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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

COLONIAL REALTY LIMITED PARTNERSHIP

(205) 250-8700
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES [ü]   NO [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12-b-2).

     YES [ü]   NO [  ]

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COLONIAL REALTY LIMITED PARTNERSHIP
INDEX TO FORM 10-Q

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COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

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COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(in thousands, except per unit data)

The accompanying notes are an integral part of these consolidated financial statements.

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COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

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COLONIAL REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)

     The consolidated financial statements of Colonial Realty Limited Partnership have been prepared pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations. The following notes, which represent interim disclosures as required by the SEC, highlight significant changes to the notes to the December 31, 2002 audited consolidated financial statements of Colonial Realty Limited Partnership and should be read together with the financial statements and notes thereto included in the Form 10-K.

Note 1 — Organization and Business

     Colonial Realty Limited Partnership (“CRLP”) is the operating partnership of Colonial Properties Trust (“the Trust”), an Alabama real estate investment trust whose shares are traded on the New York Stock Exchange. The Trust was originally formed as a Maryland real estate investment trust on July 9, 1993 and reorganized as an Alabama real estate investment trust under a new Alabama REIT statute on August 21, 1995. The Trust is a fully integrated, self-administered and self-managed REIT, which means that it is engaged in the acquisition, development, ownership, management and leasing of commercial real estate property. The Trust’s activities include ownership and operation of a diversified portfolio of properties located in the Sunbelt region of the United States, consisting of 40 multifamily apartment communities, 23 office properties and 45 retail properties, as of June 30, 2003.

Note 2 — Summary of Significant Accounting Policies

     Basis of Presentation

     The consolidated financial statements include CRLP, Colonial Properties Services Limited Partnership (in which CRLP holds 99% general and limited partner interests), and Colonial Properties Services, Inc. (“CPSI”). CPSI is a taxable REIT subsidiary of the Trust that is not entitled to a dividends paid deduction and is subject to federal, state and local income taxes. CPSI provides property development, leasing and management for third-party owned properties and administrative services to CRLP. CRLP generally reimburses CPSI for payroll and other costs incurred in providing services to CRLP. All inter-company transactions are eliminated in the accompanying consolidated financial statements. Entities in which CRLP owns, directly or indirectly, a fifty percent or less interest and does not control are reflected in the consolidated financial statements as investments accounted for under the equity method. Under this method the investment is carried at cost plus or minus equity in undistributed earnings or losses since the date of acquisition.

     Use of Estimates

     The preparation of consolidated condensed financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) 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 reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

     Unaudited Interim Statements

     The consolidated financial statements as of and for the three and six months ended June 30, 2003 and 2002 and related footnote disclosures are unaudited. In the opinion of management, such financial statements reflect all adjustments necessary for a fair presentation of the results of the interim periods. All such adjustments are of a normal, recurring nature.

     Reclassifications

     Certain reclassifications have been made to the previously reported 2002 statements in order to provide comparability with the 2003 statements reported herein. These reclassifications have no impact on partners’ equity or net income.

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     Recent Pronouncements of the Financial Accounting Standards Board (“FASB”)

     In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS 145 rescinds SFAS 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Accounting Principles Board Opinion 30, will now be used to classify those gains and losses. SFAS 64 amended SFAS 4, and is no longer necessary because SFAS 4 has been rescinded. SFAS 44 and the amended sections of SFAS 13 are not applicable to CRLP and therefore have no effect on CRLP’s financial statements. SFAS 145 is effective for fiscal years beginning after May 15, 2002 with early application encouraged. The adoption of SFAS 145 on January 1, 2003 has not had a material effect on CRLP.

     On November 25, 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34. FIN 45 clarifies the requirements of SFAS 5, Accounting for Contingencies, relating to the guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. The disclosure provisions of the Interpretation are effective for financial statements for periods that end after December 15, 2002. However, the provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002, irrespective of a guarantor’s year end. See Note 15, Guarantees and Other Arrangements of CRLP’s Annual Report on Form 10-K, for additional discussion of CRLP’s financial guarantees as of December 31, 2002. The initial adoption of this standard did not have an impact on the financial condition or results of operations. Management does not believe the provisions of this standard will have a material impact on future operations of CRLP.

     On January 15, 2003, FASB completed its redeliberations of the project related to the consolidation of variable interest entities which culminated with the issuance of FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities (VIEs). FIN 46 states that if a business enterprise has a controlling financial interest in a VIE, the assets, liabilities and results of the activities of the VIE should be included in the consolidated financial statements of the business enterprise. This Interpretation explains how to identify VIEs and how an enterprise assesses its interests in a VIE to decide whether to consolidate that entity. FIN 46 also requires existing unconsolidated VIEs to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. VIEs that effectively disperse risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. This Interpretation applies immediately to variable interest entities created after January 31, 2003, and to VIEs in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003.

     CRLP has identified certain relationships that it deems reasonably possible are VIEs in which it holds a significant variable interest. CRLP deems that it is reasonably possible that its investments in partially owned entities are VIEs. CRLP’s maximum exposure to loss is limited to the carrying value of CRLP’s investments in those entities, which is $34.7 million as of June 30, 2003. In addition to these VIEs, CRLP considers its relationship with four other entities to be potential VIEs. These other entities are more fully discussed in Note 15 of CRLP’s 2002 Annual Report on Form 10-K and Note 8 herein, and primarily relate to the commitment to fund development through a mezzanine financing commitment and other guarantees. The maximum exposure related to these other entities is limited to the amount of the funding commitment and other guarantees and is $11.6 million as of June 30, 2002, which results in a total maximum exposure to CRLP attributable to all potential VIEs in the aggregate amount of $46.3 million. CRLP is currently evaluating the consolidation provisions of FIN 46 and does not anticipate consolidation of its potential VIEs will be required for the agreements entered into prior to December 31, 2002. For the funding commitment entered into in April 2003, as discussed in Note 8 herein, CRLP has evaluated the arrangement and has determined that the relationship is a VIE. However, under the consolidation provisions of FIN 46, consolidation of the VIE is not required.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150). SFAS 150 establishes how an issuer classifies and measures certain free standing financial instruments with characteristics of both liabilities and equity and requires that such instruments be classified as liabilities. SFAS 150 was effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003 for those existing financial instruments subject to the provisions of SFAS No. 150. CRLP has not

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entered into any financial instruments within the scope of SFAS 150 since May 31, 2003. CRLP is currently evaluating the impact of this pronouncement on financial instruments in place prior to May 31, 2003.

Note 3 — Capital Structure

     At June 30, 2003, the Trust controlled CRLP as the sole general partner and as the holder of 71.3% of the common units of CRLP and 63.6% of the preferred units (the “Series C Preferred Units” and “Series D Preferred Units). The limited partners of CRLP who hold common units or “redeemable units”, are those persons (including certain officers and directors) who, at the time of the Initial Public Offering, elected to hold all or a portion of their interest in the form of units rather than receiving units of common stock of the Trust, or individuals from whom CRLP acquired certain properties, who elected to receive units in exchange for the properties. Redeemable units represent the number of outstanding limited partnership units as of the date of the applicable balance sheet, valued at the closing market value of the Trust’s common shares. Each redeemable unit may be redeemed by the holder thereof for either one share of Common Stock or cash equal to the fair market value thereof at the time of such redemption, at the option of the Trust. Additionally, in 1999, CRLP issued $100 million of Series B Cumulative Redeemable Perpetual Preferred Units (“Series B Units”) in a private placement, that are exchangeable for Series B Preferred Shares of the Trust after ten years at the option of the holders of the Series B Units.

     The Board of Trustees of the Trust manages CRLP by directing the affairs of the Trust. The Trust’s interests in CRLP entitle it to share in cash distributions from, and in the profits and losses of, CRLP in proportion to the Trust’s percentage interest therein and entitle the Trust to vote on all matters requiring a vote of the limited partners.

Note 4 — Financing Activities

     On April 4, 2003, CRLP completed a $125.0 million public debt offering of unsecured senior notes. The notes, which mature in April 2013, bear a coupon rate of 6.15%, and were priced to yield an effective rate of 6.18% over the ten year term. CRLP used the net proceeds of the offering to repay a portion of the outstanding balance on its unsecured line of credit.

     On April 30, 2003, the Trust issued $125.0 million or 5,000,000 depositary shares, each representing 1/10 of a share of 8.125% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest of the Trust. The depositary shares may be called by the Trust on or after April 30, 2008 and have a liquidation preference of $25.00 per depositary share. The depositary shares have no stated maturity, sinking fund or mandatory redemption and are not convertible into any other securities of the Trust. Pursuant to the partnership agreement, the Trust contributed the net proceeds of the foregoing transaction to CRLP in exchange for preferred units of CRLP. The net proceeds of the offering were approximately $120.7 million and were used to redeem the Trust’s $125.0 million 8.75% Series A Preferred Shares on May 7, 2003. Upon redemption of the Series A preferred shares, CRLP deducted the original issuance costs of Series A preferred shares of $4.5 million from net income available to common unitholders, in accordance with the SEC’s clarification of Emerging Issues Task Force (EITF) Abstracts, Topic No. D-42 “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock”.

     On June 2, 2003, the Trust issued $75.2 million or 2,110,000 of its common shares at $35.65 per share in a public offering, in which Merrill Lynch & Co. acted as underwriter. The net proceeds from the offering to the Trust, after deducting offering expenses, were $72.5 million. Pursuant to the partnership agreement, the Trust contributed the net proceeds of the foregoing transaction to CRLP in exchange for units of general partnership interest in CRLP. CRLP intends to use the net proceeds of the offering for general company purposes, which may include the development, redevelopment and acquisition of properties. Pending one or more such uses, CRLP used the net proceeds from this offering to repay a portion of the outstanding balance on its unsecured line of credit.

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Note 5 — Net Income Per Unit

     The following table sets forth the computation of basic and diluted earnings per unit:

(amounts in thousands, except per unit data)

     Options to purchase 80,000 common shares of the Trust at a weighted average exercise price of $34.97 per share were outstanding during 2003, but were not included in the computation of diluted net income per unit because the options’ exercise price was greater than the average market price of the Trust’s common shares and, therefore, the effect would be antidilutive.

Note 6 — Income (Loss) from Discontinued Operations

     During the quarter ended June 30, 2003, CRLP had no operating property dispositions. During the first quarter of 2003, CRLP sold one retail property and one multifamily property for proceeds of approximately $30.9 million. In accordance with SFAS No. 144 Accounting for the Impairment on Disposal of Long-Lived Assets, net income and gain (loss) on disposition of real estate for properties sold, in which CRLP does not maintain continuing involvement, are reflected in the consolidated statements of income as “discontinued operations” for all periods presented. Below is a summary of the operations of the properties sold during 2002 and 2003 that are classified as discontinued operations:

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Note 7 — Segment Information

     CRLP is organized into, and manages its business based on the performance of three separate and distinct operating divisions: Multifamily, Office, and Retail. Each division has a separate management team that is responsible for acquiring, developing, managing, and leasing properties within each division. The applicable accounting policies of the segments are the same as those described in the “Summary of Significant Accounting Policies” in CRLP’s 2002 Annual Report. The pro rata portion of the revenues, net operating income (NOI), and assets of the partially-owned entities and joint ventures that CRLP has entered into are included in the applicable segment information. Additionally, the revenues and NOI of properties sold that are classified as discontinued operations are also included in the applicable segment information. In reconciling the segment information presented below to total revenues, income from continuing operations, and total assets, investments in partially-owned entities and joint ventures are eliminated as equity investments and their related activity are reflected in the consolidated financial statements as investments accounted for under the equity method and discontinued operations are reported separately. Management evaluates the performance of its segments and allocates resources to them based on divisional NOI. Divisional NOI is defined as total property revenues, including unconsolidated partnerships and joint ventures, less real estate expenses (such items as repairs and maintenance, payroll, utilities, property taxes, insurance, advertising). Divisional information and the reconciliation of total divisional revenues to total revenues, total divisional NOI to income from continuing operations and minority interest, and total divisional assets to total assets, for the three and six months ended June 30, 2003 and 2002, and for the periods ended June 30, 2003 and December 31, 2002 is presented below:

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