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 and six months ended June 30, 2009 as compared to the three and six months ended June 30, 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 three 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. We also invest through our venture with Sealy & Co. in which we have made three investments in office flex parks. 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 June 30, 2009, we held interests in approximately 9.5 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. Average occupancy at our consolidated properties was approximately 95% for the six months ended June 30, 2009. As of June 30, 2009 our consolidated properties were approximately 89.6% leased. The decline in occupancy at June 30, 2009 was the result of the loss of a tenant in May 2009 which occupied approximately 285,000 square feet at our Jacksonville, Florida Property. In addition to our operating properties and our joint venture arrangements, we held REIT securities with a fair value of $53,871,000 as of June 30, 2009. 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 two quarters of 2009 has affected profitability and limited the availability of financing and the ability to raise equity capital. During the first two quarters of 2009 we continued to focus our attention primarily on maintaining our liquidity and reducing our exposure to near-term debt maturities, while at the same time seeking opportunistic investments and investments with current returns. Toward that end, we capitalized on the market mispricing of senior REIT securities and invested $29,889,000 in REIT preferred and debt securities during the first half of 2009.

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 June 30, 2009 there is $2,871,000 of scheduled principal payments on mortgage loans remaining in 2009. The remaining balance of approximately $223,784,000 is scheduled to be paid down or mature in 2010 or later.

During 2009, we have taken material other-than-temporary impairment losses on assets in our portfolio that have lost considerable value. In doing so, we have addressed the financial statement impact of our legacy asset issues. These issues related primarily to our investment in Lex-Win Concord LLC ("Concord") and our suburban Chicago investments in Marc Realty. As it relates to Concord, we have specifically responded to market trends of accelerating CDO and CMBS rating downgrades, increasing default probability assumptions, market interest rate fluctuations, the short-term nature of Concord's repurchase agreement financing and an overall lack of clarity on future recovery of the underlying collateral in these assets. These factors along with the recent failure by Inland to make its capital call, the litigation initiated by Inland, the expectation that there will not be any distributions received in the near term and the non-controlling nature of our investment in Lex-Win have resulted in our determination that an other than temporary impairment exists and an additional impairment related to our investment in Concord was warranted in the second quarter. The aggregate impairments consist of both a proportionate share of Concord's operating losses plus a decline in the fair value that management has assigned to the remaining equity in the investment. While we have determined that the decline in the fair value of our investment in Concord is other than temporary, the writedown of our investment in Concord to zero for financial statement purposes should not convey to investors that we and our partners have ceased to work towards equity recovery.

During the second quarter, we worked towards improving our position on our legacy Marc Realty portfolio and in July 2009 the Trust restructured this investment. This integrated transaction was strategic in that, in its simplest terms, we exchanged our interest in several Chicago suburban properties for an increased overall interest in certain downtown Chicago properties which we consider to be opportunities with a lower risk profile and a better return potential and are more aligned with our overall investment strategy.

The contractual changes of the restructuring include the elimination of certain accumulated deferred returns due to Marc Realty on their equity, the modification and equalization of the priority of payments to the parties and an increase of the interest rates on our mezzanine loans and an increase in the interest rate on Marc Realty's equity in exchange for us transferring our interests in four properties to Marc Realty. In addition, we made an additional aggregate advance of $684,000 in July 2009 which effectively resulted in the equalization of interests to 50%-50% between our equity investment and Marc Realty's equity. Due to the nature of this multi-step transaction we recognized losses of approximately $5,755,000 in the second quarter of 2009. In accordance with GAAP, we are required to recognize an accounting loss equal to the carrying value of our basis in the suburban properties in which we transferred our interest, which amount was $5,755,000 and was recognized in the second quarter. Conversely, GAAP does not allow us to recognize the value of the increased equity in the downtown properties that we received in the form of the elimination of the accumulated deferred returns due to Marc Realty from the properties in which we continue to hold an interest. At June 30, 2009, the investments in those properties continue to be carried at cost and any future benefit of the foregoing modification will be recognized at the time of realization. Effective July 1, 2009, our investments in the Marc Realty properties will be reclassified from preferred equity investments to common equity investments.

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 borrowers will be unable to obtain replacement financing or sell the collateral underlying 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 the sale of assets. Further, the declining availability of financing 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 a 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, to the extent market conditions permit 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 a 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 and possible appreciation of REIT securities;

· cash distributions from joint ventures;

· borrowings under our credit facilities; and

· asset specific borrowings.

At June 30, 2009, we had cash and cash equivalents of $20,469,000. In addition, we had other liquid assets consisting of securities carried at fair value and available for sale securities totaling $53,871,000.

Significant financial transactions during the first two quarters 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, resulting in a net gain of $5,237,000;

· the acquisition of REIT securities consisting of senior debentures with a face value of $29,490,000 for a cost of $19,665,000, preferred shares at a cost of $9,361,000 and common shares at a cost of $863,000;

· the acquisition of two first mortgage loans with a face value of $81,015,000 for a cost of $43,869,000;

· the extension of the maturity date of the mortgage loan on our River City property for a period of one year;

· the extension of the maturity date of our $24,372,000 mortgage loan for a period of one year; and

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

Subsequent to June 30, 2009, the following transactions have occurred:

· the acquisition on July 9, 2009 of 100,000 of our Series B-1 Preferred Shares with a liquidation value of $2,500,000 for $2,000,000 in cash, resulting in a net gain of approximately $444,000;

· the sale on July 14, 2009 at par of a $35,000,000 A Note with respect to the first mortgage loan secured by the property located at 160 Spear Street, San Francisco, California; and

· the restructuring of our preferred equity investment in Marc Realty as discussed in Item 1 - Financial Statements, Note 7.

Cash Flows

Operating Activities

Cash provided by operating activities of $10,138,000 for the six months ended June 30, 2009 reflects our net loss of $93,293,000 adjusted by non-cash items of $102,115,000 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, $2,520,000 of distributions from non-consolidated interests and a net decrease due to changes in other operating assets and liabilities of $1,204,000. See our discussion of our Results of Operations below for additional details on our operations.

Investing Activities

Cash used in investing activities of $50,539,000 for the six months ended June 30, 2009 was compr ised primarily of the following:

· $35,000,000 for purchases of available for sale real estate loans which represents the portion of the 160 Spear loan that was subsequently sold in July;

· $29,889,000 for purchases of securities carried at fair value;

· $9,072,000 for acquisitions of loans receivable, primarily the Siete Square loan and the balance of the 160 Spear loan;

· $2,075,000 for additional loan advances related to the Marc Realty portfolio; and

· $719,000 for tenant improvements.

These uses of investing cash flows were offset primarily by:

· $16,759,000 in proceeds from the sale of securities carried at fair value;

· $6,800,000 in proceeds from the repayment of loans receivable; and

· $2,597,000 in net 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 provided by financing activities of $1,632,000 for the six months ended June 30, 2009 was comprised primarily of the following:

· $35,000,000 of proceeds from our revolving line of credit;

· $19,818,000 of proceeds from our loan payable; and

· $3,938,000 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.

These sources of financing cash flows were offset primarily by:

· $35,000,000 for repayment of borrowings on our revolving line of credit;

· $9,800,000 for payment of the note payable to CitiBank;

· $9,888,000 for dividend payments on our Common Shares; and

· $3,131,000 for mortgage loan repayments.

Dividends

Since December 2005 we have paid regular dividends to our shareholders. In paying dividends we have endeavored 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 both projected as recurring and nonrecurring, its overall 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 each of the first two quarters of 2009, which represented a reduction from $0.325 per share for each of the first two quarters of 2008. This represents our existing budgeted recurring cash flow generated by assets currently owned and excludes any realized gains from capital transactions, 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 regular quarterly dividends $0.40625 per Series B-1 Preferred Share in each of the first two quarters 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 investment trusts; 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.

                             WINTHROP REALTY TRUST
                            FORM 10-Q JUNE 30, 2009

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

                                  June 30,       December 31,
                                    2009             2008

Operating properties              $ 281,041     $      286,780
Loan assets and loan securities     106,167            146,560
REIT securities                      53,967             36,796
Corporate
  Cash and cash equivalents          20,469             59,238
  Other                              23,088             48,720
Total Assets                      $ 484,732     $      578,094

Total assets decreased by $93,362,000, or 16.2%, from $578,094,000 at December 31, 2008 to $484,732,000 at June 30, 2009. The decrease was due primarily to a decrease of $38,769,000 in cash and cash equivalents, a decrease of $40,393,000 in loan assets and loan securities and a decrease of $25,632,000 in other assets.

The decrease in loan assets and loan securities is due primarily to a decrease of $73,061,000 in the carrying value of our equity investment in Concord as a result of the operating loss incurred by Concord for the six months ended June 30, 2009 as well as a $24,941,000 other comprehensive income reclassification adjustment and a $51,916,000 valuation adjustment recognized by the Trust on this investment at June 30, 2009. The decrease in other assets resulted from the utilization of $17,081,000 for the re-acquisition of the Series B-1 Preferred Shares and the release of approximately $8,642,000 of funds held in escrow. The release of escrow funds was 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.

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

Comparison of Six Months ended June 30, 2009 versus Six Months ended June 30, 2008

The following table summarizes our results by business segment for the six months ended June 30, 2009 and 2008 (in thousands):

                                                  2009          2008

Operating properties                           $    2,298     $   2,379
Loan assets and loan securities                  (102,577 )     (14,363 )
REIT securities                                     6,714           999
Corporate income (expenses)                           272        (6,760 )
Consolidated loss from continuing operations   $  (93,293 )   $ (17,745 )



Operating Properties
                                              2009         2008

Rents and reimbursements                    $ 21,432     $ 21,660
Operating expenses                            (3,823 )     (3,669 )
Real estate taxes                             (1,355 )     (1,414 )
Equity in loss of Sealy Northwest Atlanta       (242 )       (236 )
Equity in loss of Sealy Airpark Nashville       (572 )       (550 )
Equity in loss of Sealy Newmarket               (363 )          -
Operating income                              15,077       15,791

Depreciation expense                          (5,581 )     (5,968 )
Interest expense                              (7,198 )     (7,444 )
Net income                                  $  2,298     $  2,379

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

· a $228,000 decrease in rents and reimbursements due primarily to:

- a decrease of $351,000 on our wholly-owned net lease portfolio due to the restructuring of the lease for our Plantation, Florida property as of January 1, 2009;

- a decrease of $194,000 at our Lisle, Illinois properties due to an approximate 9% decrease in occupancy at one of the properties in 2009;

- a decrease of $44,000 at our Ontario property as a result of a decline in revenue from the parking facility in 2009 ;

- an increase of $263,000 at our River City property due to an approximate 6% increase in average occupancy in 2009;

- an increase of $57,000 at our Creekwood Apartments property due to an approximate 7% increase in average occupancy in 2009;

· a $154,000 increase in operating expenses due primarily to increased cost at our River City property; and

· a $391,000 increase in losses from our Sealy equity investments due primarily to a $363,000 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 $665,000 from the Sealy equity investments for the six months ended June 30, 2009.

Depreciation, real estate taxes 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                                                   $    1,207     $     828
Equity in earnings (loss) of preferred equity investment       (2,194 )       1,418
Equity in loss of Lex-Win Concord                             (99,235 )     (16,857 )
Gain on sale of mortgage backed securities                          -           454
Provision for loss on loan receivable                          (2,152 )           -
Unrealized loss on available for sale loans                      (203 )           -
Operating loss                                               (102,577 )     (14,157 )

Interest expense                                                    -          (206 )
Net loss                                                   $ (102,577 )   $ (14,363 )

The decrease in operating income from loan assets and loan securities for the . . .