Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "intends," "plans," "would," "may" or similar expressions in this quarterly report on Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. Factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those set forth in our Annual Report on Form 10-K for the year ended December 31, 2008 under "Forward Looking Statements" and "Item 1A - Risk Factors" as well as our other filings with the SEC. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on forward-looking statements, which are based on information, judgments and estimates at the time they are made, to anticipate future results or trends.

Management's Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our consolidated financial statements for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

This item should be read in conjunction with the financial statements, footnotes thereto and other items contained elsewhere in this report.

Overview

We are a real estate investment trust engaged in the business of owning real property and real estate related assets. Our business objective is to maximize long-term shareholder value through a total return value approach to real estate investing. We seek to achieve this objective by acquiring investments with both recurring cash flow in order to sustain our dividend, along with investments that we believe have appreciation potential. We operate in three strategic business segments: (i) operating properties; (ii) loan assets and loan securities; and (iii) REIT equity and debt securities. We acquire assets through direct ownership as well as through strategic alliances and ventures, and have entered into two significant venture arrangements. Our venture with Marc Realty, a Chicago area real estate company, is our primary vehicle for investments in the Chicago metropolitan area. In addition, since its formation in March 2006, we have acquired substantially all of our loan assets and loan securities through Concord Debt Holdings LLC, which we refer to as Concord, a joint venture with Lexington Realty Trust, which we refer to as Lexington, and, since August 2008, Inland America Concord Sub LLC, which we refer to as Inland.

As of March 31, 2009, we held interests in approximately 9.7 million rentable square feet of office, retail, multi-tenant and mixed use space through our 21 wholly owned operating properties and our ventures with Marc Realty and Sealy & Co., Ltd., which we refer to as Sealy. As of March 31, 2009 our properties were approximately 96.0% leased. Our primary sources of income are rental income and tenant recoveries from leases of our operating properties, interest income from our loan assets and loan securities, and interest and dividend income and possible appreciation from our investments in REIT securities. The comparability of financial data from period to period is affected by several items including the timing of our property acquisition and leasing activities and the purchases and sales of assets and investments.

The weakness in the economy since late 2007 and the subsequent disruption of the capital and credit markets throughout 2008 and the first quarter of 2009 has affected profitability and limited the availability of financing and the ability to raise equity capital. During the first quarter of 2009 we continued to focus our attention primarily on maintaining our liquidity and reducing our exposure to short-term debt, while at the same time seeking investments with current returns. With respect to our debt exposure, each of our investment platforms and investments is essentially a stand-alone business, such that any potential problems or liabilities which might occur are limited to that specific platform or investment. Consequently, our exposure is in each case limited to our equity in that particular investment and not to us as a whole. Inclusive of extension rights, none of our loans are scheduled to mature in 2009. As of March 31, 2009 there is $4,565,000 of scheduled principal payments on mortgage loans remaining in 2009. The remaining balance of approximately $223,735,000 is scheduled to be paid down or mature in 2010 or later.

Capital and Credit Market Deterioration

As the capital and credit market deterioration has worsened, we have performed additional assessments to determine our exposure to bankruptcies, which could negatively affect the tenancy at our operating properties as well as negatively impact borrowers' cash flow and thus their ability to meet their obligations under our loan assets and loan securities. We have also monitored the impact of the currently limited availability of financing and equity offerings. Because there is little funding available in the capital and credit markets, there are fewer buyers in the market and buyers are seeking significantly higher returns, placing significant downward pressure on current real estate values. Consequently, there is a risk that our borrowers will be unable to obtain replacement financing or sell the collateral underlying our loan assets and loan securities upon maturity which could lead to more loan defaults and/or negotiated extensions to existing loans beyond their current expirations. In addition, we further reviewed our risk associated with counterparties to our hedging instruments and credit facilities. We believe our greatest risk to operating results and liquidity is the recent unprecedented volatility in capital and credit markets, which, if not stabilized, may create additional losses in the upcoming years.

A continued weakness in the economy could further impair our ability to raise future capital through equity and debt offerings, thereby requiring us to obtain additional capital through other means. Further, the declining availability of financing has had, and will likely continue to have, an impact on our ability to finance additional acquisitions and, ultimately, the value of real estate generally.

We have historically used the public equity markets and secured financing as our primary sources of capital. We expect to continue to fund our investments through one or a combination of cash reserves, borrowings under our credit facility, property loans, or the issuance of debt or equity. In addition, as our investments reach a level in value to the point where we may be unlikely to achieve better than market returns, we may exit the investment and redeploy the capital to what we believe to be higher yielding opportunities.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including commitments to repay borrowings, fund and maintain investments and other general business needs. We believe that cash flow from operations will continue to provide adequate capital to fund our operating and administrative expenses, regular debt service obligations and all dividend payments in accordance with REIT requirements in the short-term. We anticipate that cash on hand, borrowings under our credit facility and issuance of equity and debt securities, as well as other alternatives, will provide the necessary capital required for our investment activities. As a REIT, we must distribute annually at least 90% of our REIT taxable income. As a result of this dividend requirement, we, like other REITs, are unable to reinvest all of our operating cash flow and, in addition to cash reserves, are dependent on raising capital through equity and debt issuances or forming ventures with institutional or high net worth investors to obtain additional funds with which to expand our business.

Our primary sources of funds include:

· cash and cash equivalents;

· rents and reimbursements received from our operating properties;

· payments received under our loan assets and loan securities;

· the issuance of equity and debt securities;

· interest and dividends received from investments in REIT securities;

· cash distributions from joint ventures;

· borrowings under our credit facilities; and

· asset specific borrowings.

At March 31, 2009, we had cash and cash equivalents of $41,070,000. In addition, we had other liquid assets consisting of securities carried at fair value and available for sale securities totaling $44,168,000, and we have $35,000,000 available under our line of credit.

Cash Flows

Operating Activities

Cash provided by operating activities of $6,423,000 for the three months ended March 31, 2009 was comprised of $28,053,000 of adjustments for non-cash items including depreciation and amortization expense, the effect of straight-lining of rental income, equity in losses of partially-owned entities and unrealized losses on securities carried at fair value, and $1,403,000 of distributions from non-consolidated interests which were partially offset by a net decrease due to changes in other operating assets and liabilities of $600,000 and a net loss of $22,433,000. See our discussion of our Results of Operations below for additional details on our operations.

Investing Activities

Cash used in investing activities of $13,311,000 for the three months ended March 31, 2009 was comprised primarily of the following:

· $25,668,000 for purchases of securities carried at fair value;

· $1,596,000 for additional loan advances related to the Marc Realty portfolio; and

· $949,000 for tenant improvements and lease commissions.

These uses of investing cash flows were offset primarily by:

· $6,967,000 in proceeds from the sale of securities carried at fair value;

· $5,300,000 in proceeds from the repayment of loans receivable; and

· $2,635,000 in proceeds from the release of cash escrows, primarily related to the release of funds from the qualified intermediary for the sale of our Biloxi, Mississippi property.

Financing Activities

Cash used in financing activities of $11,280,000 for the three months ended March 31, 2009 was comprised primarily of the following:

· $9,800,000 for payments of loans payable;

· $5,934,000 for dividend payments on our Common Shares; and

· $1,486,000 for mortgage loan repayments.

These uses of financing cash flows were offset primarily by:

· $5,293,000 of restricted cash held in escrow that was released, primarily related to the application of funds held as cash collateral and utilized to pay off the CitiBank note payable; and

· $665,000 of dividends reinvested by shareholders in our Dividend Reinvestment and Stock Purchase Plan.

Significant financial transactions during the first quarter of 2009 include:

· the acquisition on January 6, 2009 of 917,105 of our Series B-1 Preferred Shares with a liquidation value of $22,928,000 for $17,081,000 in cash, representing a discount to their liquidation value;

· the March 2009 repayment of a $9,800,000 note payable;

· the acquisition of senior debentures with a face value of $25,401,000 for a cost of $16,433,000, preferred shares at a cost of $8,947,000 and common shares at a cost of $288,000; and

· the extension of the maturity date of the former $9,500,000 mortgage loan on our River City property for a period of one year.

Dividends

Since December 2005 we have paid regular dividends to our shareholders. In paying dividends we have always sought to have our dividends track cash flow from operations, both recurring and nonrecurring. As a result, while we intend to continue paying dividends each quarter, future dividend declarations will be at the discretion of our Board of Trustees and will depend on the actual cash flow of the Trust, its financial condition, capital requirements, the distribution requirements for REITs under the Internal Revenue Code of 1986 and such other factors as our Board of Trustees deem relevant. Subject to the foregoing, we expect to continue distributing our current cash flow after reserving normal and customary amounts thereby allowing us to maintain our capital. Toward that end, the Board of Trustees elected to reduce our dividend to $0.25 per share for the first quarter of 2009, which represented a reduction from $0.325 per share for the first quarter of 2008. This represents our existing budgeted recurring cash flow generated by assets currently owned and excludes any potential cash flow from our investment in Concord, as well as potential future cash flow generated from the investment of the substantial cash and cash equivalents on hand. We expect to continue applying these standards with respect to our dividends on a quarterly basis which could cause the dividends to increase or decrease depending on cash flow.

We paid a regular quarterly dividend $0.40625 per Series B-1 Preferred Share in the first quarter of 2009. We declared a special dividend of $0.05 per Common Share in December 2008, which was paid in January 2009.

Results of Operations

Our results are discussed below by business segment:

† Operating Properties - our wholly and partially owned operating properties;

† Loan Assets and Loan Securities - our activities related to senior and mezzanine real estate loans as well as commercial mortgage-backed securities including our investment in Concord and our Marc Realty venture properties;

† REIT Securities - our activities related to the ownership of equity and debt securities in other real estate companies; and

† Non-segment specific results are discussed under Corporate - includes interest on cash reserves, general and administrative expenses and other non-segment specific income and expense items.

The following table summarizes our assets by business segment (in thousands):

                                         March 31, 2009       December 31, 2008

      Operating properties              $        283,416     $           286,780
      Loan assets and loan securities            124,502                 146,560
      REIT securities                             44,263                  36,796
      Corporate
      Cash and cash equivalents                   41,070                  59,238
      Other                                       22,529                  48,720
      Total Assets                      $        515,780     $           578,094

Total assets decreased $62,314,000, or 10.8%, from $578,094,000 at December 31, 2008 to $515,780,000 at March 31, 2009. The decrease was due primarily to a decrease of $22,058,000 in loan assets and loan securities, a decrease of $26,191,000 in other assets and a decrease of $18,168,000 in cash and cash equivalents. The decrease in loan assets and loan securities is due primarily to a decrease of $17,878,000 in the carrying value of our equity investment in Concord as a result of the operating loss incurred by Concord for the quarter. The decrease in other assets resulted from the release of approximately $8,642,000 of funds held in escrow, primarily the result of $2,678,000 released from the qualified intermediary for the sale of our Biloxi, Mississippi property and $5,227,000 released from the CitiBank cash collateral account and utilized to pay off the $9,800,000 note payable, and the utilization of the $17,081,000 deposit for the re-acquisition of the Series B-1 Preferred Shares.

The results of operations and changes in financial position for the Trust and Concord are discussed below.

Comparison of Three Months ended March 31, 2009 versus Three Months ended March 31, 2008

The following table summarizes our results by business segment for the three months ended March 31, 2009 and 2008 (in thousands):

                                                              2009          2008

    Operating properties                                    $   1,305     $    799
    Loan assets and loan securities                           (16,716 )      7,160
    REIT securities                                            (9,936 )      2,113
    Corporate income (expenses)                                 3,085       (3,809 )
    Consolidated (loss) income from continuing operations   $ (22,262 )   $  6,263



Operating Properties

                                                        2009         2008

          Rents and reimbursements                    $ 10,985     $ 10,667
          Operating expenses                            (2,001 )     (1,867 )
          Real estate taxes                               (703 )       (739 )
          Equity in loss of Sealy Northwest Atlanta        (38 )       (138 )
          Equity in loss of Sealy Newmarket               (186 )          -
          Equity in loss of Sealy Airpark Nashville       (258 )       (283 )
          Operating income                               7,799        7,640

          Depreciation expense                          (2,899 )     (3,058 )
          Interest expense                              (3,595 )     (3,783 )
          Net income                                  $  1,305     $    799

The increase in operating income from our operating properties for the comparable periods was due primarily to:

· a $318,000 increase in rents and reimbursements due primarily to:

- an increase of $197,000 at our River City property due to higher occupancy in 2009;

- an increase of $145,000 at our Ontario property due to new leasing activity in 2009;

- a decrease of $104,000 at our Lisle, Illinois properties due to lower occupancy in 2009;

· a $134,000 increase in operating expenses due primarily to increased cost at our River City property; and

· a $61,000 increase in losses from our Sealy equity investments due primarily to a $186,000 loss related to our Newmarket office complex in Atlanta, Georgia which we acquired in August 2008. Losses from the Sealy portfolio are primarily the result of non-cash depreciation and amortization expenses. We received cash distributions of $343,000 from the Sealy's equity investments for the three months ended March 31, 2009.

Depreciation and interest expenses related to our operating properties remained relatively constant with the comparable prior year period.

Loan Assets and Loan Securities

                                                            2009         2008

      Interest                                            $     378     $   506
      Equity in earnings of preferred equity investment       1,015       2,330
      Equity in (loss) earnings of Lex-Win Concord          (17,681 )     4,076
      Gain on sale of mortgage backed securities                  -         454
      Provision for loss on loan receivable                    (428 )         -
      Operating (loss) income                               (16,716 )     7,366

      Interest expense                                            -        (206 )
      Net (loss) income                                   $ (16,716 )   $ 7,160

The decrease in operating income from loan assets and loan securities for the comparable periods was due primarily to:

· a $21,757 ,000 decrease in equity in earnings from Concord due primarily to:

- a $36,908,000 increase in unrealized losses on real estate loans held for sale at Concord of which the

Trust's share was $18,454,000;
- a $2,500,000 provision for loan loss reserves at Concord of which the Trust's share was $1,250,000;

· a $1,315,000 decrease in equity in earnings from our preferred equity investment, Marc Realty, primarily due to a decrease of $959,000 of gains on sales of real estate;

· a $454,000 gain on sale of mortgage backed securities recognized in the quarter ended March 31, 2008; and

· a $428,000 provision for loss on loans receivable related to three properties in our Marc Realty portfolio.

REIT Securities

                                                             2009         2008

     Interest and dividends                                $   1,374     $    27
     Gain (loss) on sale of securities                           (87 )     2,029
     Impairment loss on available for sale securities              -        (100 )
     Unrealized loss on securities carried at fair value     (11,148 )         -
     Equity in loss of Lex-Win Acquisition, LLC                    -         157
     Operating income                                         (9,861 )     2,113

     Interest expense                                            (75 )         -
     Net income (loss)                                     $  (9,936 )   $ 2,113

The decrease in operating income from REIT securities for the comparable periods was due primarily to:

· a $11,148,000 increase in unrealized losses on securities carried at fair value;

· a $2,116,000 decrease in gain on sale of securities; and

· an increase of $1,347,000 in dividend income due primarily to interest and dividends received in 2009 on our REIT investment portfolio of which we invested $25,625,000 for the three months ended March 31, 2009.

Corporate

                                                   2009         2008

                Interest income                  $     72     $    228
                General and administrative         (1,446 )     (2,071 )
                Interest expense                     (728 )     (1,842 )
                Gain on extinguishment of debt      5,237            -
                State and local taxes                 (50 )       (124 )
                Operating income (loss)          $  3,085     $ (3,809 )

The increase in corporate operations for the comparable periods was due primarily to:

· a $5,237,000 gain on early extinguishment of debt resulting from our January 2009 purchase of 917,105 of our Series B-1 Preferred Shares at a discount to their liquidation value;

· a $1,114,000 decrease in corporate interest expense due primarily to lower aggregate payments in 2009 on our Series B-1 Preferred Shares as a result of fewer Series B-1 Preferred Shares outstanding during 2009;

· a $625,000 decrease in general and administrative expenses due primarily to the reduction in the base management fee as a result of the modification to the agreement effective January 1, 2009; and

· a $156,000 decrease in corporate interest income earned on our cash and cash equivalents due primarily to lower yields on U.S. Treasury securities during the first three months of 2009 versus 2008.

State income taxes were $50,000 and $124,000 for the three months ended March 31, 2009 and 2008, respectively, due primarily to our anticipated taxable income for state purposes, after deductions for dividends paid and after the utilization of net operating loss carryforwards, where applicable.

Off-Balance Sheet Investments

We have two significant off-balance sheet investments - our Marc Realty and Lex-Win Concord investment platforms. Marc Realty is discussed at Item 1. Financial Statements - Note 7 and Lex-Win Concord is discussed at Item 1. Financial Statements - Note 8 and below.

Concord

Liquidity and Capital Resources

Concord began experiencing declines in the fair value of its loan securities in the fourth quarter of 2007 consistent with liquidity concerns impacting the commercial bond and real estate markets and the overall economy. As a result of these declines in values of loan assets and loan securities, Concord was required to satisfy significant margin calls under its repurchase facilities. Additionally, with the lack of available financing in the market, replacement financing became unavailable and the likelihood of loan defaults increased. The market in which Concord's loan securities trade has effectively evaporated. Moreover, the need for liquidity by those investors and banks that trade loan securities has continued to cause the current values of loan securities to decrease.

The real estate markets have been significantly impacted by the continued deterioration of the global credit markets and other macro economic factors. Although the significant majority of Concord's borrowers remain in relatively strong financial standing, the current recession has resulted in three defaults of borrower obligations and has cast uncertainty as to whether Concord will recover its entire investment in certain loans and available for sale securities.

Declining collateral values could result in the need for Concord to fund further margin calls and could potentially have a negative impact on Concord's consolidated cash flows, results of operations and financial position. Such declines could also adversely affect Concord's financial ratios, which need to be maintained for compliance with the covenants of its warehouse repurchase facilities and revolving line of credit. Concord could be subject to accelerated maturities of its outstanding borrowings. In addition, certain of Concord's . . .