UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2009
OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-12358 (Colonial Properties Trust)

Commission File Number 0-20707 (Colonial Realty Limited Partnership)

COLONIAL REALTY LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

Alabama (Colonial Properties Trust)		59-7007599
Delaware (Colonial Realty Limited Partnership)		63-1098468
(State or other jurisdiction		(IRS Employer
of incorporation)		Identification Number)

2101 Sixth Avenue North, Suite 750, Birmingham, Alabama 35203
(Address of principal executive offices) (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Shares of Beneficial Interest of Colonial Properties
Trust,		New York Stock Exchange
$.01 par value per share
Depositary shares of Colonial Properties Trust, each
representing 1/10 of a share of 8 1/8% Series D Cumulative
Redeemable
Preferred Shares of Beneficial Interest,		New York Stock Exchange
par value $.01 per share

Securities registered pursuant to Section 12(g) of the Act: Class A Units of Limited Partnership Interest of Colonial Realty Limited Partnership

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Colonial Properties Trust		YES o		NO þ
Colonial Realty Limited Partnership		YES o		NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Colonial Properties Trust		YES o		NO þ
Colonial Realty Limited Partnership		YES o		NO þ

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.

Colonial Properties Trust		YES þ		NO o
Colonial Realty Limited Partnership		YES þ		NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Colonial Properties Trust		YES o		NO o
Colonial Realty Limited Partnership		YES o		NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Colonial Properties Trust

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Colonial Realty Limited Partnership

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Colonial Properties Trust		YES o		NO þ
Colonial Realty Limited Partnership		YES o		NO þ

     The aggregate market value of the 44,550,255 Common Shares of Beneficial Interest held by non-affiliates of Colonial Properties Trust was approximately $329,671,887 based on the closing price of $7.40 as reported on the New York Stock Exchange for such Common Shares of Beneficial Interest on June 30, 2009. The aggregate market value of the 3,035,213 common units of partnership interest held by non-affiliates of the Colonial Realty Limited Partnership was approximately $22,460,576 based on the closing price of $7.40 of the common shares of Colonial Properties Trust into which the common units are exchangeable, as reported on the New York Stock Exchange on June 30, 2009. Number of Colonial Properties Trust’s Common Shares of Beneficial Interest outstanding as of February 24, 2010: 66,788,853

 

 

Contents

				PAGE
PART I
Item 1		Business			3
Item 1A		Risk Factors			16
Item 1B		Unresolved Staff Comments			31
Item 2		Properties			31
Item 3		Legal Proceedings			40
Item 4		Submission of Matters to a Vote of Security Holders			40
PART II
Item 5		Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchase’s of Equity Securities			40
Item 6		Selected Financial Data			43
Item 7		Management’s Discussion and Analysis of Financial Condition and Results of Operations			46
Item 7A		Quantitative and Qualitative Disclosures about Market Risk			70
Item 8		Financial Statements and Supplementary Data			71
Item 9		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			163
Item 9A		Controls and Procedures			163
Item 9B		Other Information			165
PART III
Item 10		Trustees, Executive Officers and Corporate Governance			166
Item 11		Executive Compensation			166
Item 12		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			166
Item 13		Certain Relationships and Related Transactions, and Director Independence			167
Item 14		Principal Accountant Fees and Services			167
PART IV
Item 15		Exhibits and Financial Statement Schedules			168
		Signatures			181
EX-10.56
EX-10.57
EX-12.1
EX-12.2
EX-21.1
EX-23.1
EX-23.2
EX-23.3
EX-23.4
EX-31.1
EX-31.2
EX-31.3
EX-31.4
EX-32.1
EX-32.2
EX-32.3
EX-32.4

Explanatory Note

This Form 10-K includes information with respect to 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 an 89.1% limited partner interest as of December 31, 2009. The Trust conducts all of its business and owns all of its properties through CRLP and CRLP’s various subsidiaries. Separate financial statements and accompanying notes are provided for each of the Trust and CRLP. Except as specifically noted otherwise, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is presented as a single discussion with respect to both the Trust and CRLP since the Trust conducts all of its business and owns all of its properties through CRLP and CRLP’s various subsidiaries.

          Documents Incorporated by Reference

          Portions of the proxy statement for the annual shareholders meeting to be held on April 28, 2010 are incorporated by reference into Part III of this report. We expect to file our proxy statement within 120 days after December 31, 2009.

PART I

          This annual report on Form 10-K 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 herein. Such factors include, among others, the following:

	•		the deterioration of the economy and high unemployment in the U.S., together with the downturn in the overall U.S. housing market resulting in weakness in the multifamily market;
	•		national and local economic, business and real estate conditions generally, including, but not limited to, the effect on demand for multifamily units and commercial rental space or the creation of new multifamily and commercial developments, the extent, strength 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 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 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 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 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 or capitalization rates or capital market conditions;
	•		effect of any terrorist activity or other heightened geopolitical crisis; and
	•		other risks identified in this 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.

Item 1. Business.

          As used herein, the term the “Trust” refers to Colonial Properties Trust, and the term “CRLP” refers to Colonial Realty Limited Partnership, of which the Trust is the sole general partner and in which the Trust owned an 89.1% limited partner interest as of December 31, 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.

          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 by managing commercial assets, primarily through joint venture investments, and 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 156 properties as of December 31, 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 December 31, 2009, we owned or maintained a partial ownership in 111 multifamily apartment communities containing a total of 33,520 apartment units (including 105 consolidated properties, of which 104 are wholly-owned and one is partially-owned and six properties partially-owned through unconsolidated joint venture entities aggregating 31,520 and 2,004 units, respectively) (the “multifamily apartment communities”), 45 commercial properties containing a total of approximately 12.8 million square feet (consisting of nine wholly-owned consolidated properties and 36 properties partially-owned through unconsolidated joint-venture entities aggregating 3.2 million and 9.6 million square feet, respectively) (the “commercial properties”) and certain parcels of land adjacent to or near certain of these properties (the “land”). The multifamily apartment communities, the commercial properties and the land are referred to herein collectively as the “properties.” As of December 31, 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 94.7% and 89.9% leased, respectively.

          The Trust is the direct general partner of, and as of December 31, 2009, held approximately 89.1% 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 one consolidated and certain other unconsolidated joint venture entities. We perform the majority 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 related to management of properties.

          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

          As a result of the transactions executed in 2007, we implemented our strategic initiative to become a multifamily focused REIT, which included two significant joint venture transactions whereby the majority of our wholly-owned office and retail properties were transferred into separate joint ventures. Simplifying our business plan has allowed us to concentrate the majority of our resources primarily on our multifamily business.

          The United States economy is believed to have entered a recession sometime during 2008. In addition, the United States stock and credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective debt financings to widen considerably. As a result of this economic downturn and the related credit crisis experienced in 2008 and 2009, in 2009, our priorities were strengthening the balance sheet, improving liquidity, addressing near term debt maturities, operating our

portfolio efficiently and reducing overhead and postponing/phasing development activities. Despite the challenging environment, we executed our strategic initiatives during 2009 through the following activities:

Strengthening the Balance Sheet

	•		From April 2009 through October 2009, we raised net proceeds of $42.6 million through the issuance of 4,802,971 of the Trust’s common shares under our $50.0 million continuous equity offering program, which was terminated following our October 2009 public offering.
	•		In October 2009, we completed a public offering of 12,109,500 of the Trust’s common shares generating net proceeds to us of $109.8 million.
	•		During 2009, we sold assets for aggregate proceeds of approximately $157.7 million.

Improving Liquidity

•

During 2009, we closed on two 10-year secured credit facilities totaling $506.4 million with a weighted average interest rate of 5.81%, both of which are with Fannie Mae.

•

With respect to the final three quarters of 2009, the Trust’s Board of Trustees declared reduced quarterly cash dividends on the Trust’s common shares and CRLP’s partnership units of $0.15 per common share and per partnership unit, compared to $0.25 for the first quarter 2009.

Addressing Near Term Maturities

•

During 2009, we repurchased an aggregate of $579.2 million of our outstanding unsecured notes and recognized aggregate net gains of approximately $54.7 million.

•

During 2009, we exited seven existing joint venture arrangements including 37 properties and eliminated $231.1 million of our pro-rata portion of property specific mortgage debt exposure.

Reducing Overhead

•

Since October 2008, we have eliminated a total of 177 employee positions, which equals approximately 10% of the workforce, and have generated anticipated annualized cost reductions of approximately $20.7 million.

Postponing/Phasing Developments

•

Following our decision in January 2009 to postpone future development activities until the economic environment sufficiently improves, we preserved capital by reducing development spending, recording an aggregate of approximately $46.1 million during 2009.

          We believe that the steps that we have made to achieve our 2009 initiatives have positioned us to be able to continue to work through this challenging economic environment. During 2010, we expect to continue to focus our business efforts on strengthening our balance sheet, including, if the market conditions permit, through preferred share and bond repurchases, asset sales and potential additional equity offerings, simplifying our business through additional dispositions of joint venture interests, improving operating margins by controlling expenses and opportunistically pursuing development and acquisition opportunities to grow long-term shareholder value. Any continuing or prolonged downturn in the financial markets may require us, however, to adjust our business plan.

          For additional discussion regarding management’s assessment of the current economic environment, see “Business Strategy and Outlook” in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.

Operating Strategy

     Our general business objective as a multifamily focused REIT is to generate stable and increasing cash flow and portfolio value for our shareholders through a strategy of:

	•		realizing growth in income from our existing portfolio of properties;
	•		selectively acquiring and developing multifamily properties to grow our core portfolio and improve the age and quality of our multifamily apartment communities in growth markets located in the Sunbelt region of the United States;
	•		employing a comprehensive capital maintenance program to maintain properties in first-class condition, including recycling capital by selectively disposing of assets and reinvesting the proceeds into opportunities with more perceived growth potential;
	•		managing our own properties, including our assets through joint venture arrangements, which enables us to better control our operating expenses and establish and maintain long-term relationships with our commercial tenants; maintaining our third-party property management business, which increases cash flow through management fee income stream and establishes additional relationships with investors and tenants; and
	•		executing our plan to dispose of our for-sale residential assets and land held for future sale.

Financing Strategy

We seek to maintain a well-balanced, conservative and flexible capital structure by:

	•		pursuing long-term debt financings and refinancings on a secured or unsecured basis subject to market conditions;
	•		borrowing primarily at fixed rates;
	•		extending and sequencing the maturity dates of our debt; and
	•		targeting appropriate debt service and fixed charge coverage.

          We believe that these strategies have enabled, and should continue to enable, us to access the debt and equity capital markets to fund debt refinancings and the acquisition and development of additional properties consistent with our 2010 business objectives. As further discussed under “Liquidity and Capital Resources” in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K, we expect that our availability under our existing unsecured credit facility, minimal debt maturities in 2010, the number of unencumbered properties in our multifamily portfolio and the additional financing through secured agency financing obtained in 2009 and anticipated in 2010 will provide sufficient liquidity to execute our business plan. This liquidity, along with our projected asset sales is expected to allow us to execute our plan in the short-term. See Item 1A — “Risk Factors – Risks Associated with Our Indebtedness and Financing Activities — A downgrade in our credit ratings could have a material adverse effect on our business, financial condition and results of operations.”

          During 2008 and 2009, certain long-term unsecured senior notes issued by CRLP traded at a discount to the current debt amount. In 2008, the Trust’s Board of Trustees authorized up to $550 million in repurchases of outstanding unsecured senior notes of CRLP, including up to $500 million in repurchases through a repurchase program that ran through December 31, 2009. During 2009, we repurchased an aggregate of $181.0 million of our outstanding unsecured senior notes in separate transactions at a weighted-average discount of 25.4% to par value, which represents a 12.5% yield to maturity.

          In addition, during 2009, we completed two cash tender offers for unsecured senior notes of CRLP. In April 2009, we completed a cash tender offer for $250 million in aggregate principal amount of outstanding notes maturing in 2010 and 2011. In September 2009, we completed an additional cash tender offer for $148.2 million in aggregate principal amount of outstanding notes maturing in 2014, 2015 and 2016.

          In total, during 2009, we repurchased an aggregate of $579.2 million of outstanding unsecured senior notes of CRLP at an aggregate average of 10.6% discount to par value, which represents an 8.1% yield to maturity.

          On January 27, 2010, the Trust’s Board of Trustees authorized a new unsecured notes repurchase program which allows us to repurchase up to $100 million of outstanding unsecured senior notes of CRLP. This new repurchase program runs through December 31, 2010. We will continue to selectively repurchase the unsecured debt of our operating partnership as funds are available and as current market conditions permit.

          We may modify our borrowing policy and may increase or decrease our ratio of debt to gross asset value in the future. To the extent that the Trust’s Board of Trustees determines to seek additional capital, we may raise such capital through additional asset dispositions, equity offerings, secured financings, debt financings or retention of cash flow (subject to provisions in the Internal Revenue Code of 1986, as amended, requiring the distribution by a REIT of a certain percentage of taxable income and taking into account taxes that would be imposed on undistributed taxable income) or a combination of these methods.

Property Management

          We are experienced in management and leasing of multifamily and commercial properties and believe that the management and leasing of our own portfolio has helped maintain consistent income growth and has resulted in reduced operating expenses from the properties.

Operational Structure and Segments

          Prior to December 31, 2008, we had four operating segments: multifamily, office, retail and for-sale residential. Since January 1, 2009, we have managed our business based on the performance of two operating segments: multifamily and commercial. See Note 10 — “Segment Information” in our Notes to Consolidated Financial Statements of the Trust and CRLP contained in Item 8 of this Form 10-K for information on our segments and the reconciliation of total segment revenues to total revenues, total segment net operating income to income from continuing operations and noncontrolling interest for the years ended December 31, 2009, 2008 and 2007, and total segment assets to total assets as of December 31, 2009 and 2008. Information regarding our segments contained in such Note 10 — “Segment Information” in our Notes to Consolidated Financial Statements of the Trust and CRLP contained in Item 8 of this Form 10-K is incorporated by reference herein.

          Additional information with respect to each operating segment is set forth below as of December 31, 2009:

          Multifamily Operations — Multifamily management is responsible for all aspects of multifamily operations, including day-to-day management and leasing of our 111 multifamily apartment communities (including 105 consolidated properties, of which 104 are wholly-owned and one is partially-owned and six of which are partially-owned through unconsolidated joint venture entities), as well as providing third-party management services for apartment communities in which we do not have an ownership interest or have a non-controlling ownership interest. Multifamily management is also responsible for all aspects of our for-sale residential disposition activities. As of December 31, 2009, we had three for-sale properties remaining, two of which are residential and one of which is a lot development project. During 2009, we disposed of the remaining units at Regents Park, located in Atlanta, Georgia; Azur at Metrowest and Capri and Hunters Creek, located in Orlando, Florida; Murano, located in Delray Beach, Florida; Portofino, located in Jensen Beach, Florida, The Grander, located in Gulf Shores, Alabama and Regatta located in Charleston, South Carolina.

          Commercial Operations — Commercial management is responsible for all aspects of our commercial property operations, including the management and leasing services for our 45 commercial properties (nine of which are wholly-owned properties and 36 of which are partially-owned through unconsolidated joint venture entities), as well as third-party management services for commercial properties in which we do not have an ownership interest and for brokerage services in other commercial property transactions.

Developments

          The following table summarizes our developments that were completed in 2009. For the purposes of the following table and throughout this Form 10-K, multifamily properties are measured by the number of units and commercial properties are measured in square feet. Project development costs, including land acquisition costs, were funded through our unsecured credit facility.

				Total Units/				Total
				Square Feet (1)				Cost
		Location		(unaudited)				(in thousands)
Completed Developments:
Multifamily Properties
Colonial Grand at Onion Creek		Austin, TX			300			$	32,210
Colonial Grand at Ashton Oaks		Austin, TX			362				34,254
Colonial Grand at Desert Vista		Las Vegas, NV			380				51,918
					1,042			$	118,382
Commercial Development
Colonial Promenade Tannehill (2)		Birmingham, AL			84				2,964
Total Completed Developments								$	121,346

          In addition, we completed one unconsolidated commercial development, Colonial Pinnacle Turkey Creek III, a joint venture in which we own a 50% interest. This property is a 166,000 square foot development located in Knoxville, Tennessee. Our portion of the project development costs, including land acquisition costs, was $12.4 million and was funded primarily through a secured construction loan.

          All of the new multifamily communities listed above will have numerous amenities, including a cyber café, a fitness center, a resort style swimming pool and a resident business center.

Ongoing Development Activity

          In January 2009, we decided to postpone future development activities (including the future development activity identified below) until we determine that the current economic environment has sufficiently improved. The following table summarizes the project under construction as of December 31, 2009. This development is expected to be funded through our unsecured credit facility (discussed in this Form 10-K below under the heading “Management’s Discussion and Analysis – Liquidity and Capital Resources”):

Total

Costs

Square

Estimated

Capitalized

Feet (1)

Estimated

Total Costs

to Date

Location

(unaudited)

Completion

(in thousands)

(in thousands)

Commercial Project:

Colonial Promenade Craft Farms (2)

Gulf Shores, AL

68

2010

9,900

$

6,865

Construction in Progress for Active Developments

$

6,865

Future Development Activity

          As discussed above, in 2009, we made a strategic decision to accelerate our plan to dispose of our for-sale residential assets and land held for future sale and for-sale residential and mixed-use developments and postpone future development activities (including the future development activities identified below). We plan to complete the development project described above but do not intend to start any new developments until we determine that the current economic environment has sufficiently improved.

          Of the developments listed below, in 2010, we expect to resume development on the first phase of the Colonial Promenade Nord du Lac commercial development, located in Covington, Louisiana. Our intention is to develop a power center in phases over time, as opposed to our original lifestyle center plan.

          The remaining projects listed below are the consolidated development projects that we had planned to pursue, but that we have suspended indefinitely. While we currently anticipate developing the other projects in the future, given the current economic uncertainties, we can give no assurance that we will pursue any of these particular development projects in the future.

				Total Units/				Capitalized
				Square Feet (1)				to Date
		Location		(unaudited)				(in thousands)
Multifamily Projects:
Colonial Grand at Sweetwater		Phoenix, AZ			195			$	7,294
Colonial Grand at Thunderbird		Phoenix, AZ			244				8,379
Colonial Grand at Randal Park (2)		Orlando, FL			750				19,155
Colonial Grand at Hampton Preserve		Tampa, FL			486				14,473
Colonial Grand at South End		Charlotte, NC			353				12,084
Colonial Grand at Azure		Las Vegas, NV			188				7,851
Colonial Grand at Cityway		Austin, TX			320				4,980
					2,536			$	74,216
Commercial Projects:
Colonial Promenade Huntsville		Huntsville, AL			111				9,712
Colonial Promenade Nord du Lac (3)		Covington, LA			—				37,737
					111			$	47,449
Other Projects and Undeveloped Land
Multifamily									3,434
Commercial									48,105
For-Sale Residential (4)									57,031
								$	108,570
Consolidated Construction in Progress								$	230,235

Dispositions

          During 2009, we sold assets for aggregate proceeds of approximately $157.7 million, $117.4 million from consolidated assets, $40.3 million from unconsolidated assets, which amount represents our pro-rata share of the proceeds, as well as $55.7 million in gross proceeds from condominium conversion and for-sale residential assets and $10.8 million from land sales. These transactions are described below.

				Percent				Total Units/								Gain on Sales
Property		Location		Owned				Square Feet(1)				Sales Price				of Property
								(unaudited)				(in millions)				(in millions)
Consolidated Dispositions
Commercial Properties
Colonial Promenade Fultondale		Fultondale, AL			100	%			159			$	30.7			$	4.5
Colonial Promenade Winter Haven		Orlando, FL			100	%			286				20.8				1.7
									445			$	51.5			$	6.2
Unconsolidtaed Dispositions
Multifamily Properties
CMS Joint Venture (2)
CMS / Colonial Joint Venture I (CG at Mountain Brook)		Birmingham, AL			15.00	%			392
CMS / Colonial Joint Venture II (CV at Rocky Ridge)		Birmingham, AL			15.00	%			226
CMS Florida (CV at Palma Sola)		Sarasota, FL			25.00	%			340
CMS Tennessee (CG at Brentwood)		Nashville, TN			25.00	%			254
									1,212			$	17.3			$	1.8
DRA Cunningham (3)		Austin, TX			20.00	%			280				3.6				—
DRA Alabama (Colony Woods) (4)		Birmingham, AL			10.00	%			414				2.5				0.2
									1,906			$	23.4			$	2.0
Commercial Properties
Colonial Pinnacle Craft Farms		Gulf Shores, AL			15.00	%			220			$	—	(5)		$	—	(5)
OZRE		Multiple Locations			17.10	%			2,311				—	(6)			—	(6)
Mansell (7)		Atlanta, GA			15.00	%			689				16.9				2.8
DRA/CRT		Multiple Locations			15.00	%			8,406				—	(8)			—	(8)
									11,626			$	16.9			$	2.8

          In addition, throughout 2009, we sold various parcels of land for an aggregate sales price of approximately $10.7 million (excluding $0.1 million of sales proceeds from unconsolidated land sales). In connection with the sale of one land parcel, we extended $5.0 million of seller-financing with a term of six months and an interest rate of 7.5%. We recognized an aggregate gain of approximately $0.3 million on the sale of these parcels of land. The proceeds from the 2009 dispositions were used to repay a portion of the borrowings under our unsecured credit facility and for general corporate purposes.

          For-Sale Projects

          During 2009, we completed the sale of the following condominium conversion and for-sale residential projects:

				Units Sold				Gross Proceeds(1)
								(in millions)
Condominium Conversion (2):
Azur at Metrowest		Orlando, FL			7			$	0.7
Capri at Hunters Creek		Orlando, FL			20				0.5
Murano		Delray Beach, FL			93				9.0
Portofino		Jensen Beach, FL			118				6.7
For-Sale Residential
Regents Park (3)		Atlanta, GA			17				16.3
Grander (3)		Gulf Shores, AL			14				3.3
Regatta (3)		Charleston, SC			63				7.7
Metropolitan		Charlotte, NC			24				7.6
Southgate		Charlotte, NC			14				3.9
					370			$	55.7

     During 2009, “Gains from sales of property” on the Consolidated Statements of Operations and Comprehensive Income (Loss) included $1.0 million ($0.9 million net of income taxes) from these condominium conversion and for-sale residential sales. A summary of the revenues and costs from these sales of for-sale projects are set forth in the table below.

		Year Ended
		December 31,
(in thousands)		2009
Condominium conversion revenues		$	16,851
Condominium conversion costs			(16,592	)
Gains on condominium conversion sales, before noncontrolling interest and income taxes			259
For-sale residential revenues			38,839
For-sale residential costs			(38,161	)
Gains on for-sale residential sales, before noncontrolling interest and income taxes			678
Noncontrolling interest			—
Provision for income taxes			(71	)
Gains on condominium conversion and for-sale residential sales, net of noncontrolling interest and income taxes		$	866

          The net gains on condominium unit sales are classified in discontinued operations if the related condominium property was previously operated as an apartment community. For 2009, 2008 and 2007, gains on condominium unit sales, net of income taxes, of $0.2 million, $0.1 million and $9.3 million, respectively, are included in discontinued operations. Completed for-sale residential projects of approximately $65.0 million are reflected in real estate assets held for sale as of December 31, 2009.

          For cash flow statement purposes, we classify capital expenditures for newly developed for-sale residential communities and for other condominium conversion communities in investing activities. Likewise, the proceeds from the sales of condominium units and for-sale residential sales are also included in investing activities.

Impairment

          During 2009, we recorded impairment charges totaling $12.4 million. Of the $10.4 million presented in “Impairment and other losses” in continuing operations on the Consolidated Statements of Operations and Other Comprehensive Income (Loss), $10.3 million relates to a reduction of the carrying value of certain of our for-sale residential assets, one retail development and certain land parcels. The $2.0 million presented in “Income (loss) from discontinued operations” on the Consolidated Statements of Operations and Other Comprehensive Income (Loss) relates to the sale of the remaining units at two of our condominium conversion properties. The remaining amount in continuing operations, $0.1 million, was recorded as the result of fire damage at one of our multifamily apartment communities. In addition to these impairment charges, we determined that it was probable that we will have to fund the $3.5 million partial loan repayment guarantee provided on the original construction loan for Colonial Grand at Traditions, a joint venture asset in which CRLP has a 35% noncontrolling interest, and recognized a charge to earnings. This charge is reflected in “(Loss) income from partially-owned unconsolidated entities” on the Consolidated Statements of Operations and Other Comprehensive Income (Loss).

          See Item 1A — “Risk Factors — Risks Associated with Our Operations — Our ability to dispose of our existing inventory of condominium and for-sale residential assets could adversely affect our results of operations.”

Recent Events

          Unsecured Notes and Preferred Securities Repurchase Programs

          On December 31, 2009, our previously announced unsecured notes repurchase program expired. On January 27, 2010, the Trust’s Board of Trustees authorized a new unsecured notes repurchase program which allows us to repurchase up to $100 million of outstanding unsecured senior notes of CRLP. This new repurchase program runs through December 31, 2010. Under the new repurchase program, senior unsecured notes may be repurchased from time to time in open market transactions or privately negotiated transactions, subject to applicable legal requirements, market conditions and other factors. The repurchase program does not obligate the repurchase of any specific amounts of senior notes, and repurchases pursuant to the program may be suspended or resumed at any time from time to time without further notice or announcement. We will continue to monitor the debt markets and repurchase certain senior notes that meet our required criteria, as funds are available. We anticipate funding potential repurchases from borrowings under our existing credit facility, proceeds from property sales and/or other available funds. In February 2010, we repurchased $8.7 million in unsecured senior notes, at a minimal discount to par value, which represents a 6.51% yield to maturity and resulted in the recognition of immaterial net gains.

          Additionally, on January 27, 2010, the Trust’s Board of Trustees authorized a new preferred securities repurchase program which allows us to repurchase up to $25 million of the Trust’s outstanding 8 1/8 percent Series D preferred depositary shares. The preferred shares may be repurchased from time to time over the next 12 months in open market purchases or privately negotiated transactions, subject to applicable legal requirements, market conditions and other factors. This repurchase program does not obligate us to repurchase any specific amounts of preferred shares, and repurchases pursuant to the program may be suspended or resumed at any time from time to time without further notice or announcement. We will continue to monitor the equity markets and repurchase certain preferred shares that meet our required criteria, as funds are available. In connection with the repurchase of the Series D preferred depositary shares, the Board of Trustees of the Trust, as general partner of CRLP, also authorized the repurchase of a corresponding amount of Series D Preferred Units of CRLP.

          Continuous Equity Offering Program

          On February 22, 2010, the Trust’s Board of Trustees approved the issuance of up to $50.0 million of common shares of the Trust under an at-the-market continuous equity offering program.

          Distribution

          During January 2010, the Trust’s Board of Trustees declared a cash distribution to our shareholders and the partners of CRLP in the amount of $0.15 per share and per partnership unit, totaling approximately $11.2 million. The distribution was made to shareholders and partners of record as of February 8, 2010 and was paid on February 16, 2010. The Trust’s Board of Trustees reviews the dividend quarterly and there can be no assurance as to the manner in which future dividends will be paid or that the current dividend level will be maintained in future periods.

Competition

          The ownership, development, operation and leasing of multifamily, office and retail properties are highly competitive. We compete with domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships and individual investors for the acquisition of properties. See Item 1A — “Risk Factors – Risks Associated with Our Operations – Competition for acquisitions could reduce the number of acquisition opportunities available to us and result in increased prices for properties, which could adversely affect our return on properties we purchase” in this Form 10-K for further discussion. In addition, we compete for tenants in our markets primarily on the basis of property location, rent charged, services provided and the design and condition of improvements. With respect to our multifamily business, we also compete with other quality apartment and for-sale (condominium) projects owned by public and private companies. The number of competitive multifamily properties in a particular market could adversely affect our ability to lease our multifamily properties and develop and lease or sell new properties, as well as the rents we are able to charge. In addition, other forms of residential properties, including single family housing and town homes, provide housing alternatives to potential residents of quality apartment communities or potential purchasers of for-sale (condominium) units. With respect to the multifamily business we compete for residents in our apartment communities based on our high level of resident service, the quality of our apartment communities (including our landscaping and amenity offerings) and the desirability of our locations. Resident leases at our apartment communities are priced competitively based on market conditions, supply and demand characteristics, and the quality and resident service offerings of its communities. We do not seek to compete on the basis of providing a low-cost solution for all residents.

Environmental Matters

          We believe that our properties are in material compliance in all material respects with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. We are not aware of any environmental condition that we believe would have a material adverse effect on our capital expenditures, earnings or competitive position (before consideration of any potential insurance coverage). Nevertheless, it is possible that there are material environmental conditions and liabilities of which we are unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations or future interpretations of existing requirements will not impose any material environmental liability or (ii) the current environmental condition of our properties has not been or will not be affected by tenants and occupants of our properties, by the condition of properties in the vicinity of our properties or by third parties unrelated to us. See “Risk Factors—Risks Associated with Our Operations—We could incur significant costs related to environmental issues which could adversely affect our results of operations through increased compliance costs or our financial condition if we become subject to a significant liability” in this Form 10-K for further discussion.

Insurance

          We carry comprehensive liability, fire, extended coverage and rental loss insurance on all of our majority-owned properties. We believe the policy specifications, insured limits of these policies and self insurance reserves are adequate and appropriate. There are, however, certain types of losses, such as lease and other contract claims, which generally are not insured. We anticipate that we will review our insurance coverage and policies from time to time to determine the appropriate levels of coverage, but we cannot predict at this time if we will be able to obtain or maintain full coverage at reasonable costs in the future. In addition, as of December 31, 2009, we are self insured up to $0.8 million, $1.0 million and $1.8 million for general liability, workers’ compensation and property insurance, respectively. We are also self insured for health insurance and responsible for amounts up to $135,000 per claim and up to $1.0 million per person. Our policy for all self insured risk is to accrue for expected losses on reported claims and for estimated losses related to claims incurred but not reported as of the end of the reporting period. See “Risk Factors – Risks Associated with Our Operations – Uninsured or underinsured losses could adversely affect our financial condition.”

Employees

          As of December 31, 2009, CRLP employed 1,037 persons, including on-site property employees who provide services for the properties that we own and/or manage. The Trust employs all employees through CRLP and its subsidiaries.

Tax Status

          We are considered a corporation for federal income tax purposes. We qualify as a REIT and generally will not be subject to federal income tax to the extent we distribute our REIT taxable income to our shareholders. REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates. We may be subject to certain state and local taxes on our income and property. Distributions to shareholders are generally partially taxable as ordinary income and long-term capital

gains, and partially non-taxable as return of capital. During 2009, our total common distributions had the following overall characteristics:

		Distribution Per						Return of
Quarter		Share		Ordinary Income		Capital Gain		Capital
1st		$0.25		96.20%		3.80%		0.00%
2nd		$0.15		96.20%		3.80%		0.00%
3rd		$0.15		96.20%		3.80%		0.00%
4th		$0.15		96.20%		3.80%		0.00%

          In addition, our financial statements include the operations of a taxable REIT subsidiary, CPSI, which is not entitled to a dividends paid deduction and is subject to federal, state and local income taxes. CPSI provides property management, construction management and development services for joint ventures and third party owned properties and administrative services to us. In addition, we perform all of our for-sale residential and condominium conversion activities through CPSI. We generally reimburse CPSI for payroll and other costs incurred in providing services to us. All inter-company transactions are eliminated in the accompanying consolidated financial statements. We recognized an income tax expense (benefit) of $(7.9) million, $0.8 million and $(7.4) million in 2009, 2008 and 2007, respectively, related to the taxable income of CPSI.

Available Information

          Our website address is www.colonialprop.com. The information contained on our website is not incorporated by reference into this report and such information should not be considered a part of this report. You can obtain on our website in the “Investors” section, free of charge, a copy of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Also available on our website, free of charge, are our corporate governance guidelines, the charters of the governance, audit and executive compensation committees of the Trust’s Board of Trustees and our code of ethics (which applies to all trustees and employees, including our principal executive officer, principal financial officer and principal accounting officer). If you are not able to access our website, the information is available in print form to any shareholder who should request the information directly from us at 1-800-645-3917.

Executive Officers of the Company

          The following is a biographical summary of our executive officers:

          Thomas H. Lowder, 60, was re-appointed Chief Executive Officer effective December 30, 2008. Mr. Lowder has served as Chairman of the Trust’s Board of Trustees since the Company’s formation in July 1993. Additionally he served as President and Chief Executive Officer from July 1993 until April 2006. Mr. Lowder became President and Chief Executive Officer of Colonial Properties, Inc., the Company’s predecessor, in 1976, and has been actively engaged in the acquisition, development, management, leasing and sale of multifamily, office and retail properties for the Company and its predecessors. He presently serves as a member of the Board of the following organizations: Birmingham-Southern College, Crippled Children’s Foundation, Children’s Hospital of Alabama, the University of Alabama Health Services Foundation and the National Association of Real Estate Investment Trusts (“NAREIT”). Mr. Lowder is a past board member of The Community Foundation of Greater Birmingham, past chairman of the Birmingham Area Chapter of the American Red Cross, past chairman of Children’s Hospital of Alabama and he served as chairman of the 2001 United Way Campaign for Central Alabama and Chairman of the Board in 2007. He graduated with honors from Auburn University with a Bachelor of Science Degree. Mr. Lowder holds an honorary Doctorate of Humanities from University of Alabama at Birmingham and a honorary Doctorate of Law from Birmingham Southern College. Mr. Lowder is the brother of James K. Lowder, one of the Company’s trustees.

          C. Reynolds Thompson, III, 46, has served as President and Chief Financial Officer since December 30, 2008. Mr. Thompson previously served in the following additional positions within the company since being hired in February 1997: Chief Executive Officer, Chief Operating Officer, Chief Investment Officer, Executive Vice President, Office Division, Senior Vice President, Office Acquisitions, and Trustee. Responsibilities within these positions included overseeing management, leasing, acquisitions, and development within operating divisions; investment strategies; market research; due diligence; merger and acquisitions; joint venture development and cross-divisional acquisitions. Prior to joining Colonial Properties Trust, Mr. Thompson worked for CarrAmerica Realty Corporation, a then-publicly traded office REIT, in office building acquisitions and due diligence. Mr. Thompson serves on the Board of Visitors for the University of Alabama Culverhouse College of Commerce and Business Administration, the Board of Directors of Birmingham Business Alliance, and the Board of Directors of United Way of Central Alabama. Mr. Thompson holds a Bachelor of Science Degree from Washington and Lee University.

          Paul F. Earle, 52, has been our Chief Operating Officer since January 2008, and is responsible for all operations of the properties owned and/or managed by the Company. From May 1997 to January 2008, Mr. Earle served as Executive Vice President-Multifamily Division and was responsible for management of all multifamily properties owned and/or managed by us. He joined us in 1991 and has previously served as Vice President – Acquisitions, as well as Senior Vice President – Multifamily Division. Mr. Earle is past Chairman of the Alabama Multifamily Council and is an active member of the National Apartment Association. He also is a board member and is on the Executive Committee of the National Multifamily Housing Council. He is past President and current Board member of Big Brothers/Big Sisters. Before joining us, Mr. Earle was the President and Chief Operating Officer of American Residential Management, Inc., Executive Vice President of Great Atlantic Management, Inc. and Senior Vice President of Balcor Property Management, Inc.

          John P. Rigrish, 61, has been our Chief Administrative Officer since August 1998 and is responsible for the supervision of Corporate Governance, Information Technology, Human Resources and Employee Services. Prior to joining the Company, Mr. Rigrish worked for BellSouth Corporation in Corporate Administration and Services. Mr. Rigrish holds a Bachelor’s degree from Samford University and did his postgraduate study at Birmingham-Southern College. He previously served on the Board of Directors of Senior Citizens, Inc. in Nashville, Tennessee. Mr. Rigrish is a current member and previous Chairman of the American Red Cross Board of Directors-Alabama Chapter. He also serves on the City of Hoover Veteran’s Committee, John Carroll Educational Foundation Board of Directors, and the Edward Lee Norton Board of Advisors at Birmingham-Southern College.

          Jerry A. Brewer, 38, has been our Executive Vice President, Finance since January 2008, and is responsible for all Corporate Finance and Investor Relations activities of the Company. Mr. Brewer previously served as our Senior Vice President – Corporate Treasury since September 2004. Mr. Brewer joined the Company in February 1999 and served as Vice President of Financial Reporting for the Company until September 2004 and was responsible for overseeing all of the Company’s filings with the Securities and Exchange Commission, and internal and external consolidated financial reporting. Prior to joining the Company, Mr. Brewer worked for Arthur Andersen LLP, serving on independent audits of public and private entity financial statements, mergers and acquisitions due diligence, business risk assessment and registration statement work for public debt and stock offerings. Mr. Brewer is a member of the American Institute of Certified Public Accountants, the Alabama State Board of Public Accountancy and Auburn University School of Accountancy Advisory Council. He is a Certified Public Accountant, and holds a Bachelor of Science degree in Accounting from Auburn University and a Masters of Business Administration from the University of Alabama at Birmingham.

          Bradley P. Sandidge, 40, was appointed Executive Vice President, Accounting effective January 30, 2009, and is responsible for all accounting operations of the Company to include Internal Control functions, compliance with generally accepted accounting principles, SEC financial reporting, regulatory agency compliance and reporting and management reporting. Mr. Sandidge previously served as our Senior Vice President, Multifamily Accounting and Finance, since joining the Company in 2004, and was responsible for overseeing the accounting operations of the Company’s multifamily operations. Mr. Sandidge is a Certified Public Accountant with over 15 years of real estate experience. Prior to joining the Company, Mr. Sandidge served as Tax Manager for the North American and Asian portfolios of Archon Group, L.P. / Goldman Sachs from January 2001 through June 2004, and worked in the tax real estate practice of Deloitte & Touche LLP from January 1994 through October 1999. Mr. Sandidge holds a Bachelor’s degree in accounting and a Master’s degree in tax accounting from the University of Alabama.

Item 1A. Risk Factors

     In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, set forth below are cautionary statements identifying important factors that could cause actual events or results to differ materially from any forward-looking statements made by or on behalf of us, whether oral or written. We wish to ensure that any forward-looking statements are accompanied by meaningful cautionary statements in order to maximize to the fullest extent possible the protections of the safe harbor established in the Private Securities Litigation Reform Act of 1995. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause actual events or results to differ materially from our forward-looking statements. If any of the following risks actually occur, our business, financial condition or results of operations could be negatively affected, and the trading price of the Trust’s common shares could decline.

     These forward-looking statements are based on management’s present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. There may be additional risks and uncertainties not presently known to us or that we currently deem immaterial that also may impair our business operations. You should not consider this list to be a complete statement of all potential risks or uncertainties.

Risks Associated with Real Estate

          Recession in the United States and the related downturn in the housing and real estate markets have adversely affected and may continue to adversely affect our financial condition and results of operations.

          The United States economy is believed to have entered a recession sometime during 2008. The trends in both the real estate industry and the broader United States economy continue to be unfavorable and continue to adversely affect our revenues. The downturn in the U.S. economy and related reduction in spending, falling home prices and high unemployment, together with the price volatility, dislocations and liquidity disruptions in the financial and credit markets could, among other things, impede the ability of our residents at our multifamily properties and our tenants at our commercial properties and other parties with which we conduct business to perform their contractual obligations, which could lead to an increase in defaults by our residents, tenants and other contracting parties, which could adversely affect our revenues. Furthermore, our ability to lease our properties at favorable rates, or at all, is adversely affected by the increase in supply and deterioration in the multifamily market stemming from ongoing recession and is dependent upon the overall level of spending in the economy, which is adversely affected by, among other things, job losses and unemployment levels, recession, personal debt levels, the downturn in the housing market, stock market volatility and uncertainty about the future. With regard to our ability to lease our multifamily properties, the increasing rental of excess for-sale condominiums, which increases the supply of multifamily units and housing alternatives, may further reduce our ability to lease our multifamily units and further depress rental rates in certain markets. With regard to for-sale residential properties, the market for our for-sale residential properties depends on an active demand for new for-sale housing and high consumer confidence. Continuing decline in demand, exacerbated by tighter credit standards for home buyers and foreclosures, has further contributed to an oversupply of housing alternatives adversely affecting the timing of sales and price at which we are able to sell our for-sale residential properties and thereby adversely affecting our profits from for-sale residential properties. We cannot predict how long demand and other factors in the real estate market will remain unfavorable, but if the markets remain weak or deteriorate further, our ability to lease our properties, our ability to increase or maintain rental rates in certain markets and the pace of condominium sales and closings and/or the related sales prices may continue to weaken during 2010.

          We face numerous risks associated with the real estate industry that could adversely affect our results of operations through decreased revenues or increased costs.

          As a real estate company, we are subject to various changes in real estate conditions, particularly in the Sunbelt region where our properties are concentrated, and any negative trends in such real estate conditions may adversely affect our results of operations through decreased revenues or increased costs. These conditions include:

	•		worsening of national and regional economic conditions, such as those we are currently experiencing as a result of the ongoing recession as described above, as well as the deteriorating local economic conditions in our principal market areas;
	•		availability of financing;
	•		the inability of residents and tenants to pay rent;
	•		the existence and quality of the competition, such as the attractiveness of our property as compared to our competitors’ properties based on considerations such as convenience of location, rental rates, amenities and safety record;
	•		increased operating costs, including increased real property taxes, maintenance, insurance and utilities costs;
	•		weather conditions that may increase or decrease energy costs and other weather-related expenses;

	•		oversupply of multifamily, commercial space or single-family housing or a reduction in demand for real estate in the markets in which our properties are located;
	•		a favorable interest rate environment that may result in a significant number of potential residents of our multifamily apartment communities deciding to purchase homes instead of renting;
	•		rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs; and
	•		changing trends in the demand by consumers for merchandise offered by retailers conducting business at our retail properties.

          Moreover, other factors may affect our results of operations adversely, including changes in government regulations and other laws, rules and regulations governing real estate, zoning or taxes, changes in interest rate levels, the availability of financing and potential liability under environmental and other laws and other unforeseen events, most of which are discussed elsewhere in the following risk factors. Any or all of these factors could materially adversely affect our results of operations through decreased revenues or increased costs.

          Increased competition and increased affordability of residential homes could limit our ability to retain our residents, lease apartment homes or increase or maintain rents.

          Our multifamily apartment communities compete with numerous housing alternatives in attracting residents, including other multifamily apartment communities and single-family rental homes, as well as owner occupied single- and multi-family homes. Competitive housing in a particular area and an increase in the affordability of owner occupied single and multi-family homes due to, among other things, declining housing prices, mortgage interest rates and tax incentives and government programs to promote home ownership, could adversely affect our ability to retain residents, lease apartment homes and increase or maintain rents.

          We are subject to significant regulations, which could adversely affect our results of operations through increased costs and/or an inability to pursue business opportunities.

          Local zoning and use laws, environmental statutes and other governmental requirements may restrict our development, expansion, rehabilitation and reconstruction activities. These regulations may prevent or delay us from taking advantage of economic opportunities. Failure to comply with these requirements could result in the imposition of fines, awards to private litigants of damages against us, substantial litigation costs and substantial costs of remediation or compliance. In addition, we cannot predict what requirements may be enacted in the future or that such a requirement will not increase our costs of regulatory compliance or prohibit us from pursuing business opportunities that could be profitable to us.

          Real estate investments are illiquid, and therefore, we may not be able to sell our properties in response to economic changes which could adversely affect our results of operations or financial condition.

          Real estate investments are relatively illiquid generally, and may become even more illiquid during periods of economic downturn. As a result, we may not be able to sell a property or properties quickly or on favorable terms in response to changes in the economy or other conditions when it otherwise may be prudent to do so. This inability to respond quickly to changes in the performance of our properties could adversely affect our results of operations if we cannot sell an unprofitable property. In the case of our for-sale residential properties, our inability to sell units in a timely manner could adversely affect our financial condition, among other things, by causing us to hold properties for a longer period than is otherwise desirable and requiring us to record impairment charges in connection with the properties (see Note 4 – “Impairment” to our Notes to Consolidated Financial Statements of the Trust and CRLP included in this Annual Report on Form 10-K). Our financial condition could also be adversely affected if we were, for example, unable to sell one or more of our properties in order to meet our debt obligations upon maturity. In addition, the tax laws applicable to REITs require that we hold our properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of properties that otherwise would be in our best interest. Therefore, we may be unable to vary our portfolio promptly in response to market conditions, which may adversely affect our financial position.

          Compliance or failure to comply with the Americans with Disabilities Act and Fair Housing Act could result in substantial costs.

          Under the Americans with Disabilities Act of 1990, or ADA, and the Fair Housing Amendment Act of 1988, or FHAA, and various state and local laws, all public accommodations and commercial facilities must meet certain federal requirements related to access and use by disabled persons. Compliance with these requirements could involve removal of structural barriers from certain disabled persons’ entrances. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such means of access. Noncompliance with the ADA, FHAA or related laws or regulations could result in the imposition of fines by government authorities, awards to private litigants of

damages against us, substantial litigation costs and the incurrence of additional costs associated with bringing the properties into compliance.

Risks Associated with Our Operations

          Our revenues are significantly influenced by demand for multifamily properties generally, and a decrease in such demand will likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.

          Our portfolio is focused predominately on multifamily properties. As a result, we are subject to risks inherent in investments in a single industry. A decrease in the demand for multifamily properties would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio. Resident demand at multifamily properties has been and could continue to be adversely affected by the downturn in the U.S. economy and the related reduction in spending, reduced home prices and high unemployment, together with the price volatility, dislocations and liquidity disruptions the in financial and credit markets, as well as the rate of household formation or population growth in our markets, changes in interest rates or changes in supply of, or demand for, similar or competing multifamily properties in an area. To the extent that any of these conditions occur and continue to occur, they are likely to affect occupancy and market rents at multifamily properties, which could cause a decrease in our rental revenue. Any such decrease could impair our ability to satisfy our substantial debt service obligations or make distributions to our shareholders.

          Our ability to dispose of our existing inventory of condominium and for-sale residential assets could adversely affect our results of operations.

          To help implement our plans to strengthen the balance sheet and deleverage the company, in January 2009, the Trust’s Board of Trustees decided to accelerate plans to dispose of our for-sale residential assets including condominium conversions and land held for future for-sale residential and mixed-use developments until we determine that the current economic environment has sufficiently improved. As of December 31, 2009, we have 52 for sale-residential units remaining and 223 residential lots for sale. Exiting these markets may expose us to the following risks:

	•		local real estate market conditions, such as oversupply or reduction in demand, may result in reduced or fluctuating sales;
	•		for-sale properties acquired for development usually generate little or no cash flow until completion of development and sale of a significant number of homes or condominium units and may experience operating deficits after the date of completion and until such homes or condominium units are sold;
	•		we may abandon development or conversion opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring any such opportunities;
	•		we may be unable to close on sales of individual units under contract;
	•		buyers may be unable to qualify for financing;
	•		sales prices may be lower than anticipated;
	•		competition from other condominiums and other types of residential housing may result in reduced or fluctuating sales;
	•		we could be subject to liability claims from condominium associations or others asserting that construction performed was defective, resulting in litigation and/or settlement discussions; and
	•		we may be unable to attract sales prices with respect to our for-sale assets that compensate us for our costs (which may result in impairment charges).

          After reevaluating our operating strategy in light of the ongoing downturn in the U.S. economy and credit crisis, we recorded a non cash impairment charge of $116.9 million in the fourth quarter of 2008 largely attributable to our condominium and for-sale residential assets. In addition, during 2009, we recorded $12.3 million of non-cash impairment charges related to certain for-sale residential units, a commercial development and certain land parcels. See Item 1, “Impairment,” of this Annual Report on Form 10-K for additional information regarding this impairment charge. If market conditions do not improve or if there is further market deterioration, it may impact the number of projects we can sell, the timing of the sales and/or the prices at which we can sell them. If we are unable to sell projects, we may incur additional impairment charges on projects previously impaired as well as on projects not currently impaired but for which indicators of impairment may exist, which would decrease the value of our assets as reflected on our balance sheet and adversely affect our shareholders’ equity. There can be no assurances of the amount or pace of future for-sale residential sales and closings, particularly given current market conditions.

          Our properties may not generate sufficient rental income to pay our expenses if we are unable to lease our new properties or renew leases or re-lease space at our existing properties as leases expire, which may adversely affect our operating results.

          We derive the majority of our income from residents and tenants who lease space from us at our properties. A number of factors may adversely affect our ability to attract residents and tenants at favorable rental rates and generate sufficient income, including:

	•		local conditions such as an oversupply of, or reduction in demand for, multifamily or commercial properties;
	•		the attractiveness of our properties to residents, shoppers and tenants;
	•		decreases in market rental rates; and
	•		our ability to collect rent from our residents and tenants.

If we cannot generate sufficient income to pay our expenses, maintain our properties and service our debt as a result of any of these factors, our operating results may be adversely affected. Furthermore, the ongoing deterioration of the U.S. economy and the related reduction in spending, falling home prices and high unemployment, together with the price volatility, dislocations and liquidity disruptions in the financial and credit markets could, among other things, impede the ability of our residents or tenants to perform their contractual obligations, which could lead to an increase in defaults by residents and tenants.

          The residents at our multifamily properties generally enter into leases with an initial term ranging from six months to one year. Tenants at our office properties generally enter into leases with an initial term ranging from three to ten years and tenants at our retail properties generally enter into leases with an initial term ranging from one to ten years. As leases expire at our existing properties, residents and tenants may elect not to renew them. Even if our residents and tenants do renew or if we can re-lease the space, the terms of renewal or re-leasing, including the cost of required renovations may be less favorable than current lease terms. In addition, for new properties, we may be unable to attract enough residents and tenants and the occupancy rates and rents may not be sufficient to make the property profitable. If we are unable to renew the leases or re-lease the space at our existing properties promptly and/or lease the space at our new properties, or if the rental rates upon renewal or re-leasing at existing properties are significantly lower than expected rates, or if there is an increase in tenant defaults, our operating results will be negatively affected.

          We may not be able to control our operating costs or our expenses may remain constant or increase, even if our revenues decrease, causing our results of operations to be adversely affected.

          Factors that may adversely affect our ability to control operating costs include:

	•		the need to pay for insurance and other operating costs, including real estate taxes, which could increase over time;
	•		the need periodically to repair, renovate and re-lease space;
	•		the cost of compliance with governmental regulation, including zoning and tax laws;
	•		the potential for liability under applicable laws;
	•		interest rate levels; and
	•		the availability of financing.

If our operating costs increase as a result of any of the foregoing factors, our results of operations may be adversely affected.

          The expense of owning and operating a property is not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from the property. As a result, if revenues drop, we may not be able to reduce our expenses accordingly. Costs associated with real estate investments, such as real estate taxes, loan payments and maintenance generally will not be reduced even if a property is not fully occupied or other circumstances cause our revenues to decrease. If a property is mortgaged and we are unable to meet the mortgage payments, the lender could foreclose on the mortgage and take the property, resulting in a further reduction in net income.

          We are subject to increased exposure to economic and other factors due to the concentration of our properties in the Sunbelt region, and economic downturns, natural disasters or acts of terrorism in the Sunbelt region could adversely affect our results of operations or financial condition.

          Substantially all of our properties are located in the Sunbelt region of the United States. In particular, we derived approximately 84.3% of our net operating income in 2009 from top quartile cities located in the Sunbelt region. We are therefore subject to increased exposure to economic and other factors specific to these geographic areas. If the Sunbelt region of the United States, and in particular the areas of or near Birmingham, AL; Atlanta, GA; Orlando, FL; Charlotte, NC and Dallas/Fort Worth, TX, experiences a recession or other slowdown in the economy, a natural disaster or an act of terrorism, our results of operations and financial condition may be negatively affected as a result of decreased revenues, increased costs or damage or loss of assets.

          Tenant bankruptcies and downturns in tenants’ businesses may adversely affect our operating results by decreasing our revenues.

          At any time, a tenant may experience a downturn in its business that may weaken its financial condition. Additionally, the ongoing deterioration in the U.S. economy and related reduction in spending, reduced home prices and high unemployment, together with the price volatility, dislocations and liquidity disruptions in the financial and credit markets could, among other things, adversely affect our tenants financially and impede their ability to perform their contractual obligations. As a result, our tenants may delay lease commencement, cease or defer making rental payments or declare bankruptcy. A bankruptcy filing by or relating to one of our tenants would bar all efforts by us to collect pre-bankruptcy debts from that tenant, or their property, unless we receive an order permitting us to do so from the bankruptcy court. A tenant bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims, and there are restrictions under bankruptcy laws that limit the amount of the claim we can make if a lease is rejected. As a result, it is likely that we will recover substantially less than the full value of any unsecured claims we hold from a bankrupt tenant. The bankruptcy or financial difficulties of any of our tenants may negatively affect our operating results by decreasing our revenues.

          Risks associated with the property management, leasing and brokerage businesses could adversely affect our results of operations by decreasing our revenues.

          In addition to the risks we face as a result of our ownership of real estate, we face risks relating to the property management, leasing and brokerage businesses of CPSI, including risks that:

	•		management contracts or service agreements with third-party owners will be terminated and lost to competitors;
	•		contracts will not be renewed upon expiration or will not be available for renewal on terms consistent with current terms; and
	•		leasing and brokerage activity generally may decline.

Each of these developments could adversely affect our results of operations by decreasing our revenues.

          We could incur significant costs related to environmental issues which could adversely affect our results of operations through increased compliance costs or our financial condition if we become subject to a significant liability.

          Under federal, state and local laws and regulations relating to the protection of the environment, a current or previous owner or operator of real property, and parties that generate or transport hazardous substances that are disposed of on real property, may be liable for the costs of investigating and remediating hazardous substances on or under or released from the property and for damages to natural resources. The federal Comprehensive Environmental Response, Compensation & Liability Act, and similar state laws, generally impose liability on a joint and several basis, regardless of whether the owner, operator or other responsible party knew of or was at fault for the release or presence of hazardous substances. In connection with the ownership or operation of our properties, we could be liable in the future for costs associated with investigation and remediation of hazardous substances released at or from such properties. The costs of any required remediation and related liability as to any property could be substantial under these laws and could exceed the value of the property and/or our assets. The presence of hazardous substances or the failure to properly remediate those substances may result in our being liable for damages suffered by a third party for personal injury, property damage, cleanup costs, or otherwise and may adversely affect our ability to sell or rent a property or to borrow funds using the property as collateral. In addition, environmental laws may impose restrictions on the manner in which we use our properties or operate our business, and these restrictions may require expenditures for compliance. The restrictions themselves may change from time to time, and these changes may result in additional expenditures in order to achieve compliance. We cannot assure you that a material environmental claim or compliance obligation will not arise in the future. The costs of defending against any claims of liability, of remediating a contaminated property, or of complying with future environmental requirements could be substantial and affect our operating results. In addition, if a judgment is obtained against us or we otherwise become subject to a significant environmental liability, our financial condition may be adversely affected.

          During 2007, we engaged in the expansion of our Wal-Mart center at Colonial Promenade Winter Haven in Orlando, Florida. We received notice that the property that was purchased for the expansion contained environmental contamination that required remediation. We agreed to pay $0.9 million towards the remediation, which was paid during 2007. The expansion was completed in 2008, but we are still awaiting a “no further action” letter from the relevant regulatory agency. In 2009, we disposed of Colonial Promenade Winter Haven, but remain equally responsible with Wal-Mart for obtaining a “no further action” letter on the Wal-Mart parcel. In addition, we are obligated, using reasonable commercial efforts, to obtain a “no further action” letter for the two adjoining parcels on either side of the Wal-Mart parcel.

          Costs associated with addressing indoor air quality issues, moisture infiltration and resulting mold remediation may be costly.

          As a general matter, concern about indoor exposure to mold or other air contaminants has been increasing as such exposure has been alleged to have a variety of adverse effects on health. As a result, there have been a number of lawsuits in our industry against owners and managers of apartment communities relating to indoor air quality, moisture infiltration and resulting mold. The terms of our property and general liability policies generally exclude certain mold-related claims. Should an uninsured loss arise against us, we would be required to use our funds to resolve the issue, including litigation costs. We make no assurance that liabilities resulting from indoor air quality, moisture infiltration and the presence of or exposure to mold will not have a future impact on our business, results of operations and financial condition.

          As the owner or operator of real property, we could become subject to liability for asbestos-containing building materials in the buildings on our properties.

          Some of our properties may contain asbestos-containing materials. Environmental laws typically require that owners or operators of buildings with asbestos-containing building materials properly manage and maintain these materials, adequately inform or train those who may come in contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements. In addition, third parties may be entitled to seek recovery from owners or operators for personal injury associated with exposure to asbestos-containing building materials.

          Uninsured or underinsured losses could adversely affect our financial condition.

          As of December 31, 2009, we are self insured up to $0.8 million, $1.0 million and $1.8 million for general liability, workers’ compensation and property insurance, respectively. We are also self insured for health insurance and responsible for amounts up to $135,000 per claim and up to $1.0 million per person, according to plan policy limits. If the actual costs incurred to cover such uninsured claims are significantly greater than our budgeted costs, our financial condition will be adversely affected.

          We carry comprehensive liability, fire, extended coverage and rental loss insurance in amounts that we believe are in line with coverage customarily obtained by owners of similar properties and appropriate given the relative risk of loss and the cost of the coverage. There are, however, certain types of losses, such as lease and other contract claims, acts of war or terrorism, acts of God, and in some cases, earthquakes, hurricanes and flooding that generally are not insured because such coverage is not available or it is not available at commercially reasonable rates. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in the damaged property, as well as the anticipated future revenue from the property. The costs associated with property and casualty renewals may be higher than anticipated. We cannot predict at this time if in the future we will be able to obtain full coverage at a reasonable cost. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it impractical or undesirable to use insurance proceeds to replace a property after it has been damaged or destroyed. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.

          We may be unable to develop new properties or redevelop existing properties successfully, which could adversely affect our results of operations due to unexpected costs, delays and other contingencies.

          Our operating strategy historically has included development of new properties, as well as expansion and/or redevelopment of existing properties. Even though we decided in January 2009 to postpone future development activities (including previously identified future development projects) until we determine that the current economic environment has sufficiently improved, we have completed all but one of our developments that were in process during 2009 and expect to reengage in the development of our Colonial Promenade Nord du Lac development during 2010. Development activity may be conducted through wholly-owned affiliates or through joint ventures. However, there are significant risks associated with such development activities in addition to those generally associated with the ownership and operation of developed properties. These risks include the following:

	•		we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations, which could result in increased development costs and/or lower than expected leases;
	•		local real estate market conditions, such as oversupply or reduction in demand, may result in reduced or fluctuating rental rates;

	•		we may incur development costs for a property that exceed original estimates due to increased materials, labor or other costs, changes in development plans or unforeseen environmental conditions, which could make completion of the property more costly or uneconomical;
	•		land, insurance and construction costs continue to increase in our markets and may continue to increase in the future and we may be unable to attract rents that compensate for these increases in costs;
	•		we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring any such opportunities;
	•		rental rates and occupancy levels may be lower than anticipated;
	•		changes in applicable zoning and land use laws may require us to abandon projects prior to their completion, resulting in the loss of development costs incurred up to the time of abandonment; and
	•		we may experience late completion because of construction delays, delays in the receipt of zoning, occupancy and other approvals or other factors outside of our control.

          In addition, if a project is delayed, certain residents and tenants may have the right to terminate their leases. Furthermore, from time to time we may utilize tax-exempt bond financing through the issuance of community development and special assessment district bonds to fund development costs. Under the terms of such bond financings, we may be responsible for paying assessments on the underlying property to meet debt service obligations on the bonds until the underlying property is sold. Accordingly, if we are unable to complete or sell a development property subject to such bond financing and we are forced to hold the property longer than we originally projected, we may be obligated to continue to pay assessments to meet debt service obligations under the bonds. If we are unable to pay the assessments, a default will occur under the bonds and the property could be foreclosed upon. Any one or more of these risks may cause us to incur unexpected development costs, which would negatively affect our results of operations.

          Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on our joint venture partners’ financial condition, any disputes that may arise between us and our joint venture partners and our exposure to potential losses from the actions of our joint venture partners.

          As of December 31, 2009, we had $17.4 million of equity invested in joint ventures. See Note 9 – “Investment in Partially-Owned Entities and Other Arrangements” in our Notes to Consolidated Financial Statements of the Trust and CRLP contained in Item 8 of this Form 10-K. Our investments in these joint ventures involve risks not customarily associated with our wholly-owned properties, including the following:

	•		we share decision-making authority with some of our joint venture partners regarding major decisions affecting the ownership or operation of the joint venture and the joint venture properties, such as the acquisition of properties, the sale of the properties or the making of additional capital contributions for the benefit of the properties, which may prevent us from taking actions that are opposed by those joint venture partners;
	•		prior consent of our joint venture partners is required for a sale or transfer to a third party of our interests in the joint venture, which restricts our ability to dispose of our interest in the joint venture;
	•		our joint venture partners might become bankrupt or fail to fund their share of required capital contributions, which may delay construction or development of a joint venture property or increase our financial commitment to the joint venture;
	•		our joint venture partners may have business interests or goals with respect to the joint venture properties that conflict with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of such properties;
	•		disputes may develop with our joint venture partners over decisions affecting the joint venture properties or the joint venture, which may result in litigation or arbitration that would increase our expenses and distract our officers and/or trustees from focusing their time and effort on our business, and possibly disrupt the day-to-day operations of the property such as by delaying the implementation of important decisions until the conflict or dispute is resolved (see, for example, the discussion under Note 19 — “Commitments, Contingencies, Guarantees and Other Arrangements” to our Notes to Consolidated Financial Statements of the Trust and CRLP included in Item 8 of this Form 10-K);
	•		our joint venture partners may be unsuccessful in refinancing or replacing existing mortgage indebtedness, or may choose not to do so, which could adversely affect the value of our joint venture interest;
	•		we may suffer losses as a result of the actions of our joint venture partners with respect to our joint venture investments; and
	•		our joint venture partner may elect to sell or transfer its interests in the joint venture to a third party, which may result in our loss of management and leasing responsibilities and fees that we currently receive from the joint venture properties.

          During 2009, certain of our unconsolidated joint ventures exercised options to extend an aggregate of approximately $48.5 million of outstanding mortgage debt from 2009 to 2010. In addition, one of our unconsolidated joint ventures disposed of its only property, a 280-unit multifamily apartment community, a portion of the proceeds of which were used to repay an outstanding collateralized $14.0 million mortgage loan on the property (of which our pro rata share was $2.8 million). We intend to cooperate with our joint venture partners in connection with their efforts to refinance and/or replace any outstanding joint venture indebtedness (which may also include, for example, property dispositions), which cooperation may include additional capital contributions from time to time. There can be no assurance that our joint ventures will be successful in refinancing and/or replacing such existing debt at maturity or otherwise. The failure to refinance and/or restructure such debt could materially adversely affect the value of our joint venture interests and therefore the value of our joint venture investments, which, in turn, could have a material adverse effect on our financial condition and results of operations.

          Our results of operations could be adversely affected if we are required to perform under various financial guarantees that we have provided with respect to certain of our joint ventures and retail developments.

          From time to time, we guarantee portions of the indebtedness of certain of our unconsolidated joint ventures. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Guarantees and Other Arrangements” of this Annual Report on Form 10-K, for a description of the guarantees that we have provided with respect to the indebtedness of certain of our joint ventures as of December 31, 2009. From time to time, in connection with certain retail developments, we receive funding from municipalities for infrastructure costs through the issuance of bonds that are repaid primarily from sales tax revenues generated from the tenants at each respective development. In some instances, we guarantee the shortfall, if any, of tax revenues to the debt service requirements on these bonds. If we are required to fund any amounts related to any of these guarantees, our results of operations and cash flows could be adversely affected. In addition, we may not be able to ultimately recover funded amounts.

          Competition for acquisitions could reduce the number of acquisition opportunities available to us and result in increased prices for properties, which could adversely affect our return on properties we purchase.

          We compete with other major real estate investors with significant capital for attractive investment opportunities in multifamily and commercial properties. These competitors include publicly traded REITs, private REITs, domestic and foreign financial institutions, life insurance companies, pension trusts, trust funds, investment banking firms, private institutional investment funds and national, regional and local real estate investors. This competition could increase the demand for multifamily properties, and therefore reduce the number of suitable acquisition opportunities available to us and increase the prices paid for such acquisition properties. As a result, our expected return from investment in these properties would deteriorate.

          Acquired properties may expose us to unknown liability.

          We may acquire properties subject to liabilities and without any recourse, or with only limited recourse, against the prior owners or other third parties with respect to unknown liabilities that were not discovered during due diligence. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which could adversely affect our results of operations and cash flow. Unknown liabilities with respect to acquired properties might include:

	•		liabilities for clean-up of undisclosed environmental contamination;
	•		claims by tenants, vendors or other persons against the former owners of the properties;
	•		liabilities incurred in the ordinary course of business; and
	•		claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.

          We may not be able to achieve the anticipated financial and operating results from our acquisitions, which would adversely affect our operating results.

          We will acquire multifamily properties only if they meet our criteria and we believe that they will enhance our future financial performance and the value of our portfolio. Our belief, however, is based on and is subject to risks, uncertainties and other factors, many of which are forward-looking and are uncertain in nature or are beyond our control. In addition, some of these properties may have unknown characteristics or deficiencies or may not complement our portfolio of existing properties. As a result, some properties may be worth less or may generate less revenue than, or simply not perform as well as, we believed at the time of the acquisition, thereby negatively affecting our operating results.

          Failure to succeed in new markets may limit our growth.

          We may from time to time commence development activities or make acquisitions outside of our existing market areas if economic conditions warrant and appropriate opportunities arise. Our historical experience in our existing markets does not ensure that we will be able to operate successfully in new markets. We may be exposed to a variety of risks if we choose to enter new markets. These risks include, among others:

	•		an inability to evaluate accurately local apartment or for-sale residential housing market conditions and local economies;
	•		an inability to obtain land for development or to identify appropriate acquisition opportunities;
	•		an inability to hire and retain key personnel; and
	•		lack of familiarity with local governmental and permitting procedures.

Risks Associated with Our Indebtedness and Financing Activities

          We have substantial indebtedness and our cash flow may not be sufficient to make required payments on our indebtedness or repay our indebtedness as it matures.

          We rely on debt financing for our business. As of December 31, 2009, the amount of our total debt was approximately $1.9 billion, consisting of $1.7 billion of consolidated debt and $0.2 billion of our pro rata share of joint venture debt. In addition, as of December 31, 2009, a significant amount of our indebtedness was secured by our real estate assets. Due to our high level of debt, we may be required to dedicate a substantial portion of our funds from operations to servicing our debt and our cash flow may be insufficient to meet required payments of principal and interest.

          If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose upon that property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies.

          In addition, if principal payments due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow will not be sufficient in all years to repay all maturing debt. Most of our indebtedness does not require significant principal payments prior to maturity. However, we will need to raise additional equity capital, obtain collateralized or unsecured debt financing, issue private or public debt, or sell some of our assets to either refinance or repay our indebtedness as it matures. We cannot assure you that these sources of financing or refinancing will be available to us at reasonable terms or at all. Our inability to obtain financing or refinancing to repay our maturing indebtedness, and our inability to refinance existing indebtedness on reasonable terms, may require us to make higher interest and principal payments, issue additional equity securities, or sell some of our assets on disadvantageous terms, all or any of which may result in foreclosure of properties, partial or complete loss on our investment and otherwise adversely affect our financial conditions and results of operation. Also see Item 1A — “Risk Factors – Risks Associated with Our Operations – Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on our joint venture partners’ financial condition, any disputes that may arise between us and our joint venture partners and our exposure to potential losses from the actions of our joint venture partners.”

          Our degree of leverage could limit our ability to obtain additional financing and have other adverse effects which would negatively impact our results of operation and financial condition.

          As of December 31, 2009, our consolidated borrowings and pro rata share of unconsolidated borrowings totaled approximately $1.7 billion of consolidated borrowings and $0.2 billion of unconsolidated borrowings. Our organizational documents do not contain any limitation on the incurrence of debt. Our leverage and any future increases in our leverage could place us at a competitive disadvantage compared to our competitors that have less debt, make us more vulnerable to economic and industry downturns, reduce our flexibility in responding to changing business and economic conditions, and adversely affect our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, development or other general corporate purposes which would negatively impact our results of operation and financial condition.

          Due to the amount of our variable rate debt, rising interest rates would adversely affect our results of operation.

          As of December 31, 2009, we had approximately $384.6 million of variable rate debt outstanding, consisting of $323.9 million of our consolidated debt and $60.7 million of our pro rata share of variable rate unconsolidated joint venture debt. While we have sought to refinance our variable rate debt with fixed rate debt or cap our exposure to interest rate fluctuations by using interest rate swap agreements where appropriate, failure to hedge effectively against interest rate changes may adversely affect our results of operations. Furthermore, interest rate swap agreements and other hedging arrangements may expose us to additional risks, including a risk that a counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of

operations or financial condition. In addition, as opportunities arise, we may borrow additional money with variable interest rates in the future. As a result, a significant increase in interest rates would adversely affect our results of operations.

          We have entered into debt agreements with covenants that restrict our operating activities, which could adversely affect our results of operations, and violation of these restrictive covenants could adversely affect our financial condition through debt defaults or acceleration.

          Our unsecured credit facility contains numerous customary restrictions, requirements and other limitations on our ability to incur debt, including the following financial ratios:

	•		collateralized debt to total asset value ratio;
	•		fixed charge coverage ratio;
	•		total liabilities to total asset value ratio;
	•		total permitted investments to total asset value ratio; and
	•		unencumbered leverage ratio.

          The indenture under which our senior unsecured debt is issued also contains financial and operating covenants including coverage ratios. Our indenture also limits our ability to:

	•		incur collateralized and unsecured indebtedness;
	•		sell all or substantially all or our assets; and
	•		engage in mergers, consolidations and acquisitions.

          Also, certain of our mortgage indebtedness contains customary covenants which, among other things, limit our ability, without the prior consent of the lender, to further mortgage the property, to enter into new leases or materially modify existing leases, and to discontinue insurance coverage.

          These restrictions, as well as any additional restrictions which we may become subject to in connection with additional financings or refinancings, will continue to hinder our operational flexibility through limitations on our ability to incur additional indebtedness, pursue certain business initiatives or make other changes to our business. These limitations could adversely affect our results of operations. In addition, violations of these covenants could cause the declaration of defaults and any related acceleration of indebtedness, which would result in adverse consequences to our financial condition. As of December 31, 2009, we were in compliance with all of the financial and operating covenants under our existing credit facility and indenture, and we believe that we will continue to remain in compliance with these covenants. However, given the deterioration in the U.S. economy and continued uncertainty in the credit markets, there can be no assurance that we will be able to maintain compliance with these ratios and other debt covenants in the future, particularly if conditions were to worsen.

          Our inability to obtain sufficient third party financing could adversely affect our results of operations and financial condition because we depend on third party financing for our capital needs, including development, expansion, acquisition and other activities.

          To qualify as a REIT, we must distribute to our shareholders each year at least 90% of our REIT taxable income, excluding any net capital gain. Because of these distribution requirements, it is not likely that we will be able to fund all future capital needs from income from operations. As a result, when we engage in the development or acquisition of new properties or expansion or redevelopment of existing properties, we will continue to rely on third-party sources of capital, including lines of credit, collateralized or unsecured debt (both construction financing and permanent debt), and equity issuances. These sources, however, may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of factors, including the market’s perception of our growth potential and our current and potential future earnings. Moreover, additional equity offerings may result in substantial dilution of our shareholders’ interests, and additional debt financing may substantially increase our leverage. There can be no assurance that we will be able to obtain the financing necessary to fund our current or new development or project expansions or our acquisition activities on terms favorable to us or at all. If we are unable to obtain a sufficient level of third party financing to fund our capital needs, our results of operations and financial condition may be adversely affected.

          Disruptions in the financial markets could adversely affect our ability to obtain sufficient third party financing for our capital needs, including development, expansion, acquisition and other activities, on reasonable terms or at all and could have other adverse effects on us and the market price of the Trust’s common shares.

          During 2009, the United States credit markets experienced significant dislocations and liquidity disruptions, which have caused the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in some cases have resulted in the unavailability of financing, even for companies who are otherwise qualified to obtain financing. Continued uncertainty in the

credit markets may negatively impact our ability to access additional financing for our capital needs, including development, expansion, acquisition activities and other purposes at reasonable terms or at all, which may negatively affect our business. Additionally, due to this uncertainty, we may be unable to refinance or extend our existing indebtedness or the terms of any refinancing may not be as favorable as the terms of our existing indebtedness. If we are not successful in refinancing this debt when it becomes due, we may be forced to dispose of properties on disadvantageous terms, which might adversely affect our ability to service other debt and to meet our other obligations. In addition, we may be unable to obtain permanent financing on development projects we financed with construction loans or mezzanine debt. Our inability to obtain such permanent financing on favorable terms, if at all, could cause us to incur additional capital costs in connection with completing such projects, of which could have an adverse affect on our business. A prolonged downturn in the financial markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to further adjust our business plan accordingly. These events also may make it more difficult or costly for us to raise capital through the issuance of the Trust’s common shares, preferred shares or subordinated notes. The disruptions in the financial markets have had and may continue to have a material adverse effect on the market value of the Trust’s common shares and other adverse effects on us and our business.

          Our senior notes do not have an established trading market, therefore, holders of our notes may not be able to sell their notes.

          Each series of CRLP’s senior notes is a new issue of securities with no established trading market. We do not intend to apply for listing of any series of notes on any national securities exchange. The underwriters in an offering of senior notes may advise us that they intend to make a market in the notes, but they are not obligated to do so and may discontinue market making at any time without notice. We can give no assurance as to the liquidity of or any trading market for any series of our notes.

          A downgrade in our credit ratings could have a material adverse effect on our business, financial condition and results of operations.

          During 2009, Moody’s Investors Service lowered the credit rating on our senior unsecured debt to Ba1 from Baa3. Additionally, Standard & Poor’s lowered the credit rating on our senior unsecured debt to BB+ from BBB- and the rating on our preferred shares to B+ from BB. While the downgrades by both Moody’s Investors Service and Standard & Poor’s do not affect our ability to draw proceeds under our unsecured line of credit, the pricing on the credit facility has adjusted from LIBOR plus 75 basis points to LIBOR plus 105 basis points. The downgrade had the effect of increasing our borrowing costs, and further downgrades, while not impacting our borrowing costs, could shorten borrowing periods, thereby adversely impacting our ability to borrow secured and unsecured debt and otherwise limiting our access to capital, which could adversely affect our business, financial condition and results of operations.

Risks Associated with Our Organization and Structure

          Some of our trustees and officers have conflicts of interest and could exercise influence in a manner inconsistent with the interests of our shareholders.

          As a result of their substantial ownership of common shares and units, Messrs. Thomas Lowder, our Chairman and Chief Executive Officer, James Lowder and Harold Ripps, each of whom is a trustee, could seek to exert influence over our decisions as to sales or re-financings of particular properties we own. Any such exercise of influence could produce decisions that are not in the best interest of all of the holders of interests in us.

          The Lowder family and their affiliates hold interests in a company that has performed insurance brokerage services with respect to our properties. This company may perform similar services for us in the future. As a result, the Lowder family may realize benefits from transactions between this company and us that are not realized by other holders of interests in us. In addition, given their positions with us, Thomas Lowder, as our Chairman and Chief Executive Officer, and James Lowder, as a trustee, may be in a position to influence us to do business with companies in which the Lowder family has a financial interest.

          Other than a specific procedure for reviewing and approving related party construction activities, we have not adopted a formal policy for the review and approval of conflict of interest transactions generally. Pursuant to our charter, our audit committee reviews and discusses with management and our independent registered public accounting firm any such transaction if deemed material and relevant to an understanding of our financial statements. Our policies and practices may not be successful in eliminating the influence of conflicts. Moreover, transactions with companies controlled by the Lowder family, if any, may not be on terms as favorable to us as we could obtain in an arms-length transaction with a third party.

          Restrictions on the acquisition and change in control of the Company may have adverse effects on the value of the Trust’s common shares and CRLP’s partnership units.

          Various provisions of the Trust’s Declaration of Trust restrict the possibility for acquisition or change in control of us, even if the acquisition or change in control were in the shareholders’ interest. As a result, the value of the Trust’s common shares and CRLP’s partnership units may be less than they would otherwise be in the absence of such restrictions.

          The Trust’s Declaration of Trust contains ownership limits and restrictions on transferability. The Trust’s Declaration of Trust contains certain restrictions on the number of common shares and preferred shares that individual shareholders may own, which is intended to ensure that we maintain our qualification as a REIT. In order for us to qualify as a REIT, no more than 50% of the value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year and the shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. To help avoid violating these requirements, the Trust’s Declaration of Trust contains provisions restricting the ownership and transfer of shares in certain circumstances. These ownership limitations provide that no person may beneficially own, or be deemed to own by virtue of the attribution provisions of the Code, more than:

	•		9.8%, in either number of shares or value (whichever is more restrictive), of any class of our outstanding shares;
	•		5% in number or value (whichever is more restrictive), of our outstanding common shares and any outstanding excess shares; and
	•		in the case of certain excluded holders related to the Lowder family: 29% by one individual; 34% by two individuals; 39% by three individuals; or 44% by four individuals.

These ownership limitations may be waived by the Trust’s Board of Trustees if it receives representations and undertakings of certain facts for the protection of our REIT status, and if requested, an IRS ruling or opinion of counsel.

          The Trust’s Declaration of Trust permits the Trust’s Board of Trustees to issue preferred shares with terms that may discourage a third party from acquiring us. The Trust’s Declaration of Trust permits the Board of Trustees of the Trust to issue up to 20,000,000 preferred shares, having those preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, or terms or conditions of redemption as determined by the Board of Trustees. Thus, the Board of Trustees of the Trust could authorize the issuance of preferred shares with terms and conditions that could have the effect of discouraging a takeover or other transaction in which some or a majority of shareholders might receive a premium for their shares over the then-prevailing market price of shares.

          The Trust’s Declaration of Trust and Bylaws contain other possible anti-takeover provisions. The Trust’s Declaration of Trust and Bylaws contain other provisions that may have the effect of delaying, deferring or preventing an acquisition or change in control of the Company, and, as a result could prevent our shareholders from being paid a premium for their common shares over the then-prevailing market prices. These provisions include:

	•		a prohibition on shareholder action by written consent;
	•		the ability to remove trustees only at a meeting of shareholders called for that purpose, by the affirmative vote of the holders of not less than two-thirds of the shares then outstanding and entitled to vote in the election of trustees;
	•		the limitation that a special meeting of shareholders can be called only by the president or chairman of the board or upon the written request of shareholders holding outstanding shares representing at least 25% of all votes entitled to be cast at the special meeting;
	•		the advance written notice requirement for shareholders to nominate a trustee or submit other business before a meeting of shareholders; and
	•		the requirement that the amendment of certain provisions of the Declaration of Trust relating to the removal of trustees, the termination of the Company and any provision that would have the effect of amending these provisions, require the affirmative vote of the holders of two-thirds of the shares then outstanding.

          We may change our business policies in the future, which could adversely affect our financial condition or results of operations.

          Our major policies, including our policies with respect to development, acquisitions, financing, growth, operations, debt capitalization and distributions, are determined by the Trust’s Board of Trustees. A change in these policies could adversely affect our financial condition or results of operations, including our ability to service debt. For example, in January 2009, we decided to accelerate our plan to dispose of our for-sale residential assets and land held for future for-sale residential and mixed-use developments and postpone future development activities (including previously identified future development projects) until we determine that the current economic environment has sufficiently improved. As a result of this decision, in the fourth quarter of 2008, we recorded a non-cash impairment charge of $116.9 million, $4.4 million of abandoned pursuit costs and $1.0 million of restructuring charges related to a reduction in our development staff and other overhead personnel. In

2009, we recorded non-cash impairment charges of $12.3 million, $2.0 million of abandoned pursuit costs and $1.4 million of restructuring charges related to a reduction in our development staff and other overhead personnel. The Trust’s Board of Trustees may amend or revise these and other policies from time to time in the future, and no assurance can be given that additional amendments or revisions to these or other policies will not result in additional charges or otherwise materially adversely affect our financial condition or results of operations.

Risks Related to the Trust’s Shares

          Market interest rates and low trading volume may have an adverse effect on the market value of the Trust’s common shares.

          The market price of shares of a REIT may be affected by the distribution rate on those shares, as a percentage of the price of the shares, relative to market interest rates. If market interest rates increase, prospective purchasers of the Trust’s shares may expect a higher annual distribution rate. Higher interest rates would not, however, result in more funds for us to distribute and, in fact, would likely increase our borrowing costs and potentially decrease funds available for distribution. This could cause the market price of the Trust’s common shares to go down. In addition, although the Trust’s common shares are listed on the New York Stock Exchange, the daily trading volume of the Trust’s shares may be lower than the trading volume for other industries. As a result, our investors who desire to liquidate substantial holdings may find that they are unable to dispose of their shares in the market without causing a substantial decline in the market value of the shares.

          A large number of shares available for future sale could adversely affect the market price of the Trust’s common shares and may be dilutive to current shareholders.

          The sales of a substantial number of common shares, or the perception that such sales could occur, could adversely affect prevailing market prices for the Trust’s common shares. In addition to issuances of shares pursuant to share option and share purchase plans, as of December 31, 2009, we may issue up to 8,162,845 common shares of the Trust upon redemption of currently outstanding units of CRLP. In addition, the Trust has filed a registration statement with the SEC allowing us to offer, from time to time, equity securities of the Trust (including common or preferred shares) for an aggregate initial public offering price of up to $500 million on an as-needed basis and subject to our ability to affect offerings on satisfactory terms based on prevailing conditions. As of December 31, 2009, the Trust had issued 4,802,971 of its common shares, at a weighted average issue price of $9.07 per share, under a continuous equity issuance program and 12,109,500 of its common shares, at an aggregate public offering price of $115,040,250, in an underwritten public offering. The continuous equity issuance program was terminated by the Trust in October 2009 following the completion of the underwritten public offering. Pursuant to the CRLP partnership agreement, each time the Trust issues common shares CRLP issues to the Trust an equal number of units for the same price at which the common shares were sold. Accordingly, CRLP issued 4,802,971 common units to the Trust, at a weighted average issue price of $9.07 per share, in connection with the continuous equity issuance program and 12,109,500 common units to the Trust, at $9.50 per unit, with respect to the common shares issued by the Trust in the underwritten equity offering. Additionally, the Trust’s Board of Trustees can authorize the issuance of additional securities without shareholder approval. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including issuances of common and preferred equity. No prediction can be made about the effect that future distribution or sales of common shares of the Trust will have on the market price of the Trust’s common shares.

          We may change our dividend policy.

          The Trust intends to continue to declare quarterly distributions on its common shares. Future distributions will be declared and paid at the discretion of the Trust’s Board of Trustees and the amount and timing of distributions will depend upon cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, and such other factors as the Trust’s Board of Trustees deem relevant. The Trust’s Board of Trustees reviews the dividend quarterly and there can be no assurance as to the manner in which future dividends will be paid or that the current dividend level will be maintained in future periods.

          Changes in market conditions or a failure to meet the market’s expectations with regard to our earnings and cash distributions could adversely affect the market price of the Trust’s common shares.

          We believe that the market value of a REIT’s equity securities is based primarily upon the market’s perception of the REIT’s growth potential and its current and potential future cash distributions, and is secondarily based upon the real estate market value of the underlying assets. For that reason, our shares may trade at prices that are higher or lower than the net asset value per share. To the extent we retain operating cash flow for investment purposes, working capital reserves or other purposes, these retained funds, while increasing the value of our underlying assets, may not correspondingly increase the market price of the Trust’s common shares. In addition, we are subject to the risk that our cash flow will be insufficient to meet the required payments on our preferred shares and the Operating Partnership’s preferred units. Our failure to meet the

market’s expectations with regard to future earnings and cash distributions would likely adversely affect the market price of our shares.

          The stock markets, including The New York Stock Exchange (“NYSE”), on which the Trust lists its common shares, have experienced significant price and volume fluctuations. As a result, the market price of the Trust’s common shares could be similarly volatile, and investors in the Trust’s common shares may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. Among the market conditions that may affect the market price of our publicly traded securities are the following:

	•		our financial condition and operating performance and the performance of other similar companies;
	•		actual or anticipated differences in our quarterly operating results;
	•		changes in our revenues or earnings estimates or recommendations by securities analysts;
	•		publication of research reports about us or our industry by securities analysts;
	•		additions and departures of key personnel;
	•		strategic decisions by us or our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;
	•		the reputation of REITs generally and the reputation of REITs with portfolios similar to ours;
	•		the attractiveness of the securities of REITs in comparison to securities issued by other entities (including securities issued by other real estate companies);
	•		an increase in market interest rates, which may lead prospective investors to demand a higher distribution rate in relation to the price paid for our shares;
	•		the passage of legislation or other regulatory developments that adversely affect us or our industry;
	•		speculation in the press or investment community;
	•		actions by institutional shareholders or hedge funds;
	•		changes in accounting principles;
	•		terrorist acts; and
	•		general market conditions, including factors unrelated to our performance.

In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.

Risks Associated with Income Tax Laws

          The Trust’s failure to qualify as a REIT would decrease the funds available for distribution to its shareholders and adversely affect the market price of the Trust’s common shares.

          We believe that the Trust has qualified for taxation as a REIT for federal income tax purposes commencing with its taxable year ended December 31, 1993. The Trust intends to continue to meet the requirements for taxation as a REIT, but it cannot assure shareholders that the Trust will qualify as a REIT. The Trust has not requested and does not plan to request a ruling from the IRS that the Trust qualifies as a REIT, and the statements in this Form 10-K are not binding on the IRS or any court. As a REIT, the Trust generally will not be subject to federal income tax on its income that it distributes currently to its shareholders. Many of the REIT requirements are highly technical and complex. The determination that the Trust is a REIT requires an analysis of various factual matters and circumstances that may not be totally within its control. For example, to qualify as a REIT, at least 95% of our gross income must come from sources that are itemized in the REIT tax laws. The Trust generally is prohibited from owning more than 10% of the voting securities or more than 10% of the value of the outstanding securities of any one issuer, subject to certain exceptions, including an exception with respect to certain debt instruments and corporations electing to be “taxable REIT subsidiaries.” The Trust is also required to distribute to its shareholders at least 90% of its REIT taxable income (excluding capital gains). The fact that the Trust holds most of its assets through the CRLP further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize the Trust’s REIT status. Furthermore, Congress or the Internal Revenue Service might make changes to the tax laws and regulations, or the courts might issue new rulings that make it more difficult, or impossible, for the Trust to remain qualified as a REIT.

          If the Trust fails to qualify as a REIT for federal income tax purposes, and is unable to avail itself of certain savings provisions set forth in the Internal Revenue Code (“IRS”), the Trust would be subject to federal income tax at regular corporate rates. As a taxable corporation, the Trust would not be allowed to take a deduction for distributions to shareholders in computing its taxable income or pass through long term capital gains to individual shareholders at favorable rates. The Trust also could be subject to the federal alternative minimum tax and possibly increased state and local taxes. The Trust would not be able to elect to be taxed as a REIT for four years following the year it first failed to qualify unless the IRS were to grant it relief under certain statutory provisions. If the Trust failed to qualify as a REIT, it would have to pay significant income taxes, which would reduce its net earnings available for investment or distribution to its shareholders. This likely would have a

significant adverse effect on the Trust’s earnings and the value of the Trust’s common shares and CRLP’s partnership units. In addition, the Trust would no longer be required to pay any distributions to shareholders. If the Trust fails to qualify as a REIT for federal income tax purposes and is able to avail itself of one or more of the statutory savings provisions in order to maintain our REIT status, the Trust would nevertheless be required to pay penalty taxes of at least $50,000 or more for each such failure. Moreover, the Trust’s failure to qualify as a REIT also would cause an event of default under its credit facility and may adversely affect the Trust’s ability to raise capital and to service its debt.

          Even if the Trust qualifies as a REIT, it will be required to pay some taxes (particularly related to the Trust’s taxable REIT subsidiary).

          Even if the Trust qualifies as a REIT for federal income tax purposes, the Trust will be required to pay certain federal, state and local taxes on its income and property. For example, the Trust will be subject to income tax to the extent we distribute less than 100% of its REIT taxable income (including capital gains). Moreover, if the Trust has net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. However, the Trust will not be treated as a dealer in real property with respect to a property that it sells for the purposes of the 100% tax if (i) the Trust has held the property for at least two years for the production of rental income prior to the sale, (ii) capitalized expenditures on the property in the two years preceding the sale are less than 30% of the net selling price of the property, and (iii) the Trust either (a) has seven or fewer sales of property (excluding certain property obtained through foreclosure) for the year of sale or (b) the aggregate tax basis of property sold during the year of sale is 10% or less of the aggregate tax basis of all of the Trust’s assets as of the beginning of the taxable year or (c) the fair market value of the property sold during the year of sale is 10% or less of the aggregate fair market value of all of the Trust’s assets as of the beginning of the taxable year and in the case of (b) or (c), substantially all of the marketing and development expenditures with respect to the property sold are made through an independent contractor from whom the Trust derives no income. The sale of more than one property to one buyer as part of one transaction constitutes one sale for purposes of this “safe harbor.” The Trust intends to hold its properties, and CRLP intends to hold its properties, for investment with a view to long-term appreciation, to engage in the business of acquiring, developing, owning and operating properties, and to make occasional sales of properties as are consistent with our investment objectives. However, not all of the Trust’s sales will satisfy the “safe harbor” requirements described above. Furthermore, there are certain interpretive issues related to the application of the “safe harbor” that are not free from doubt under the federal income tax law. While we acquire and hold our properties with an investment objective and do not believe they constitute dealer property, we cannot provide any assurance that the IRS might not contend that one or more of these sales are subject to the 100% penalty tax or that the IRS would not challenge our interpretation of, or any reliance on, the “safe harbor” provisions.

          In addition, any net taxable income earned directly by the Trust’s taxable REIT subsidiaries, or through entities that are disregarded for federal income tax purposes as entities separate from the Trust’s taxable REIT subsidiaries, will be subject to federal and possibly state corporate income tax. The Trust has elected to treat CPSI as a taxable REIT subsidiary, and it may elect to treat other subsidiaries as taxable REIT subsidiaries in the future. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by the taxable REIT subsidiaries if the economic arrangements between the REIT, the REIT’s tenants, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of the Trust’s income even though as a REIT it is not subject to federal income tax on that income because not all states and localities treat REITs the same as they are treated for federal income tax purposes. To the extent that the Trust and its affiliates are required to pay federal, state and local taxes, the Trust will have less cash available for distributions to the Trust’s shareholders.

          REIT Distribution requirements may increase our indebtedness.

          The Trust may be required from time to time, under certain circumstances, to accrue as income for tax purposes interest and rent earned but not yet received. In such event, or upon the Trust’s repayment of principal on debt, it could have taxable income without sufficient cash to enable us to meet the distribution requirements of a REIT. Accordingly, we could be required to borrow funds or liquidate investments on adverse terms in order to meet these distribution requirements.

          Tax elections regarding distributions may impact our future liquidity.

          Under certain circumstances, the Trust may make a tax election to treat future distributions to shareholders as distributions in the current year. This election may allow the Trust to avoid increasing its dividends or paying additional income taxes in the current year. However, this could result in a constraint on the Trust’s ability to decrease its dividends in future years without creating risk of either violating the REIT distribution requirements or generating additional income tax liability.

          We may in the future choose to pay dividends in our own common shares, in which case shareholders may be required to pay income taxes in excess of the cash dividends they receive.

          We may in the future distribute taxable dividends that are payable partly in cash and partly in our common shares. Under existing IRS guidance with respect to taxable years ending on or before December 31, 2011, up to 90% of such a dividend could be payable in our common shares. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes, regardless of whether such shareholder receives cash, REIT shares or a combination of cash and REIT shares. As a result, a shareholder may be required to pay income tax with respect to such dividends in excess of the cash received. If a shareholder sells the REIT shares it receives in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, if the market value of our shares decreases following the distribution. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to dividends paid in our common shares. In addition, if a significant number of our shareholders determine to sell shares of our common shares in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common shares.

Item 1B. Unresolved Staff Comments.

          None.

Item 2. Properties.

General

          As of December 31, 2009, our consolidated real estate portfolio consisted of 114 consolidated operating properties. In addition, we maintain non-controlling partial interests ranging from 10% to 20% in an additional 42 properties held through unconsolidated joint ventures. These 156 properties, including consolidated and unconsolidated properties, are located in 10 states in the Sunbelt region of the United States.

Multifamily Properties

          Our multifamily segment is comprised of 111 multifamily apartment communities, including those properties in lease-up, including 105 consolidated properties, of which 104 are wholly-owned and one is partially-owned and six properties held through unconsolidated joint ventures, which properties contain, in the aggregate, a total of 33,524 garden-style apartments and range in size from 80 to 586 units. Each of the multifamily properties is established in its local market and provides residents with numerous amenities, which may include a swimming pool, exercise room, jacuzzi, clubhouse, laundry room, tennis court(s) and/or a playground. We manage all of the multifamily properties.

          The following table sets forth certain additional information relating to the consolidated multifamily properties as of and for the year ended December 31, 2009.

Consolidated Multifamily Properties

																		Average
						Number				Approximate								Rental
				Year		of				Rentable Area				Percent				Rate
Consolidated Multifamily Property (1)		Location		Completed (2)		Units (3)				(Square Feet)				Occupied				Per Unit (4)
Alabama:
CG at Liberty Park		Birmingham		2000			300				338,684				96.7	%		$	939
CV at Inverness II & III		Birmingham		1986/1987/1990/1997			586				508,472				93.0	%			604
CV at Trussville		Birmingham		1996			376				410,340				93.9	%			716
CV at Cypress Village		Gulf Shores		2008			96				205,992				93.8	%			1,138
CG at Edgewater I		Huntsville		1990/1999			500				542,892				97.6	%			709
CG at Madison		Huntsville		2000			336				354,592				97.3	%			809
CV at Ashford Place		Mobile		1983			168				145,600				98.2	%			609
CV at Huntleigh Woods		Mobile		1978			233				198,861				94.8	%			547
Subtotal — Alabama							2,595				2,705,433				95.5	%			721
Arizona:
CG at Inverness Commons		Scottsdale		2002			300				305,904				80.7	%			746
CG at OldTown Scottsdale North		Scottsdale		1995			208				205,984				90.9	%			822
CG at OldTown Scottsdale South		Scottsdale		1994			264				264,728				91.3	%			858
CG at Scottsdale		Scottsdale		1999			180				201,569				95.0	%			959
Subtotal — Arizona							952				978,185				88.6	%			834
Florida:
CG at Heather Glen		Orlando		2000			448				523,228				96.2	%			942
CG at Heathrow		Orlando		1997			312				353,040				93.6	%			909
CG at Town Park Reserve		Orlando		2004			80				77,416				98.8	%			1,063
CG at Town Park(Lake Mary)		Orlando		2002			456				535,340				96.9	%			964
CV at Twin Lakes		Orlando		2004			460				417,808				96.3	%			819
CG at Lakewood Ranch		Sarasota		1999			288				301,656				100.0	%			944
CG at Seven Oaks		Tampa		2004			318				301,684				96.9	%			857
Subtotal — Florida							2,362				2,510,172				96.7	%			911
Georgia:
CG at Barrett Creek		Atlanta		1999			332				309,962				95.5	%			761
CG at Berkeley Lake		Atlanta		1998			180				244,217				97.2	%			896
CG at McDaniel Farm		Atlanta		1997			425				450,696				96.7	%			753
CG at McGinnis Ferry		Atlanta		1997			434				509,455				93.8	%			833
CG at Mount Vernon		Atlanta		1997			213				257,180				96.7	%			1,011
CG at Pleasant Hill		Atlanta		1996			502				501,816				95.2	%			733
CG at River Oaks		Atlanta		1992			216				276,208				97.2	%			826
CG at River Plantation		Atlanta		1994			232				310,364				94.4	%			848
CG at Shiloh		Atlanta		2002			498				533,243				95.0	%			795
CG at Sugarloaf		Atlanta		2002			250				328,558				94.0	%			846
CG at Godley Station I		Savannah		2005			312				337,344				97.1	%			806
CG at Hammocks		Savannah		1997			308				323,844				97.1	%			936
CV at Godley Lake		Savannah		2008			288				269,504				97.6	%			836
CV at Greentree		Savannah		1984			194				165,216				95.4	%			695
CV at Huntington		Savannah		1986			147				121,112				96.6	%			752
CV at Marsh Cove		Savannah		1983			188				197,200				100.0	%			779
Subtotal — Georgia							4,719				5,135,919				96.0	%			812
Nevada:
CG at Desert Vista (5)		Las Vegas		2008			380				338,288			LU					—
Subtotal — Nevada							380				338,288				—				—
North Carolina:
CV at Pinnacle Ridge		Asheville		1948/1985			166				146,856				98.8	%			714
CG at Ayrsley		Charlotte		2008			368				371,652				94.6	%			821
CG at Beverly Crest		Charlotte		1996			300				278,685				95.0	%			710
CG at Huntersville		Charlotte		2008			250				247,908				98.8	%			787
CG at Legacy Park		Charlotte		2001			288				300,768				95.8	%			732
CG at Mallard Creek		Charlotte		2004			252				232,646				99.6	%			774
CG at Mallard Lake		Charlotte		1998			302				300,806				98.0	%			738
CG at Matthews Commons		Charlotte		2008			216				203,280				96.3	%			785
CG at University Center		Charlotte		2006			156				167,051				98.1	%			735
CV at Chancellor Park		Charlotte		1996			340				326,560				95.6	%			683
CV at Charleston Place		Charlotte		1986			214				172,405				94.4	%			552
CV at Greystone		Charlotte		1998/2000			408				386,988				81.4	%			629
CV at Matthews		Charlotte		1990			270				255,712				92.6	%			742
CV at Meadow Creek		Charlotte		1984			250				230,430				95.2	%			598
CV at South Tryon		Charlotte		2002			216				236,088				93.1	%			681
CV at Stone Point		Charlotte		1986			192				172,992				92.7	%			650
CV at Timber Crest		Charlotte		2000			282				273,408				94.0	%			640
Enclave		Charlotte		2008			85				108,345				94.1	%			1,456
Heatherwood		Charlotte		1980			476				438,563				78.6	%			594
Autumn Park I & II		Greensboro		2001/2004			402				403,776				93.5	%			717
CG at Arringdon		Raleigh		2003			320				311,200				94.7	%			762
CG at Crabtree Valley		Raleigh		1997			210				209,670				91.4	%			716
CG at Patterson Place		Raleigh		1997			252				236,756				96.8	%			787
CG at Trinity Commons		Raleigh		2000/2002			462				484,404				93.9	%			748
CV at Deerfield		Raleigh		1985			204				198,180				98.5	%			727
CV at Highland Hills		Raleigh		1987			250				262,639				91.6	%			728
CV at Woodlake		Raleigh		1996			266				255,124				92.1	%			667
CG at Wilmington		Wilmington		1998/2002			390				355,896				98.7	%			675
CV at Mill Creek		Winston-Salem		1984			220				209,680				91.8	%			563
Glen Eagles I & II		Winston-Salem		1990/2000			310				312,320				88.1	%			635
Subtotal — North Carolina							8,317				8,090,788				93.3	%			707

																		Average
						Number				Approximate								Rental
				Year		of				Rentable Area				Percent				Rate
Consolidated Multifamily Property (1)		Location		Completed (2)		Units (3)				(Square Feet)				Occupied				Per Unit (4)
South Carolina:
CG at Cypress Cove		Charleston		2001			264				303,996				98.1	%			859
CG at Quarterdeck		Charleston		1987			230				218,880				95.2	%			830
CV at Hampton Pointe		Charleston		1986			304				314,600				96.1	%			726
CV at Waters Edge		Charleston		1985			204				187,640				99.5	%			644
CV at Westchase		Charleston		1985			352				258,170				99.4	%			613
CV at Windsor Place		Charleston		1985			224				213,440				98.2	%			656
Subtotal — South Carolina							1,578				1,496,726				97.8	%			718
Tennessee:
CG at Bellevue		Nashville		1996			349				344,954				96.6	%			878
Subtotal — Tennessee							349				344,954				96.6	%			878
Texas:
Ashton Oaks		Austin		2008			362				307,514				93.9	%			757
CG at Onion Creek		Austin		2008			300				312,520				99.0	%			930
CG at Round Rock		Austin		2006			422				429,645				95.3	%			792
CG at Silverado		Austin		2004			238				239,668				94.1	%			761
CG at Silverado Reserve		Austin		2006			256				266,146				96.9	%			835
CV at Canyon Hills		Austin		1996			229				183,056				95.2	%			702
CV at Quarry Oaks		Austin		1996			533				469,899				94.2	%			694
CV at Sierra Vista		Austin		1999			232				205,604				97.8	%			674
CG at Canyon Creek (6)		Austin		2007			336				348,960				92.0	%			811
Brookfield		Dallas/Fort Worth		1984			232				165,672				90.9	%			564
CG at Valley Ranch		Dallas/Fort Worth		1997			396				462,104				98.2	%			1,011
CV at Main Park		Dallas/Fort Worth		1984			192				180,258				97.4	%			755
CV at Oakbend		Dallas/Fort Worth		1996			426				382,751				85.7	%			747
CV at Vista Ridge		Dallas/Fort Worth		1985			300				237,468				97.0	%			584
Paces Cove		Dallas/Fort Worth		1982			328				219,726				95.1	%			501
Remington Hills		Dallas/Fort Worth		1984			362				346,592				90.6	%			744
Summer Tree		Dallas/Fort Worth		1980			232				136,272				94.0	%			495
CG at Bear Creek		Dallas/Fort Worth		1998			436				395,137				92.2	%			834
CV at Grapevine I & II		Dallas/Fort Worth		1985			450				387,244				92.9	%			702
CV at North Arlington		Dallas/Fort Worth		1985			240				190,540				93.3	%			591
CV at Shoal Creek		Dallas/Fort Worth		1996			408				381,756				93.6	%			794
CV at Willow Creek		Dallas/Fort Worth		1996			478				426,764				94.1	%			769
Subtotal — Texas							7,388				6,675,296				94.0	%			741
Virginia:
Autumn Hill		Charlottesville		1970			425				369,664				91.5	%			739
CV at Harbour Club		Norfolk		1988			213				193,163				91.1	%			818
CV at Tradewinds		Norfolk		1988			284				279,884				92.6	%			817
Ashley Park		Richmond		1988			272				194,464				100.0	%			691
CR at West Franklin		Richmond		1964/1965			332				169,854				93.4	%			763
CV at Chase Gayton		Richmond		1984			328				311,266				98.8	%			805
CV at Hampton Glen		Richmond		1986			232				177,760				98.7	%			805
CV at Waterford		Richmond		1989			312				288,840				100.0	%			833
CV at West End		Richmond		1987			224				156,332				100.0	%			737
CV at Greenbrier		Washington DC		1980			258				217,245				100.0	%			868
Subtotal — Virginia							2,880				2,358,472				96.4	%			785
TOTAL							31,520				30,634,233				94.7	%		$	761