• The Company could be adversely affected by changes in the local markets where its properties are located, as well as by adverse changes in national economic and market conditions;

• The Company may fail to anticipate the effects on its properties of changes in consumer buying practices, including sales over the Internet and the resulting retailing practices and space needs of its tenants or a general downturn in its tenants' businesses, which may cause tenants to close stores;

• The Company is subject to competition for tenants from other owners of retail properties, and its tenants are subject to competition from other retailers and methods of distribution. The Company is dependent upon the successful operations and financial condition of its tenants, in

particular of its major tenants, and could be adversely affected by the bankruptcy of those tenants;

• The Company may not realize the intended benefits of acquisition or merger transactions. The acquired assets may not perform as well as the Company anticipated, or the Company may not successfully integrate the assets and realize the improvements in occupancy and operating results that the Company anticipates. The acquisition of certain assets may subject the Company to liabilities, including environmental liabilities;

• The Company may fail to identify, acquire, construct or develop additional properties that produce a desired yield on invested capital, or may fail to effectively integrate acquisitions of properties or portfolios of properties. In addition, the Company may be limited in its acquisition opportunities due to competition, the inability to obtain financing on reasonable terms or any financing at all and other factors;

• The Company may fail to dispose of properties on favorable terms. In addition, real estate investments can be illiquid, particularly as prospective buyers may experience increased costs of financing or difficulties obtaining financing, and could limit the Company's ability to promptly make changes to its portfolio to respond to economic and other conditions;

• The Company may abandon a development opportunity after expending resources if it determines that the development opportunity is not feasible due to a variety of factors, including a lack of availability of construction financing on reasonable terms, the impact of the current economic environment on prospective tenants' ability to enter into new leases or pay contractual rent, or the inability by the Company to obtain all necessary zoning and other required governmental permits and authorizations;

• The Company may not complete development projects on schedule as a result of various factors, many of which are beyond the Company's control, such as weather, labor conditions, governmental approvals, material shortages, or general economic downturn resulting in limited availability of capital, increased debt service expense and construction costs and decreases in revenue;

• The Company's financial condition may be affected by required debt service payments, the risk of default and restrictions on its ability to incur additional debt or enter into certain transactions under its credit facilities and other documents governing its debt obligations. In addition, the Company may encounter difficulties in obtaining permanent financing or refinancing existing debt. Borrowings under the Company's revolving credit facilities are subject to certain representations and warranties, including any event which has had or could reasonably be expected to have a material adverse effect on the Company's business or financial condition;

• Changes in interest rates could adversely affect the market price of the Company's common shares, as well as its performance and cash flow;

• Debt and/or equity financing necessary for the Company to continue to grow and operate its business may not be available or may not be available on favorable terms;

• The Company is subject to complex regulations related to its status as a real estate investment trust, or REIT, and would be adversely affected if it failed to qualify as a REIT;

• The Company must make distributions to shareholders to continue to qualify as a REIT, and if the Company must borrow funds to make distributions, those borrowings may not be available on favorable terms or at all;

• Joint venture investments may involve risks not otherwise present for investments made solely by the Company, including the possibility that a partner or co-venturer may become bankrupt, may at any time have different interests or goals than those of the Company and may take action contrary to the Company's instructions, requests, policies or objectives, including the Company's policy with respect to maintaining its qualification as a REIT. In addition, a partner or co-venturer may not have access to sufficient capital to satisfy its funding obligations to the joint venture. Furthermore, if the current constrained credit conditions in the capital markets persist or deteriorate further, the Company could be required to reduce the carrying value of its equity method investments if a loss in the carrying value of the investment is other than a temporary decline pursuant to APB 18, "The Equity Method of Accounting for Investments in Common Stock";

• The Company may not realize anticipated returns from its real estate assets outside the United States. The Company expects to continue to pursue international opportunities that may subject the Company to different or greater risks than those associated with its domestic operations. The Company owns assets in Puerto Rico, an interest in an unconsolidated joint venture that owns properties in Brazil and an interest in consolidated joint ventures that will develop and own properties in Canada, Russia and Ukraine;

• International development and ownership activities carry risks that are different from those the Company faces with the Company's domestic properties and operations. These risks include:

• Adverse effects of changes in exchange rates for foreign currencies;

• Changes in foreign political or economic environments;

• Challenges of complying with a wide variety of foreign laws including tax laws, addressing different practices and customs relating to corporate governance, operations and litigation;

• Different lending practices;

• Cultural and consumer differences;

• Changes in applicable laws and regulations in the United States that affect foreign operations;

• Difficulties in managing international operations and

• Obstacles to the repatriation of earnings and cash;

• Although the Company's international activities are currently a relatively small portion of its business, to the extent the Company expands its international activities, these risks could significantly increase and adversely affect its results of operations and financial condition;

• The Company is subject to potential environmental liabilities;

• The Company may incur losses that are uninsured or exceed policy coverage due to its liability for certain injuries to persons, property or the environment occurring on its properties and

• The Company could incur additional expenses in order to comply with or respond to claims under the Americans with Disabilities Act or otherwise be adversely affected by changes in

government regulations, including changes in environmental, zoning, tax and other regulations.

Executive Summary
The Company is a self-administered and self-managed REIT, in the business of acquiring, developing, redeveloping, owning, leasing and managing shopping centers. As of September 30, 2008, the Company's portfolio consisted of 713 shopping centers and six business centers (including 329 owned through unconsolidated joint ventures and 40 that are otherwise consolidated by the Company). These properties consist of shopping centers, lifestyle centers and enclosed malls owned in the United States, Puerto Rico and Brazil. At September 30, 2008, the Company owned and/or managed approximately 146.3 million total square feet of Gross Leasable Area ("GLA"), which includes all of the aforementioned properties and one property owned by a third party. The Company also has assets under development in Canada and Russia. The Company believes that its portfolio of shopping center properties is one of the largest (measured by the amount of total GLA) currently held by any publicly-traded REIT. At September 30, 2008, the aggregate occupancy of the Company's shopping center portfolio was 94.5%, as compared to 94.9% at September 30, 2007. The Company owned 708 shopping centers at September 30, 2007. The average annualized base rent per occupied square foot was $12.47 at September 30, 2008, as compared to $12.15 at September 30, 2007. The Company also owns six office and industrial properties.
Net income applicable to common shareholders for the three-month period ended September 30, 2008, was $27.9 million, or $0.23 per share (diluted and basic), compared to $32.7 million, or $0.26 per share (diluted) and $0.27 per share
(basic), for the prior-year period. Net income applicable to common shareholders for the nine-month period ended September 30, 2008, was $90.2 million, or $0.75 per share (diluted and basic), compared to $192.9 million, or $1.59 per share (diluted) and $1.60 per share (basic), for the prior-year period. Funds from operations ("FFO") applicable to common shareholders for the three-month period ended September 30, 2008, was $100.0 million compared to $99.5 million for the three-month period ended September 30, 2007, an increase of 0.5%. FFO applicable to common shareholders for the nine-month period ended September 30, 2008, was $298.7 million compared to $365.0 million for the nine-month period ended September 30, 2007, a decrease of 18.2%. The decrease in net income and FFO applicable to common shareholders for the nine-month period ended September 30, 2008, of approximately $102.7 million and $66.3 million, respectively, is primarily related to a reduction in the amount of transactional income earned compared to the same period in 2007 (gains on disposition of real estate of approximately $72.5 million and promoted income from joint venture interests of approximately $14.3 million), the transfer of 62 assets to unconsolidated joint ventures in 2007 and the sale of 67 assets to third parties in 2007. Third quarter 2008 operating results The results for the three-month period ended September 30, 2008, reflect only a small amount of transactional income as compared to the comparable period of 2007. Notwithstanding this decrease in transactional activity, the third quarter results demonstrate the stability and the consistency of the core portfolio. Net income applicable to common shareholders of $27.9 million is primarily derived

from recurring operating income from the Company's core portfolio. Further, the Company's operating metrics continue to be in line with its expectations.
Significant asset sales closed late in the second quarter and in the third quarter of 2007 and, as such, a year-over-year comparison is difficult. The Company sold approximately $1.4 billion of assets into joint venture investments during this time period. The revenues and expenses in 2007 associated with these assets, as depreciation expense was not recorded for the newly acquired Inland Retail Real Estate Trust, Inc. ("IRRETI") assets sold, are reflected in the 2007 results and are not reclassified to discontinued operations due to the Company's continuing involvement with these assets.
In response to the unprecedented events that have recently taken place in the capital markets, the Company has refined its strategies in order to mitigate risk and focus on core operating results. The Company's top priority is to ensure that it is positioned to navigate this current challenging environment and emerge as a stronger company. The Company is taking proactive steps, as described below, to reduce leverage by utilizing strategic financial measures to protect the Company's long-term financial strength. The Company expects to continue to enhance liquidity, protect the quality of the balance sheet and maximize access to a variety of capital sources.
The Company intends to address its capital requirements through generating capital from anticipated asset sales, including sales to joint ventures, retaining capital, the elimination of the fourth quarter 2008 dividend, as well as the previously announced intention to reduce its 2009 quarterly dividend, and pursuing existing and prospective financings, in order to fund the Company's debt repayments and repurchases and, to the extent deemed appropriate, minimizing further capital expenditures.
With respect to capital expenditures, the Company generally considers this type of spending to be discretionary. Within the Company's development and redevelopment portfolios, the Company has dramatically reduced expected spending and is able to do so by phasing construction until sufficient pre-leasing is reached and financing is in place. One of the historical benefits of the Company's asset class is the relatively low level of capital necessary to lease and maintain the portfolio. The Company can operate the portfolio in a highly cash-efficient manner and still generate consistent cash flows.
The Company will selectively pursue new investment opportunities only after significant equity and debt financings are identified and when underwritten expected returns sufficiently exceed the Company's current cost of capital. The Company is focusing on conserving capital, ensuring that capital allocation decisions are prudent. The Company continues to scrutinize all capital expenditures for its development pipeline as well. The Company does not expect to pursue any further projects that do not meet the Company's pre-leasing thresholds or other thresholds necessary to secure third-party construction financing and/or the Company's return thresholds. In situations where the Company's joint ventures are unable to obtain adequate third-party financing, construction may be delayed on development projects until such financing is obtained.
With respect to international development, the Company has recently suspended funding relating to proposed developments in Russia until there is greater clarity on the economic and business environment in that country and debt financing is available on commercially reasonable terms. In Brazil, the project in Manaus is almost fully leased and expected to become operational in April 2009.

The Company does not expect to commence any other prospective development projects in Brazil in the near future. While the Company continues to believe in the long term value of these prospective development projects and their returns in the future, capital is being carefully rationed at this time. As a result only projects that meet the Company's underwriting thresholds are expected to receive funding.
The Company has adjusted its leasing strategy to meet the changing environment. The Company's top leasing priority is to maintain occupancy with high-quality tenants. The Company has conducted full portfolio reviews and is meeting with its major tenants. The Company is proactively renewing tenants' extension options before the contractual expiration dates. The Company is also executing leases more quickly, in particular leases which require no or nominal capital investment by the Company. The Company is also revisiting and renegotiating deals that had previously been declined to determine if they may be feasible and in best interest of the Company on revised terms given the current market conditions.
In response to recent tenant bankruptcies and potential space recapture, the Company has dedicated personnel in the leasing department to monitor the day-to-day events of the bankruptcy process and to focus on marketing and re-tenanting those properties. This approach increases the Company's ability to more quickly release units whose leases have been rejected and to pursue package deals or portfolio transactions to mitigate potential vacancies or rent loss caused by such bankruptcy proceeding.
Operationally, the third quarter of 2008 was rewarding from a leasing perspective, considering the challenging environment in which the Company operated. The Company expects that 2009 will be equally challenging. The Company intends to respond in a conservative manner by concentrating on the Company's core operations and limiting development spending.
The Company has experienced many difficult economic cycles before. The Company knows that the best strategy is to focus on and commit to the basics of maintaining and enhancing a high-quality retail real estate portfolio, which generates the vast majority of the Company's revenues and drives value creation, in addition to making more capital available for distribution and investment.

Results of Operations
Revenues from Operations (in thousands)

                                                 Three-Month Periods Ended
                                                       September 30,
                                                  2008                 2007            $ Change          % Change
Base and percentage rental revenues           $     159,285         $  158,891        $      394               0.2 %
Recoveries from tenants                              51,644             51,609                35               0.1
Ancillary and other property income                   4,950              5,110              (160 )            (3.1 )
Management fees, development fees and
other fee income                                     15,378             13,827             1,551              11.2
Other                                                 2,656              2,110               546              25.9

Total revenues                                $     233,913         $  231,547        $    2,366               1.0 %

                                                 Nine-Month Periods Ended
                                                       September 30,
                                                  2008                2007           $ Change          % Change
Base and percentage rental revenues           $     480,030         $ 485,087        $  (5,057 )            (1.0 )%
Recoveries from tenants                             152,194           152,640             (446 )            (0.3 )
Ancillary and other property income                  15,932            14,048            1,884              13.4
Management fees, development fees and
other fee income                                     47,302            34,906           12,396              35.5
Other                                                 7,834            13,536           (5,702 )           (42.1 )

Total revenues                                $     703,292         $ 700,217        $   3,075               0.4 %

Base and percentage rental revenues relating to new leasing, re-tenanting and expansion of the core portfolio properties (shopping center properties owned as of January 1, 2007, and since March 1, 2007, with regard to IRRETI assets, but excluding properties under development/redevelopment and those classified as discontinued operations) ("Core Portfolio Properties") increased approximately $4.1 million, or 1.0%, for the nine-month period ended September 30, 2008, as compared to the same period in 2007. There was a decrease in overall base and percentage rental revenues due to the following (in millions):

                                                                 Increase
                                                                (Decrease)
      Core Portfolio Properties                                 $       4.1
      IRRETI merger and acquisition of real estate assets              18.3
      Development/redevelopment of shopping center properties           3.3
      Disposition of shopping center properties in 2007               (28.9 )
      Business center properties                                        0.4
      Straight-line rents                                              (2.3 )

                                                                $      (5.1 )

At September 30, 2008, the aggregate occupancy rate of the Company's shopping center portfolio was 94.5%, as compared to 94.9% at September 30, 2007. The Company owned 713 shopping centers at September 30, 2008, as compared to 708 shopping centers at September 30, 2007. The average annualized base rent per occupied square foot was $12.47 at September 30, 2008, as compared to $12.15 at September 30, 2007.
At September 30, 2008, the aggregate occupancy rate of the Company's wholly-owned shopping centers was 93.3%, as compared to 93.6% at September 30, 2007. The Company had 344wholly-owned shopping centers at September 30, 2008, as compared to 352 shopping centers at September 30, 2007. The average annualized base rent per occupied square foot for wholly-owned shopping centers was $11.68 at September 30, 2008, as compared to $11.50 at September 30, 2007.
At September 30, 2008, the aggregate occupancy rate of the Company's joint venture shopping centers was 94.0%, as compared to 97.2% at September 30, 2007. The Company's joint ventures owned 369 shopping centers including 40 consolidated centers primarily owned through the Mervyns Joint Venture at September 30, 2008, as compared to 317 shopping centers including 39 consolidated centers primarily owned through the Mervyns Joint Venture at September 30, 2007. The average annualized base rent per occupied square foot was $13.15 at September 30, 2008, as compared to

$12.72 at September 30, 2007. The increase in annualized base rent is primarily a result of the tenant mix of shopping center assets in the joint ventures at September 30, 2008, as compared to September 30, 2007.
At September 30, 2008, the aggregate occupancy rate of the Company's business centers was 80.9%, as compared to 64.1% at September 30, 2007. The increase in occupancy is primarily a result of the sale of the business center in Boston, Massachusetts. The business centers consist of six assets in four states at September 30, 2008. The business centers consisted of seven assets in five states at September 30, 2007.
Recoveries from tenants decreased $0.4 million for the nine-month period ended September 30, 2008, as compared to the same period in 2007. This decrease is primarily due to the transfer of assets to joint ventures in 2007. Operating expenses and real estate taxes increased approximately $14.0 million primarily due to the merger with IRRETI in February 2007 and the Company's Core Portfolio Properties. Recoveries were approximately 80.0% and 86.6% of operating expenses and real estate taxes for the nine-month periods ended September 30, 2008 and 2007, respectively.

   The decrease in recoveries from tenants was primarily related to the
following (in millions):

                                                                             Increase
                                                                            (Decrease)
IRRETI merger and acquisition of real estate assets                         $       5.8
Development/redevelopment of shopping center properties in 2008 and
2007                                                                                3.2
Transfer of assets to unconsolidated joint ventures in 2007                       (10.7 )
Increase in operating expenses at the remaining shopping center and
business center properties                                                          1.3

                                                                            $      (0.4 )

Ancillary and other property income is a result of pursuing additional revenue opportunities in the Core Portfolio Properties. Continued growth is anticipated in the area of ancillary or non-traditional revenue as new revenue . . .