The following discussion should be read in conjunction with the condensed consolidated interim financial statements and notes thereto appearing in Item 1 of this report and the more detailed information contained in our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on February 25, 2008.

Unless the context otherwise requires, all references to "we", "our", "us", and "Equity One" in this report refer collectively to Equity One, Inc. and its consolidated subsidiaries.

Critical Accounting Policies

Our 2008 Annual Report on Form 10-K contains a description of our critical accounting policies, including revenue recognition, cost capitalization, impairment of real estate assets, purchase accounting treatment for acquisitions, accounting for securities, impairment testing of goodwill, and joint venture accounting. For the three months ended March 31, 2009, there were no material changes to these policies, with the exception to the following:

On January 1, 2009, the Company adopted the provisions of FASB Statement No. 141 (revised 2007), Business Combinations ("FAS 141R") and is applying such provisions prospectively to business combinations that have an acquisition date on or after January 1, 2009. FAS 141R establishes principles and requirements for how an acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures goodwill acquired in a business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. In addition, FAS 141R requires that changes in the amount of acquired tax attributes be included in the Company's results of operations. While FAS 141R applies only to business combinations with an acquisition date after its effective date, the amendments to FASB Statement No. 109, Accounting for Income Taxes ("FAS 109"), with respect to deferred tax valuation allowances and liabilities for income tax uncertainties have been applied to all deferred tax valuation allowances and liabilities for income tax uncertainties recognized in prior business combinations. On January 9, 2009, the Company entered into a Stock Exchange Agreement with an unrelated party under which it acquired on January 14, 2009 1,237,676 shares of DIM Vastgoed N.V., or DIM's ordinary voting shares in exchange for 866,373 shares of the Company's common stock. Also on January 9, 2009, we entered into a voting rights agreement with the same unrelated party covering an additional 766,573 ordinary voting shares. During January 2009, we also purchased an additional 105,461 shares of DIM stock on the open market. As of January 31, 2009, EQY owned 65.2 % of DIM's outstanding ordinary shares and had voting control over another 9.4 % resulting in voting control of over 74.6% of DIM's outstanding ordinary shares. As such management determined it had effectively gained control of DIM and as such applied the provisions of FAS 141R in conjunction with this acquisition. Refer to Note 7 of the Notes to the Condensed Consolidated Financial Statements for detailed disclosure on the consideration provided, the net assets acquired, and the bargain purchase gain recorded.

On January 1, 2009, the Company adopted the provisions of FAS 160. The provisions of FAS 160 establish accounting and reporting standards for the noncontrolling interest in a consolidated subsidiary. FAS 160 is being applied prospectively, except for the provisions related to the presentation of noncontrolling interests in the statement of shareholders' equity. As of March 31, 2009 and December 31, 2008, noncontrolling interests of $989,000 and $989,000, respectively, have been classified as a component of equity in the consolidated balance sheet. For the three months ended March 31, 2009 and 2008, net loss attributable to noncontrolling interests of $476,000 and $0, respectively, is included in net income. Earnings per share has not been affected as a result of the adoption of the provisions of FAS 160.

In June 2008, the FASB issued FSP EITF No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities which clarifies that unvested share-based payment awards that entitle their holders to receive non-forfeitable dividends, such as our restricted stock awards, are considered participating securities. As participating securities, these instruments will be included in the calculation of basic EPS. Because the awards are considered participating securities under Statement of Financial Standards FAS No. 128, Earnings per Share, the issuing entity is required to apply the two-class method of computing basic and diluted earnings per share. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common shareholders. Under the two-class method, earnings for the period are allocated between common shareholders and other security holders, based on their respective rights to receive dividends. The FSP requires retrospective application for periods prior to the effective date and as a result, all prior period earnings per share data presented herein have been adjusted to conform to these provisions. The adoption of FSP EITF 03-6-1 did not result in a change to the previously reported basic EPS and diluted EPS for the three months ended March 31, 2008.

Changes in Basis of Presentation

As discussed more fully in Note 1 to the accompanying consolidated financial statements, certain 2008 financial information has been reclassified so that the basis of presentation is consistent with that of the 2009 financial information. This reclassification includes (i) the adoption of Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("Statement") No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51 ("FAS 160"), and (ii) the adoption of FASB Staff Position ("FSP") Emerging Issues Task Force ("EITF") Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("FSP No. EITF 03-6-1").

Executive Overview
We are a real estate investment trust ("REIT") that owns, manages, acquires, develops and redevelops neighborhood and community shopping centers. Our primary objective is to maximize stockholder value by generating sustainable cash flow growth and increasing the value of our real estate assets. To achieve our objective, we lease and manage our shopping centers primarily with experienced, in-house personnel. We acquire neighborhood or community shopping centers that either have leading anchor tenants or contain a mix of tenants that reflect the shopping needs of the communities they serve. We also develop and redevelop shopping centers on a tenant-driven basis, leveraging either existing tenant relationships or geographic and demographic knowledge while seeking to minimize risks associated with land development.

We acquired a controlling interest in DIM Vastgoed N.V. in the first quarter of 2009. DIM is a public company, the shares of which are listed on the NYSE Euronext Amsterdam stock exchange. We acquired our controlling stake by means of a stock exchange with another DIM shareholder which resulted in us acquiring voting control over 74.6% of DIM's outstanding ordinary shares. Prior to this acquisition, we accounted for our 48% interest in DIM on December 31, 2008 as an available-for-sale security. As part of this acquisition, we acquired net assets of $114.2 million, with a noncontrolling interest of $25.8 million, at a bargain gain of $26.9 million. We are still in the process of finalizing valuations of certain assets and liabilities, thus these provisional measurements are subject to change. The results of DIM's operations have been included in our financial statements from the acquisition date and for the first quarter of 2009. The pro forma consolidated statement of operations has not been presented because it is impracticable to prepare such information. Please refer to Note 7 in the accompanying unaudited condensed consolidated Financial Statements for a complete description of the transaction and for additional detail on the accounting of this transaction in accordance with FASB Statement No. 141 (revised 2007), Business Combinations ("FAS 141R").

As of March 31, 2009, our consolidated property portfolio comprised 181 properties, including 167 shopping centers consisting of approximately 19.0 million square feet of gross leasable area ("GLA"), four development/redevelopment properties, six non-retail properties, and four parcels held for development. Included in our portfolio for the three months ended March 31, 2009 are 21 shopping centers consisting of approximately 2.6 million square feet of GLA owned by DIM. As of March 31, 2009, our core portfolio, which does not include DIM, was 91.5% leased and included national, regional and local tenants. In addition, we currently own a 10% interest in GRI-EQY I, LLC ("GRI Venture"), which owns ten neighborhood shopping centers totaling approximately 1.4 million square feet of GLA as of March 31, 2009. The GRI joint venture properties were 94.7% leased at March 31, 2009.

Additionally, we own a 20% interest in G&I VI Investment South Florida Portfolio, LLC ("DRA Venture") which owns one office building and two neighborhood shopping centers totaling approximately 503,000 square feet of GLA as of March 31, 2009. In total, the DRA Venture's properties were 65% leased at March 31, 2009.

During 2009, our business has continued to feel the effects of the challenging economic environment and the turmoil in the U.S credit and retail markets. Buyers and sellers of real estate assets have faced a market that has made completing transactions more difficult as a result substantial declines in the available capital from the credit market. A consumer-led economic slowdown has had a meaningful impact on most retailers, causing many companies, both national and local, to cease or curtail operations or declare bankruptcy. We have seen these economic conditions broadly across all of our markets.

These macro-trends have made it more difficult for us to achieve our objectives of growing our business through internal rent increases, re-cycling capital from lower-tier assets into higher quality properties, and growing our asset management business. As an example, reductions in occupancy have adversely impacted our rental revenue and expense recoveries, thereby negatively affecting our year over year operating results.

Notwithstanding the difficult operating environment, the execution of our business strategy during the first quarter of 2009 resulted in:

· the execution of 30 new leases in our core portfolio totaling 100,068 square feet, the renewal of 79 leases totaling 188,453 square feet and the extension of 7 leases totaling 10,242 square feet;

· we have acquired a 9.6% interest in Ramco-Gershenson Properties Trust with a cost basis of approximately $9 million.

· the repurchase of $30.5 million of our outstanding senior notes at a gain of $8.7 million; and

· utilizing other options to grow our business through transactions such as the acquisition of a controlling interest in DIM on January 14, 2009.

· the sale of two ground lease outparcels for an aggregate gross sales price of $1.7 million which generated an aggregate gain of approximately $1.2 million.

Results of Operations

We derive substantially all of our revenues from rents received from tenants under existing leases on each of our properties. These revenues include fixed base rents, recoveries of expenses that we have incurred and that we pass through to the individual tenants and percentage rents that are based on specified percentages of tenants' revenues, in each case as provided in the particular leases.

Our primary cash expenses consist of our property operating expenses, which include real estate taxes, repairs and maintenance, management expenses, insurance, utilities and other expenses, general and administrative expenses, which include payroll, office expenses, professional fees and other administrative expenses, and interest expense, primarily on mortgage debt, unsecured senior debt and revolving credit facilities. In addition, we incur substantial non-cash charges for depreciation and amortization on our properties. We also capitalize certain expenses, such as taxes and interest related to properties under development or redevelopment until the property is ready for its intended use.

Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, developments and redevelopments. The results of operations of any acquired property are included in our financial statements as of the date of its acquisition. A large portion of the change in our statement of operations line items is related to these changes in our property portfolio. In particular, our 2009 results reflect the impact of consolidating DIM's operations with our own.

The following summarizes certain line items from our unaudited condensed consolidated statements of operations which we think are important in understanding our operations and/or those items which have significantly changed in the three months ended March 31, 2009 as compared to the same period in 2008:

                                                       Three Months Ended
                                                           March 31,
                                               2009          2008         % Change
                                                 (In thousands)

       Total revenue                         $  69,328     $  63,271            9.6 %
       Property operating expenses              18,922        16,067           17.8 %
       Rental property depreciation and
       amortization                             15,291        11,764           30.0 %
       General and administrative expenses      12,256         6,885           78.0 %
       Investment income                         2,057         6,162          -66.6 %
       Equity in real estate joint
       ventures                                      7             -            N/A
       Other income (expense), net               1,050            42         2404.2 %
       Interest expense                         19,563        15,982           22.4 %
       Loss on sale of real estate                   -            42         -100.0 %
       Amortization of deferred financing
       fees                                        444           429            3.6 %
       Gain on acquisition of controlling
       interest in subsidiary                   26,866             -            N/A
       Gain on extinguishment of debt            8,691         2,380          265.2 %
       Income tax benefit of taxable REIT
       subsidiaries                                639            83          666.5 %
       Income from discontinued operations       1,209            85         1320.2 %
       Net loss attributable to
       Noncontrolling interest                     476             -            N/A
       Net Income                            $  43,357     $  20,854          107.9 %

Comparison of the three months ended March 31, 2009 to 2008

Included in the following discussion of results of operations are the results of DIM which has been consolidated in our results of operations for the three months ended March 31, 2009 commencing on the acquisition date of January 14, 2009 but not for the 2008 period. For additional details on the consolidation of DIM and the effect on our financial reporting, see the Notes to the Condensed Consolidated Financial Statements included in this report.

Total revenue increased by $6.0 million, or 9.6%, to $69.3 million in 2009. The increase is primarily attributable to the following:

· an increase of approximately $10.3 million attributable to the DIM properties;

· an increase of approximately $670,000 associated with management, leasing and asset management services provided to our joint ventures;

· an increase of approximately $490,000 related to the completion of various development/redevelopment projects;

· a decrease of approximately $4.8 million attributable to the sale of our nine income producing properties to our GRI joint venture, revenue which was included in our first quarter 2008 results; and

· a decrease of approximately $550,000 in same-property revenue due primarily to lower percentage rent income and lower small shop occupancy which also has the effect of lowering rental, expense recoveries.

Property operating expenses increased by $2.9 million, or 17.8%, to $18.9 million in 2009. The increase primarily consists of the following:

· an increase of approximately $2.6 million attributable to the DIM properties;

· an increase of approximately $1.3 million in property operating costs, higher real estate tax expense, insurance expense, bad debt expense, and general repair and maintenance costs associated with vacant rental units, partially offset by lower common area maintenance expense;

· an increase of approximately $170,000 related to the completion of various development/redevelopment properties and projects currently under construction;

· an increase of $40,000 in property operating costs associated with our non-retail properties; and

· a decrease of approximately $1.2 million associated with the sale of our nine income producing properties to our GRI joint venture.

Rental property depreciation and amortization increased by $3.5 million, or 30.0%, to $15.3 million for 2009 from $11.8 million in 2008. The increase in 2009 was primarily related to the following:

· an increase of approximately $4.5 million related to the DIM properties; and

· a decrease of approximately $1.0 million attributable to the sale of our nine income producing properties to the GRI joint venture included fully in the 2008 results, but not included in the 2009 results.

General and administrative expenses increased by $5.4 million, or 78%, to $12.3 million in 2009 compared to $6.9 million in 2008. The increase is attributable to $3.3 million associated with severance and severance related costs related to the termination of employment of two senior executives initiated as part of our management streamlining and cost management program. We also incurred an increase in leasing personnel cost and higher audit fee expense associated with finalizing the 2008 audit which were not present in the same 2008 three month period. In addition, we had the following direct and indirect costs associated with DIM; approximately $450,000 in administrative costs associated with DIM's ongoing operations, which comprises legal, accounting services and other costs, and approximately $800,000 in transaction costs, such as legal accounting and other professional services associated with our acquisition of the controlling interest in DIM.

Investment income decreased by $4.1 million, or 67%, to $2.1 million in 2009 compared to $6.2 million 2008. The decrease is primarily attributable to a $5.4 million reduction in dividend income due to the absence of $5.9 million in DIM dividends in the current period, partially offset by $500,000 of dividend income recognized on our current equity investments. We also recognized in the 2009 period $1.3 million of interest income from our investment in debt securities that were not present in the comparable 2008 period.

Equity in loss in unconsolidated joint ventures was $7,000 for 2009 which represents our pro rata share of our joint ventures operating results. There was no activity for the 2008 period because the GRI joint venture did not commence operations until the second quarter of 2008 and the DRA joint venture acquired its first property in the third quarter of 2008.

Other income increased by approximately $1.0 million in the 2009 period compared to the 2008 period. The increase primarily resulted from approximately $800,000 in income related to insurance proceeds received for tornado damage on a property in South Carolina.

Interest expense increased by $3.6 million, or 22.4%, to $19.6 million in the 2009 period as compared to $16.0 million in the 2008 period. The increase is primarily attributable to the following:

· an increase of approximately $900,000 associated with the amortization of the fair market value of mortgage debt pertaining to DIM's properties which was not present in the 2008 period;

· an increase of approximately $4.0 million of interest expenses related to the mortgages on DIM's properties which were not present in the 2008 period;

· an increase of $1.1 million associated with a secured mortgage loan we added in the third quarter of 2008;

· an increase of approximately $500,000 associated with lower capitalized interest due to fewer development projects in process;

· a decrease of approximately $1.6 million related to the repayment of certain mortgages and senior notes;

· a decrease of $1.2 million in mortgage interest related to our nine income producing properties that we sold to the GRI joint venture, which are included fully in the 2008 results, but not included in the 2009 results;

The bargain purchase gain of $26.9 million recorded in the 2009 period resulted from our acquisition of a controlling interest in DIM. The total gain consists of $39.0 million representing the net value of DIM assets acquired in excess of our cost basis after recognizing a $12.1 million revaluation loss of our previously recorded cost investments in DIM.

In the first quarter of 2009, we repurchased and canceled approximately $30.5 million principal amount of our senior notes and recognized a net gain on early extinguishment of debt of approximately $8.7 million. In the 2008 period, we repurchased and canceled approximately $27.9 million of our senior debt and recognized a net gain on early extinguishment of debt of approximately $2.4 million.

In the first quarter of 2009, we recognized $639,000 in net tax benefits mainly attributable to the consolidation of DIM , which accounts for $750,000 in tax benefits in the current period, net of $110,000 in tax provisions from our core portfolio. In the same 2008 three month period, we recognized a tax provision of $83,000.

In the first quarter of 2009, we recognized a net gain of $1.2 million from discontinued operations mainly due to the sale of two ground lease outparcels at two of our properties.

In the first quarter of 2009, net losses of $476,000 were attributable to the noncontrolling interest in DIM. No comparable amounts are included in the 2008 period.

As a result of the foregoing, we had net income of $43.4 million in the first quarter ended 2009, compared to net income of $20.8 million in the first quarter of 2008.

Funds From Operations

We believe Funds from Operations ("FFO") (combined with the primary GAAP presentations) is a useful supplemental measure of our operating performance that is a recognized metric used extensively by the real estate industry and, in particular, REITs. The National Association of Real Estate Investment Trusts ("NAREIT") stated in its April 2002 White Paper on Funds from Operations, "Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminish predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves".

FFO, as defined by NAREIT, is "net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable real property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures". It states further that "adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis". We believe that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from our FFO measure. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

FFO is presented to assist investors in analyzing our operating performance. FFO
(i) does not represent cash flow from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs, including the ability to make distributions, (iii) is not an alternative to cash flow as a measure of liquidity, and (iv) should not be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating our operating performance.

The following table illustrates the calculation of FFO for the three months ended March 31, 2009 and 2008:

                                                         Three Months Ended
                                                             March 31,
                                                         2009          2008
                                                           (In thousands)

       Net income attributed to Equtiy One            $   43,833     $  20,854
       Adjustments:
       Rental property depreciation and
       amortization, including discontinued
       operations, net of noncontolling intrerest         13,744        11,796
       Pro rata share of real estate depreciation
       from unconsolidated JV                                361             -
       Funds from operations                          $   57,938     $  32,650

The following table reflects the reconciliation of FFO per diluted share to earnings per diluted share, the most directly comparable GAAP measure, for the periods presented:

                                                            Three Month Ended
                                                                March 31,
                                                     2009                       2008


Earnings per diluted share atributbale to
Equity One                                       $        0.56             $         0.28
Adjustments:
Rental property depreciation and
amortization, including discontinued
operations, net of noncontrolling intrerest               0.18                       0.16
Pro rata share of real estate depreciation
from unconsolidated JV                                       -                          -
Net adjustment for unvested shares and
non-controlling interest*                                 0.01                          -
Funds from operations per diluted share          $        0.75             $         0.44

. . .