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 in Part II "Item 1A - Risk Factors" in this quarterly report on Form 10-Q 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 nine months ended September 30, 2009 as compared to the three and nine months ended September 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 and managing 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., Ltd., which we refer to as Sealy, 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 venture with Lexington Realty Trust, which we refer to as Lexington, and, since August 2008, Inland America Concord Sub LLC. As of June 30, 2009, we determined that the decline in the fair value of our investment in Concord is other-than-temporary, and wrote down our investment in Concord to zero for financial statement purposes. While we and our partners continue to work towards some equity recovery, we do not plan to make any future investments through Concord.

As of September 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. Average occupancy at our consolidated properties was approximately 93% for the nine months ended September 30, 2009. As of September 30, 2009 our consolidated properties were approximately 85% leased. The decline in occupancy at September 30, 2009 was primarily due to the loss in 2009 of two tenants who occupied a combined 460,000 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 $61,691,000 as of September 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 appreciation from our investments in REIT securities. The comparability of financial data from period to period is affected by several items including 1) the timing of our property acquisition and leasing activities, 2) the purchases and sales of assets and investments, 3) taking material other-than-temporary impairment losses on assets in our portfolio and 4) the reclassification of assets. In this regard, the comparability of financial results for the current periods were significantly impacted by the write-down of our investment in Concord to zero during the second quarter of 2009 and the reclassification of certain Marc Realty assets from preferred equity to individual equity investments during the third quarter of 2009.

With respect to our debt exposure, each of our investment platforms and equity investments is essentially a stand-alone business, such that any potential liabilities which might occur are limited to that specific platform or investment and are not recourse to our other assets. Consequently, our risk of loss is in each case limited to our investment in that particular venture. Inclusive of extension rights, none of our borrowings are scheduled to mature in 2009. As of September 30, 2009 there was $1,870,000 of scheduled principal payments on mortgage loans remaining in 2009. After giving effect to extension rights, approximately $15,784,000 is scheduled to be paid down or mature in 2010 and $207,800,000 is scheduled to be paid down or mature in 2011 or later.

The weakness in the economy since late 2007 and the subsequent disruption of the capital and credit markets to date has affected profitability and limited the availability of financing and the ability to raise equity capital. During the first half of 2009 we addressed the issues facing our assets with a view towards revising our business plans as necessary in order to weather the downturn in the economy. For example, we executed the lease extension with Bell South at the Plantation, Florida property which resulted in a short term reduced rental rate but extended the lease for ten years and we initiated and executed the Marc Realty portfolio restructuring. Under the Marc Realty restructure we transferred our interest in properties which we perceived to have less opportunity for superior returns on a risk adjusted basis and increased our interest in the downtown Chicago properties. In exchange Marc Realty relinquished $12,500,000 of deferred returns due to them. In addition to stabilizing our existing assets, at the same time we continued to monitor and pursue new opportunities in the market. Toward that end, we capitalized on the market mispricing of senior REIT securities and invested $30,552,000 primarily in REIT preferred and debt securities during the first nine months of 2009. For the period ended September 30, 2009, we have recorded an aggregate realized and unrealized gain of $17,284,000 on our securities. Additionally, in June 2009 the Trust acquired from Concord for $44,000,000 two first mortgage loans with a face value of $81,015,000.

We strategically position ourselves by monitoring asset pricing and developing appropriate infrastructure for collecting and evaluating current market data. We have been patient during this unstable time and we believe we are poised to take advantage of the surplus of sound investment opportunities that we see on the horizon as we did earlier this year with our acquisition of other REIT securities and our targeted loan acquisitions.

In order to better position ourselves to take advantage of investment opportunities, in October 2009 we 1) commenced a rights offering to shareholders of record on October 22, 2009 enabling them to purchase up to an aggregate of 4,974,911 Common Shares at a price of $9.05 per share and 2) offered to the holders of our Series B-1 Preferred Shares the right to convert such shares into an equivalent number of Series C Preferred Shares. If the rights offering is fully subscribed we will raise approximately $45,000,000 which, we believe can be invested accretively within a reasonable time period and which we believe, together with our existing liquid assets, provides liquidity sufficient to target a variety of investments. As a result of the Series B-1/Series C transaction, we believe that due to the reduction in our outstanding Series B-1 Preferred Shares to 852,000 shares which have a liquidation value of $21,300,000, it provides us greater flexibility in the future to raise capital through the sale of additional preferred shares as the Series C Preferred Shares permit the issuance of pari passu preferred shares, subject to certain limitations, whereas the Series B-1 Preferred Shares do not.

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 to grow 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 from 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 September 30, 2009, we had cash and cash equivalents of $35,147,000. In addition, we had other liquid assets consisting of securities carried at fair value and available for sale securities totaling $61,691,000.

Significant financial transactions during the first three quarters of 2009 include:

· the acquisition of 1,017,105 of our Series B-1 Preferred Shares with a liquidation value of $25,428,000 for $19,081,000 in cash, resulting in a net gain of $5,682,000;

· 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 $1,526,000;

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

· 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;

· the restructuring of our preferred equity investment in Marc Realty;

· 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.

Cash Flows

Operating Activities

Although our operating activities generated a net loss of $77,821,000 for the nine months ended September 30, 2009, operating activities generated positive cash flow of $13,911,000. Our cash provided by operations reflects our net loss adjusted by: (i) non-cash items of $90,046,000 including equity in losses of partially-owned entities, unrealized losses on securities carried at fair value, depreciation and amortization expense and the effect of straight-lining of rental income; (ii) $3,887,000 of distributions from non-consolidated interests; and (iii) a net decrease due to changes in other operating assets and liabilities of $2,201,000. See our discussion of our Results of Operations below for additional details on our operations.

Investing Activities

Cash used in investing activities of $13,011,000 for the nine months ended September 30, 2009 was comprised 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;

· $30,552,000 for purchases of securities carried at fair value;

· $13,050,000 for acquisitions of loans receivable, primarily the Siete Square loan and the balance of the 160 Spear loan;

· $2,451,000 for additional loan advances related to the Marc Realty portfolio;

· $2,007,000 for investment in our equity investment in Marc Realty; and

· $1,301,000 for tenant improvements on our operating properties.

These uses of investing cash flows were offset primarily by:

· $34,797,000 in proceeds from the sale of the 160 Spear A Note;

· $22,866,000 in proceeds from the sale of securities carried at fair value;

· $10,980,000 in proceeds from the repayment of loans receivable which were primarily short term loans made to Concord; and

· $2,647,000 in net proceeds, primarily related to the release of funds held in escrow from the qualified intermediary for the sale of our Biloxi, Mississippi property.

Financing Activities

Cash used in financing activities of $24,991,000 for the nine months ended September 30, 2009 was comprised primarily of the following:

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

· $19,818,000 for repayment of borrowings on our loan payable;

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

· $13,844,000 for dividend payments on our Common Shares; and

· $4,332,000 for mortgage loan repayments.

These uses of financing cash flows were offset primarily by:

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

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

· $3,970,000 of proceeds, primarily related to the application of escrow funds held as cash collateral and utilized to pay off the CitiBank note payable.

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. 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 our actual cash flow 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. 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 three 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 prior to July 1, 2009 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

· Corporate - non-segment specific results which include 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):

                                       September 30,       December 31,
                                           2009                2008

Operating properties (1)              $       337,773     $      286,780
Loan assets and loan securities (1)            13,663            146,560
REIT securities                                61,786             36,796
Corporate
Cash and cash equivalents                      35,147             59,238
Other                                          24,287             48,720
Total Assets                          $       472,656     $      578,094

(1) As of July 1, 2009, in conjunction with the restructuring of our preferred equity investment in Marc Realty, our investments in the Included Properties in the Marc Realty portfolio are now classified as equity investments and are included in the operating properties segment.

Total assets decreased by $105,438,000, or 18.2%, from $578,094,000 at December 31, 2008 to $472,656,000 at September 30, 2009. Cash and cash equivalents decreased by $24,091,000. In addition, we experienced decreases as described below of $75,269,000 in loan assets and loan securities (exclusive of the transfer of $57,628,000 related to the reclassification of our mezzanine loans and tenant improvement and capital expenditure loans in the Marc Realty portfolio from the loan assets and loan securities segment to the operating properties segment) and of $24,433,000 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 nine months ended September 30, 2009 and a $31,670,000 other-than-temporary impairment recognized by us on this investment at June 30, 2009 as well as a $4,695,000 other comprehensive income reclassification adjustment.

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 net reduction of funds held in escrow of approximately $5,608,000. 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.

Our results of operations and changes in financial position are discussed below.

                             WINTHROP REALTY TRUST
                          FORM 10-Q SEPTEMBER 30, 2009

Comparison of Nine Months ended September 30, 2009 versus Nine Months ended
September 30, 2008

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

                                                  2009          2008

Operating properties                           $    3,512     $   3,403
Loan assets and loan securities                  (101,149 )      (9,992 )
REIT securities                                    21,424         1,035
Corporate expenses                                 (1,608 )      (9,832 )
Consolidated loss from continuing operations   $  (77,821 )   $ (15,386 )



Operating Properties

                                                2009          2008

Rents and reimbursements                      $  32,074     $  32,533
Operating expenses                               (5,981 )      (5,517 )
Real estate taxes                                (2,059 )      (2,180 )
Equity in loss of Sealy Northwest Atlanta          (223 )        (364 )
Equity in loss of Sealy Airpark Nashville          (861 )        (913 )
Equity in loss of Sealy Newmarket                  (504 )         (90 )
Equity in income of Marc Realty investments         122             -
Operating income                                 22,568        23,469

Depreciation and amortization expense            (8,276 )      (8,948 )
Interest expense                                (10,780 )     (11,118 )
Net income                                    $   3,512     $   3,403

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

· a $459,000 decrease in rents and reimbursements due primarily to:

- a decrease of $681,000 on our wholly-owned net lease portfolio due to the reduced rent pursuant to the restructuring and 10 year extension of the lease for our Plantation, Florida property as of January 1, 2009;

- a decrease of $263,000 at our Jacksonville, Florida property due to the loss of two tenants who occupied approximately 80% of the property;

- a decrease of $344,000 at our Lisle, Illinois properties due to an approximate 7% decrease in occupancy at one of the properties in 2009;

Partially offset by:

- an increase of $107,000 at our Ontario property as a result of a $255,000 increase in rental revenue due to an approximate 2% increase in average occupancy which was partially offset by a $155,000 decline in revenue from the parking facility in 2009;

- an increase of $570,000 at our River City property due to an approximate 5% increase in average occupancy in 2009;

- an increase of $95,000 at our Creekwood Apartments property due to an approximate 8% increase in average occupancy in 2009;

· a $464,000 increase in operating expenses due primarily to increased cost of $322,000 at our River City property and a $113,000 increase in legal and professional fees related to tenant disputes;

· a $221,000 increase in losses from our Sealy equity investments due primarily to a $414,000 increase in 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 $986,000 from the Sealy equity investments for the nine months ended September 30, 2009; and

· income of $122,000 for the three months ended September 30, 2009 representing our 50% share of operations at our twelve Marc Realty equity investments. We received distributions of $110,000 during the three months ended September 30, 2009. Prior to July 1, 2009, these investments were included in the loan assets and loan securities segment.

Depreciation, amortization, 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                                                   $    2,247     $   1,171
Equity in earnings (loss) of preferred equity investment       (2,108 )       2,518
Equity in loss of Lex-Win Concord                             (98,735 )     (13,953 )
Gain on sale of mortgage backed securities                          -           454
Provision for loss on loan receivable                          (2,152 )           -
Unrealized loss on available for sale loans                      (203 )           -
Gain on sale of other assets                                        -            24
Operating loss                                               (100,951 )      (9,786 )
General and administrative expense                               (198 )           -
Interest expense                                                    -          (206 )
Net loss                                                   $ (101,149 )   $  (9,992 )

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

· a $84,782,000 increase in equity in loss from Lex-Win Concord due primarily to our allocable share of the loss from Concord of $71,889,000 for the nine months ended September 30, 2009 which represents an increase of $57,936,000 over the loss allocated for the nine months ended September 30, 2008. In addition, we recorded a $31,670,000 other-than-temporary impairment loss in 2009 to reduce our equity investment in Lex-Win Concord to zero.

· a $4,626,000 decrease in equity in earnings from our preferred equity investment, Marc Realty, primarily due to:

- a $2,664,000 loss from the transfer of our interest in three of the properties in the Marc Realty portfolio in May 2009;

- a $1,605,000 decrease in earnings as a result of having a lower investment balance in 2009;

- a $181,000 decrease in gains on sale of real estate; and

- a $186,000 increase in other-than-temporary impairments. We recognized $2,186,000 of other-than-temporary impairments on four of our mezzanine loans during the nine months ended September 30, 2009 compared with a $2,000,000 other-than-temporary impairment recognized on one mezzanine loan during the same period in 2008;

· a $2,152,000 provision for loss on loans receivable related to seven properties in our Marc Realty portfolio;

Partially offset by:

· a $1,076,000 increase in interest income due primarily to $1,476,000 . . .