The following discussion analyzes the financial condition and results of operations of both Colonial Properties Trust, or "the Trust", and Colonial Realty Limited Partnership, or "CRLP", of which the Trust is the sole general partner and in which the Trust owned an 86.7% limited partner interest as of September 30, 2009. The Trust conducts all of its business and owns all of its properties through CRLP and CRLP's various subsidiaries. Except as otherwise required by the context, the "Company," "Colonial," "we," "us" and "our" refer to the Trust and CRLP together, as well as CRLP's subsidiaries, including Colonial Properties Services Limited Partnership ("CPSLP"), Colonial Properties Services, Inc. ("CPSI") and CLNL Acquisition Sub, LLC.
The following discussion and analysis of the consolidated condensed financial condition and consolidated results of operations should be read together with the consolidated financial statements of the Trust and CRLP and the notes thereto contained in this Form 10-Q. This Quarterly Report on Form 10-Q contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "estimates," "predicts," "potential," or the negative of these terms or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our and our affiliates, or the industry's actual results, performance, achievements or transactions to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements including, but not limited to, the risks described under the caption "Risk Factors" in the Trust's 2008 Annual Report on Form 10-K and CRLP's 2008 Annual Report on Form 10-K. Such factors include, among others, the following:
• the weakening economy and mounting job losses in the U.S., together with the downturn in the overall U.S. housing market resulting in increased supply and all leading to deterioration in the multifamily market;

• national and local economic, business and real estate conditions, including, but not limited to, the effect of demand for multifamily units, office and retail rental space or the creation of new multifamily and commercial developments, the extent, severity and duration of the current recession or recovery, the availability and creditworthiness of tenants, the level of lease rents, and the availability of financing for both tenants and us;

• adverse changes in real estate markets, including, but not limited to, the extent of tenant bankruptcies, financial difficulties and defaults, the extent of future demand for multifamily units and commercial space in our core markets and barriers of entry into new markets which we may seek to enter in the future, the extent of decreases in rental rates, competition, our ability to identify and consummate attractive acquisitions on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sales proceeds in a manner that generates favorable terms;

• increased exposure, as a multifamily focused real estate investment trust ("REIT"), to risks inherent in investments in a single industry;

• risks associated with having to perform under various financial guarantees that we have provided with respect to certain of our joint ventures and retail developments;

• ability to obtain financing at reasonable rates, if at all;

• actions, strategies and performance of affiliates that we may not control or companies, including joint ventures, in which we have made investments;

• changes in operating costs, including real estate taxes, utilities, and insurance;

• higher than expected construction costs;

• uncertainties associated with our ability to sell our existing inventory of condominium and for-sale residential assets, including timing, volume and terms of sales;

• uncertainties associated with the timing and amount of real estate dispositions and the resulting gains/losses associated with such dispositions;

• legislative or other regulatory decisions, including government approvals, actions and initiatives, including the need for compliance with environmental and safety requirements, and changes in laws and regulations or the interpretation thereof;

• effects of tax legislative action;

• the Trust's ability to continue to satisfy complex rules in order for it to maintain its status as a "REIT" for federal income tax purposes, the ability of CRLP to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of certain of our subsidiaries to maintain their status as taxable REIT subsidiaries for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;

• price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on availability of financing;

• effect of any rating agency actions on the cost and availability of new debt financing;

• level and volatility of interest rates or capital market conditions;

• effect of any terrorist activity or other heightened geopolitical crisis;

• other factors affecting the real estate industry generally, including information technology risks, such as obsolescence and integrity of applications; and

• other risks identified in the Trust's 2008 Annual Report on Form 10-K and CRLP's 2008 Annual Report on Form 10-K and, from time to time, in other reports we file with the Securities and Exchange Commission (the "SEC") or in other documents that we publicly disseminate.

We undertake no obligation to publicly update or revise these forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.
General
We are a multifamily-focused self-administered equity REIT that owns, develops and operates multifamily apartment communities primarily located in the Sunbelt region of the United States. Also, we create additional value for our shareholders by managing commercial assets through joint venture investments and pursuing development opportunities. We are a multifamily-focused self-administered and self-managed equity REIT, which means that we are engaged in the acquisition, development, ownership, management and leasing of multifamily apartment communities and other commercial real estate properties. Our activities include full or partial ownership and operation of 186 properties as of September 30, 2009, located in Alabama, Arizona, Florida, Georgia, Nevada, North Carolina, South Carolina, Tennessee, Texas and Virginia, development of new properties, acquisition of existing properties, build-to-suit development and the provision of management, leasing and brokerage services for commercial real estate.
As of September 30, 2009, we owned or maintained a partial ownership in 112 multifamily apartment communities containing a total of 33,938 apartment units (consisting of 105 wholly-owned consolidated properties and seven properties partially-owned through unconsolidated joint venture entities aggregating 31,520 and 2,418 units, respectively) (the "multifamily apartment communities"), 74 commercial properties, consisting of 48 office properties containing a total of approximately 16.3 million square feet of office space (consisting of three wholly-owned consolidated properties and 45 properties partially-owned through unconsolidated joint-venture entities aggregating 0.5 million and 15.8 million square feet, respectively) (the "office properties"), 26 retail properties containing a total of approximately 5.2 million square feet of retail space, excluding anchor-owned square-footage (consisting of five wholly-owned properties and 21 properties partially-owned through unconsolidated joint venture entities aggregating 1.0 million and 4.2 million square feet, respectively) (the "retail properties"), and certain parcels of land adjacent to or near certain of these properties (the "land"). The multifamily apartment communities, the office properties, the retail properties and the land are referred to herein collectively as the "properties". As of September 30, 2009, consolidated multifamily and commercial properties that had achieved stabilized occupancy (which we have defined as having occurred once the property has attained 93% physical occupancy) were 94.4% and 86.0% leased, respectively. The Trust is the direct general partner of, and as of September 30, 2009, held approximately 86.7% of the interests in CRLP. We conduct all of our business through CRLP, CPSLP, which provides management services for our properties and CPSI, which provides management services for properties owned by third parties, including unconsolidated joint venture entities. We perform all of our for-sale residential and condominium conversion activities through CPSI. As a lessor, the majority of our revenue is derived from residents under existing leases at our properties. Therefore, our operating cash flow is dependent upon the rents that we are able to charge to our residents, and the ability of these residents to make their rental payments. We also receive third-party management fees generated from third party management agreements related to management of properties held in joint ventures.
The Trust was formed in Maryland on July 9, 1993. The Trust was reorganized as an Alabama real estate investment trust in 1995. Our executive offices are located at 2101 Sixth Avenue North, Suite 750, Birmingham, Alabama, 35203 and our telephone number is (205) 250-8700.

Business Strategy and Outlook
During the past 12 months, we have experienced a global financial and economic crisis, which included, among other things, significant reductions and disruptions in available capital and liquidity from banks and other providers of credit, substantial reductions and/or volatility in equity values worldwide and concerns that the weakening U.S. and worldwide economies could enter into a prolonged recessionary period. These circumstances materially impacted liquidity in the financial markets making terms for certain financings less attractive, and in some cases, resulted in the unavailability of financing even for companies who were otherwise qualified to obtain financing. In addition, the weakening economy and mounting job losses in the U.S., and the slowdown in the overall U.S. housing market, resulting in increased supply (and in some markets, oversupply), have led to a deterioration in the multifamily market. The turmoil in the credit and capital markets, continuing job losses, the increased housing supply and our expectation that the economy will continue to remain weak caused us to recalibrate our business plan at the beginning of this year. As a result of the economic decline, our focus for the remainder of 2009 and into the first quarter of 2010 continues to be on our previously outlined priorities of strengthening the balance sheet, improving liquidity, addressing our near term debt maturities, managing our existing properties and operating our portfolio efficiently, including reducing our overhead and postponing or phasing future development activities. We have made significant progress in implementing this business strategy in the first nine months of the year and will continue to execute on our strategic initiatives as outlined below. Strengthen the Balance Sheet
Our primary method of strengthening the balance sheet has been through asset sales, particularly non-core assets, such as for-sale residential properties and land, and through our recently completed equity offerings. Despite a challenging transaction environment, we have sold assets for aggregate proceeds of approximately $81.3 million during the nine months ended September 30, 2009, including the following significant transactions:
• Colonial Promenade Fultondale, a retail asset that we developed, for $30.7 million (including $16.9 million of seller-financing), recognizing a gain of $4.5 million;

• Our remaining 15% joint venture interest in Colonial Pinnacle Craft Farms to the majority joint venture partner, resulting in an impairment charge of $0.7 million;

• 109 units at four of our for-sale residential communities for $33.5 million, which included the remaining units at Regent's Park; and

• The remaining 238 units at our condominium conversion projects for $16.9 million, which included the sale of Portofino at Jensen Beach and Murano at Delray Beach during the third quarter.

In addition, we are working to complete additional transactions during the remainder of 2009. In July 2009, we entered into an agreement with OZ/CLP Retail LLC - our joint venture with OZRE Retail LLC and our retail joint venture partner - that is expected to result in the transfer of all of our interest in the joint venture to our joint venture partner. It is anticipated that this transaction will be completed in the fourth quarter 2009; but it remains subject to the satisfaction of certain closing conditions. No assurance can be given that we will be able to complete this sale.
During the second and third quarters of 2009, we issued 4,802,971 common shares under our $50.0 million continuous equity offering program, at a weighted average issue price of $9.07 per share, raising net proceeds of approximately $42.6 million. Following completion of the equity offering noted below, we terminated this program.
On October 6, 2009, we completed a public offering of our common shares, issuing 12,109,500 shares at a public offering price of $9.50 per share, generating net proceeds of $109.8 million after deducting the underwriting discount and offering expenses. We used the net proceeds from the offering to repay a portion of the outstanding balance under our unsecured revolving credit facility and for general corporate purposes.
Improve Liquidity
As the economic uncertainty continues, ensuring adequate liquidity remains critical. During the nine months ended September 30, 2009, we closed on a 10-year, $350.0 million collateralized loan, with a weighted-average fixed interest rate of 6.04%, and on an additional 10-year, $156.4 million collateralized loan, with a weighted-average fixed interest rate of 5.31%, both with Fannie Mae (NYSE: FNM). The proceeds from these loans were used to repay a portion of the outstanding borrowings under our $675.0 million unsecured credit facility, as discussed further under "Liquidity and Capital Resources".

Beginning in the first quarter 2009, our Board of Trustees declared a reduced quarterly cash dividend on common shares of $0.15 per common share, compared with $0.25 for the fourth quarter 2008. These actions are intended to help us further improve our liquidity position, enhance our ability to take advantage of opportunities and help protect against uncertainties in the capital markets. Address Near-Term Maturities
For the first nine months of 2009, we focused on addressing our near term maturities through repurchases of outstanding unsecured senior notes of CRLP as we continued to see significant discounts. Since inception of our repurchase efforts, which includes a previously announced $550 million repurchase program, a $250 million tender offer and a third quarter closing of an additional $148.2 million tender offer, we have repurchased an aggregate of $774.2 million of outstanding unsecured senior notes, recognizing aggregate net gains of approximately $70.3 million. Of this amount, we repurchased $579.2 million in unsecured senior notes during the first nine months of 2009, at an average discount of 10.6% to par value, which represents an 8.1% yield to maturity and resulted in the recognition of net gains of $54.8 million. As a result of our successful repurchases of unsecured notes, as of September 30, 2009, we have only $4.2 million of unsecured notes maturing in 2010. We will continue to monitor the bond market and take advantage of favorable conditions to repurchase outstanding CRLP notes.
As of September 30, 2009, we had $396.1 million available on our unsecured credit facility, with $5 million to $10 million in development spending committed for the remainder of 2009, no debt related to consolidated properties maturing in 2009 and $23.4 million of joint venture debt maturing in 2009 (of which $20.6 million is available to be extended by the joint venture). Therefore, we believe, based on our current strategy, that we have adequate liquidity in order to address our capital needs through 2011, including the remaining $44.4 million of consolidated debt maturing in 2010. Reduce Overhead
Since October 2008, we have aggressively cut overhead costs, primarily through the elimination of 159 employee positions (many of which were construction, development, and leasing personnel), of which 24 were eliminated during the third quarter 2009. These actions resulted in us incurring $0.6 million and $1.4 million in termination benefits and severance related charges in the three and nine months ended September 30, 2009, respectively. With the staff reductions in 2009, we have now reduced the size of our total workforce by more than 10% compared to the workforce size as of October 2008, which we expect to generate approximately $20.0 million in annualized savings. Throughout the remainder of 2009 and into the first quarter of 2010, we intend to continue to explore additional ways to achieve overhead savings that will help preserve capital and improve liquidity.
Postpone/Phase Developments
As previously disclosed, in January 2009, we decided to postpone/phase future development activities until we determine that the current economic environment has sufficiently improved. Our development expenditures during the three and nine months ended September 30, 2009 were $9.6 million and $40.8 million, respectively, and we anticipate total expenditures for 2009 to be approximately $45 to $50 million. Postponing/phasing future development activities will help us preserve capital until the current economic environment has sufficiently improved.
We believe that our current business strategy, the availability of borrowings under our credit facilities, limited debt maturities in 2009 and 2010, and the number of unencumbered properties in our multifamily portfolio has us positioned to work through this challenging economic environment. However, the ongoing recession and continued uncertainty in the stock and credit markets may negatively impact our ability to access additional financing for capital needs at reasonable terms, or at all, which may negatively affect our business. A prolonged downturn in the financial markets may cause us to seek alternative sources of financing on less favorable terms.

Executive Summary of Results of Operations The following discussion of results of operations should be read in conjunction with the Consolidated Condensed Statements of Income of the Trust and CRLP and the Operating Results Summary included below.
For the three months ended September 30, 2009, the Trust reported a net loss available to common shareholders of $3.5 million, compared with net income available to common shareholders of $27.2 million for the comparable prior year period. For the three months ended September 30, 2009, CRLP reported a net loss available to common unitholders of $4.0 million, compared with net income available to common unitholders of $32.6 million for the comparable prior year period. In addition to our results from operating activities, results for the three months ended September 30, 2009 include $14.3 million of net gains from the repurchase of unsecured senior notes, offset by $3.5 million in charges related to a loan repayment guarantee on our 35% joint venture interest in Colonial Grand at Traditions, an increase in interest expense and debt cost amortization of approximately $4.8 million and $1.1 million of restructuring and impairment charges.
For the nine months ended September 30, 2009 and 2008, the Trust reported net income available to common shareholders of $8.6 million and $50.4 million, respectively. For the nine months ended September 30, 2009 and 2008, CRLP reported net income available to common unitholders of $10.1 million and $60.9 million, respectively. In addition to our results from operating activities, results for the nine months ended September 30, 2009 include $54.8 million of net gains from the repurchase of unsecured senior notes, $5.7 million of gains, net of income taxes, from the disposition of assets, an increase in interest expense and debt cost amortization of approximately $13.2 million and $5.3 million of restructuring and impairment charges.

Operating Results Summary
The following operating results summary is provided for reference purposes and
is intended to be read in conjunction with the narrative discussion. This
information is presented to correspond with the manner in which we analyze our
operating results.

                                          Three Months Ended September 30,              Nine Months Ended September 30,
(amounts in thousands)                   2009             2008        Variance         2009            2008        Variance
Revenues:
Minimum rent                          $    69,028       $  70,131     $  (1,103 )   $   209,476      $ 205,073     $   4,403
Tenant recoveries                             848           1,116          (268 )         2,823          3,256          (433 )
Other property related revenue             10,823           9,070         1,753          30,191         26,109         4,082
Construction revenues                         -0-             654          (654 )            36          9,102        (9,066 )
Other non-property related revenues         3,987           5,186        (1,199 )        11,366         15,542        (4,176 )

Total revenue                              84,686          86,157        (1,471 )       253,892        259,082        (5,190 )


Expenses:
Property operating expenses                25,615          23,093         2,522          70,979         62,783         8,196
Taxes, licenses and insurance               8,385          10,347        (1,962 )        29,672         29,238           434
Construction expenses                           -             673          (673 )            35          8,503        (8,468 )
Property management expenses                1,728           2,088          (360 )         5,329          6,402        (1,073 )
General and administrative expenses         4,073           5,993        (1,920 )        12,982         17,562        (4,580 )
Management fee and other expense            3,340           4,335          (995 )        11,096         12,269        (1,173 )
Restructuring charges                         588               -           588           1,400              -         1,400
Investment and development                    100              80            20           1,585            956           629
Depreciation & amortization                28,934          25,024         3,910          87,066         73,128        13,938
Impairment                                    221               -           221           1,839              -         1,839

Total operating expenses                   72,984          71,633         1,351         221,983        210,841        11,142

Income from operations                     11,702          14,524        (2,822 )        31,909         48,241       (16,332 )


Other income (expense):
Interest expense and debt cost
amortization                              (23,840 )       (18,998 )      (4,842 )       (69,192 )      (56,026 )     (13,166 )
Gains on retirement of debt                14,929           2,515        12,414          56,480         10,716        45,764
Interest income                               345             634          (289 )         1,095          2,609        (1,514 )
(Loss) Income from partially-owned
unconsolidated entities                    (3,317 )         1,190        (4,507 )        (4,595 )       13,497       (18,092 )
Loss on hedging activities                   (649 )           (46 )        (603 )        (1,709 )         (127 )      (1,582 )
Gain from sales of property, net of
income taxes                                  507           1,814        (1,307 )         5,745          4,250         1,495
Income taxes and other                       (352 )           216          (568 )         2,518            892         1,626

Total other income (expense)              (12,377 )       (12,675 )         298          (9,658 )      (24,189 )      14,531


(Loss) Income from Continuing
Operations                                   (675 )         1,849        (2,524 )        22,251         24,052        (1,801 )


Trust
(Loss) Income from continuing
operations                                   (675 )         1,849        (2,524 )        22,251         24,052        (1,801 )
Income (Loss) from discontinued
operations                                    274          34,403       (34,129 )          (192 )       48,973       (49,165 )
Noncontrolling interest, continuing
operations:
Noncontrolling interest in CRLP -
common unitholders                            623             304           319          (1,445 )       (1,981 )         536
Noncontrolling interest in CRLP -
preferred unitholders                      (1,813 )        (1,813 )           -          (5,438 )       (5,452 )          14
Noncontrolling interest of limited
partners                                        -             (68 )          68            (999 )         (316 )        (683 )
Noncontrolling interest,
discontinued operations:
Noncontrolling interest in CRLP -
Common                                        (60 )        (5,733 )       5,673             (60 )       (8,458 )       8,398
Noncontrolling interest of limited
partners                                      155              71            84             597            341           256

Income attributable to
noncontrolling interest                    (1,095 )        (7,239 )       6,144          (7,345 )      (15,866 )       8,521

Net (loss) income attributable to
parent company                             (1,496 )        29,013       (30,509 )        14,714         57,159       (42,445 )

Dividends to preferred shareholders        (1,998 )        (2,037 )          39          (6,108 )       (6,705 )         597
Preferred share issuance costs
write-off, net of discount                     30             240          (210 )            25            (27 )          52

Net (loss) income available to
common shareholders                   $    (3,464 )     $  27,216     $ (30,680 )   $     8,631      $  50,427     $ (41,796 )

CRLP
(Loss) Income from continuing
operations                                   (675 )         1,849        (2,524 )        22,251         24,052        (1,801 )
Income (Loss) from discontinued
operations                                    274          34,403       (34,129 )          (192 )       48,973       (49,165 )

Noncontrolling interest
Noncontrolling interest of limited
. . .