006, the balance of secured debt that was assumed in conjunction with 2006 acquisitions was $140.7 million.

In conjunction with the disposition of properties completed 2007, we incurred a net loss of $.4 million on the early extinguishment of three loans totaling $22.2 million.  These defeasance costs were recognized as Interest Expense and have been reclassified and reported as discontinued operations in the Statements of Consolidated Income and Comprehensive Income in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

Various leases and properties, and current and future rentals from those lease and properties, collateralize certain debt.  At December 31, 2007 and 2006, the carrying value of such property aggregated $1.9 billion and $1.8 billion, respectively.


 
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Scheduled principal payments on our debt (excluding $255.0 million due under our revolving credit agreements, $21.0 million of certain capital leases, ($.4) million fair value of interest rate swaps and $29.7 million of non-cash debt-related items) are due during the following years (in thousands):

2008
  $ 254,509  
2009
    113,506  
2010
    119,183  
2011
    890,314  
2012
    333,112  
2013
    283,412  
2014
    373,787  
2015
    200,596  
2016
    142,667  
Thereafter
    148,616  
         

Our various debt agreements contain restrictive covenants, including minimum interest and fixed charge coverage ratios, minimum unencumbered interest coverage ratios and minimum net worth requirements and maximum total debt levels.  We are in compliance with all restrictive covenants as of December 31, 2007.

In December 2006, we issued $75 million of 10-year unsecured fixed rate medium term notes at 6.1% including the effect of an interest rate swap that had hedged the transaction.  Proceeds from this issuance were used to repay balances under our revolving credit facilities, to cash settle a forward hedge and for general business purposes.

In July 2006, we priced an offering of $575 million of 3.95% convertible senior unsecured notes due 2026, which closed on August 2, 2006.  Interest is payable semi-annually in arrears on February 1 and August 1 of each year, beginning February 1, 2007.  The net proceeds of $395.9 million 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).  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 connection with the issuance of these debentures, we filed a shelf 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 5.          Preferred Shares

On September 25, 2007, we issued $200 million of depositary shares in a private placement, and the net proceeds of $193.6 million were used to repay amounts outstanding under our credit facilities.  Each depositary share represents one-hundredth of a Series G Cumulative Redeemable Preferred Share.  The depositary shares are redeemable, in whole or in part 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.  The depositary shares are not convertible or exchangeable for any of our other property or securities.  The Series G Preferred Shares pay a variable-rate quarterly dividend through September 2008 and then a variable-rate monthly dividend and have a liquidation preference of $2,500 per share.  The variable-rate dividend is calculated on the period’s three-month LIBOR rate plus a percentage determined by the number of days outstanding.  Further, the rate may vary if any of our outstanding preferred shares are downgraded.  The variable-rate dividend is not to exceed 20%.  At December 31, 2007, the variable-rate dividend was 5.9%.
 

 
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On January 30, 2007, we issued $200 million of depositary shares.  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 preference of $2,500 per share.  Net proceeds of $194.0 million were used to repay amounts outstanding under our credit facilities and for general business purposes.

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, in whole or in part, for cash on or after July 8, 2009 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 E preferred shares pay a 6.95% annual dividend and have a liquidation preference 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 redeemable, in whole or in part, for cash on or after April 30, 2008 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 property or securities.  The Series D preferred shares pay a 6.75% annual dividend and have a liquidation preference of $750 per share.

Note 6.          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 next 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 have repurchased and cancelled 1.4 million common shares of beneficial interest at an average share price of $37.75.

In July 2006, our Board of Trust Managers authorized the repurchase of our common shares of beneficial interest to a total of $207 million, and we used $167.6 million of the net proceeds from the $575 million debt offering to purchase 4.3 million common shares of beneficial interest at $39.26 per share.  For additional information see Note 4, “Debt.”

Note 7.          Treasury Shares of Beneficial Interest

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


 
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Note 8.          Property

Our property consisted of the following (in thousands):

   
December 31,
 
   
2007
   
2006
 
             
Land
  $ 974,145     $ 847,295  
Land held for development
    62,033       21,405  
Land under development
    223,827       146,990  
Buildings and improvements
    3,533,037       3,339,074  
Construction in-progress
    179,302       91,124  
                 
Total
  $ 4,972,344     $ 4,445,888  

The following carrying charges were capitalized (in thousands):

   
Year Ended December 31,
 
   
2007
   
2006
   
2005
 
                   
Interest
  $ 25,025     $ 7,616     $ 2,629  
Ad valorem taxes
    1,985       780       293  
                         
Total
  $ 27,010     $ 8,396     $ 2,922  

During 2007, we invested $503.1 million in the acquisition of operating properties.  We completed the acquisition of 13 shopping centers, one office building and seven industrial properties that are located in Arizona, Florida, Georgia, Illinois, Oregon, Texas and Virginia.  We also acquired our partner’s 50% interest in a shopping center in Las Vegas, Nevada.  Of this total, $417.3 million was invested in shopping centers, and $85.8 million was invested in industrial properties and the office building.

During 2007, we invested $243.1 million in 28 new developments projects.  We commenced 13 new development projects located in Arizona, Florida, Georgia, Nevada, North Carolina and Texas during 2007.  Of these, six represent interests in consolidated joint ventures in which we have ownership interests ranging from 50% to 55%.

Note 9.          Discontinued Operations

During 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. In 2006, we sold 19 shopping centers and four industrial properties, 10 of which were located in Texas, three in Kansas, two each in Arkansas, Oklahoma and Tennessee, and one each in Arizona, Missouri, New Mexico and Colorado.  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, "Accounting for the Impairment or Disposal of Long-Lived Assets," as well as any gains on the respective disposition for all periods presented.  Revenues recorded in Operating Income from Discontinued Operations totaled $10.9 million in 2007, $40.8 million in 2006, and $61.5 million in 2005.  Included in the Consolidated Balance Sheet at December 31, 2006 were $180.1 million of Property, $30.4 million of Accumulated Depreciation and $22.4 million of Debt related to properties sold during 2007.

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 their disposition.  These defeasance costs were recognized as Interest Expense and have been reclassified and reported as operating income from discontinued operations.

The discontinued operations reported in 2006 had no debt that was required to be repaid upon their disposition.

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.

 
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During the first nine months of 2008, one industrial center located in Texas and eight shopping centers, five of which were located in Texas, one in California and two in Louisiana, were sold.  The operating results of these properties have been reclassified and reported as discontinued operations in the Statements of Consolidated Income and Comprehensive Income.  Included in the Consolidated Balance Sheet at December 31, 2007 were $88.3 million of Property and $35.4 million of Accumulated Depreciation related to the property sold in the first nine months of 2008.  Revenues for the properties disposed in 2008 totaled $12.4 million in 2007, $12.0 million in 2006, and $11.2 million in 2005.

The discontinued operations reported for the first nine months of 2008 had no debt that was required to be repaid upon their disposition.

Note 10.        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 5.7% to 10% at December 31, 2007 and 6.0% to 10% at December 31, 2006.  These notes are due at various dates through 2028 and are generally secured by real estate assets.  We recognized interest income on these notes as follows, in millions: $1.5 in 2007 and $1.3 in both 2006 and 2005.

Note 11.        Related Parties

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 12.        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 unaudited financial information of these ventures (at 100%) is summarized as follows (in thousands):

   
December 31,
 
   
2007
   
2006
 
             
Combined Condensed Balance Sheets
           
             
Property
  $ 1,660,915     $ 1,123,600  
Accumulated depreciation
    (71,998 )     (41,305 )
Property – net
    1,588,917       1,082,295  
                 
Other assets
    238,166       117,594  
                 
Total
  $ 1,827,083     $ 1,199,889  
                 
                 
                 
Debt (primarily mortgage payable)
  $ 378,206     $ 327,460  
Notes and accounts payable to Weingarten Realty Investors
    87,191       22,657  
Other liabilities
    138,150       39,154  
Accumulated equity
    1,223,536       810,618  
                 
Total
  $ 1,827,083     $ 1,199,889  


 
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Year Ended December 31,
 
   
2007
   
2006
   
2005
 
                   
Combined Condensed Statements of Income
                 
                   
Revenues
  $ 146,642     $ 65,002     $ 41,059  
                         
Expenses:
                       
Depreciation and amortization
    38,574       15,390       9,322  
Interest
    23,093       17,398       10,565  
Operating
    22,396       8,750       5,480  
Ad valorem taxes
    15,767       6,187       4,756  
General and administrative
    1,243       783       301  
                         
Total
    101,073       48,508       30,424  
                         
Gain on land and merchant development sales
    1,295       1,938       170  
Gain (loss) on sale of properties
    5,422       5,991       (20 )
Net income
  $ 52,286     $ 24,423     $ 10,785  

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 $15.8 million and $20.1 million at December 31, 2007 and December 31, 2006, respectively, are generally amortized over the useful lives of the related assets.

Fees earned by us for the management of these real estate joint ventures and partnerships totaled $5.0 million in 2007, $1.9 million in 2006, and $.8 million in 2005.

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.

 
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During 2006, we invested in a 25%-owned unconsolidated real estate joint venture, which acquired five shopping centers.  Fresh Market Shoppes is located in Hilton Head, South Carolina; Shoppes at Paradise Isle is located in Destin, Florida; Indian Harbor Place is located in Melbourne, Florida, and both Quesada Commons and Shoppes of Port Charlotte are located in Port Charlotte, Florida.  Two 50%-owned real estate joint ventures commenced development of a retail center each located in Mission, Texas and Apple Valley, California.  Also, two shopping centers, one each in Crosby and Dickinson, Texas, were sold.  Our share of the sales proceeds totaled $8.1 million and generated a gain of $4.1 million.  Associated with our land and merchant development activities, two parcels of land in Houston, Texas and Liberty Lake, Washington were sold in a 75%-owned and a 50%-owned real estate joint venture, respectively, of which our share of the gain totaled $1.1 million.  We also acquired our partner’s share of Heritage Station, which is located in Wake Forest, North Carolina.  Heritage Station is a 62,000 square foot shopping center that is anchored by Harris Teeter.

During the third quarter of 2006, we formed a strategic joint venture with PNC Realty Investors (“PNC”) to acquire and operate industrial properties within target markets across the United States.  PNC served as investment advisor to the AFL-CIO Building Investment Trust (“BIT”).  The joint venture is 80% owned by BIT and 20% by us.  The partners plan to invest $500 million in total capital over the next two years including leverage targeted at approximately 50% of total capital.  As part of this transaction, we contributed 16 buildings at five properties with a total value of $123 million and aggregating more than two million square feet.  The sale of an 80% interest in these properties resulted in a gain to us of $21.6 million, and due to our continuing involvement with these properties, the operating results have not been reclassified and reported in discontinued operations.  The properties are located in the San Diego, Memphis and Atlanta markets.

During the fourth quarter of 2006, two new strategic joint ventures were formed with TIAA-CREF Global Real Estate and AEW Capital Management on behalf of its institutional clients, of which we own 20%.  We contributed to the TIAA-CREF Global Real Estate joint venture seven recently purchased neighborhood/community shopping centers in South Florida with a total value of $325 million and aggregating more than 1.3 million square feet.  The AEW Capital Management joint venture acquired four grocery-anchored centers and two power centers located in Oregon and Washington.

Note 13.        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.  Our shareholders must report their share of income distributed in the form of dividends.

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 $275 million at December 31, 2007 and $70.8 million at December 31, 2006.

The following table reconciles net income to REIT taxable income for the year ended December 31, 2007, 2006 and 2005 (in thousands):


   
2007
   
2006
   
2005
 
                   
Net Income
  $ 238,017     $ 305,010     $ 219,653  
Net income of taxable REIT subsidiaries included above
    (6,352 )     (4,264 )     (923 )
Net Income from REIT operations
    231,665       300,746       218,730  
Book depreciation and amortization including discontinued operations
    134,676       131,992       126,930  
Tax depreciation and amortization
    (98,238 )     (86,002 )     (80,922 )
Book/tax difference on gains/losses from capital transactions
    (76,054 )     (128,628 )     (69,885 )
Other book/tax differences, net
    2,698       (22,534 )     (32,336 )
REIT taxable income
    194,747       195,574       162,517  
Dividends paid deduction
    (194,747 )     (195,574 )     (167,196 )
Dividends paid in excess of taxable income
  $ -     $ -     $ (4,679 )


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

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

   
2007
   
2006
   
2005
 
                   
Ordinary income
    85.6 %     76.2 %     81.2 %
Capital gain distributions
    14.4       23.8       9.7  
Return of capital (generally nontaxable)
                    9.1  
                         
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 provision of $2.1 million, $1.3 million and zero for the years ended December 31, 2007, 2006 and 2005, respectively.  Our deferred tax assets at December 31, 2007 and 2006 were $1.1 million and $.3 million, respectively, with the deferred tax liabilities totaling $1.4 million and $1.6 million, respectively.  Also, a current tax obligation of $2.3 million has been recorded at December 31, 2007 in association with this tax.

We have reviewed our tax positions under FIN 48.  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 replaces 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 becomes effective for franchise tax reports due on or after January 1, 2008 and will be based on revenues earned during the 2007 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 years ended December 31, 2007 and 2006, we recorded a provision for the Revised Texas Franchise Tax of $2.0 million and $.1 million, respectively.  The deferred tax assets and deferred tax liability associated with this tax each totaled $.1 million as of December 31, 2007 and 2006.  Also, a current tax obligation of $2.0 million has been recorded at December 31, 2007 in association with this tax.

Note 14.        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, 2007, in millions, is: $436.6 in 2008; $385.3 in 2009; $324.0 in 2010; $253.2 in 2011; $189.9 in 2012; and $780.9 thereafter.  The future minimum rental amounts do not include estimates for contingent rentals.  Such contingent rentals, in millions, aggregated $126.3 in 2007, $119.0 in 2006 and $108.8 in 2005.

 
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Note 15.        Commitments and Contingencies

We are engaged in the operations 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 2075, 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):

2008
  $ 2,436  
2009
    2,961  
2010
    2,917  
2011
    2,862  
2012
    2,821  
Thereafter
    113,568  
    $ 127,565  

Rental expense (including insignificant amounts for contingent rentals) for operating leases was, in millions:  $3.4 in 2007; $3.2 in 2006 and $2.9 in 2005.

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):

2008
  $ 32,356  
2009
    28,028  
2010
    23,814  
2011
    20,022  
2012
    16,222  
Thereafter
    68,544  
    $ 188,986  

Property under capital leases, consisting of four shopping centers at both December 31, 2007 and 2006 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, 2007 and 2006 was $14.2 million and $13.1 million, respectively.  Future minimum lease payments under these capital leases total $50.1 million, with annual payments due, in millions, of $1.9 in 2008; $2.0 in each of 2009 and 2010; $2.1 in each of 2011 and 2012; and $40.0 thereafter.  The amount of these total payments representing interest is $20.4 million.  Accordingly, the present value of the net minimum lease payments was $29.7 million at December 31, 2007.


 
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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 two real estate ventures that have properties in Florida and Texas that allow their outside partners 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 2007 and 2006 we issued common shares of beneficial interest valued at $13.6 million and $8.0, 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 $76 million and $139 million as of December 31, 2007 and 2006, respectively.

In January 2007, two retail properties were purchased 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.  As of December 31, 2007, $5.2 million has been paid and $4.2 million has been accrued.  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.  As of December 31, 2007, $5.6 million has been accrued.  Amounts paid or accrued under such earnouts are treated as additional purchase price and capitalized to the related property.

In August 2006, we purchased a portfolio of properties from North American Properties.  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 expires in August 2008.  We have no obligation for this contingency as of December 31, 2007.

We expect to invest approximately $127.0 million in 2008, $100.5 million in 2009, $53.3 million in 2010, $7.8 million in 2011 and $1.4 million in 2012 to complete construction of 32 properties under various stages of development.  We also expect to invest $8.3 million to acquire projects in 2008 and $1.8 million in 2009.

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 guarantee for the payment of any annual sinking fund requirement 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 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.  We have evaluated and determined that the fair value of the guarantee is nominal.  However, due to the guarantee, a liability has been recorded by the joint venture equal to amounts funded under the bonds.

 
59
 

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 are of the opinion that, when such litigation is resolved, our resulting liability, if any, will not have a material effect on our consolidated financial statements.

Note 16.        Identified Intangible Assets and Liabilities

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

   
December 31,
   
December 31,
 
   
2007
   
2006
 
             
Identified Intangible Assets:
           
Above-Market Leases (included in Other Assets)
  $ 18,590     $ 14,686  
Above-Market Leases – Accumulated Amortization
    (7,323 )     (5,277 )
Below-Market Assumed Mortgages (included in Debt)
    2,072       1,653  
Below-Market Assumed Mortgages – Accumulated Amortization
    (246 )        
Valuation of In Place Leases (included in Unamortized Debt and Lease Cost)
    59,498       52,878  
Valuation of In Place Leases – Accumulated Amortization
    (22,308 )     (16,297 )
                 
    $ 50,283     $ 47,643  
                 
Identified Intangible Liabilities:
               
Below-Market Leases (included in Other Liabilities)
  $ 39,141     $ 24,602  
Below-Market Leases – Accumulated Amortization
    (11,949 )     (6,569 )
Above-Market Assumed Mortgages (included in Debt)
    58,414       59,863  
Above-Market Assumed Mortgages – Accumulated Amortization
    (24,517 )     (18,123 )
                 
    $ 61,089     $ 59,773  

These identified intangible assets and liabilities are amortized over the terms of the acquired leases or the remaining lives of the assumed mortgages.

The net amortization of above-market and below-market leases increased rental revenues by $3.2 million, $1.3 million, and $.3 million in 2007, 2006, and 2005, 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):

2008
  $ 3,321  
2009
    2,771  
2010
    1,940  
2011
    1,369  
2012
    1,115  

The amortization of the in place lease intangible recorded in depreciation and amortization, was $8.3 million, $7.6 million, and $6.2 million in 2007, 2006, and 2005, respectively.  The estimated amortization of this intangible asset will increase depreciation and amortization for each of the next five years as follows (in thousands):

2008
  $ 7,187  
2009
    6,255  
2010
    5,227  
2011
    4,042  
2012
    3,229  


 
60
 

The amortization of above-market and below-market assumed mortgages decreased interest expense by $6.7 million, $7.3 million and $6.9 million in 2007, 2006, and 2005, 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):

2008
  $ 5,804  
2009
    4,476  
2010
    3,823  
2011
    2,526  
2012
    1,355  

Note 17.        Fair Value of Financial Instruments

The fair value of our financial instruments was determined using available market information and appropriate valuation methodologies as of December 31, 2007.  Unless otherwise described below, all other financial instruments are carried at amounts which approximate their fair values.

Based on rates currently available to us for debt with similar terms and average maturities, fixed-rate debt with carrying values of $2.8 billion at both December 31, 2007 and 2006, have fair values of approximately $2.9 billion and $2.7 billion, respectively.  The fair value of our variable-rate debt approximates its carrying values of $321.7 million and $115.4 million as of December 31, 2007 and 2006, respectively.

Note 18.        Share Options and Awards

On January 1, 2006, we adopted SFAS No. 123(R), “Share-Based Payment,” which established accounting standards for all transactions in which an entity exchanges its equity instruments for goods and services.  This accounting standard focuses primarily on equity transactions with employees.  We began recording compensation expense on any unvested awards granted during the remaining vesting periods.

In 1988, we adopted a Share Option Plan that provided for the issuance of options and share awards up to a maximum of 1.6 million common shares of beneficial interest.  This plan expired in December 1997, and no awards remain outstanding at December 31, 2007.

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, 2007.  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, 2007.  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.  Restricted shares under this plan have multiple vesting periods.  Prior to 2000, restricted shares generally vested over a 10 year period.  Effective in 2000, the vesting period became five years.  In addition, the vesting period for these restricted shares can be accelerated based on appreciation in the market share price.  All restricted shares related to this plan vested prior to 2005.

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 2.6 million is available for the future grant of options or awards at December 31, 2007.  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.

 
61
 

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 $5.1 million in 2007, $4.9 million in 2006 and $1.7 million in 2005, of which $1.3 million in both 2007 and 2006 and $.5 million in 2005 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,
 
   
2007
   
2006
   
2005
 
                   
Fair value per share option
  $ 4.29     $ 4.97     $ 3.02  
Dividend yield
    5.5 %     5.7 %     6.3 %
Expected volatility
    18.1 %     18.2 %     16.8 %
Expected life (in years)
    6.0       5.9       6.7  
Risk-free interest rate
    4.1 %     4.4 %     4.4 %

Following is a summary of the option activity for the three years ended December 31, 2007:

         
Weighted
 
   
Shares
   
Average
 
   
Under
   
Exercise
 
   
Option
   
Price
 
             
Outstanding, January 1, 2005
    3,011,790     $ 24.77  
Granted
    537,319       37.40  
Forfeited or expired
    (30,797 )     28.10  
Exercised
    (338,666 )     19.17  
Outstanding, December 31, 2005
    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  

The total intrinsic value of options exercised was $5.0 million in 2007, $10.3 million in 2006 and $6.4 million in 2005.  As of December 31, 2007 and 2006, there was approximately $3.3 million and $4.9 million, respectively, of total unrecognized compensation cost related to unvested share options, which is expected to be amortized over a weighted average of 2.0 years and 3.0 years, respectively.


 
62
 

The following table summarizes information about share options outstanding and exercisable at December 31, 2007:

     
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)
 
                                               
$ 17.89 - $26.83       1,059,744  
4.0 years
  $ 21.95               860,045     $ 21.55  
3.8 years
       
                                                         
$ 26.84 - $40.26       1,262,966  
7.0 years
  $ 35.58               818,749     $ 34.91  
6.8 years
       
                                                         
$ 40.27 - $49.62       517,580  
8.9 years
  $ 47.47               113,702     $ 47.46  
8.9 years
       
                                                         
Total
      2,840,290  
6.2 years
  $ 32.66     $ -                     1,792,496     $ 29.30  
5.5 years
  $ 3,836  

A summary of the status of unvested restricted shares for the ended December 31, 2007 is as follows:

   
Unvested
   
Weighted
 
   
Restricted
   
Average Grant
 
   
Shares
   
Date Fair Value
 
             
Outstanding, January 1, 2007
    172,255     $ 40.80  
Granted
    10,412       48.43  
Vested
    (55,841 )     40.63  
Forfeited
    (9,287 )     42.04  
Outstanding, December 31, 2007
    117,539     $ 41.45  

As of December 31, 2007 and 2006, there was approximately $4.4 million and $6.1 million, respectively, of total unrecognized compensation cost related to unvested restricted shares, which is expected to be amortized over a weighted average of 2.7 years and 3.7 years, respectively.

Note 19.        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 six-year period.  Compensation expense related to the plan was $1.0 million in 2007, $.8 million in 2006 and $.7 million in 2005.

We also have an Employee Share Purchase Plan under which .6 million 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 on the purchase date.  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 30,437, 24,181 and 22,717 shares were purchased by employees at an average price of $33.49, $35.38 and $30.89 during 2007, 2006 and 2005, respectively.

 
63
 

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.  Vesting generally occurs after five 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 five 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 $183,000, ($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, 2007 and 2006.

   
Fiscal Year End
 
   
2007
   
2006
 
Change in Projected Benefit Obligation:
           
Benefit obligation at beginning of year
  $ 38,997     $ 32,456  
Service cost
    3,846       3,090  
Interest cost
    2,175       2,309  
Plan amendments
            63  
Actuarial (gains) losses
    (1,325 )     1,882  
Benefit payments
    (2,610 )     (803 )
Benefit obligation at end of year
  $ 41,083     $ 38,997  
                 
Change in Plan Assets:
               
Fair value of plan assets at beginning of year
  $ 17,933     $ 15,213  
Actual return on plan assets
    1,185       1,901  
Employer contributions
    3,926       1,622  
Benefit payments
    (2,610 )     (803 )
Fair value of plan assets at end of year
  $ 20,434     $ 17,933  
                 
Unfunded Status at End of Year:
  $ 20,649     $ 21,064  
                 
Accumulated benefit obligation
  $ 40,101     $ 38,194  
                 
Amounts recognized in accumulated other comprehensive loss consist of:
               
Net loss
  $ 4,287     $ 5,565  
Prior service credit
    (587 )     (704 )
Total amount recognized
  $ 3,700     $ 4,861  

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

   
2007
 
2006
2005
           
Net gain
  $ (925 )
NA
NA
Amortization of net gain
    (353 )
NA
NA
Amortization of prior service cost
    117  
NA
NA
Total recognized in other comprehensive income
  $ (1,161 )
NA
NA
             
             
Total recognized in net periodic benefit costs and other comprehensive income
  $ 3,511  
NA
NA

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

   
2007
   
2006
 
             
Projected benefit obligation
  $ 41,083     $ 38,997  
Accumulated benefit obligation
    40,101       38,194  
Fair value of plan assets
    20,434       17,933  

At December 31, 2007 and 2006, the Retirement Plan was underfunded by $2.7 million and $4.8 million, respectively, and the SRP was underfunded by $17.9 million and $16.3 million, respectively.

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

   
2007
   
2006
   
2005
 
                   
Service cost
  $ 3,846     $ 3,090     $ 2,641  
Interest cost
    2,175       2,309       1,724  
Expected return on plan assets
    (1,500 )     (1,385 )     (1,192 )
Prior service cost
    (117 )     (128 )     (128 )
Recognized loss
    269       407       159  
                         
Total
  $ 4,673     $ 4,293     $ 3,204  

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

   
2007
   
2006
   
2005
 
                   
Discount rate – Retirement Plan
    5.75 %     5.75 %     6.00 %
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 2007.


 
65
 

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

   
2007
   
2006
   
2005
 
                   
Discount rate – Retirement Plan
    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 %

The expected contribution to be paid for both plans by us during 2008 is approximately $5.5 million, of which $2.5 million relates to the Retirement Plan.  The expected benefit payments for the next ten years for both plans are as follows, in millions: $.7 in 2008; $7.0 in 2009; $.8 in 2010; $.8 in 2011, $2.5 in 2012 and $9.3 in 2013 through 2017.

The participant data used in determining the liabilities and costs was collected as of January 1, 2007.

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

   
December 31,
 
   
2007
   
2006
 
             
Cash and short-term investments
    3 %     3 %
Mutual funds – equity
    69 %     69 %
Mutual funds – fixed income
    28 %     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.  Approximately 70% of plan assets are allocated to equity investments and 30% 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 20.        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, Illinois, Georgia, 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.


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

   
Shopping
                   
   
Center
   
Industrial
   
Other
   
Total
 
                         
Year Ended December 31, 2007:
                       
Revenues
  $ 522,140     $ 53,650     $ 10,884     $ 586,674  
Net Operating Income
    374,038       37,151       4,533       415,722  
    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
  $ 470,066     $ 53,429     $ 2,688     $ 526,183  
Net Operating Income (Loss)
    342,338       37,362       (405 )     379,295  
    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  
                                 
Year Ended December 31, 2005:
                               
Revenues
  $ 428,350     $ 46,133     $ 2,136     $ 476,619  
Net Operating Income
    316,216       33,383       885       350,484  
    Equity in Earnings (Loss) of Real Estate Joint Ventures and Partnerships, net
    6,533       87       (10 )     6,610  
Capital Expenditures
    339,328       89,066       646       429,040  
                                 
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  
                                 
As of December 31, 2005
                               
    Investment in Real Estate Joint Ventures and Partnerships
  $ 82,092     $ 480     $ 1,776     $ 84,348  
Total Assets
    3,035,964       355,848       345,929       3,737,741  


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


   
2007
   
2006
   
2005
 
                   
Total Segment Net Operating Income
  $ 415,722     $ 379,295     $ 350,484  
Depreciation and Amortization
    (129,002 )     (118,519 )     (108,031 )
General and Administrative
    (26,979 )     (23,801 )     (17,379 )
Interest Expense
    (148,829 )     (145,374 )     (129,160 )
Interest and Other Income
    8,486       9,044       2,854  
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
    19,853       14,655       6,610  
Income Allocated to Minority Interests
    (10,237 )     (6,414 )     (6,060 )
Gain on Land and Merchant Development Sales
    16,385       7,166       804  
Gain on Sale of Properties
    4,086       22,493       22,306  
Provision for Income Taxes
    (4,073 )     (1,366 )        
Income from Continuing Operations
  $ 145,412     $ 137,179     $ 122,428  


Note 21.        Quarterly Financial Data (Unaudited)

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

   
First
     
Second
     
Third
     
Fourth
   
                                 
2007:
                               
Revenues (2)
  $ 140,495       $ 142,029       $ 152,928       $ 151,222    
Net income available to common shareholders
    46,657         70,002   (1)     38,281         57,702   (1) 
Net income per common share – basic
    0.61         0.81   (1)     0.45         0.68   (1)
Net income per common share – diluted
    0.53         0.79   (1)     0.44         0.67   (1)
                                         
2006:
                                       
Revenues (2)
  $ 125,487       $ 127,802       $ 135,283       $ 137,611    
Net income available to common shareholders
    52,084         87,741   (1)     103,223   (1)     51,861    
Net income per common share – basic
    0.58         0.98   (1)     1.19   (1)     0.61    
Net income per common share – diluted
    0.57         0.95   (1)     1.15   (1)     0.59    

(1)  
The quarter results include gains on the sale of properties.
(2)  
Revenues from the sale of operating properties have been reclassified and reported as operating income from discontinued operations for all periods presented.

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