The following discussion analyzes the financial condition and results of operations of both Colonial Properties Trust (the "Trust"), and Colonial Realty Limited Partnership ("CRLP"), of which the Trust is the sole general partner and in which the Trust owned a 92.5% limited partner interest as of September 30, 2012. 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") and Colonial Properties Services, Inc. ("CPSI").
The following discussion and analysis of the consolidated condensed financial condition and consolidated condensed 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 and CRLP's Annual Report on Form 10-K for the year ended December 31, 2011 (the "2011 Form 10-K"). Such factors include, among others, the following:

•         changes in national, regional and local economic conditions, which may
          be negatively impacted by concerns about inflation, deflation,
          government deficits (including the European sovereign debt crisis),
          high unemployment rates, decreased consumer confidence and liquidity
          concerns, particularly in markets in which we have a high concentration
          of properties;


•         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 primary 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 sale proceeds in a manner that generates favorable returns;


•         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 developments;


•         ability to obtain financing at favorable rates, if at all, and
          refinance existing debt as it matures;


•         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 tax legislation,
          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;


•         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 Colonial
          Properties Services, Inc. to maintain its status as a taxable REIT
          subsidiary 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 or capitalization rates or capital
          market conditions;

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

•         other risks identified in the 2011 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, operates and develops multifamily communities primarily located in the Sunbelt region of the United States. Also, we create additional value for our shareholders from investments in commercial assets and by pursuing development opportunities. We are a fully-integrated real estate company, which means that we are engaged in the acquisition, development, ownership, management and leasing of multifamily communities and other commercial real estate properties. Our activities include full or partial ownership and operation of 136 properties as of September 30, 2012, located in Alabama, Arizona, Florida, Georgia, Louisiana, 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, 2012, we owned or maintained a partial ownership in:

                                                                                                              Total
                          Consolidated        Units/Sq.     Unconsolidated     Units/Sq.       Total        Units/Sq.
                           Properties         Feet (1)        Properties       Feet (1)      Properties     Feet (1)
Multifamily apartment
communities                       112   (2)     34,051                  3         1,016            115        35,067
Commercial
properties (3)                      9        2,362,000                 12     2,053,000             21     4,415,000


_____________________________

(2) Includes one property partially-owned through a joint venture entity.

(3) Our remaining 15% interest in the DRA/CLP joint venture, which was comprised of 18 commercial assets representing approximately 5.2 million square feet, was redeemed, effective as of June 30, 2012. As a result of the redemption, these 18 assets are not included in the table above.

In addition, we own certain parcels of land adjacent to or near these properties (the "land"). The multifamily apartment communities, the commercial properties and the land are referred to herein collectively as the "properties". As of September 30, 2012, consolidated multifamily apartment communities and commercial properties that were no longer in lease-up were 96.7% and 92.2% leased, respectively. We generally consider a property to be in lease-up until it first attains physical occupancy of at least 93%.
The Trust is the general partner of CRLP and, as of September 30, 2012, held approximately 92.5% 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 activities through CPSI.
As a lessor, the majority of our revenue is derived from residents and tenants under existing leases at our properties. Therefore, our operating cash flow is dependent upon the rents that we are able to charge our residents and tenants, and the ability of these residents and tenants 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

For the remainder of 2012, we will continue to focus on improving our portfolio and continuing efforts to maintain a strong balance sheet and an investment grade rating. We will look to grow the Company by improving operations in our multifamily portfolio and by continuing to develop multifamily apartment communities on land that we already own or on new sites in our Sunbelt markets. In addition, we may selectively acquire newer multifamily apartment communities that are attractively priced in our Sunbelt markets. We will look to improve our portfolio by recycling older multifamily apartment communities, as well as several commercial assets, in exchange for newer multifamily assets in top-quartile Sunbelt markets. Our long-term target is to increase the percentage of net operating income from our multifamily portfolio to greater than 90% of our total net operating income.

Executive Summary of Results of Operations

The following discussion of results of operations for the three and nine months ended September 30, 2012 and 2011 should be read in conjunction with the Consolidated Condensed Statements of Operations and Comprehensive Income (Loss) of the Trust and CRLP and related notes thereto included in Item 1 of this Form 10-Q.

For the three months ended September 30, 2012, the Trust reported a net loss available to common shareholders of $6.5 million, compared with net income available to common shareholders of $12.5 million for the comparable prior year period. For the three months ended September 30, 2012, CRLP reported a net loss available to common unitholders of $7.0 million, compared with net income available to common unitholders of $13.5 million for the comparable prior year period.

For the nine months ended September 30, 2012, the Trust reported net income available to common shareholders of $4.0 million, compared with a net loss available to common shareholders of $5.6 million for the comparable prior year period. For the nine months ended September 30, 2012, CRLP reported net income available to common unitholders of $0.1 million, compared with a net loss available to common unitholders of $6.1 million for the comparable prior year period.

The principal factors that influenced our results from continuing operations for the three months ended September 30, 2012 include:

•            a 5.6% increase in multifamily same-property revenue from continuing
             operations, from $73.8 million for the three months ended
             September 30, 2011 to $77.9 million for the three months ended
             September 30, 2012, primarily as a result of an improvement in both
             new and renewal lease rates and a consistently high occupancy level.
             In addition, multifamily same-property expenses from continuing
             operations increased 2.2%, from $30.7 million for the three months
             ended September 30, 2011 to $31.4 million for the three months ended
             September 30, 2012. Overall, these changes resulted in an 8.0%
             increase in multifamily same-property net operating income from
             continuing operations when compared with the third quarter of 2011
             (same-property results from continuing operations excludes the
             results of operations from five multifamily same-property apartment
             communities, which are currently classified as held for sale) (see
             Note 11 to the Trust's and CRLP's Consolidated Condensed Financial
             Statements - "Segment Information"); and


•            the inclusion of the results of operations from Colonial Grand at
             Hampton Preserve, a 486-unit multifamily apartment community located
             in Tampa, Florida. The development was completed during the three
             months ended September 30, 2012.

In addition to the factors described above, the principal factors that influenced our results from continuing operations for the nine months ended September 30, 2012 include:

•            a 5.5% increase in multifamily same-property revenue from continuing
             operations, from $217.1 million for the nine months ended
             September 30, 2011 to $229.0 million for the nine months ended
             September 30, 2012, primarily as a result of an improvement in both
             new and renewal lease rates and a consistently high occupancy level.
             In addition, multifamily same-property expenses from continuing
             operations increased 2.1%, from $88.6 million for the nine months
             ended September 30, 2011 to $90.5 million for the nine months ended
             September 30, 2012. Overall, these changes resulted in an 7.9%
             increase in multifamily same-property net operating income from
             continuing operations when compared with the nine months ended
             September 30, 2011 (same-property results from continuing operations
             excludes the results of operations from five multifamily
             same-property apartment communities, which are currently classified
             as held for sale) (see Note 11 to the Trust's and CRLP's
             Consolidated Condensed Financial Statements - "Segment
             Information"); and


•            the inclusion of the results of operations from Colonial Grand at
             Brier Falls, a 350-unit multifamily apartment community located in
             Raleigh, North Carolina, which the Company acquired for $45.0
             million on January 10, 2012, and from Colonial Grand at Fairview, a
             256-unit multifamily apartment community located in Dallas, Texas,
             which the Company acquired for $29.8 million on May 30, 2012; and


•            the redemption of our remaining 15% interest in the DRA/CLP joint
             venture, effective as of June 30, 2012, resulting in a gain of
             approximately $21.9 million, the majority of which had been deferred
             since the formation of the DRA/CLP joint venture in 2007.

Results of Operations
Comparison of the Three Months Ended September 30, 2012 and 2011
Property-related revenue
Total property-related revenues, which consist of minimum rent, tenant
recoveries and other property related revenue, were $96.8 million for the three
months ended September 30, 2012, compared to $86.7 million for the same period
in 2011. The components of property-related revenues for the three months ended
September 30, 2012 and 2011 are:
                                Three Months Ended                     Three Months Ended
                                September 30, 2012                     September 30, 2011               % Change
                                               % of Total                             % of Total          from
($ in thousands)            Revenues            Revenues           Revenues            Revenues       2011 to 2012
Minimum rent           $     79,892                  83 %     $     72,152                  83 %             11 %
Tenant recoveries             2,178                   2 %            2,173                   3 %              - %
Other
property-related
revenue                      14,757                  15 %           12,411                  14 %             19 %
Total
property-related
revenues               $     96,827                 100 %     $     86,736                 100 %             12 %

The increase in total property-related revenues of $10.1 million for the three months ended September 30, 2012, as compared to the same period in 2011, is primarily attributable to increases in minimum rent resulting from properties acquired since July 1, 2011 and an increase in rental rates at our multifamily same-property communities. The following table illustrates the change in property-related revenues by property type, with the three components (minimum rent, tenant recoveries and other property-related revenue) presented on an aggregate basis for each property type:

                                   Three Months Ended          Change
                                     September 30,              from
($ in thousands)                    2012         2011       2011 to 2012
Multifamily:
Same-property communities (1)        77,882      73,777             4,105
Acquisitions (2)                      5,116         907             4,209
Developments                          1,542           6             1,536
Other (3)                            12,287      12,046               241
                                $    96,827    $ 86,736    $       10,091


 _____________________________

(2) Includes six multifamily communities acquired since July 1, 2011.

(3) Includes all commercial properties and all multifamily communities other than same-property communities and the six multifamily communities acquired since July 1, 2011.

Property-related revenues for our multifamily same-property communities classified in continuing operations increased $4.1 million, or 5.6%, for the three months ended September 30, 2012 compared to the same period in 2011, primarily due to improvements in new and renewal lease rental rates while maintaining consistently high occupancy levels. During the quarter, rents increased an average of 3.1% on new move-ins compared to the expiring lease for the same unit and renewal rates increased an average of 5.9% over the expiring lease for the same unit. As a result, average monthly rent per unit for our multifamily same-property communities increased to $789 per unit for the three months ended September 30, 2012 compared to $750 per unit for the same period in 2011. Average occupancy for our multifamily same-property communities was 95.7% for the three months ended September 30, 2012 compared to 95.6% for the three months ended September 30, 2011.
Other non-property-related revenue
Other non-property-related revenues, which consist primarily of management fees, leasing fees and other miscellaneous fees, were $1.3 million for the three months ended September 30, 2012, compared to $2.0 million for the same period in 2011. The $0.7 million decrease is attributable to the loss, since September 30, 2011, of third-party management and leasing contracts related to properties previously held in joint ventures or owned by third-parties.

Property-related expenses
Total property-related expenses were $39.0 million for the three months ended September 30, 2012, compared to $36.1 million for the same period in 2011. The components of property-related expenses for the three months ended September 30, 2012 and 2011 are:

                                Three Months Ended                     Three Months Ended
                                September 30, 2012                     September 30, 2011               % Change
                                               % of Total                             % of Total          from
($ in thousands)            Expenses            Expenses           Expenses            Expenses       2011 to 2012
Property operating
expenses               $     28,187                  72 %     $     26,328                  73 %              7 %
Taxes, licenses and
insurance                    10,819                  28 %            9,789                  27 %             11 %
Total
property-related
expenses               $     39,006                 100 %     $     36,117                 100 %              8 %

The increase in total property-related expenses of $2.9 million for the three months ended September 30, 2012, as compared to the same period in 2011, is primarily attributable to properties acquired since July 1, 2011 and operating expenses associated with development properties. The increase in expenses at our same-property communities is primarily related to higher property taxes. The following table illustrates the change in total property-related expenses by property type, with the two components (property operating expenses and taxes, licenses and insurance) presented on an aggregate basis for each property type:

                                   Three Months Ended          Change
                                     September 30,              from
($ in thousands)                    2012         2011       2011 to 2012
Multifamily:
Same-property communities (1)        31,401      30,723             678
Acquisitions (2)                      2,054         355           1,699
Developments                            713         101             612
Other (3)                             4,838       4,938            (100 )
                                $    39,006    $ 36,117    $      2,889


 _____________________________

(2) Includes six multifamily communities acquired since July 1, 2011.

(3) Includes all commercial properties and all multifamily communities other than same-property communities and the six multifamily communities acquired since July 1, 2011.

Property management expense
Property management expenses consist of regional supervision and accounting costs related to consolidated property operations, primarily consisting of salaries and incentive compensation and property management software costs. Property management expenses were $3.2 million for the three months ended September 30, 2012, compared to $2.4 million for the same period in 2011. The $0.8 million increase in expenses is primarily attributable to an increase in salaries and higher incentive compensation expense in 2012. General and administrative expense
General and administrative expenses were $5.9 million for the three months ended September 30, 2012, compared to $5.2 million for the same period in 2011. The $0.7 million increase in expenses in 2012 is primarily attributable to an increase in incentive compensation expense and legal expense. Management fees and other expenses
Management fee and other expenses consist of property management and other services provided to third parties, primarily consisting of salaries and incentive compensation, leasing commissions and legal expenses. Management fees and other expenses were $1.4 million for the three months ended September 30, 2012, compared to $2.0 million for the same period in 2011. The $0.6 million decrease in expenses is primarily attributable to the termination of management contracts in connection with the disposition of our interests in certain joint ventures or the termination of other management contract owned by third-parties since September 30, 2011.

Depreciation

Depreciation was $29.8 million for the three months ended September 30, 2012,
compared to $28.0 million for the same period in 2011. The increase in
depreciation expense of $1.8 million was primarily attributable to properties
acquired since July 1, 2011 and expenses associated with development properties,
as follows:
                                   Three Months Ended         Change
                                     September 30,             from
($ in thousands)                    2012         2011      2011 to 2012
Multifamily:
Same-property communities (1)        22,668      22,901          (233 )
Acquisitions (2)                      2,224         321         1,903
Developments                            567           -           567
Other (3)                             4,345       4,810          (465 )
                                $    29,804    $ 28,032         1,772


_____________________________

(2) Includes six multifamily communities acquired since July 1, 2011.

(3) Includes overhead, all commercial properties and all multifamily communities other than same-property communities and the six multifamily communities . . .